Billionaire oilman changes mind about divorce deal

31 Dec 2014 | Author: | No comments yet »

Hamm $1 Billion Alimony Bill Looks Bigger as Oil Stock Sinks.

Last month, when oil magnate Harold Hamm was ordered to pay his ex-wife $1 billion in their divorce, he called the ruling “fair and equitable,” publicly thanked the judge and said he was happy to have the case behind him. As my colleague Mike Aneiro reported mentioned yesterday, Reuters reported that falling oil prices claimed their first LNG-project casualty, saying Excelerate Energy’s plan for an offshore Texas liquefied natural gas terminal has been put on hold. Now, with his estimated $19 billion personal fortune having fallen by half amid a rout in oil prices, the chief executive of Continental Resources has changed his mind.

Today, meanwhile, American Eagle Energy (AMZG) dropped more than 22% after announcing it has suspended its drilling operations and likely won’t resume until oil prices improve. He said his wealth has shrunk with the falling price of oil and the drop in shares of the company he founded, Continental Resources Inc. (CLR) Since the divorce trial ended Nov. 10, oil hit a five-year low and Continental dropped 30 percent. Arnall, a former Continental executive, has claimed the ruling wrongly allowed the oilman to keep more than 90 percent of the wealth the couple built together. (Arnall resumed using her birth name after the divorce.) The dueling appeals are the latest twist in one of the largest divorce cases in US history.

The contest pits America’s top owner of oil against a lawyer ex-wife who is intent on showing that the Hamm fortune stemmed from hard work — both his and hers — during a 26-year marriage. Hamm contends his 68 percent Continental stake, which he owned before meeting Arnall, surged in value during the marriage due to “passive,” or market factors, like rising oil prices.

But since then, Continental’s market value has fallen by almost one-third, so Hamm, whose fortune is tied up in the oil company, is appealing the ruling. Worse still, Hamm’s lawyers say, she wants the court to make him fork over a lump sum payment due Wednesday under the divorce decree, while she continues to fight for more money.

The distinction is crucial, since Oklahoma law says only marital wealth stemming from active efforts or skills of either spouse should be split in a divorce. In essence, the most successful oilman in America is arguing that he was lucky. “The vast majority of the enhanced value of the CLR (Continental) stock was due to market forces and contributions of third parties,” Hamm said in an appeal filing. He said he “is going to have to borrow money in order to pay this judgment to petitioner; there is no reason she cannot borrow money to finance her appeal” of a judgment in her favor.

Continental closed yesterday at $38.09, as the benchmark for U.S. crude oil fell as low as $52.70 a barrel, from more than $107 in June. and the cheapest since May 2009. Hamm, under the original divorce decree, was to make an initial payment of about $322 million to Arnall by the end of December, with the balance due in $7 million monthly installments until the entire $972 million alimony award is paid. Continental, the top driller in North Dakota’s oil boom, has publicly claimed its CEO’s divorce has had, and will have, no impact on its business or operations.

In a filing, Continental complained to the court about “all of the expense that Continental’s minority shareholders have been dragged through” as a result of the divorce case. She has also appealed the underlying award, saying the quarter-century she spent at Hamm’s side entitled her to a greater share of the couple’s fortune.

Arnall “has received literally hundreds of thousands of bills” from Hamm, “but has not yet received one single penny to pay the bills,” Arnall’s lawyers said in court papers. In her appeal, Arnall faulted the judge for not explaining how he calculated her “contribution to the marital estate in her roles as a wife, mother and public supporter of her prominent husband.” Robert Bartz, Arnall’s lawyer, didn’t immediately respond to a phone call seeking comment on Hamm’s court filings. Hamm said his ex-wife has received about $30 million in “temporary support and for attorney fees in the 2 1/2 years this case was pending,” along with three homes and contents valued at almost $24 million, according to a court filing The oilman also took issue with her move to appeal the award even as she collects money from him, which his lawyers said flies in the face of conventional divorce law that requires parties to forfeit appellate rights if they accept any part of a decree.

As Arnall presses Hamm for billions more, the oilman will try to convince the state’s high court that what he owes her “should be reduced or eliminated,” Thompson said. Hamm’s lawyers urged the judge to reject Arnall’s desire to “both have her cake and eat it too,” adding that she got “exactly what she asked for” in the original decree. In his appeal, Hamm is contesting most of that award, including the court’s order that he split with Arnall $1.4 billion derived from the rise in his Continental shareholdings. That became a point of contention between the couple, according to people familiar with her version of events, since she worried Hamm would leave her.

Reuters reported in September that Continental had altered its corporate timeline on the company’s website, and made changes to language in SEC filings, in ways that could benefit Hamm’s case. It included claims that important milestones, such as Continental’s lucrative shift in focus from natural gas to oil, came years before the marriage began. In August, under questioning from Arnall’s lawyer, Hamm testified that several statements on Continental’s web site had been incorrect and that he had only recently discovered the errors. Among the evidence the couple has battled over is a 104-page book published in late 2012 and commissioned earlier by Hamm, entitled “Continental Resources – A Tribute to the Enid Years.” It chronicles the huge success of Continental since it was founded by Hamm in Enid, Ok.

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