Harold Hamm, the outspoken chief executive of the independent oil driller Continental Resources, on Thursday called a bottom in U.S. oil prices—and said he expected an upsurge in the near future.
"We feel like we're at the bottom rung here on oil prices," said Hamm on an investor call shortly after noon, as WTI futures traded just beneath the $78 range. He added, "I see price improving to the $85 to $90 range" and that that would happen in the "short term."
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To underscore his point, the Oklahoma City company recently removed its crude oil price hedges for this year, 2015 and 2016—bets that may have protected Continental from taking losses if crude levels remained low for a sustained period of time. According to someone familiar with the matter, monetizing those hedges, which were handled at least in part by traders at Citigroup, generated proceeds of $433 million for Continental.
A Citi spokesman declined to comment.
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At the same time, Continental cut its spending plans for the coming year by 12 percent as a way to conserve its available cash, or liquidity—a step regarded as a possible bulwark against sustained lower oil prices.
Opting out of hedging is not an unusual decision in itself; some other companies, including American Airlines and Exxon Mobil, shy away from it as well. But Hamm's move to turn bullish at a time when a ramp-up in supplies have pushed U.S. oil to a three-year low bucks the conventional wisdom currently at play in the markets.
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Early Wednesday, analysts at the brokerage Stifel Financial lowered their price target Continental, and during the investor call a few hours later, a number of listeners indicated surprise or skepticism about the move. "It's quite a bold call," said call one participant to Hamm, asking for details on how Continental's board authorized the exit of the hedges.
Hamm said his company has a "great board" and that directors were in agreement with management's decision on the hedges.