Billionaire Harold Hamm offered to take shale oil producer Continental Resources private on Tuesday.
What does this mean?
Harold Hamm founded Continental in 1967, and he and his family still own 83% of the company today. But apparently that’s not enough: he offered over $4 billion – about $70 a share – for the rest of the firm on Tuesday, in a deal that would value the company at over $25 billion. See, Harold thinks being a public oil and gas company has put Continental under more scrutiny and limited its growth. Case in point: increasingly eco-conscious investors have been pressuring public oil producers to use their record profits to pay dividends instead of upping production. Thing is, global supply of the slippery stuff is still low, and prices are still booming. So if Continental was private, it could drill more – and make the most of those high prices – without facing the backlash.
Why should I care?
For markets: Not so fast…
Continental’s shares might’ve jumped 7% after the news, but not everyone thinks the deal’s a done thing: some analysts reckon Harold will need to cough up more cash for shareholders to agree. After all, while the $70-a-share offer is 9% more than they were worth on Monday, it’s still below the eight-year high the shares hit last week. And with demand poised to outdo supply for some time, oil producers like Continental are likely to enjoy higher profits and share prices for a while yet.
The bigger picture: We’re the gas guzzlers.
OPEC certainly expects demand to stay high: the group of oil-producing countries predicted on Tuesday that global oil consumption will reach an average of nearly 102 million barrels a day in the second half of the year – beating even pre-pandemic levels. That’s a problem: many OPEC nations lack the funding or capacity needed to produce more oil, and the ones that can would still struggle to plug the gap caused by Russian sanctions.
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Software Giant Oracle Reported Better-Than-Expected Results
Software giant Oracle reported better-than-expected quarterly results earlier this week.
What does this mean?
Oracle knows there’s money in the cloud, so it’s been trying to push more of its existing customers toward its cloud offerings recently. That’s been paying off: demand was up across the software giant’s cloud segment last quarter, including a hefty 36% uptick in its cloud infrastructure business. Overall, Oracle’s cloud revenue was up 19% last quarter versus the same time last year, which helped push overall sales up a better-than-expected 6% – the company’s eighth straight quarter of growth.
That’s not the only reason Oracle’s happy: the world’s second-biggest software maker completed its $28 billion purchase of healthcare IT company Cerner last week. The healthcare industry’s been slow to adopt cloud technology, so Oracle will be hoping to benefit this quarter by making inroads in the sector. Investors were on board: they sent Oracle’s stock up 13%.
Source: Google Finance
Why should I care?
The bigger picture: No bang for your buck.
Still, Oracle’s results could’ve been better. It does a lot of business overseas like many of its tech peers, and it needs to convert that foreign revenue back to its home currency. Thing is, Oracle said the dollar’s currently so strong that those conversions cut into its revenue by 5% last quarter, and the currency’s only expected to get stronger as interest hikes keep coming. There’s one positive, mind you: analysts reckon economic issues like inflation could end up helping Oracle, as more businesses could head to the cloud in a bid to cut costs.
Zooming out: The cloud’s growing.
Oracle’s rival Salesforce is pushing into new areas of the cloud: it announced last week that it’s launching a cloud-based service for creating and selling NFTs which should be widely available by October. That’s interesting timing: folk might’ve spent $2 billion on NFTs last month, but trading activity has already plunged 90% from its September peak.
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