John S. Callon steps down as chairman but remains committed to company

Published 12:00 am Friday, September 17, 2004

A pioneer in the oil industry, John S. Callon is no less excited about his company today than in the heady days of the 1950s, when the newly organized Callon Petroleum Company of Natchez began to catch the eye of big-time investors.

As Callon stepped down as the company’s chairman of the board on Friday, he did so with Callon Petroleum in a strong position, its stock price up by more than 200 percent in 2003 and its production expected to be 80 percent higher in 2004 than in the previous year.

For more than 50 years, Callon has ridden the roller coaster the oil industry often emulates. He has ridden out the downswings to $2.50 a barrel and the soaring to $40.

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He and his wife, Betty, have traveled the globe, often in the company of celebrities and some of America’s most influential financial and political leaders. Often glamorous and always exhilarating, he said, the work he did indeed was hard work. It was challenging.

An unlikely beginning

His successes and talents well known, Callon tells the story of a life that might have been spent selling insurance or wholesale ketchup and tomatoes but for some ill-read assessments of his potential.

&uot;I was in the Navy for four years of World War II,&uot; he said. &uot;I came home knowing nothing of the oil business. I had never seen an oil rig.&uot;

It was the mid 1940s. He saw strange things rising from among the pine trees and asked what they were. &uot;I was told they were oil rigs. That was my introduction to the oil

business,&uot; he said.

Times were tough, and he needed work. He sold men’s clothes at Benoist’s on Main Street. He sold sporting goods for Sears, Roebuck and Company.

Then he followed up on a couple of recommendations and had interviews with New York Life Insurance Company and with Heinz.

&uot;They both gave me tests,&uot; he said. &uot;New York Life told me that I looked good in many respects but that I didn’t have enough experience in selling and finance. Heinz gave me extensive tests and told me basically the same thing, that I was not sales material.&uot;

His break into the oil business came through two geologists who had opened their office in Natchez soon after the war ended. They needed someone to handle oil and gas leases for them. &uot;I knew nothing about it, but they assured me I could handle it,&uot; Callon said.

The making of a landman

He handled it. He liked the work. Soon he began to work on his own, with his first big lease of several thousand acres at 50 cents an acre giving his career a big boost.

By the late 1940s, he had begun to study what was going on in the oil business and to figure out what moves to make. The area around Natchez was a big geological area, and many people came in to find oil, including some major companies.

Callon began to work with the big national companies. &uot;They wanted to farm out the work. They would give me $15,000 in dry hole money and 80 acres of leases to go out and drill a wildcat well,&uot; he said. &uot;I’d take that and give it to someone like Doris Ballew. He would take a half interest and get the $15,000 if it was dry, to cover his costs. It worked out for him and it certainly did for me.&uot;

His first 42 wells were dry, Callon said. &uot;And then 43 and 44 were wildcat discoveries. They came in on the same day.&uot;

Knocking on the big doors

The nature of the business began to change. Dry hole money became a thing of the past. Investors would be key to the success of entrepreneurs in the industry.

&uot;I grew up in the country, in Fenwick,&uot; Callon said. &uot;I didn’t have a lot of wealthy neighbors and acquaintances to call as investors. You might get one in 10 wells in those times.&uot;

He began to look for sources and turned to friend John James, who had made friends among some big corporations through his work with the Atomic Energy Commission.

&uot;I asked him to find some contacts who might want to invest in oil and gas,&uot; Callon said. &uot;He introduced me to people in Detroit, Chicago, Los Angeles &045;&045; all over the country, substantial contractors interested in developing sources of revenue to go with projects we had here.&uot;

James also introduced Callon to Pat Hyland, president of Hughes Aircraft. Their relationship blossomed not only in business ventures but as genuine friendship.

&uot;Betty and I traveled around the world with the Hylands, Pat and Murial,&uot; he said. &uot;He invested in every well I ever drilled, and he was happy with his investments.&uot;

Meanwhile, John’s brother, Sim Callon, had joined him in the business. About 1950, the two had transferred the assets into a new company, Callon Petroleum Company.

Funds were business highlights

Highlights of the 50 years since then include the establishment of a limited partnership drilling fund. &uot;It was the next step for raising money for drilling. We were getting up into the millions of dollars by then,&uot; he said.

A second highlight was organizing the Callon Petroleum Income Fund. &uot;This was not money for drilling but strictly for buying production,&uot; he said. &uot;We were working with the big corporations then. We had something to sell and it made sense and they bought it.&uot;

Third was the organization of the first and only royalty fund, the Callon Royalty Fund, Callon said. &uot;In the royalty fund, completely different from drilling or production, I came up with the theory that I could buy a piece of royalty from a landowner, and the law of averages was going to work. We had lots of success.&uot;

Investment banks from all over the country joined the company to raise money. &uot;We raised multi millions of dollars. This appealed to the big money, the pension funds. They wanted reasonable safety and high returns. We’re talking about hundreds of millions of dollars.&uot;

The company’s first major discovery was the Quitman Bayou Field north of Natchez. &uot;It produced over 25 million barrels of oil,&uot; Callon said.

Soon after, the Clear Springs Field in Franklin County came in &045;&045; about 10 million barrels of oil.

Stepping back but staying

&uot;I’ve enjoyed every minute of it,&uot; Callon said. &uot;But I couldn’t have done all of it by myself. I couldn’t have done it without the people who work for us, the people who love the company.&uot;

Callon will remain a member of the board of directors. He is excited by the work he sees accomplished by his nephew, Fred Callon, who succeeds him as chairman of the board and already holds the title of president and CEO.

&uot;Fred and John Weatherly have done a masterful job ever since taking over,&uot; he said. Weatherly is chief financial officer.

&uot;Of course there are ups and downs all the time. We’ve seen them all,&uot; he said. &uot;I’m pushing 85, and it’s time for me to step down and let someone younger take over.&uot;

Still, his enthusiasm for the work and the company remain high. &uot;I can hardly wait to get to the office,&uot; he said.