Oilman Harold Hamm convinced Continental Resources to go private at a valuation of around $27 billion after he pitched a deal they couldn't refuse.
Hamm announced that he wanted to take his company private in June, claiming that public markets have not supported the oil and gas industry. While he proposed $70 per share for stakes not owned by him, he increased that to $74.28 last week, causing the company's shares to leap up over 8% – a total return of 67% in 2022 thus far.
The all-cash offer from Hamm represents a premium of 8.9% on top of Continental Resource's closing price on Friday, October 21, 2022. The tender offer would be comprised of 58 million shares with a valuation of $4.3 billion. Despite Hamm's revised proposal, the company’s second largest shareholder (after the Hamm family, which owns 83% of the common stock), Smead Capital Management, says that Continental Resources is still undervalued. However, the deal does not require a vote by shareholders, and Smead only holds about 2% of the company’s stock.
Hamm's deal does not appear to be part of a trend among other publicly traded oil producers, though Andrew Dittmar, a Director at market researcher Enverus, told Reuters that taking the company private could provide Continental with greater flexibility compared to its competitors.
"We believe E&Ps are broadly undervalued by public markets relative to the cash flow they are expected to generate next year," Dittmar told Reuters.
Hamm founded Continental Resources in 1967 under the name Shelley Dean Oil Company and kept it private until 2007. However, now he claims that public markets have limited the oil and gas industry's growth, a problem which has worsened since the pandemic's beginning.
Hamm also claims environmental regulations threaten U.S. oil production. Continental Resources produced 400,000 barrels of oil per day in the second quarter of 2022 through their operations in North Dakota's Bakken area and Oklahoma’s Anadarko.