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Continental Resources Becomes Private, Harold Hamm Purchases it for $4.3 Billion
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Continental Resources Inc. agreed to be purchased by its founder, Harold G. Hamm, in a $4.3 billion cash deal that would take the U.S. shale giant private.
On October 17 Continental, based in Oklahoma City, concluded an agreement to be acquired by Omega Acquisition Inc., an entity owned by Hamm, for $74.28 per share. The offer price denotes a 15% premium to the closing price on June 13 — the day before Hamm’s family revealed their initial $70 per share proposal.
Being an industry icon who helped lead the charge to lift America’s 40-year-old ban on U.S. crude oil exports, Hamm had managed to establish Continental Resources in 1967. Since then, the company has evolved into one of the top 10 oil producers in the U.S.
However, Continental became public in 2007, as the public market rewarded companies for both growth and performance, according to Harold G. Hamm.
Throughout a long time, the public market has changed, especially since the COVID pandemic. Hamm is convinced that the market response has not been there for the oil and gas industry, noting the decreasing number of public E&P companies.
David Deckelbaum, managing director, and senior analyst at Cowen agreed with Hamm’s view that Continental is not obliged to be supported by capital markets, given its healthy free cash flow (FCF) yield and a leverage-neutral profile in 2023 and even taking into account plans to partially finance the transaction through a new term loan facility.
Even with the proposed incremental leverage from the buyout, CLR would be almost 0.6x leveraged in 2023, and expected FCF, even before assuming reduced costs from going private (else dividend), would have the term loan repaid in about 1.5 years. As a private company, Continental should have greater freedom to operate, particularly in areas such as exploration.
Being a chairman of Continental Resources, Hamm and his family own 83% of the company’s stock. Based on the shares outstanding as of October 12, the tender offer would be for almost 58 million shares of common stock, according to the Continental release.
The tender offer values Continental at roughly $27 billion. The offer price is slightly under Siebert Williams Shank & Co. LLC’s $75 price target and compares to the consensus price target of $72.86 on FactSet and $71.73 on Bloomberg.
Continental is the largest leaseholder and the largest producer in the nation’s premier oil field, the Bakken play of North Dakota and Montana. Continental is considered to be the largest producer in the Anadarko Basin of Oklahoma. Additionally, the company has newly purchased positions in the Powder River Basin of Wyoming and the Permian Basin of West Texas.
Meanwhile, the merger transaction does not demand a vote by Continental’s shareholders and is anticipated to close before year-end. Following closing, the remaining public operators in the Bakken will include Chord Energy Corp., ConocoPhillips Co., Hess Corp., Devon Energy Corp., Northern Oil and Gas Inc., Marathon Oil Corp., Ovintiv Inc., and Exxon Mobil Corp.
Continental’s board of directors, acting on the unanimous recommendation of a special committee including only independent and disinterested directors, has approved the merger agreement and the transactions contemplated thereby and recommended that Continental’s shareholders tender their shares of common stock under the tender offer.
Intrepid Partners LLC is acting as financial adviser and Vinson & Elkins LLP (V&E) is acting as legal counsel to Hamm. Evercore is a financial adviser and Wachtell, Lipton, Rosen & Katz is providing legal counsel to the special committee of the Continental Resources board of directors. Sidley Austin lawyers Mark Metts and Kayleigh McNelis represented Evercore.
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Ain't Nothing Like a $2 Billion Deal: Oasis Sells Midstream Affiliate to Crestwood
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Crestwood & Oasis Midstream merge to create a top Williston #basin player. $1.8 billion deal is expected to close during the Q1 of 2022. The transaction will result in a 21.7% ownership stake for Oasis in Crestwood common units. The remaining ownership of Oasis in Crestwood will also be of benefit to the company since it will create a diversified midstream operator with a strong balance sheet and a bullish outlook after this accretive merger.
Energy Transfer LP Races to Carry Permian Basin Gas to Gulf Coast Hubs
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The ever-increasing demand for natural gas exports from the Gulf Coast started a race to further develop Permian Basin. Various companies, including Kinder Morgan and MPLX, are among those looking at building new pipelines in the region due to the demand spike. But Energy Transfer seems to edge past them into the lead since its project strikes as the most economical option for the basin outside of capacity expansions on existing pipelines and could essentially add 1.5-2 Bcf/d of transport capacity with just 260 miles of new pipe.
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Enbridge acquired Tres Palacios natural gas storage facility in Texas for $335 million, adding approximately 35 Bcf of natural gas storage to their portfolio. The facility uses salt caverns for storage and has a gas header pipeline system that spans 62 miles and links to 11 major gas pipelines. Crestwood Equity Partners LP intends to divest its interests in Tres Palacios by the second quarter.
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The U.S. natural gas pipeline network is a complex system of pipelines that transport natural gas from production areas to consumers across the country. The pipeline network consists of three main types of pipelines: gathering pipelines, transmission pipelines, and distribution pipelines. Gathering pipelines are small-diameter pipelines that transport natural gas from production wells to processing facilities or larger transmission pipelines. Transmission pipelines are large-diameter pipelines that transport natural gas over long distances, sometimes across multiple states. Distribution pipelines operate at low pressure and are located in or near urban areas. They are often referred to as "utility pipelines" because they are typically owned and operated by local gas utility companies.
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Diamondback Energy, an independent oil and gas company, has successfully completed the acquisition of Lario Permian, marking the closure of two major deals in the fourth quarter of 2022. The company purchased two private operators in the Midland Basin for approximately $3.3 billion.