Posted on 06/15/2022 7:10:34 AM PDT by lasereye
Shale baron Harold Hamm has hardly hidden his disdain for Wall Street’s environmental, social and governance movement, considering it a leash on companies such as Continental Resources as they try to get on with the job of producing more fossil fuels.
A climate change “religion” had gripped investors, he argued in an interview with the Financial Times last year, and companies such as European supermajor BP were about to “cut their [own] throat” by winding down oil operations under pressure to decarbonise.
Now, Hamm, who first took Continental public in 2007, has a chance to break free of Wall Street’s restraint, with a bid to buy the rest of the shares his family does not already own and return the company to private hands.
“Positioning ourselves as a private company will allow us to take maximum advantage of our greatest strength — our strong heritage as one of the leading exploration companies in the world,” he told employees in an email on Tuesday.
Analysts said the move could free Continental to do what public producers have for months been told by Wall Street not to: fire up drilling rigs to capitalise on a surge in oil prices to well above $100 a barrel.
Hamm and other public shale bosses watched as their privately held rivals sharply escalated drilling activity this year, unbothered by institutional investors insisting on scooping up their piece of the windfall.
Executives have often seethed in private about their difficulties in persuading ESG-focused portfolio managers in long-only funds to back more oil and gas exploration.
The shale pioneer’s move could tempt others to follow suit, using a cash flow bonanza to buy back shares they think have been unfairly discounted, concentrating them in a smaller group of loyal investors, analysts said. In theory, that smaller group could eventually take the entire company off the public market.
“Investors have stopped valuing the long term for oil and gas producers, so their market value is quite low,” said Raoul LeBlanc, vice-president of upstream at S&P Global Commodity Insights. “But every day the spiking commodity price is bringing in real cash, while spending on new wells is disciplined.”
LeBlanc said the “highly unusual” situation means some of the largest shale companies “could theoretically buy themselves back entirely in less than five years”.
Shale baron Harold Hamm has hardly hidden his disdain for Wall Street’s environmental, social and governance movement, considering it a leash on companies such as Continental Resources as they try to get on with the job of producing more fossil fuels.
A climate change “religion” had gripped investors, he argued in an interview with the Financial Times last year, and companies such as European supermajor BP were about to “cut their [own] throat” by winding down oil operations under pressure to decarbonise.
Now, Hamm, who first took Continental public in 2007, has a chance to break free of Wall Street’s restraint, with a bid to buy the rest of the shares his family does not already own and return the company to private hands.
“Positioning ourselves as a private company will allow us to take maximum advantage of our greatest strength — our strong heritage as one of the leading exploration companies in the world,” he told employees in an email on Tuesday.
Analysts said the move could free Continental to do what public producers have for months been told by Wall Street not to: fire up drilling rigs to capitalise on a surge in oil prices to well above $100 a barrel.
Hamm and other public shale bosses watched as their privately held rivals sharply escalated drilling activity this year, unbothered by institutional investors insisting on scooping up their piece of the windfall.
Executives have often seethed in private about their difficulties in persuading ESG-focused portfolio managers in long-only funds to back more oil and gas exploration.
The shale pioneer’s move could tempt others to follow suit, using a cash flow bonanza to buy back shares they think have been unfairly discounted, concentrating them in a smaller group of loyal investors, analysts said. In theory, that smaller group could eventually take the entire company off the public market.
“Investors have stopped valuing the long term for oil and gas producers, so their market value is quite low,” said Raoul LeBlanc, vice-president of upstream at S&P Global Commodity Insights. “But every day the spiking commodity price is bringing in real cash, while spending on new wells is disciplined.”
LeBlanc said the “highly unusual” situation means some of the largest shale companies “could theoretically buy themselves back entirely in less than five years”.
The cash influx and balance sheet strength mark a stunning turnround for an industry whose debt-fuelled drilling sprees took US oil output to a record high in 2020 — but left investors disillusioned with the poor returns.
US oil and gas stocks once made up about a quarter of the S&P 500’s value, but only account for around 4 per cent now — a reflection of investors’ disillusionment but also longer-term fears about the value of fossil fuel stocks amid efforts to combat climate change.
Even shares in Devon Energy, the S&P 500’s best performer last year, remain cheap enough that it could buy back its outstanding shares in less than six years, reckons S&P Global. The company has pledged $2bn in buybacks, roughly 4 per cent of its market value as of Tuesday.
And given the constraints on capital spending, share repurchases increasingly make sense, said Matt Portillo, an analyst at Houston investment bank Tudor, Pickering, Holt.
“If the market doesn’t start to recognise the value [shale companies are] creating through equity repurchases, you’re just going to continue to see shares gobbled up by management teams,” Portillo said.
In the next two to three years, several shale producers could buy back between 30 and 40 per cent of their existing market capitalisation just through free cash flow generation, leaving them an opportunity to privatise the rest, Portillo added.
He cited companies such as EOG Resources, one of the shale patch’s largest producers, which would have a “huge cash war chest by the end of the year” as income streamed in.
But even if other shale bosses would like greater control over their companies, Hamm and his family’s controlling stake in Continental make him a special case.
“Harold owns 83 per cent,” Pioneer chief executive Scott Sheffield said in an email. “[It’s] the key and big difference with others. I believe it would be very hard for others to do.”
I'm buying more of these drilling stocks. There could be a bunch of buyouts.
many companies felt forced to “diversify” their boards, and are now filled with retarded leftists and environmental idiots.
The only way to get rid of them at this point is to take a company private and fire them all.
I saw Tucker’s bit on the ESGs I thought I was comprehending the concept but there’s a question in my head that didn’t seem to get answered;
Knowing how opportunistic investors, capitalists, and speculators can be, why aren’t there people/groups/institutions hawking up the low fruit that is being left by the ESG colluding managers and firms?
I know Musk (for example) isn’t exactly a right-winger, but he certainly doesn’t seem to be huge freinds with the wokesters either, and it tends to be a rebel in his way of doing things.
Is there really noone willing to buck the woke capital investment trend?
Governments, specifically the Biden administration, have also said they will use ESG scores to determine taxation rates, as well as how often regulators show up. So the IRS does look at ESG scores now for corporate taxes.
No one wants to back it when the power of government makes it nearly impossible. The Government loves ESG scores, and will tax and regulate your company based on it.
As I pointed out elsewhere, 80% of the oil produced on this planet comes from national oil companies.
If these shale people go private, they will be 1000% more easy to nationalize. Though maybe no one would bother. Shale is diesel light.
Because the investment banks will block any energy related loans, and Wall Street brokerages, analysts, and media will black ball you.
Everything is ultimately controlled by the Feral Government™'s abuse of power via "Administrative Law".
Venezuela’s leadership is thug city. Seems like the sheeple would have revolted by now but same can be said for us.
The marriage of Venezuela Orinoco Heavy and Shale light is one made in heaven. Ditto for oil sands from Canada.
The would could be vastly improved on the turn of a dime without politics but that is dreaming.
I wish Hamm well. I could not go to work again under the esg crap that is going on. I will never pledge fealty to it or approve any more than i will to the whole queer freak thing. I’m no babble thumper but Romans 1:18-32 could not be more clear. I may go to hell but it won’t be for saying what is wrong is right or not saying how wrong it is.
The Venezuela masses are poor, but the government takes very aggressive good care of them. The US propaganda about starvation and oppression was never true. All crap.
There was an earthquake in Caracas a few years ago and video appeared online. I watched as people streamed out of buildings into the streets. Videos appeared from all over the city of this happening. People pouring outside.
Then there were videos of the people crossing the border to get out.
You know what I saw? Those people coming out of the buildings and houses all over Caracas looked just fine. No emaciated, starving skeletons. They looked like a US lunchtime crowd emerging from McDs. Perfectly normal.
Those desperately poor people at the border being interviewed about leaving? The women held a hand up before the interview started, reached into their purses and put on lipstick and eyeliner. The men were not skinny. They were wearing Nike and UnderArmour teeshirts.
Chavez and Maduro win elections because they make damn sure their base is happy. The people who are the opposition are the capitalists whose businesses cannot grow.
That’s what the people want. So too damn bad they can’t grow business. Voters got bribed, just like in the US.
Have not been in country since ‘97 or so.
Loved Venezuela and working there.
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