ap First Published Otis History July 1, 1985 oTIs ols) ‘The Otis History — Part 1 Introduction Otis has been at the forefront of Well Interventions from the very beginning, leading by innovation, engineering and expertise. Anyone involved in the intervention business is familiar with the reach of the Otis products and services and the Otis History is a part of the History of the Oill and Gas Industry from wild beginnings in an anything goes world to the safety and service orientated industry that now exists. The Otis History is in many respects similar to the stories of the other oil field pioneers, people prepared to risk tall in their firm belief that they could succeed, do it better and get the job done, as they say the rest is history. Interestingly, the main photo we've used for this article was taken in 1993 of a snubbing unit in Algeria, ‘moments before an underground implosion dropped the wellhead and snubbing unit down ten feet. Photograph courtesy of Ozzy Ozzbourne, duced lowing article (rep loaded from the Otis Engineering tographs were dor p, Facebook Page with the kind permission of the OEG Admi ors Mr. 8. Wilson and Mr. R. Viator The Otis History The oilfield product industry, as well asthe oil industry, began in 1859 at Oil City, Pennsylvania when Col. E.L. Drake drilled a well to a depth of 69-1/2 feet and struck oll. Most early oil wells were shallow enough not to need sophisticated pressure control or extensive maintenance and service. As American demand for fossil fuels grew — especially after the development of the internal combustion engine in the late 1800's ~ more and deeper wells were drilled and completed under increasingly difficult pressure, temperature, and corrosion conditions. These pressures posed safety problems for the personnel working on the well and for the continued maintenance and serviceability of the well By the late 1920's many wells which malfunctioned under adverse conditions had to be abandoned for lack of technology or techniques to safely condition and service them. It was obviously not in the best interest of the oll companies to have their wells shut down so rewards were frequently offered to anyone who could make the well serviceable again. In 1928, an oil company offered a $1000 reward to anyone who could service a well with a malfunctioning valve. The well had a pressure of over 1000 pounds per square (psi) ~ more than enough to kill the unwary or unskilled. The reward had been unclaimed for more than a year when a young man named Herbert C. Otis, decided to give ita try. Mr. Otis had been in the oil business for eight or so years and was currently employed {sa drilling and production superintendent for the Bethany Oil and Gas Company in Shreveport, Louisiana. Using an improvised stuffing box and other equipment he had personally modified, Mr. Otis was able to control the wells pressure adequately enough to drill through the defective valve, replace it with a new one, get the well back into production and collect the $1000 reward, ‘As word of this feat spread through the local oilfields, Mr. Otis was often contacted by oil production companies for consultation on pressure control problems that were being encountered as well became deeper. Mr. Otis often invented new tools or modified existing tool to deal with these situations. One of his earliest inventions was a set of balanced snubbers that made it possible to run tubing into a well against pressure. Before long numerous wells in the Shreveport area had been services with what was becoming suly 22985, (tis Engineering Corporation UP Quality Improvement Process MQ Page LotsoTis First Published ° Otis Histor aB ry hy. 1985 known as the “Otis Process”. What Mr. Otis needed before he could go into business for himself was a reputation outside of Northern Louisiana, He soon got an opportunity for a job installing tubing under pressure on two wells for a major oil company in (Oklahoma if he could provide both crew and all required equipment. This was his big chance to establish a reputation outside of the local area but he had a problem; he could not afford to buy all the equipment he needed nor did he have a crew. What he did have was a strong determination not to let this opportunity get away. The equipment problem was solved by arranging credit at a local supply store. A idle well crew was located in a nearby oilfield where they were waiting ten days for a cement job to dry. Armed with these resources Mr. Otis headed to Oklahoma, performed the “Otis Process” on the two wells, visited the paymaster, and paid off his note at the supply store. He paid his crew and returned them to the Louisiana well before the cement had finished setting, By 1928 Mr. Otis had developed enough of a reputation in the oilfields of the southwest to quit his job and set up the Southern States Company in Shreveport. His early work forces consisted of four crews trained in the Otis Well Tubing process, More than 500 wells were “tubed” in the first two years of operation. In 1934 Mr. Otis moved the Southern States Company to the Tower Petroleum Building in Dallas, Texas, which he felt was ‘more centrally located. The Southern States Company was reincorporated as Otis Pressure Control, Inc in 1935. The new name more accurately reflected the function of the company. The company prospered throughout the 1930's in spite of the great depression but was almost exclusively a service or “labor” company. Any equipment that was needed was purchased from suppliers and modified as needed by local machine shops to Otis specifications. Little advertising was done as Mr. Otis depended on his reputation for “getting the job done” to bring in business for his company. Even with the Otis Well Tubing Process, pressure control was far from safe in those early years and severe - often fatal- accidents were a regrettably frequent occurrence. In the mid 1930's Mr. Otis made safety one of the Company's major goals. Much engineering skill was devoted to making Otis products and services safe and the accident rate began to fall and remains one of the lowest in the industry. In the late 1930's, Otis Pressure Control began to innovate new products as well as services, though the primary emphasis remained on service. Among these products were paraffin scrapers - which removed the wax that accumulates inside the tubing of a producing well—and wellhead control equipment. ‘A machine shop was opened in a Dallas warehouse in 1938 on an experimental basis to see if there would be ‘an advantage to manufacturing Otis equipment in-house rather than in outside machine shops. It was quickly discovered that product quality and delivery dates could be better controlled in an in-house shop. By January of 1939 the shop was working 16 hours a day and by May it was making a majority of Otis equipment. The Otis offices, shop and warehouse were moved to a new facility on Denton Drive in 1940, Otis Engineering Corporation was established in January of 1941 as a separate company to handle the design and manufacture of new and existing products for Otis Pressure Control. The beginning of the Second World war in 1939 increased the search for new energy in the late 1930's and early 1940's, Otis benefitted from this increase in activity and efforts were made to develop new markets overseas and the expand markets in the U.S. through increased salesmanship. America’s entry into the war in late 1941 dramatically increased domestic drilling activity though it did crimp overseas activity. Otis’ suly 22985, (tis Engineering Corporation UP Quality Improvement Process MQ Page otsoTis 7 First Published : Otis History as) July 1, 1985 contribution to the war effort was important enough that government owned machines were placed in the shop to help increase production, Three shifts were run around the clock as the shop struggled to keep pace with orders for machine-gun parts, precision gauges, and other war materials. Otis safety valves were the hottest selling oilfield product during the war as Allied countries used them to prevent enemy sabotage of oil supplies. Oilfield activity slowed in 1945 as the American economy returned to a peacetime footing, but the return of Otis employees who had joined the service during the war led to increases in productivity and product innovation. This impetus helped create the biggest increases in revenues up t that time. Otis’ market share Increased in most product and service lines and Otis’ domestic revenue increases far exceeded the increases in domestic drilling activity. With the end of the war, International markets could be developed again and Otis’ first international field office was opened in eastern Venezuela in 1947. Otis Pressure Control Export, Inc. was established in 1947 to handle the sale, distribution and service of Otis tools overseas. A new part number system was implemented in 1949 to help organize Otis product lines and reduce confusion in the shop, Equipment business increased so much that by the late 1940's the Dallas shop had trouble meeting delivery requirements, Otis continued to expand its sales and service operations throughout the free world, The onset of the Korean Conflict in 1950 added even more impetus to the rapidly growing oilfield product, line, Otis again played and important role in the war effort and given Defense Deportment’s highest rating for raw material priority, Otis was rewarded as 1950 revenues increased 20% and equipment sales passed $1 million mark for the first time. The war also brought a return of skilled manpower shortages that were ‘common in World war Il and by 1954 sales were far ahead of the shop's ability to deliver. The boom continued until early 1956 when the oll industry slowed for a few months and then took off again. America’s love affair with the automobile ~ particularly the large automobile ~ served to keep the oil industry growing briskly throughout the 1950'3, In 1956 Otis acquired the Bryan Gas Lift Co. and the gas lift patents of Cummings Inc. and entered the gas lift industry for the first time. Otis Pressure Control Inc. merged with Otis Engineering Corporation in 1957 to reflect the importance of product design and innovation in the increasingly technical make-up of the company. Mr. Otis named Robert McLemore to succeed him as President of Otis Engineering in 1957. Concerned about ensuring the continued prosperity of the company he had founded, Mr. Otis decided to sell Otis Engineering rather than risk its being forcibly sold at this death to pay inheritance taxes. Several companies and investor groups sought to purchase Otis. Mr. Otis selected Halliburton because he felt their products were natural compliments to those of Otis and respected Halliburton management. Otis became a wholly owned subsidiary of Halliburton Company in 1959 and thus gained new access to capital for expansion as well as a new product line: production packers. Fueled by continued growth in the oil industry and by Halliburton Company Capital, Otis grew dramatically through the 1960's in spite of the slowdown in drilling activity late in the decade. This growth necessitated a ‘new facility and in 1962 the company moved to the current headquarters site on Beltline Road in Carrollton, Texas. By 1970 Otis Engineering had expanded to four times the size it had been when acquired by Halliburton in 1959. suly 22985, (tis Engineering Corporation UP Quality Improvement Process MQ Page otsoTis First Published ° Otis Histor aB ry hy. 1985 The early 1970's brough continued growth and expansion for Otis as worldwide oil consumption set new records each year. Otis also benefitted from impressive sales in new product lines such as safety and pollution prevention equipment. Mr. McLemore retired in 1975 and Mr. M.E. Shelton was named as his replacement. During a 1973 war the Organization of petroleum Exporting Countries (OPEC), an alliance of oll exporting countries which controlled over 50% of the world’s oll supplies, began an embargo of crude oil sales to countries (including the U.S., Japan and Western Europe) that were dependent on imported oil. At the same time OPEC quadrupled the price of crude oil. The embargo ended in 1974 but the price of oil continued to rise throughout the 1970's. The increasing prices of crude oil and natural gas led to a worldwide boom in oil exploration and development which further expanded Otis markets for its products and services. Business was increasing so rapidly, without and end in sight, that many controls on capital spending and a manufacturing costs were loosened or abandoned. The prime emphasis became delivery at any cost because it was assumed that increased expenses could be passed on to the customers in the form of higher prices. As long as Otis’ customers. expected oil and gas prices to continue rising, they were not concerned about how much they were being charged as long as they could get the products when they needed them, Otis inventories began to grow as oilfield product usage became more and more difficult to predict. The oil boom became an explosion ater the 1979 Iranian Revolution temporarily shutoff Iranian oll production. The price of cl rose to above $30 per barrel and many oil industry analysts predicted oil prices in the $100 per barrel range by the end of 1983. Otis inventories, capital expenditures, debt, and sales order backlog continued to grow as expectations ofa long-term prosperity inthe oll industry grew. Mr. TH. Cruikshank replaced Mr. Shelton as Otis’ President in 1980 Part 2to follow. suly 22985, (tis Engineering Corporation UP Quality Improvement Process MQ Page botsOTIS. ols) Otis History First Published July 1, 1985 suly 22985, (tis Engineering Corporation UP Quality Improvement Process MQ Pages ots