Continental Resources shareholders on Friday morning will vote to determine whether the Oklahoma City-based energy company should spend $340 million to buy another firm owned by Continental executives.
But first, U.S. District Judge Timothy D. DeGiusti on Wednesday will hear arguments in a lawsuit filed by a group of shareholders hoping to stop the vote.
The Louisiana Municipal Police Employees' Retirement System filed the suit in June, saying Continental's directors breached their fiduciary duty to the shareholders by agreeing to pay too much for Enid-based Wheatland Oil Co.
Wheatland is 75 percent owned by Continental CEO Harold Hamm and 25 percent owned by Jeff Hume, Continental's vice chairman of strategic growth initiatives.
Continental won a legal victory Friday when DeGiusti denied a request by the shareholders for a temporary restraining order that would have blocked Friday's vote.
The Louisiana retirement system claimed that Continental has not provided its shareholders enough information. DeGiusti disagreed.
“Indeed, a similar argument can be made that the public interest favors the ability of corporations and shareholders to govern their internal affairs without undue interference in advance of an expression of the will of all eligible shareholders through the voting of their shares,” the judge wrote in his order Friday.
Continental praised the judge's decision.
“We are pleased with DeGiusti's very careful and thoughtful opinion,” said Eric Eissenstat, Continental's senior vice president, general counsel and secretary.
Wheatland's holdings include acreage in North Dakota and Montana and interests in more than 1,000 wells with production of more than 2,500 barrels of oil equivalent a day in December.
The Enid company was formed in 1987, but it acquired most of its Bakken assets as part of a 10-year participation agreement that began in January 2002.
Continental said it began the participation agreement because at the time Continental was not public and had limited access to capital and because the Bakken plays were unproven and undeveloped.
“Wheatland became an investor to share the risks of developing these Bakken plays,” the proxy stated.
Before becoming a publicly traded company in 2007, Continental was owned almost exclusively by Harold Hamm and other members of his family. Hamm still owns about 68 percent of Continental stock, and a trust controlled by his children owns another 8.1 percent in the Oklahoma City oil company.
For the sale to move forward, the transaction must be approved by at least 50 percent of the shares not owned by Hamm, Hume and Continental directors and executives, or more than 28.4 million shares. The shares owned by Hamm's children will be counted in the vote, the proxy said.
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