Few ventures in the oil industry have ever produced such a gusher of speculation. Early next month, engineers will drill a 14,000-ft. well near Jarim Reef off the island of Bahrain, a tiny Persian Gulf nation not far from the world's richest oil deposits. If the exploratory pipe hits crude, it will enrich a cast of investors that includes the Bass brothers of Texas, the Rupert family of South Africa, the Harvard University endowment fund and George W. Bush, the President's eldest son. If the well is dry, the episode will prompt shareholders to wonder why they ever put faith in a Texas-size enigma called Harken Energy Corp.
The suburban Dallas company is surely one of the most mysterious and eccentric outfits ever to drill for oil. Harken consists of almost no assets besides an exclusive 35-year contract to explore for crude in Bahrain. When the country's rulers handed Harken that deal early last year, it puzzled oil experts around the world. Why would Bahrain stake so much of its financial future on an obscure, money-losing company with no refineries and no experience in offshore oil exploration? "It was a surprise," says Jay Gallagher, a senior analyst for Petroconsultants, one of the world's largest oil information outfits. "Harken is not traditionally a company that explores internationally."
The deal ignited oil-patch speculation that Bahrain's rulers see the arrangement as a way to gain influence with the Bush Administration. The President's son, known informally as George Jr., is a Harken investor, director and consultant. No one has produced evidence that Bahrain has won any favors from the White House in return. Yet the financial connection has caused the Administration some discomfort, most notably last fall when reporters asked whether the young Bush's gulf investment had any influence on his father's decision to send troops there. Said Bush's son last October: "No, I don't feel American troops in Saudi Arabia are preserving George Jr.'s drilling prospects. I think that's a little farfetched."
Yet the tiny country, with a population of 500,000 and a land area only four times the size of Washington, D.C., is unabashed in its desire to foster a warm relationship with the U.S. Last week the President greeted Bahrain's emir, Sheik Isa bin Salman al-Khalifa, with a 21-gun salute at the White House in honor of his nation's role as the principal allied naval base during the gulf war.
The firm Bahrain chose to find its bonanza has a freewheeling history, even by Texas standards. Harken director E. Stuart Watson, a former executive for oil giant Atlantic Richfield, calls the Dallas company's deals "convoluted" and difficult even for industry veterans to grasp. Says Harken founder Phil Kendrick, still a small shareholder: "Their annual reports and press releases get me totally befuddled. There's been so much promotion, manipulation and inside dealmaking. It's been a fast-numbers game." Some former executives charge the firm with routinely inflating its assets to make its balance sheets look better. Harken's longtime chief executive, Mikel Faulkner, insists the operation is "clean." But Faulkner, an accountant, offers this advice for those trying to decipher Harken's financial statements: "Good luck. They're a mess."