What's going on?
Billionaire Harold Hamm offered to take shale oil producer Continental Resources private on Tuesday.
What does this mean?
Harold Hamm founded Continental in 1967, and he and his family still own 83% of the company today. But apparently that’s not enough: he offered over $4 billion – about $70 a share – for the rest of the firm on Tuesday, in a deal that would value the company at over $25 billion. See, Harold thinks being a public oil and gas company has put Continental under more scrutiny and limited its growth. Case in point: increasingly eco-conscious investors have been pressuring public oil producers to use their record profits to pay dividends instead of upping production. Thing is, global supply of the slippery stuff is still low, and prices are still booming. So if Continental was private, it could drill more – and make the most of those high prices – without facing the backlash.
Why should I care?
For markets: Not so fast…
Continental’s shares might’ve jumped 7% after the news, but not everyone thinks the deal’s a done thing: some analysts reckon Harold will need to cough up more cash for shareholders to agree. After all, while the $70-a-share offer is 9% more than they were worth on Monday, it’s still below the eight-year high the shares hit last week. And with demand poised to outdo supply for some time, oil producers like Continental are likely to enjoy higher profits and share prices for a while yet.
The bigger picture: We’re the gas guzzlers.
OPEC certainly expects demand to stay high: the group of oil-producing countries predicted on Tuesday that global oil consumption will reach an average of nearly 102 million barrels a day in the second half of the year – beating even pre-pandemic levels. That’s a problem: many OPEC nations lack the funding or capacity needed to produce more oil, and the ones that can would still struggle to plug the gap caused by Russian sanctions.