"We were different than the other oil companies," said Texaco President John McKinnley. "We made more money than they did, because we were different."
Today Texaco remains different, but that is because it now makes less money - proportinate to its size - than any of the other international oil majors except British Petroleum.
It may be hard to feel sorry for a company that last year reported $931 million in profits on sales of $27.9 billion. But according to industry analysts, if Texaco were operating up to industry norms in its production, refining and marketing, it should have earned an extra half billion dollars in 1977.
But for the first half of 1978, the company reported a 28 percent decrease in income to $346 million, for the poorest showing in the industry. The company blamed the results on reduced oil production both here and abroad.
The last five years have been quite difficult for once-proud Texaco which found that its worldwide refining and marketing system, one that worked extremely well in an era of limitless cheap crude oil, was extremely ill-adapted to the suddenly higher prices that came in the wake of the 1973 Arab oil embargo.
Meanwhile, its once vast domestic oil production - centered in Texas and Louisiana - has been declining rapidly, while its own exploration record for the period has been one of the poorest in the industry.
Texco's domestic crude oil and natural gas liquids production has fallen 32 percent in the last six years, according to Merrill Lynch Analyst Philip Dodge, dropping from 940,000 barrels a day in 1972 to 639,000 barrels in 1977.
The feet that Texaco was the first company to strike any hydrocarbons in the Baltimore Canyon, off the New Jersey coast makes the company hope that is dry spell may be over but the development came as a surprise to many in the industry for just that reason.
Texaco's 50-state U.S. marketing system became a costly albatross when prices climbed and demand dropped. While the company has tried to prune it back, it has been hampered by government allocation rules.
Overall, the company feels that it has been disproportionately penalized by the government's price control and allocation system, since it has more domestic production to be controlled, and because the allocation rules have made it harder to withdraw from unprofitable operations.
"If we had been able to design the control system we wouldn't maybe have gotten hurt as badly as we did," said Texaco chairman Maurice "Butch" Granville.
Texaco's drop in profitability has been startling, with Standard & Poor's in 1977 even reducing Texaco's credit rating from AAA to AA Plus because of "declining return on investment capital" and reduced cash flow.
Texaco, under Granville, has taken some major steps to turn the situation around. But analysts believe that it may be many years before the company, third largest in the world oil industry, will show any improvement.
"Through 1974, Texaco's return on investment ranked at the upper end of the range for the oil companies," commented Charles Cahn Jr., an oil analyst with Goldman Sachs. "However, beginning in 1975 a significant and unfavorable divergence developed. While virtually all of the majors experienced declines in profitability in 1975, Texaco's earnings collapsed with return on operating investment falling from 15 percent to 8 percent and return on equity falling from 20 percent to 10 percent.
According to Cahn, Texaco can expect to stay at this 8 percent level of return for number of years to come. Despite huge outlays to modernize its domestic refining system so it can handle more imported high-sulfer crude and changes in its European refineries to yield more light products like gasoline, and despite extensive exploration expenditures to compensate for its declining reserves, Texaco will be spending freely to just to keep even, in Cahn's view.
"The company's one real hope for a breakout from this rather gloomy outlook is for some major decontrol of domestic oil prices, a move that would probably benefit Texaco more than anyone else.
With the failure of Congress to pass President Carter's Crude Oil Equilization Tax (COET) as part of his energy package, Texaco and other oil companies are already preparing a big push for next May 31 when the present domestic price control system can either expire or be unilaterally extended by the president.
The companies would like to see the price controls come off instantly, but they will probably urge some gradual decontrol as a compromise way to bring U.S. prices up to the world level - the purpose of COET in the first place.
"To really schedule of decontrol of oil both old and new will give proper recognition to companies such as ours who spent our money to develop crude oil long ago, and are being deprived of the proper compensation for it now," said Granville.
"I have a very strong feeling there is a growing awareness, even within the government, that the solution to this thing has to lie with a phaseout of price controls on crude oil," he added. "There is still a hang-up that goes with it of so-called windfall profits for the oil companies. But the fact of the matter is that as soon as you get through with royalty payments, and the regular taxation of the industry, that the percentage of profit that would go to the producer is relatively small - certainly less than 40 percent. And that's money that's really needed."