Shale oil pioneer Harold Hamm wants to privatize Continental Resources

Shale billionaire Harold Hamm has agreed to buy out all of Continental Resources and estimates the equity of the US oil producer he founded at around $27 billion.

The move to fully privatize Continental is an attempt by one of the most influential figures in the US energy industry to break free from Wall Street pressure and start pumping more oil.

“We’ve all felt the limits of being publicly held in recent years, and at a time like this, when the world desperately needs what we’re producing, I’ve never been so optimistic,” Hamm said in a statement to the Employee.

The shale tycoon said the privatization would give the company “freedom to explore for more oil” and to grow “as we do our part to ensure America’s energy independence without encumbrances.”

The transaction would give Hamm and his family full ownership of Continental, which he founded in 1967 and took public in 2007 as the Oklahoma City-based company emerged at the forefront of the U.S. shale energy revolution.

Continental is the largest oil producer in the Bakken shale fields in North Dakota and Montana, and has expanded into Wyoming and the Permian Basin of Texas and New Mexico in the past year.

Hamm agreed to pay $74.28 per share in cash to buy the 17 percent of Continental that his family does not already own. The $4.3 billion bid announced Monday represents a 13 percent premium to Continental’s closing price in mid-June, before it made an initial bid for the company at $70 a share. Continental shares rose 8.5 percent to about $74 a share at midday in New York.

However, the transaction will be funded entirely from Continental’s existing cash and debt, meaning Hamm will not spend any additional money.

The deal was approved by Continental’s board of directors but met immediate opposition from a top shareholder, who said Hamm’s new price was tantamount to “stealing” the company’s assets.

Cole Smead, president of Smead Capital Management, Continental’s largest shareholder after the Hamm family, told the Financial Times that the new offer still undervalued the assets and that the board’s approval looked like a “backdoor deal.”

“It’s like a basketball away game in a small town in the middle of nowhere,” Smead said. “None of the calls go your way because the referees are not on your side. Where I’m from, we call these “Homers”. I suppose they call them the same in Oklahoma.”

Continental’s fortunes, hit hard by collapsing oil demand in the early days of 2020’s coronavirus crisis, have since skyrocketed as energy use has recovered and crude oil prices have risen since Russia’s invasion of Ukraine . In June, Hamm said it was in Continental’s best interest to be delisted.

Analysts said Hamm’s expansion and take-private move also reflected his view that oil demand would continue to rise despite mounting environmental concerns and investor skepticism about the longevity of fossil fuels.

“Hamm is only acting out of his belief that the energy transition will be slow and that war and politics are causing oil shortages are not consistent with Wall Street’s desire for shale producers to hold back,” said Andrew Gillick, strategist at consulting firm Enverus.