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result in discovery of crude oil deposits. Moreover, even
if a crude oil deposit is discovered, there is no guarantee
that it will produce significant reserves. There is also
no guaranty that oil and gas reserves developed by other
companies will be available for purchase at an affordable
price. Petitioner’s directors were aware of the risks
associated with petroleum exploration and production at the
time they decided to enter into this activity.
From 1945 until 1970, petitioner explored for crude
oil and natural gas through CRA. CRA was also active in
acquiring working properties and undeveloped reserves of
crude oil. These activities were regularly described in
petitioner’s annual reports.
By 1963, the volume of crude oil processed in
petitioners’ refineries had increased to over 14 million
barrels per year, or approximately 40,000 barrels per day.
At the same time, however, the volume of crude oil produced
by petitioner was only approximately 2 million barrels per
year. In petitioner’s annual report for 1963, its
president and general manager, Mr. Homer Young, stated that
petitioner had launched a program to increase its crude oil
production. Petitioner’s ultimate goal was to produce
20,000 barrels of crude oil per day, or approximately 50
percent of its refineries’ daily requirements.
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