The Coffee Shop Credit Check

By Paul Kenworthy

Every year on July 4th, our National Birthday, I am reminded of another birthday: My father, Paul W. Kenworthy, was born on July 3rd. He formed and operated the original Kenworthy Tank Rental in Odessa during the late ’50s, ’60s and early ’70s. During this period Kenworthy Tank Rental was the largest renter of frac tanks and test tanks in the Midland-Odessa area, which is not really saying much. As a second-generation Oilfield Brat, I experienced and heard stories about events in “The Good Old Days” of the Permian Basin oil business. In retrospect, these stories have made me realize that there actually were many good things and many good people in the oil business when I was growing up in Odessa.

My father and his generation grew up in The Great Depression and it affected them for life. Kenworthy Tank Rental was run out of an old steel building on South Grandview in Odessa. The building had an office in front and a shop in the back. The office had burlap sacks for curtains, surplus steel desks and, on the floor, cracked linoleum squares covering the concrete foundation. My father called the office decor “salesman repellent.” He told me that when salesmen would make cold sales calls, they would take one look at the office and think that this outfit was broke. My father’s attitude about trucks and equipment was just the opposite. He started out as a trucking contractor and the company’s Mack trucks were the top of the line and maintained like new. “Offices don’t make you any money, son. Trucks do.”

During my last two years at the University of Texas at Austin business school, where I majored in Finance, I started taking an interest in the family business. During a visit home, I went to the office and talked to Dad about the business and looked at the financial statements. When I looked at the Balance Sheet, armed with the vast knowledge I acquired in business school, I told Dad that 25 percent of the company’s annual income was in Accounts Receivable. That ratio was way too high and he needed to do something about it. He responded that major oil companies are 90-day payers, there was nothing you could do about it and his bad debt expense was less than 1 percent a year.

During this same visit, my father got a phone call from a new oil company in the area that wanted to rent some frac tanks. He had not done business with this company before so he took detailed notes and ended the conversation by telling the caller that three frac tanks would be delivered to their location the next morning. I ask Dad why he would rent tanks to a company he did not know anything about. Shouldn’t he check their credit rating? He told me that if you rent tanks to a company that needs help when they are just starting out, they will stick with you as they grow. He also pointed out that all the company was risking providing the tanks was truck driver time and truck fuel.

Then Dad told me something I have never forgotten. He told me if that new company never paid the relatively small frac tank rental invoice, it would eventually go out of business. Back then the service companies were fewer and smaller. Most of them were friendly competitors who always gossiped with each other at coffee shops and popular lunch cafes. The reason a company would go out of business if it did not pay its bills is what I call the “Coffee Shop Credit Check.” Dad told me that if this company did not pay Kenworthy Tank Rental’s invoice and called another tank rental company like Diamond Tank Rental, Diamond would tell that company it would not rent them any tanks because they did not pay Kenworthy. The oil business has certainly changed since then.

One effect the Depression had on my father was that he did not trust banks. When he was a struggling trucking contractor a bank foreclosed on the truck of a friend of his who was also a trucking contractor and Dad never forgot it. Dad would never deposit all of the company’s money in one bank. He would deposit the money in multiple accounts in multiple banks. The amount of money deposited in any one bank never exceeded the amount of money that was insured by the FDIC so that in the event any of the banks failed, the company would not suffer a loss. I told Dad that he was paranoid and that I learned all about the Federal Reserve System in business school and banks could never fail again. When the 1986 oil bust hit, my father’s eldest son with two college degrees (me) suffered the indignity of having to wait in long lines at two local banks that had failed to get the FDIC checks that were paid to depositors whose money was deposited in insured checking and savings accounts. My father’s “I paid your college tuition” grin had been enough to motivate me to volunteer to do it.

There were other members of my father’s oil business generation that I admired. One of them was Shorty Hall, who owned Shorty Hall Rig Company. Shorty Hall Rig Company built the old wooden oil derricks originally used to drill oil wells like Spindletop. In fact, Shorty Hall and his son Don Hall rebuilt the wooden derrick that is on display at the Permian Basin Petroleum Museum. When the steel rigs in use today replaced the wooden rigs, Shorty Hall Rig Company should have gone out of business. However, Shorty’s company began trucking the steel rigs instead of building wooden rigs and became one of the largest trucking companies in the Permian Basin. It is a true example of West Texas ingenuity at work. I got to know Shorty Hall when his son Don was my partner in Kenworthy Oil Company before he died of a heart attack. The lesson I learned from Shorty was “Fast pay makes fast friends.” Years ago, the Post Office would deliver mail twice a day, once in the morning and once in the afternoon. Shorty would come by our office periodically to talk business. Several times Shorty was at the office when the morning mail came. Shorty would go through the mail and if he had a bill in the mail, he would immediately write a check to give to the postman when he delivered the afternoon mail.

Many times you do not learn things about your parents until after their death and that was true of my father. My parents moved to their ranch in Oklahoma after Dad and his partner sold Kenworthy Tank Rental. After Dad died, the family arranged a funeral in Odessa. We were deciding on pallbearers and I knew that Dad had a good friend in Odessa named Buddy Carpenter. Buddy started and operated a company called Saber Tool that rented oilfield equipment used in drilling and well service projects. At the luncheon held at the church before the funeral Buddy came up to me and told me something I will always remember. Buddy said he was so honored to be a pallbearer because Dad helped him when he started his business. When he started Saber Tool, he was low on cash but he needed a truck to haul the tools to the field. Buddy told me: “Your father gave me a truck and told me that I could pay him for it whenever I could.”

As a member of the PBPA Board of Directors I am well aware that some people have a negative opinion of people in the oil business. Many of these people are patriotic and celebrate July 4th. I also celebrate July 4th. But I also celebrate July 3rd, my father’s birthday, and I celebrate that I was raised in West Texas and am in the oil business.

Called “Santa Rita #2,” this rig, a restoration of Santa Rita #1 in its 1923 appearance, was done by Shorty and Don Hall, of Odessa. The rig, on display at the Petroleum Museum in Midland, serves as a lasting reminder of the hundreds of cable tool rigs once used throughout the United States. PHOTO COURTESY OF THE PETROLEUM MUSEUM

Paul Kenworthy is president of Kenworthy Oil Company, a small independent oil company based in Odessa. A graduate of Permian High School, the University of Texas in Austin, and St. Mary’s University School of Law, he serves on the board of directors of the Permian Basin Petroleum Association and is a past chairman of the PBPA Legislative Committee.