Establishing a “Major:” The Magnolia Petroleum Company (Nov 17, 2024)

by Scott Sosebee

There is no debate that the extraction, refining, and production of petroleum was the most defining and significant facet of the Texas economy in the 20th century and perhaps in any century. Texas has been the fortunate beneficiary of sitting “on top” of one of the largest and most accessible sources of oil reserves in the world, a happenstance that has gone a long way toward making Texas’ economy one of the most dynamic in the nation—even the world—in the last one hundred years. The state of Texas’ commercial success continues to rise and fall with the fate of the petroleum industry.

Spanish explorers during the 17th and 18th centuries used petroleum to caulk their ships and later grease the axles of wagons, a practice that early migrants to Texas in the 19th century continued. Lyne Taliaferro Barret drilled the first commercial oil well in the state, near Nacogdoches, in 1866, and small discoveries continued within the state through the 1880s. In 1894, a significant discovery in Navarro County near Corsicana truly signaled the beginning of the Texas oil industry.

The Corsicana Field began the industry, but the beacon of what the oil industry would one day become occurred on January 10, 1901, when Anthony Lucas brought in the Spindletop gusher. Drillers and speculators fanned out in the Gulf Coast area in the next half-decade as the Sour Lake, Batson-Old, Humble, and Goose Creek fields came into production. This first “boom”—there would be many others in the next century—initiated the establishment of numerous companies, almost all smaller, largely entrepreneurially driven enterprises that would grow into some of the largest corporations in the world. The Humble Oil Company would, through mergers and corporate machinations with Standard Oil, become Exxon; what began as the Texas Fuel Company in 1902 would one day be known as Texaco. In that year, what would become the largest of these early producers—the J.M. Guffey Petroleum Company—also came on line. You probably remember that company by the more recognizable name it took in 1907: The Gulf Oil Corporation. One of the companies that began during that time would also grow into a corporate giant: The Magnolia Petroleum Company, which would become Mobil Oil.

The origins of Magnolia stretch back to the field at Corsicana. Petroleum—the sticky, gooey, odiferous substance that is extracted from the earth—has few uses in its raw form, often referred to as “crude.” Thus, for the industry to be truly profitable and productive, petroleum needed to be refined. This is what John D. Rockefeller understood in the 1870s, and some of the most enterprising oilmen of the 1890s followed such a lead. One of those was J.S. Cullinan, who built and operated a refinery in 1899 to handle the production at Corsicana. His company would eventually be known as the Navarro Refining Company. After the discovery of Spindletop, another company, the George A. Burts Refining Company, began to refine a significant portion of the crude oil from Lucas’ gusher. Burts’ name would eventually become the Security Oil Company. Finally, in 1911, Galveston financier John H. Sealy bought both the Navarro and Security Companies, merged them together, and christened the new entity Magnolia Petroleum Company. Sealy would serve as the new company’s first president.

During the 1920s, the Texas oil boom spread out of the Gulf Coast region and into first north-central and then northwest Texas, and later into the abundant reserves of the Permian Basin, West Texas. As Texas’ production increased, Texas oil companies such as Magnolia saw their assets and capitalization skyrocket. Magnolia returned to its roots in 1925 when it purchased the Corsicana Petroleum Company, which raised the value of the company to over $180 million—a vast sum in the 1920s. Profit and success in Texas quickly attracted the interest of the then-larger petroleum corporations headquartered on the U.S. East Coast. One of those was a portion of the remnants of the break-up of Rockefeller’s Standard Oil, Standard Oil of New York, or Socony. As Magnolia expanded, Socony seized the opportunity to begin to purchase Magnolia stock, and eventually, the eastern company acquired enough of a stake to take over the Texas company. In December 1925, all of the Magnolia stock was exchanged for Socony stock, and all Texas properties became the property of the new entity, which became the new Magnolia Petroleum Company. Socony and the Vacuum Oil Company merged in 1931, and Magnolia then became an affiliate of the new company.

The new company’s offices relocated to Dallas in the 1940s, with its familiar red “flying horse” icon marking its headquarters. Magnolia became one of the most profitable and largest oil production companies in the world, with refineries, a production company, as well as a pipeline subsidiary. The Magnolia Petroleum Company merged again in 1959 with one of its larger corporate umbrella “partners,” the Socony Mobil Oil Company, and the now single larger company took the name of the Mobil Oil Company, with its corporate offices in New York. Throughout the 1960s, 70s, and 80s, Mobil remained one of the five largest oil companies in the world and one of the largest corporations of any kind.

In a somewhat ironic twist of fate, the huge conglomerate returned “home” in 1999 when Mobil and Exxon, both two descendants of Rockefeller’s Standard Oil as well as of two of those original Texas companies (Magnolia and Humble) merged to form Exxon/Mobil, which at the time became the largest corporation in the world. They also returned to their origins by moving the corporate headquarters to Texas. The new offices were first located on a campus in Irving, but coming full circle, Exxon/Mobil has relocated to The Woodlands, just a stone’s throw from Ross Sterling’s first Humble Oil strike.

The East Texas Historical Association provides this column as a public service. Scott Sosebee is a Professor of History at Stephen F. Austin State University and the Executive Director of the Association. He can be contacted at sosebeem@sfasu.edu or via www.easttexashistorical.org.