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Annual Reviews of the Scottish Oil Trade

The promotion of public limited companies gave small investors the opportunity to play a part in the ownership of Scottish shale oil businesses. The successful launch of the Broxburn Oil Company (Limited) in 1877 was quickly followed by the establishment of many new shale oil concerns that were similarly constituted as limited companies.

Investors were able to follow the value of their shares in stock market reports published in daily newspapers such as The Scotsman and The Glasgow Herald. Such newspapers also published lengthy accounts of the annual shareholder's meetings held by the major oil companies, sometimes printing word-for-word the dialogue between directors and disgruntled shareholders. At the end of the reporting season for these companies, these newspapers often published an annual review, reflecting on the oil trade as a whole and on the performance of individual companies. These commentaries were intended to advise and inform investors, and offer an informed and independent insight into the oil trade at that time.


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1885

The Scotch Oil Trade - the past year's results

The reports of all the Scotch Mineral Oil Companies having now been issued, it is fitting that some consideration should be given to the results they disclose, especially as they throw much light on the position of what is now undoubtedly one of our most important native industries. It is about thirty-five years since there was commenced, by the late Dr. Young and his partners, the nucleus of what has developed into a trade of gigantic proportions and which has conferred upon the world a light of unprecedented cheapness and brilliancy. Its economy and supremacy over the old moderator lamps have been so marked that no other light, where gas is not available, is now to be found in the houses of the poor; even on the tables of the rich its bright and pleasant radiance has become familiar, and no West-End dinner-table arrangement is now complete without its array of paraffin lamps and candles. The industry can lay claim to other special characteristics. Not only do its illuminating products make dwellings cheerful, its lubricating oils have lowered the cost of manufactures, and its sulphate of ammonia has approved itself the best fertiliser in producing food for man and beast. Originating in our midst, and developing so rapidly that the whole world now experiences its effects, it is therefore appropriate that its progress should be noted.

The parent and premier company, known by the sounding title of Young's Paraffin Light and Mineral Oil Company (Limited), has existed for twenty years, and is still vigorous and active. Being burdened with a large capital - the result, we understand, of an arrangement with the original proprietor on the basis of two shillings and sixpence per gallon for burning oil, and of heavy subsequent outlay in the frequent modernising of plant and works, so as to maintain the company's position - the rate of dividend at present proposed is only eight per cent; but the amount of money available for distribution amongst the shareholders is £48,500. And this in these dull times cannot but be considered a very satisfactory return on a safe investment. The report of the directors further shows that many improvements in the working have been devised; yet the most important of these not having taken effect until late in the past financial year, the full benefits which will accrue therefrom will fall for the first time into the year now entered on. The directors attach great importance to the lessening of their shale supplies from the West Calder district, and to superseding them with the products of the rich Newliston field, and this they have set about doing energetically.

The Broxburn Oil Company, starting seven years ago with the advantage of all the improvements inaugurated previously and also through introducing the Henderson retorts, which have revolutionised the trade, has been a great success. For several years it has paid to the shareholders the uniform and notable dividend of 25 per cent distributing £45,000 per annum. While the management has been careful and prudent, the company is indebted also for much of its success to the possession of a supply of good, thick, and cheap shale,: and to a capital small in proportion to the output.

The Clippens Oil Company has experienced the benefit of removing from a poor and costly shale district to one where the seam is thick and the quality good. It is generally understood that the working of the old Clippens shale was latterly unprofitable, notwithstanding the higher prices for products which then prevailed; and it is therefore satisfactory to learn, from the report that the prudent transition to Pentland has resulted in a 12 per cent. dividend to the shareholders. In acquiring the Mid-Lothian Oil Company, one of those concerns begotten of the foolish inflation of recent years, the Clippens benefits both itself and the trade generally by the absorption of a weak competitor.

The Burntisland Oil Company maintains its dividend of 20 per cent. The capital is moderate, and the shale is extraordinarily rich in paraffin scale so that with good management it has been enabled to produce highly satisfactory results. We believe part of the company's district abounds with what is known as floating whin, which imports a degree of precariousness and uncertainty into mining operations, but through the acquisition of other mineral estates the risk of inconvenience from this intrusive material has probably been diminished.

The Oakbank Oil Company has fallen from its high estate. Founded by the late Sir James Simpson and others at a cost, it is said, of £50,000, the works became unremunerative, and were ultimately acquired for a few thousand pounds by a Limited Company. With a capital much lower in proportion to the output than any other oil work, it appeared as if the Oakbank Company had a brilliant prospect before it. Today, however, the dividend is nil. From the report it is not quite clear to what this is attributable, or why, with such a small capital, the company should pay no dividend, while its neighbour the Broxburn Company might have declared thirty per cent.

The Walkinshaw Oil Company's absence of a dividend is more easily understood. Its shale is stated to be only about 16 inches thick, and to yield below the average in ammonia and scale. The only reflection on the concern as a company is the going into a district which, in these days of low prices, has not in it the elements of prosperity and profit. The Lanark Company is a paying no dividend, but is issuing 10 per cent debentures to its shareholders instead. The Mid-Lothian Company paid no dividend, but its individuality is now merged in that of the Clippens.

There are certain other companies, such as the Westfield and Bathgate, which, so far as we know, have as yet paid no dividend; and there are companies paying dividends for a few months of their existence. To the latter circumstance no great importance can be attached as a crucial test of their future, because a new oil company, on a few months' operations- so long as capital and revenue are opening out together, and before heavy repairs and replacements, resulting from high heats, &c., are incurred - may have, no difficulty whatever in declaring a dividend.

The outcome of the past year's proceedings, it will be seen, are of a somewhat diverse character. If there is one thing, however, more than another that the results recapitulated bring out strikingly and convincingly it is this, that whatever other requisites may be needful (such as scientific knowledge, commercial skill, and effective general management) it is certainly most essential to the success of an oil company that it should possess an abundant supply of a shale of good thickness and proper quality. The public have been for some years past misled in a flattering but fallacious prospectuses by the insertion of well-known names of shale, such as "Fell's," "Broxburn," and "Dunnet," and have only discovered, when their capital in the concern was irretrievably gone, how little there is in a name. So much money, however, has been sunk during a the past three years in the East and West of Scotland in companies which have brought ruin on their own shareholders, and by over-production have tended to injure an important and interesting industry, that we believe much greater caution will be exercised in future by the general investing community before going into new oil companies.

The Glasgow Herald, 3rd June 1885

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1892

The Oil Trade in West Lothian

As is well known, the Mineral Oil Trade is the principal industry in this county, and on it and shale mining the population largely depend for employment. At the beginning of the year there was little room for complaint, but the closing months have been gloomy indeed, and the outlook is the reverse of reassuring. By a general arrangement among the Scottish oil companies two reductions of wages have taken place during the year,in the months of May and October, and which were accepted in most cases without demur.

Most of the works had for a time been on restricted make of oil. In the case of the works of Messrs Ross & Company, at Philpstoun, the restriction extended from July to October; but during that time not a single workman was dismissed, all the spare retort men being sent to the fields to work at restoring land. At Broxburn a new crude work has been erected. and a new shale mine sunk at a part of the neighbourhood known as "The Roman Camp." This is intended to take in the Pumpherston shales, and is on the Drumshoreland section of the company's mineral field. The new works are expected to start early next year.

Otherwise, and notwithstanding the depression, matters have been proceeding smoothly. At Dalmeny things were a little upset for a time by one of the mines taking fire and having to be flooded in order to subdue the outbreak. In consequence of this mishap, many of the miners travelled night and morning to Philpstoun, where, by arrangement with Messrs. Ross & Co., they worked the shale, which was despatched to Dalmeny. In that way the supply of shale was fully maintained.

At the works of Messrs Young at Addiewell and Uphall things have been very quiet, particularly at the first-mentioned place. On the whole the Uphall works have been very fully employed, but in the Addiewell and West Calder district, trade matters have not been so depressed for very many years. Hermand works were shut down early in the year, but a part of the establishment has since been re-started.

The Pumpherston Company, which figured so prominently in connection with the affairs of the now defunct Scottish Mineral Oil Trade Association, has been able to hold its own with the other companies, although the output has not been what could be desired. Excepting in the shape of candles, there has been considerable difficulty in getting a market for wax, and, as is known, the Pumpherston Company have no candlemaking department. At the present time those works which manufacture candles are exceptionally busy in that department, some of them working night and day. The market for paraffin scale has been flat for months, but the growing agitation re the flash point of burning oils (home and foreign) is likely in due course to benefit the home trade. The Linlithgow Oilworks, which were established in 1884, have been on the whole fully employed.

The Glasgow Herald, 29th December 1892

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1894

The Scottish Mineral Oil Companies in 1894

The enterprise these are engaged in is one which looks back on a very eventful and uneven history . Probably a capital sum of but little short of three millions of money has been absorbed by it from first to last . Burning oil was originally the chief, almost the only, product cultivated by these shale distillers, and it was long a richly profitable article to put on the market; but that cannot at all be said now. Other products resulting from the distillation of the parent mineral shale are lubricating oil, naphtha, solid paraffin, and sulphate of ammonia -all formerly little thought of, but now, out of pressing necessity, carefully looked to, and pushed for every penny they are worth. This still extensive and once most flourishing industry has just passed through another year of constant trial and of ever present threat, and it enters into 1895 in a mood of no little anxiety and even dread .

With one or two exceptions, the values of its products are all seriously lower than they hare been over a period of two years, and this is a feature which is of the gravest possible sort when affecting a manufacture already reduced to about the lowest level of weakness consistent with living. Take sulphate of ammonia, called for in the market chiefly as an agricultural fertilising agent. This product during 1893, and over at least the first half of 1894 ruled comparatively high in value, mounting at one time to over £ 15 per ton, spot terms at Leith. Now for several months of late the article has been persistently neglected by buyers, and the inevitable consequence of an ever-increasing decline in the procurable price. As the year closes prompt value, Leith delivery terms, is found to have shoaled down to below £ 11 per ton , being a loss of over £ 4 per ton from the maximum of 1893, and be it remembered also that during the recent time of high values, a period which lasted well and seemed almost as if it had come to stay, the shale distillers of Scotland exerted the utmost of their effort and ingenuity to increase the proportionate output of sulphate of ammonia from each ton of shale . A good deal of fresh capital expenditure was entered into for the purchase of additional sulphate plant, and in some instances the success achieved was very strongly marked. By certain makers the output of this one remunerative product was about trebled , and indeed sulphate of ammonia was beginning to be relied on as a main prop of the industry .

The balancing of books in 1893 by the various companies gave dismal results truly; but these would have shown as still more disastrous had it not been for the then steadily improving market position of sulphate of ammonia. The balancing of the spring of 1894 (some particulars of which will be found below) showed an improvement on its predecessor , although in no case up to the mark of dividend paving. This improvement was due to continued good prices got for sulphate of ammonia, and that in the face, too, of falling values on the part of the other staple products of the industry. A month or two after the balancing spoken of, the article took a decided turn downwards, not precipitately, it is true , but at the same time hardly once with any thing in the shape of a rally . The fall has gone on practically without check till now , with the result of a total leakage of value to the serious extent above stated.

The dropping of sulphate would have mattered less and the other important products being gaining in value so as to compensate , but these (with perhaps one exception ) have also been losing. Burning oil, which at the beginning of the year was 5d per gallon, felt itself more and more pressed by the American and Russian oils lately pushed upon the home market in rivalry, and at prices purposely pitched a shade lower. These foreign oils are of about the lowest flash-point permissible by existing British import regulations , and on that account are held by many to be too inflammable for reasonable safety to consumers . The Scottish oil is of the comparatively high and safe flashpoint of 100 degs. and agitation has for some time been afoot for an emendation of the import regulations so as to prevent the entrance into this country of all foreign oils under 100 degs. flashpoint . A Government Commission has been appointed to hear evidence, and the matter is still in suspension . Change of law to the extent desired would probably aid the failing Scottish manufacture by stopping the importation of low-priced (and dangerous) foreign oils, but it has to be confessed that the matter does not as yet look hopeful. At the fixing of the contract prices of the native burning oil in July last , the Scottish makers saw that, in the face of the existing foreign competition, they had no choice but to drop another farthing a gallon , and this was accordingly done, forming the basis of the deliveries of the coming season, which deliveries are now at about their maximum, and really very large. A farthing a gallon, thus stated, seems a trifle, but in reality it is a very serious matter in an industry so placed as this is, signifying a shrinkage of many thousands of pounds at the next time of balancing . Burning oil is a vast output, and the difference of a farthing a gallon is a grave affair when prices have been already cut down more than is bearable. It was burning oil, in the bypast rich years, which furnished the 20, 25, and 30 per cent dividends, the other products counting for very little . Now burning oil is good for no dividend at all, and if positive loss is to he avoided, it is to these other products that directorates have to look for that limited measure of success.

The market, in short, is entirely revolutionised. We have seen how sulphate of ammonia has behaved as a reputed "staff " Solid paraffins—scale and wax—have continued all that year at the low value down to which there were some time ago pressed by the competition of American scale and wax imports , these lowered values raising from 1 and 7/8d to 2 and 1/2d per lb., according to quality. If there be no positive loss in making and selling at these rates there is certainly little or no profit in paraffin candles, into which the bulk of the solid paraffin are made, command a large market, it is true, but the highest price procurable is still far short of being sufficiently remunerative. The other important product is lubricating oil of varying gravity, and turned out in considerable bulk. Over the past two years the higher gravities ( 885-895 ° ) have been losing in value , with a recent slight rally. With the lower gravities ( 843-865 °) things have been looking up a little, consequent on the continued favour extended to them not as lubricants, but in their new use as gasmaking oils for lighting purposes.

Quite a large number of gas-making concerns (municipal and private) have adopted the oil-gas, wholly or in part, and it is certain that as time goes on, more will fall into line, the attractions being greater economy and clearer light . The improvement is most marked in 865 ° oil , which of late has been fetching £4 5s. per ton. This is the one section of the industry which , as a settled habit , seems to be mending , but it gives no promise of ever becoming a sufficient "staff" for a generally crippled trade , though no doubt it will help . Naphtha has risen to a good price of late , but is sure to fall with the lengthening day, and, being of only trifling output, it counts for out little either way.

The bulk of the mineral oil companies, as already hinted, balance in the spring of the year. In no case did these pay any dividend as the outcome of the 1894 function , but sulphate of ammonia had been high-priced all through the financial year , and the directorates found that they had mended somewhat on the previous year's bad failure. Interests on loans and debentures were as a rule paid out of revenue, and one company that had failed to pay any interest the year before managed to clear off the two years in one operation. One concern, the Dalmeny Oil Company , closed its books later in the year, as has been its custom- viz ., at October 31st , and its announcement of results was made so late as December 27th . The Dalmeny is but a small undertaking producing only crude oil and sulphate of ammonia . It has all along escaped the extreme vicissitudes of the larger firms, and, affecting this balance, it had the full stretch of the transient good time enjoyed by its best paying product; sulphate of ammonia— which was comparatively high priced from November 1893 to October 1894 , although falling at the latter date . Thus incidentally aided , its forthcoming dividend is quite a phenomenal one, being once more at the old opulent rate of 20 per cent, an achievement, of course due almost solely to the passing good services of sulphate of ammonia. Various influences other than those of generally low market prices have been making for a poor result at the next time of annual balancing by the general industry. Amongst the shale miners there has been no wages outbreak affecting the whole of the industry, but in individual cases the masters have been much hampered by localised agitations resulting - in one instance - in a temporary stoppage of production .

The greatest Scottish coal-mining strike of the year, though not affecting these shale oil companies directly, hit them sorely , nevertheless, in the advanced prices they had to pay for the coal fuel necessary to their distilling and refining operations. This adverse influence indeed threatened wholesale stoppage of the manufacture, and it would have come to that had the strike been prolonged much farther. As it happened, only one factory was forced to close up on this account , the others continuing production in the face of heavily increased oncosts arising from the compulsory employment of coal fuel at high prices , and often of indifferent burning quality.

The Company that thus had to close works was the Clippens. This concern was about two years ago forced into liquidation by pressure of liabilities; but finding no feasible market for its mines and works , the creditors and the shareholders combined in continuing operations as a make-shift . The liquidator-directors were expected to declare working results for the year ending 30th June did not close books till September 30th , thus balancing on a period of fifteen months instead of twelve. The result was not made public till December 22nd. Shareholders and the trade generally expected little of good under the circumstances but they were scarcely prepared for a working loss, virtually of over £10,000 over fifteen months' trading .There was a net loss of £5082, 10s on the Company's manufacture, and a meeting of shareholder took place in Glasgow so recently as December 28th when the Chairman frankly admitted that the report was moat unpleasant reading , at the same time stating his belief that if product values would only take up a very little they would then begin to produce at a profit. The Clippens, not very long ago paid good dividends regularly

Another of' the castaway companies is the Burntisland, at one time a coveted investment on change. In this case the creditors and shareholders also cojoined in the forming of a new Company , in the absence of any adequate market for mines and plant, but the closed works have never been restarted, and now even the pumping of the water out of the workings has been discontinued as but the throwing of good money after bad. Over two years ago the Hermand directors, calling halt until they had lost up to the mark of insolvency, decided to cease production till a time of better markets came around . Production has never been resumed and it is understood that during 1894 a portion of the plant was sold.

Under circumstance such as these thus briefly sketched above, it could not be expected that there would be much of life in the mineral oil section of Stock Exchange business in Edinburgh and Glasgow. Formerly this used to be an animated section, and certain stocks in the days of big profits were procurable only at from 150 to 200 per cent over par, Not a shadow remains now of this bygone activity and opulence. Setting aside the Dalmeny, which , owing to its smallness of scope as a non-refining concern , runs few risks , there is no company whose stock is not now below par; most stocks are hopelessly so. There are no buyers for investment now, and during 1894 day after day has passed without a single transaction in "Oils" The outlook in the industry as 1895 opens is sufficiently disquieting , bearing in mind recent steadily lowering market tendencies in the chief staples of production . There will, indeed , require to be increased frugality in working methods , and the further cheapening of manufacturing processes—the latter a pursuit on the part of the various managements which during past years of adversity has been pushed on to really marvellous economical results.

 

The Scotsman, 1st January 1895

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