Derbyshire, who admits to knowing very little about the oil business, said he had to learn about it quickly after Whittaker's board voted to spend $50 million on oil projects. He said Whittaker was willing to "gamble several million dollars" to find out if Wright's oil fields had the potential to be successful.
Relations Were Strained
But, by the end of 1983, Whittaker had already lent Wright about $9 million and "relations between us were strained," said the cigar-smoking Derbyshire in a recent interview. "I was very unhappy with the way the water-flooding project was being managed." He said the water-flooding project, which including drilling scores of new wells, was not even half finished although most of the money had been spent. Derbyshire went back to Kentucky to see if there was any impropriety. Finding none, he said he decided more professional engineers should run the project and hired some.
Frustrated by the tangle of court suits and bankruptcy proceedings, Derbyshire said he is sure Whittaker will end up with "absolutely nothing." He said Whittaker, which spent about $40 million of the $50 million it committed to oil-related projects, is getting out of the oil business once and for all, although its two other small oil projects were very successful.
U.S. Bankruptcy Judge Ralph Pagter, based on an independent appraisal, ruled in mid-November, that the Kentucky properties have a fair market value of $30 million.
Barclays Bank petitioned the court to order Wright to sell the fields. But Pagter, who declined to be interviewed, ruled that Wright could continue operating them while the company drafts a reorganization plan due in mid-March. He also ordered Wright to continue paying Barclays Bank $15,000 a month interest.
Wants Money Back
"The bank just wants its money back," said Barclays' San Francisco attorney Ronald Friedman in a recent interview. "Nobody knows what the fields are worth."
No one has argued that the Kentucky oil fields are worthless. Petroleum engineers hired by Wright estimate that the fields contain about 9.3 million barrels of oil. Wright's consultants also estimate that it is economically feasible to extract between $72 million and $100 million worth of oil from the fields.
Wright contends that he lost control of his company operations in the fall of 1983, when Derbyshire, unhappy with the way Wright's engineers were handling the water-flooding program, began paying Wright's bills directly. Before Derbyshire cut off the funds to Wright in February, 1984, Whittaker had paid $8.3 million of the $10 million it agreed to lend the struggling oil company.
Wright, who worked for Shell Oil's geophysical department in the 1950s, said the relationship between the two companies was strained from the start. He said Kenneth Poovey, Whittaker's attorney, changed the merger agreements at the last minute and disregarded concerns expressed by Wright's attorneys.
In a recent interview, Poovey said the series of agreements which gave Whittaker the right to either merge with Wright or purchase the Kentucky fields alone, "started off on the wrong foot."
Made New Demands
Poovey said he was aware that Don Wright "did not trust me," but didn't think that should have soured the deal between the companies. He said he was upset with Don Wright because a few weeks after Wright signed the initial agreement with Whittaker in April, 1983, Wright repudiated the agreement and demanded that it be rewritten. Those demands came after Whittaker had bought $750,000 worth of Wright stock from Wright himself.
Wright confirmed the stock purchase, but said he changed his mind about the way the agreement was worded after his lawyers raised questions about its fairness to Wright shareholders. Revisions were made and a new agreement took effect in July, 1983.
"I don't think the problem was in personality conflicts," Poovey said. "Don Wright is primarily a promoter, as opposed to being an oil and gas man. He didn't want to be in a situation where the property was proved to be not economically feasible. He wanted to shift the risk to Whittaker before Whittaker wanted to take the risk."