Cloyce Talbott, co-founder of Patterson UTI, was all in for drilling, right from the get-go.
By Hanaba Munn Welch
Cloyce Talbott wasn’t born into the oil business. Just almost.
In 1939, at Megargel, Texas, Talbott’s father took the advice of a neighbor, lease operator C. T. Hedges, and acquired a lease with four wells—shallow wells that collectively made two to three barrels a day.
“You need to buy those,” Hedges had said. To back up his advice, Hedges co-signed the note, and Allie Talbott suddenly found himself with a steady way to supplement his farming operation. At age 4, little Cloyce Talbott made a good sidekick. “I went with my daddy all the time on those leases,” Talbott said, reminiscing about his earliest days in the oilfield.
Now Talbott is the retired chief executive officer of one of the world’s largest drilling companies, Patterson-UTI, and he still serves on the board. His path to phenomenal success from those long ago days in Megargel has sometimes been as rough as the roads on that first little lease.
The only expansion of his father’s operation was in 1941, when he acquired four or five more wells north of Megargel. It was seven-day-a-week work. “My mother [Badge Talbott] and daddy pulled those wells with a Fordson tractor and an A-frame,” he said. “We never made a lot of oil. He farmed. We never really had any money, but it was a living. We always had food.”
Talbott can still recall years when farm income was down and his mother would remark that the lease income was a great help.
When Talbott headed to college at Texas Tech, he chose to study petroleum engineering. “The reason I became a petroleum engineer, I had a cousin who was married to a petroleum engineer,” Talbott said. “It just seemed fascinating.”
Gasoline off the leases helped him fuel his car, and he worked summers in Megargel. “I went to school on that drip gasoline,” he said.
When Talbott started college, things were booming. In 1957, a year before he graduated, the downturn happened. “That down cycle lasted 17 years,” he said.
But, fresh out of school, Talbott managed to hire on with Standard Oil of Texas in Monahans. “I was real fortunate I didn’t get laid off,” he said. “Mobil laid off all their engineers.”
After two years, Talbott transferred to Snyder, where he still lives today. In 1962, he teamed up with a friend, Gordon Taylor, and Taylor’s father to run a well service business. When Taylor’s father sold out and left, so did the son. “Basically, Gordon gave his half to the accountants taking care of the books,” Talbott said. “Literally we had no money. I know about being broke.”
But Talbott’s real desire wasn’t to service wells but to drill them. “For some reason, I always wanted to be in the drilling business,” he said. “I don’t know why.”
In 1975, Talbott married Anita Franklin from Ira. He didn’t know then that her brother, Glenn Patterson, soon would be his partner in the drilling business. “Glenn was a school teacher,” Talbott said. “Glenn loved it. He was doing a good job. He had worked for us when he was a kid. I knew what a good worker Glenn was.”
The conversation at the family’s Thanksgiving meal in 1977 turned to drilling. “Let’s go into the drilling business,” Talbott said.
The two men had only a cursory knowledge of the business. “He had roughnecked all through college,” Talbott said. “I’d been on drilling rigs when I was an engineer for Standard Oil of Texas.”
Patterson didn’t immediately go along with the idea. “At Christmas I hit him up again about it,” Talbott said.
He remembers Patterson’s response: “I think I’m just going to do that.”
And the rest is history—from an inauspicious beginning to even worse times before things began to look up for the two.
The business started with seven partners. Those who stayed with Patterson and Talbott lived to see their investments pay off. It took a while.
The first Patterson Drilling rig was a used one bought from Junior Haney of Bowie. Then they expanded. “We bought another rig from Junior Haney, even junkier,” Talbott said.
They refinanced. Then Talbott decided to enlist the help of the late Myrle Greathouse of WES-TEX Drilling. “If you’ll sign the notes with me, I’ll give you half of Patterson Drilling,” Talbott told him.
Instead, Greathouse contracted with Patterson for drilling services. In 1980 and 1981, Patterson Drilling’s only contracts were with Greathouse.
“We started making a profit,” Talbott said. “In ‘81 and ‘82, things just skyrocketed. There were 5,500 rigs in the United States; 4,500 were running,” Talbott said. “We were right in the middle.”
It was the era of tax write-offs that encouraged drilling ventures—a “perfect storm,” Talbott said, that ultimately brought on the failure of banks, notably Penn Square Bank in Oklahoma City and Abilene National Bank in Abilene.
When the bottom fell out, the rig count dropped to 2,000, Talbott said. Idle rigs were everywhere. Patterson Drilling took advantage of the situation to buy rigs at depressed prices, not knowing how difficult the 1980s would be. Patterson bought an offshore rig—a Bigfoot 2.
“It was one of the big mistakes we made,” Talbott said. Idled rigs lined Sabine Pass. “As far as you could see were those jackup rigs,” he said. “There were just lined up in the water.”
The Big Foot 2 had a $12 million insurance value. It had been repossessed by the Bank of New York and ITT Capital, Talbott said. The cost simply to maintain the rig was $60,000 a month. Patterson offered $225,000 for the rig. “Give me five minutes, and I’ll call you back,” said the big city banker.
“We bought that rig,” Talbott said. “We put it to work.”
Despite the bargain basement price, the rig didn’t make money for Patterson. Every day it was in operation, Patterson Drilling lost $5,000, Talbott said. “It cost more to run it,” Talbott said.
Meanwhile, Talbott and Patterson insured the hull—not because they wanted to but because the company providing insurance for their crew stipulated the rig had to be insured too. “We worked that rig between six months and a year,” Talbott said.
Then came a call that Patterson’s Big Foot 2 had sunk in the mouth of the Mississippi River. Patterson and Talbott made a trip to New Orleans to see the rig tilting severely, footing askew in the deep muddy bottom of the big river. “They had what they call a ‘punch through,’” Talbott said.
For Patterson Drilling, the demise of the money-losing rig was a good day. “I learned the meaning of ‘constructive total loss,’” Talbott said. “They paid us $2 million for that rig. We didn’t make much money, but we paid everybody off. That was long before we were public.”
Maintaining working relationships with creditors and investors was a continuing challenge through the lean years. “Our worst times were ‘86 to ‘89,” Talbott said. “We owed $4 million.”
Sales of oil and gas properties in ‘85 and ‘87 helped Patterson (now officially Patterson Energy) stay in business. So did their creditors. “Halliburton, Smith [Drilco], Schlumberger, Hughes—they let us go out as much as six months,” Talbott said.
Glenn Patterson’s communication skills helped, Talbott said.
“You couldn’t do it today,” Talbott said. “You don’t have those relationships that we had.”
Besides the major companies, individuals come to Talbott’s mind from those early years, among them a man named Ferguson with Farmer Trucking. “Mr. Ferguson was an old bachelor,” Talbott said. “He loved Glenn Patterson. He wouldn’t sell his business to Glenn Patterson, but he would move his rigs for him.”
Things finally began to improve toward the end of the ‘80s. “In April of 1989, we started doing a little cash flow,” Talbott said. “It got progressively better. We were trying to figure out a way to get money back to those people who gave us money in 1981.”
Not everyone had stayed in for the long haul.
Talbott remembers a man in Billings, Mont., who had invested in Patterson Drilling to finance his retirement. At one point he could have joined a lawsuit and pulled out, but things changed over lunch in Billings. “I told them my side of the story,” Talbott said, unable to recall the man’s name. “He stayed with Patterson. Then we went public.”
Talbott heard later from a contact in New York that the man was not only pleased not to lose his investment but that he ultimately found himself with more money from his investment in Patterson than he’d ever anticipated. It’s the kind of story that makes Cloyce Talbott smile. “The people that stayed in did really well,” Talbott said.
In a way, it was always much about people, both for Talbott and his personable brother-in-law Glenn, who no longer participates in the business because of health issues. “You can’t run a business without a lot of good people,” Talbott said. “It’s amazing where you find them. You can find people on a drilling rig, uneducated. They would want to please.”
And that’s not to mention the long-suffering investors and suppliers who helped Patterson through the tough times.
Talbott has seen the other side of human nature too. An employee of the company “stole $78 million from us over nine years,” he said.
It’s the kind of theft that couldn’t have gone unnoticed in the early lean years of Patterson Drilling. It happened instead after Patterson went public in 1993 and then merged in 2001 with UTI.
“I trusted him,” Talbott said of the employee. “He was like my son.”
In the aftershock of the embezzlement, Talbott came under the scrutiny of the Securities Exchange Commission. An investigator interviewed him by phone. Talbott remembers how the SEC representative summed things up:
“This guy said, ‘Well, you know, a person can’t run a company without trusting someone, and y’all just trusted the wrong man.’”
Talbott, retired for seven years, is still trusting people. More than ever, he has confidence in the leadership of Patterson-UTI—Mark Siegel, longstanding chairman of the board, and Andy Hendricks, president and chief executive officer—a “crackerjack,” in Talbott’s estimation. He also speaks well of Doug Wall, Hendricks’ predecessor. “Patterson-UTI is being run the best overall that it’s ever been run,” Talbott said.
As a member of the Patterson-UTI board, Talbott travels to Houston four times a year for board meetings and generally keeps up with what’s happening in the industry. From his earliest years in the drilling business, he’s seen things change. “The majors have all come back into this shale play from the foreign countries,” he said, mentioning Shell, Conoco, Exxon Mobil, and Standard. “If you don’t work for them, you’re not going to be a big company.”
Working for the top players requires the best equipment—nothing like the used equipment Patterson acquired in the early years. By the time Talbott retired as CEO, rigs were $21 million each.
On the wall of his office at CML Exploration in Snyder is a picture of one of the first Patterson land rigs, the derrick lit against a night sky and not looking all that bad—a reminder of how it all began.
“When we started Patterson, we never had an intention of getting it as big as it is now,” he said. “We were a commodity driller.”
Sometimes things just fall into place.