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By 1967, the funds that petitioner invested in
petroleum production and refining accounted for
petitioner’s largest outlay of funds and predepreciation
investment in plant and equipment. Crude oil production
and refining facilities represented 44 percent of
petitioner’s predepreciation investment, compared to 42
percent for fertilizer facilities, and 14 percent for all
other facilities.
In May 1967, petitioner purchased most of the oil and
gas properties of the AMAX Petroleum Corp. (AMAX).
However, despite the purchase of AMAX and additional
capital expenditures, petitioner’s crude oil production at
the end of 1968 was only approximately 5.6 million barrels
per year. At the same time, petitioner’s refineries were
processing more than 17 million barrels per year.
Petitioner also sought to acquire crude oil by
exploring outside the United States. In December 1960,
petitioner formed a wholly owned subsidiary called Cracca
Libya, Inc. (Cracca Libya). Cracca Libya thereafter joined
other cooperatives and independent oil producers in a
partnership called the Eastern Hemisphere Group (the
Group), which was organized to explore for crude oil in
North Africa. In January 1962, the Group participated in
forming a private Libyan corporation called the National
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