Shale Tycoon Hamm has made an offer to take over Continental Private

Shale Tycoon Hamm has made an offer to take over Continental Private

Shale oil billionaire Harold Hamm has offered to buy the rest of Continental Resources Inc. that he and his family don’t already own for about $4.3 billion in order to take the Oklahoma City-based driller private.

Despite Continental shares almost doubling over the past 12 months, Hamm said the diminishing number of listed exploration and production companies in the US shows a “lack of support from the public market” for the industry.

The Hamm family proposed an all-cash offer of $70 per share, Continental said Tuesday in a statement, representing an 8.5% premium over the previous closing price.

“We have consistently said that as long as we were appreciated in the market, we would remain a public company, but if our opportunities were limited by being public, we should look at alternatives,” he said in a message to his employees, which was included in a filing. “We have determined that the opportunity today is with private companies who have the freedom to operate and aren’t limited by public markets.”

Hamm, 76, the youngest of 13 children born to poor Oklahoma sharecroppers, started in the energy industry at the age of 18 with an oilfield services business he funded with a $1,000 loan, before getting into wildcatting. Continental became one of the preeminent producers to come out of the initial shale boom. The company went public via an initial offering in 2007. Hamm’s net worth is $19.7 billion.

Continental’s stock has risen 44% this year, with energy equities outperforming the rest of the market amid a rally in oil and gas prices. Shale producers have bounced back financially after the early days of Covid-19 sent global crude demand tumbling and prompted widespread production cutbacks. Since then, US drillers have kept output below pre-pandemic highs and prioritized the return of cash to investors, despite repeated pleas from President Joe Biden to boost production in order to ease rampant fuel-price inflation.

Hamm was one of the first people to see the opportunities in horizontal drilling and hydraulic fracturing in the Bakken shale play in North Dakota and Montana. More recently, he has expanded into the Permian Basin of West Texas and Wyoming’s Powder River region.

In April, Continental raised its 2022 drilling spending plan by about 15% to $2.65 billion and hiked its crude production target by 2.5% from its February guidance to an average of 205,000 barrels a day. The company also boosted its dividend 22%, joining other industry peers in increasing payouts to shareholders.

Hamm has taken steps this year to secure his legacy. In February, he handed each of his five children stakes in the company which at the time were valued at about $2.3 billion. Despite the transfers, which were largely tax-free, Hamm said that he retained control because his children can’t sell the shares until after he dies. Continental “has always been closely held and consummating a full take-private has been mentioned previously as a viable alternative and is not fully surprising,” David Deckelbaum, an analyst at Cowen, wrote Tuesday in a note to clients.

The Hamm family collectively owns 83% of the total outstanding shares of the company, according to Tuesday’s statement. A higher offer price will probably be needed for shareholder approval given the “current elevated commodity price environment,” Scott Hanold, an analyst at RBC Capital Markets, wrote in a note to clients. The 12-month target price is about $74, according to analyst estimates compiled by Bloomberg.

Continental said its board will establish a special committee to consider the proposal. The shares rose 8.5% to $70 at 8:27 a.m. in premarket trading in New York.

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