After XTO Energy Inc. announced its deal to buy Hunt Petroleum for nearly $4.2 billion earlier this month, there was speculation that the heirs of oil legend H.L. Hunt sold too cheaply.
XTO chief Bob Simpson probably contributed to the perception when he said on a conference call that the deal was done “at a price that one could hardly believe.”
Dallas attorney Bill Brewer, who represents one Hunt heir in a lawsuit alleging mismanagement of the trusts that own Hunt Petroleum, quickly jumped in, telling The Dallas Morning News:
“XTO is so giddy about what a bargain-basement price they’re paying for these assets. If we discover this isn’t an arms-length transaction, we’ll need to stop it.”
Industry analysts, familiar with the booms and busts in the industry, were more sanguine.
“I’m pretty agnostic on the deal,” Subash Chandra told Forbes. “It wasn’t overpriced, it wasn’t underpriced.”
Interestingly, the deal closely follows the outline of a “hypothetical” sale distributed at a Hunt family meeting in Colorado Springs last July. The two-page document said Hunt Petroleum could fetch as much as $4 billion and assumed a sale at $2.5 billion.
XTO, based in Forth Worth, is paying $2.6 billion in cash and nearly $1.6 billion in stock. The company expects the deal to close by Sept. 3.
Prices for oil and natural gas have increased substantially since last July. Some experts think prices will increase further. Some think they will fall.
If the Hunt heirs sold too cheaply, their stake in XTO stock (23.5 million shares) gives them some respite. Since the deal was announced, XTO has traded as high as $73.74, more than $6 above the deal price ($67.50 a share). At current prices, that means roughly $100 million more for the family.
Old H.L., who died in 1974, would be smiling.
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