With news that Continental Resources Inc. (“Continental”) Executive Chairman Harold Hamm sent a letter to the U.S. Commodity Futures Trading Commission asking the regulator to investigate “potential market manipulation, failed systems or computer programming failures” in regards to the pricing of WTI futures, an even brighter light has been shone upon Hamm’s private letter delivery service, ‘The Hammbone Express’. The five-year service was modeled after Hamm’s childhood heroes, ‘The Pony Express’, and aims to deliver all of his high-profile stationary via horseback.
While at times the service has been useful, like preventing timely payment of JIBs and other service obligations, it has more often been to the detriment of the company. As an anonymous member of the Continental Resources executive team explains, “It can be a real pain in the ass. A data analyst on the team thought they had spotted an anomaly in the way futures were calculated, so Harold typed up the letter on his Commodore 64 and sent it on its’ way. Unfortunately, the letter arrived a few days too late to prevent the crash. It’s also the reason we never hedge; the contracts can never be settled at the agreed upon prices because we can’t get them there in time.” While some would argue that the failure to hedge given the $5+ billion in debt on the company was a poor decision, it appears the courier was to blame.
As Greg Casillas, CEO of Kayne Anderson-backed Casillas Petroleum Resource Partners II, LLC (“Casillas”) learned, it can mean failure to comply with a Purchase and Sale Agreement (“PSA”). Casillas brought a lawsuit against Continental last week for breach of contract, allegedly reneging on a PSA from March 6, 2020. As it turns out, in Hamm’s rush to sue the world in response to Coronavirus/OPEC+, it turns out that the ‘Hambone Express’ was overwhelmed and lost the check in the mail and unfortunately could not follow through with this ‘company-changing’ acquisition.
Figure 1: ‘Payment’ for Casillas Petroleum Resource Acreage
Still, Greg has not been deterred, especially given that the 74-year old Hamm appeared to have written the check from his own trust as opposed to Continental. Of course, since the Oklahoma Judiciary and Regulators are firmly under the thumb of Hamm, it will likely be an unsuccessful strategy.