By Caleb Talley | Photo by Jamison Mosley
A year-in-a-box calendar rests on Claiborne Deming’s desk in his expansive sixth-floor office in downtown El Dorado. It’s a Murphy’s Law calendar – not a code of conduct for the Murphy Oil Corporation, but a play on the old humorous adage, “Anything that can go wrong, will go wrong.” He’s torn off the latest day and reads it out loud.
“If you can keep your head when all about you are losing theirs, then you just don’t understand the problem,” he says with a laugh.
For Deming, former president and CEO and current chairman of Murphy Oil, the proverb isn’t entirely accurate. In an industry as volatile as energy, it was his level head and calculated decisions that brought the company some of its most significant victories.
And he almost chose a different career path.
“I grew up in Alexandria, La., which is a town in the middle of the state,” says Deming, nephew of Charles Murphy Jr., whose father founded Murphy Oil. “I graduated from high school there. I went to Tulane for my undergraduate and then Tulane Law School. When I graduated from law school in 1979, I actually took a job at one of the big firms in New Orleans.”
The firm offered him a starting salary of $20,000, approximately $70,000 by today’s standards. It was a great job doing what he’d spent years studying to do. But he had a second thought.
“The oil business was on one of its periodic booms, so I called my uncle Charles and asked if they would entertain me coming up and interviewing for a legal position,” Deming says. “I came, interviewed and they offered me the job.
“I took the job at Murphy for $15,000 year. I said, ‘Hey, you know the firm is going to pay me more, right?’” he recalls with a laugh. “That didn’t work.”
He’s been with the company ever since. “I guess I’m old school,” he says. “Back in the day, it was pretty typical to stick with the same outfit. But today it isn’t. I liked it from the outset, and I’ve never had any reason to leave.”
But that doesn’t mean Deming never faced more than his fair share of challenges during a 40-year tenure with Murphy. The oil and gas business, he says, is famously volatile.
“When I went to work for the company, it was a boom period,” Deming says. “Oil was on the move up to $40 a barrel, which at the time was unprecedented. There was a lot of investment in the business, and the company was growing fast.”
According to Deming, at the time, the Murphy Corporation was in the business of off-shore drilling, with a majority interest in the second largest offshore drilling fleet in the world. The company also had a big concession in Iran.
“And then, the Shah of Iran was overthrown,” Deming says. “We suddenly lost our concession, and the new government renounced all of our contracts. That was half of our production at the time.”
Despite the blow, the company weathered the storm, as another oil field in the North Sea off the English coast came on stream right as they lost their Iranian production. “Our production stayed right where it was,” he says.
“So, we were dealing with losing a big field and dealing with adding a big oil field,” Deming continues. “We had about 40 rigs all over the world… And then, in 1979 or ‘80, the biggest offshore drilling rig in the world, called the Ocean Ranger, was drilling off the coast of Newfoundland. There was a massive winter storm, and it capsized the rig. All 80 men aboard lost their lives.
“It was an enormous catastrophe, the human tragedy above all. But there were also a lot of financial implications. Being a lawyer, I had to work on that. It was a really wild time, with a lot going on.”
And in 1983, Deming says, the bottom fell out in what would later be referred to as the ‘80s oil glut, when a serious surplus of crude oil caused by falling demand resulted in plummeting prices. The price of a barrel fell from $40 to below $6. “It was a lost decade,” he says.
“The contracting oil business was the hardest hit,” Deming adds. “The biggest of these rigs were leasing out for about $100,000 a day. That’s an enormous amount of money, especially in that day. Oil companies stopped using these rigs.
“Now, if the price of oil drops, you’re still making some money. You’re just making a lot less money. But if you have a drilling rig that suddenly no one is using, you have zero revenue from it. And you have to pay to maintain it because business might come back. It’s an ongoing expense. And here we are, with a fleet of them. They’re stacked and not working. It was a big part of our company, and suddenly there’s no revenue and expenses are ongoing.”
It was a significant hit to Murphy, and the company was forced to shed as much cost as possible. The company had approximately 6,000 employees when the decade began, spread across their farm and timber, offshore drilling, marketing, exploration and production businesses. That workforce was reduced to 1,500.
“If you don’t do that, you don’t survive,” he says. “I worked with some smart people. We collectively spent the 1980s dealing with that. But we made it. So, the 1990s were all about growing again.”
In 1994, Deming was given the reins, having been named president and CEO. He credits his predecessor, the late Jack McNutt, with cleaning up the mess that was the 1980s. Deming’s job was to turn the page and write Murphy’s next chapter.
“We had a pretty clean slate,” Deming says. “We bought some production at the bottom of the market. We sold our drilling fleet. With that money, we reinvested in some really high-quality offshore oil fields at a rock-bottom price, three fields in particular…Those were really lucky but prescient buys. They ended up making a lot of money for us. They came on stream as I was taking over.”
And when oil prices went back up, Murphy, with Deming at the helm, went back into the exploration business.
“We took some big gambles on wildcat wells,” he says with a grin. “That became our hallmark.”
Wildcat drilling is the industry term given to the process of drilling for oil in unproven areas with no historic production records or thought to have been fully exploited as a site for oil output.
“We were always just big enough to where we could afford to do that,” he says, “But small enough to where it made a disproportionate influence and impact on the company. You can define the company’s history by the big oilfields we’ve discovered… When I took over, we got back into that exploration business.”
One such oilfield might even define Deming’s tenure as CEO.
“We didn’t do very well for the first few years,” says Deming. “I laughingly ask people who the worst CEO in America was from 1994 to 1998. I can assure you I was. There wasn’t a mistake I didn’t make. We could not find oil with a drill bit. We were terrible, one dry hole after another.”
His team made a couple of discoveries in the Gulf of Mexico. In 1998, he signed a concession with Malaysia to drill off the coast of Sarawak and Sabah, two Malaysian provinces in the South China Sea that flank Brunei, a region that had been dominated by Shell. At first, they found little more than natural gas.
“We eventually found some really big underground structures by seismic,” says Deming. “When our guys first saw it, our head of exploration called and said, ‘Claiborne, get your tail down here right now. Leave your office. Get on a plane. Right now.’
“So, we took it with an 80 percent interest. Shell had initially looked at it, but they were trying to trade the Malaysians too hard for it. The Malaysians got mad at them, so they brought us in to spoil their plans. We agreed to their terms; I think they were even shocked. We got it with a three-well commitment.”
The first well produced nothing. The second well was dry, too. “It was pretty dire times around here,” says Deming. But he kept his head while others were losing theirs.
In 2002, the third well struck oil. A lot of it. “It was the biggest discovery in the history of the company,” Deming says. “It was a 500-million-barrel field.”
When he signed the concession in 1998, oil was roughly $12 a barrel. When the discovery was made in 2002, it was approximately $20. Deming “operated the field” ¬– the process of bringing in contractors to build wells and platforms – at a fixed price. And in 2005, the price of oil skyrocketed, eventually reaching $100 a barrel.
“When the price of oil goes up, the price of all those contracted services goes up because everyone wants their share,” Deming says. “Our prices were fixed. When our field finally went on stream, oil was $100 [a barrel]. Let’s just say it was a very profitable field. It was a huge windfall.”
The field cost Murphy Oil $2 billion to develop. It paid off in less than two years.
Deming considers the accomplishment to be the defining moment of his career and his legacy. Students of El Dorado High School, both past and present, may say otherwise. That’s because Deming, before retiring as CEO, was instrumental in the development of the El Dorado Promise, a Murphy-funded program that pays the college tuition of El Dorado High School graduates.
The El Dorado Promise was modeled after a similar program implemented in Kalamazoo, Mich., years earlier. Deming says it was a friend of his who introduced him to the concept at a Chamber of Commerce meeting. And it was another friend, a banker in El Dorado, that told Deming they could make it a reality.
“The price of oil was $100 a barrel. We had just brought on a massive oil field. We had just agreed with Walmart to put Murphy gas stations in front of their supercenters. We were crushing it,” Deming says. “That year we had a net income of $1.5 billion, with a cash flow of $4 billion. We had a lot of money. I looked at this and said, ‘We can do this.’”
Deming put his planning department in charge of estimating the program’s cost, which came in at approximately $50 million. The idea was taken to the Murphy board, and after a 10-minute presentation, it was approved unanimously. “We just made this profound impact on South Arkansas, and the whole discussion took about 45 seconds,” he laughs.
They kept the decision a secret. Days later, Deming, alongside Gov. Mike Beebe and El Dorado school administrators, made the announcement to the students of El Dorado High School.
“We got up and announce this thing, and there was total silence,” he says. He gets excited as he recounts the events of that day. “Everyone sat there processing for a few seconds. Then there was this massive explosion of excitement. People were weeping, calling their parents. It was stunning. It was really, really fun.
“And then,” he adds, “the voters of El Dorado overwhelming passed a property tax to build a new high school. They’d tried to get that passed twice before and couldn’t get support, and suddenly it passed with more than 65 percent. The whole thing was just terrific.”
Deming, who continues to serve as chairman for the Murphy Oil Corporation, a position he’s held since 2008, will join his uncle, Charles H. Murphy Jr., in the Arkansas Business Hall of Fame.
“I’m honored,” Deming says. “It’s such an exalted group. It’s an accomplished group. It’s a real sense of accomplishment to be included with a group like this.”