The Transcontinental Oil Company was established in June 1919, in Pittsburgh, Pennsylvania, with Foster Parriott, president, Michael Late Benedum, chairman of the board, and Levi Smith, a director responsible for field operations. In 1895 Benedum, a lease man for South Penn Oil, met Joseph Clifton Trees, an independent driller. The two formed a partnership, headquartered in Pittsburgh, that lasted until Trees died, on May 20, 1943. By 1918 Benedum-Trees interests included refineries, skimming plants, and leases throughout Louisiana, Illinois, Kansas, Pennsylvania, and Texas, as well as in Colombia, Mexico, and Romania. Benedum conceived the idea of consolidating these holdings and assigning direction of all operations, from the well to the retail customer, to Transcontinental. Many stockholders in the various companies, including Trees and a Dallas geologist, William E. Wrather, rejected this proposal and were paid cash for their holdings, which included Wrather's interest in the Desdemona (Texas) oilfield. Transcontinental was organized and listed on the New York Curb Exchange, and although general offices were in Pittsburgh, Parriott established the main office in Tulsa, Oklahoma.
In 1920 Desdemona field production, the new company's source of crude oil, suddenly declined, from 2,283 to 212 barrels per day. To replace this loss Transcontinental drilled unsuccessfully in Texas and California before making a small strike near Craig, Colorado, and discovering, in 1926, the Nigger Creek pool west of Mexia in Limestone County. Despite these developments, the need for more oil remained. Since 1923 the company had controlled leases in West Texas, on land owned by Ira Yates in Pecos County. Although wildcatters commonly downplayed the area west of the Pecos River, Transcontinental decided to drill. Because financing was a problem, the Ohio Oil Company, a Standard Oil affiliate, was asked to drill four wells in return for half interest in any discoveries. Ohio agreed and designated its subsidiary, Mid-Kansas Oil and Gas Company (originally a Benedum-Trees corporation), to do the drilling. The first three holes on Transcontinental leases in Reagan County were dry. Mid-Kansas then moved to Yates's ranch, and on October 5, 1926, a well was spudded at a location near the Yates Dome, an upfolding of rock that contained oil deposits. The dome had been mapped in 1923–24 by Ray Hennen and Arthur M. (Jack) Hagan, Transcontinental geologists. On October 28, 1926, the discovery well of the fabulous Yates oilfield began flowing. By the end of 1929 Transcontinental and Mid-Kansas had brought in thirty producers on the discovery lease and more on adjoining leases. At midyear they were the third-ranking producers in the Permian Basin. This tremendous production did not, however, solve Transcontinental's need for crude, since the existing contract gave Ohio Oil control of all production. The necessity of purchasing crude strained the company's resources to the extent that in 1930 Transcontinental ceased to exist when Benedum exchanged all of its assets for 1,848,051 shares of stock in Ohio Oil. Included in the agreement were 376 filling stations under the name of Marathon, a company organized by Transcontinental to protect its trade name of Marathon and its logo, the heroic Greek runner, Pheidippides.