LARIO OIL & GAS COMPANY

Company History

Company founder I. A. O’Shaughnessy’s first venture into the energy industry began in Oklahoma in 1916 with the formation of Globe Oil and Refining which focused on the conversion of crude to usable fuels and oils. Realizing that there were excellent opportunities to participate in the exploration needed to provide feedstock for the refinery near Blackwell, Oklahoma, several careful investments were made in drilling projects in that area. After advancing fairly sizable sums to one wildcatter in particular, O’Shaughnessy created Lario Oil & Gas Company for the purpose of managing these interests. Lario was incorporated in Delaware on July 16, 1926 with the growing city of Wichita, Kansas selected as company headquarters. Later in this same year, Lario participated in its first venture on the Wenrich lease, which later became known as the Oxford Pool, in Sumner County, Kansas. Photos of the discovery display a classic image; the over-the-top-of-the derrick gusher! This lease is still making oil and has proven to be one of the most outstanding producers in the entire state of Kansas. To this day it ranks as the largest recovery per acre of any lease in Lario history.

Looking to repeat its success, in 1930 Lario obtained a farmout from Shell Petroleum in the Ritz-Canton field in McPherson County, Kansas. In short order, Lario became the most active operator and largest producer in this giant field. Subsequently, Globe built a new refinery in McPherson to make use of this supply of crude oil. It was during this time that one of I. A. O’Shaughnessy’s sons, John F., arrived in Wichita and went to work in the family business. In 1935 he became Vice-President of Lario, and management of the company was turned over to him.

As the production from Ritz-Canton declined, new discoveries were being made in Northwest Kansas. As they pursued additional reserves, Lario selectively acquired leases in Ellis County, Kansas which became part of the Bemis-Shutts (Arbuckle) field, one of the largest accumulations in the state. The field office in Hays requires a staff of 20 to manage the production from this historic field. Lario was also the firs oil company to discover oil in Barber County Kansas in 1936, now a mature producing area.

Due to its success and a need for more personnel, additional office space was required at the Wichita headquarters, and so in 1941 the building at 301 S. Market was acquired and remodeled and remains the “home office” to this day.

In 1942, an office was opened in Midland, Texas in order to establish exploration and production in the fast emerging Permian Basin. That effort was also successful, and another of I. A.’s sons, Donald E. O’Shaughnessy, became manager of that operation.

During the 1950’s and 1960’s the company’s primary exploration efforts targeted Oklahoma and West Texas, but in1969, Lario became an international company by becoming an active explorer in Alberta, Canada through select joint ventures. An exploration office was opened in Calgary in the early 1970’s and is vitally active today, representing 1/3rd of the company’s exploration budget.

In 1977, Mike O’Shaughnessy, a grandson of I.A. O’Shaughnessy opened an exploration office in Denver, Colorado to exploit burgeoning Rocky Mountain and Williston Basin opportunities. Early drilling resulted in a very successful string of oil discoveries in the Minnelusa play of northeast Wyoming. Lario continues to operate substantial production while continuing to explore the Rockies and beyond, often accomplished via strategic partnerships with operators that demonstrate expertise in a particular area or play, such as the Williston Basin.

By the early 1980’s, ownership of the company was highly fragmented within the
O’Shaughnessy family and in 1985, the company entered into a leveraged buyout for the purpose of consolidating and transferring ownership of the company to the portion of the family that managed the company. O’S Companies was formed as a holding company and holds all of the stock of Lario Oil & Gas Company.

As many in the industry know, one of the best places to look for oil is where you found it before, and in times of low prices, a good practice is to buy oil that has already been found. Operating on these two themes the decade of the 1990’s brought about a renewed interest in Southwest Kansas exploration for Lario and significant new production was developed during this period. Additionally, during this devastating period of low commodity pricing, the company sought opportunities to purchase select proven, producing properties and their long-life reserves at discounted prices. This was clearly a way for a strong, stable company to improve long term return on investment and Lario made several key acquisitions in West Texas, Oklahoma, Wyoming, and Kansas.

Since 2000, the company has expanded its repertoire, successfully participating in natural gas exploration in California and the Greater Green River Basin of southwest Wyoming, as well as extensive exploitation of bypassed oil and gas reserves in the Sedgwick Basin of Kansas. Lario also continues to invest heavily in the oil prone Williston Basin, primarily in North Dakota and Montana.

Most recently, Lario has dedicated half of its available capital towards the development of unconventional plays, namely tight gas and shale gas plays. Expectations are high for the recent investments made in the established or emerging gas shale plays in the Barnett Shale in Texas, the Woodford Shale in Oklahoma, the Fayetteville Shale in Arkansas and the Neal/Floyd Shale Mississippi and Alabama.

Keeping the portfolio balanced is always good practice and so most recently, Lario has been building a leasehold position targeting oil in the Middle Bakken Shale play of North Dakota. Early successful drilling by EOG and Whiting Petroleum in the immediate area has attracted a great deal of industry attention lately and Lario is well positioned to make the most of this activity.

With oil prices at an all time high and natural gas holding on through some ups and downs, acquisitions have been replaced by drilling and developing reserves and growth through the drill-bit has been the main focus since 2004.

The company currently employs 90 highly skilled people located in Wichita, Denver and Calgary as well as six production offices and continues to do business family-style, with an eye towards the long term. Patrick O’Shaughnessy serves as Chairman of Lario Oil & Gas Company and Mike O’Shaughnessy serves as its President.

While there are many oil companies that have failed to last through one, or even two of the up and down cycles that have marked the recent history of the industry, Lario and its predecessor, Globe Oil and Refining, have weathered every storm for over the last 80 years.
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