Harold Hamm, an energy billionaire, is planning to take full control of petroleum and natural gas major Continental Resources, Inc. (NYSE: CLR), The Wall Street Journal stated in a report.
Shares of the company declined 3.4% to close at $71.68 on Wednesday.
Harold Hamm and the Hamm family collectively own an 83% stake in the company. Hamm, who founded Continental Resources in 1967 and is the Chairman of the board of directors, has offered to buy the remaining stake in the company for $70 a share (or $4.3 billion) in cash, valuing the entire company at about $25.4 billion.
Hamm’s move to take the company private reflects his position to realize more profits from the rising oil prices, as the company remains one among the few that doesn’t use hedging contracts to lock prices for future production. Further, Hamm wants to free the company from the shackles of widespread scrutiny present in the capital markets.
He opined, “We have determined that the opportunity today is with private companies who have the freedom to operate and aren’t limited by public markets. Going private will enhance our ability to maintain our competitive edge and will also enable us to be even more nimble in our efforts to create value through the drill bit.”
In a statement, the company said its board plans to constitute a special committee consisting of independent directors to study the proposal.
Stock Rating
On June 15, Wells Fargo analyst Nitin Kumar CFA downgraded the stock to Hold from Buy with a price target of $82, which implies upside potential of 14.4% from current levels.
Overall, the Street community is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on six Buys, eight Holds and one Sell. CLR’s average price target of $78.27 implies that the stock has upside potential of 10.24% from current levels.
Smart Score
Continental Resources scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform the market. Shares have gained 99.4% over the past year.
Conclusion
Hamm’s decision to take Continental Resources private is aimed at boosting the company’s profitability and freeing it from the scrutiny of the capital markets.
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