The shares traded above that price, rising 13% to $72.93 at 1:14 p.m. in New York, indicating investors see a higher bid emerging. Hamm’s take-private proposal may be intended to attract rival suitors, according to Truist Securities.
“We would not be surprised if a process ultimately resulted in a sale given our forecast that the company is worth at least our $95/share price target,” Neal Dingmann, an analyst at Truist, wrote in a note to investors.
After being pummeled during the worst of the Covid-19 pandemic and a plunge in global crude demand in 2020, Continental and other shale drillers have staged a strong recovery on the back of a dramatic rally in oil and natural gas prices. They have also largely resisted increasing output, even as President Joe Biden urges more drilling to combat energy inflation.
Energy equities have outperformed the rest of the stock market this year. But although Continental has surged more than 80% in the 12 months leading up to Hamm’s offer, the 76-year-old wildcatter said the diminishing number of listed US drillers evinced a “lack of support from the public market.”
“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,” Hamm said in a message to employees that was included in a filing on Tuesday. “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, 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. Continental helped pioneer the shale-oil boom and debuted as a publicly traded company in 2007. Hamm’s net worth is $19.7 billion, according to the Bloomberg Billionaires Index.
Hamm was one of the first people to see the opportunities in horizontal drilling and hydraulic fracturing in the Bakken shale region of North Dakota and Montana. More recently, he’s expanded into the Permian Basin of West Texas as well as Wyoming’s Powder River Basin.
In April, Continental raised its 2022 drilling budget by about 15% to $2.65 billion and hiked its crude production target by 2.5%. The company also boosted dividends by 22%.
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 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 in a note to clients.
The family’s offer represents an 8.5% premium to Monday’s closing price. A higher offer 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.