I’ve rarely met a more down-to-earth person than Harold Hamm. Hamm’s rags-to-riches success is the quintessential “only in America” story. Growing up in rural Oklahoma, he was the last of 13 kids of sharecroppers who never owned land. He didn’t have money to go to college, so as a teenager he went to work in the oil fields and developed a passion. “I always wanted to find oil. It was always an irresistible calling.”
Today, Hamm is the Founder, Chairman and Chief Executive Officer of Continental Resources and one of the most successful men in America, with a level of influence that follows him everywhere he goes.
Early Life and Education
Harold can hardly remember a time when he didn’t work. As a child, he gathered eggs, milked the cows, and slopped the hogs. He worked the cotton fields with his family every fall. Hamm could not attend school until the last cotton crop was in. While he was always behind in school, this didn’t suppress his love of learning.
While attending high school in Enid, Oklahoma, Hamm participated in distributive education (DECA), which allowed him to earn school credit while working. Through DECA, Hamm hauled fuel for a truck stop/fuel distributor — his first job in the petroleum industry. Hamm would deliver fuel to wells that were located in the current STACK Play in Oklahoma. These were some of the first wells to implement hydraulic fracturing technology.
Hamm recalls it as a pretty broad area. “Try to imagine a young man going out in a fuel truck, and the whole thing — it was about 26 drilling rigs, and you could see them all lit up at night. It was something to behold.”
As a DECA requirement, Hamm had to write a report on the vast benefits of the petroleum industry in America. He researched all of the industry greats — E.W. Marland, J. Paul Getty, and others. He saw all the good things they did for the country and decided he wanted to be part of it.
“DECA had a lot to do with my future. Not only did they emphasize that without hard work we wouldn’t get anywhere, but without them, I may not have found my calling.”
Upon graduation, he worked a few years in the industry to learn the business before borrowing $1,000 to buy the family’s used truck. Hamm began hauling water and cleaning oil tanks and, before long, he created the Shelly Dean Oil Company, named after his two daughters, Shelly and Deana.
And seemingly overnight, his drive, ambition and enthusiasm led him to become one of the most influential producers in the country. Oil and gas had become his lifeblood. And he would do whatever it took to grow and protect it. As Hamm’s company grew, he began experimenting with horizontal drilling technologies. Using two- and three-dimensional seismic imaging and multistage fracturing, Hamm saw the potential of these new drilling techniques and was willing to take risks while others shied away.
He now jokes about the early stages of building Continental’s predecessor, Wheatland Oil, which Hamm cofounded with Jeff Hume, now the Vice Chairman of Strategic Growth Initiatives at Continental.
But the two of them didn’t always strike oil. They encountered 17 straight dry holes, enough to shake anyone’s faith. But not Harold Hamm.
“I never considered quitting,” Hamm can say now with a smile on his face.
“I wouldn’t say they were planned, but we knew the risk. But that’s what took us to the oilier areas of the U.S. At that time, we were 65 percent gas and 35 percent oil. We thought, after that, that our future might be brighter with crude oil, so we started focusing on oil prospects. They were high-risk, high-potential deals.”
The decision to focus on crude oil brought Hamm to the Williston Basin area in North Dakota. Following a directional drilling trajectory from Oklahoma through Montana to North Dakota, Continental experienced critical success in the Peterson well of the Cedar Hills Field in North Dakota. Soon, the company began seriously exploring the area and leased nearly 1 million acres across the Bakken. Using new and improved technologies such as multistage, horizontal fracturing to gain access to previously inaccessible oil, Hamm and his team at Continental Resources discovered some of the most prolific oil finds in U.S. history. At its peak, the Williston Basin had 250 rigs running.
The Bakken discovery launched America into an era of energy abundance — a renaissance in U.S. oil production, and Harold Hamm was determined to make it last.
Backing the Bakken
At the time of the Bakken discovery, North Dakota lawmakers, both county and state, had recently imposed higher taxes on the oil and gas industry — up to 11.5 percent — and, as a result, oil production in the state was languishing. On the other side of the play, Canadian producers, who were drilling in the northern half of Williston Basin on the Canadian side of the border, were able to take advantage of their government’s “tax holiday” which was instituted in 1993 to provide a tax break on the first 100,000 barrels of oil produced on each well using horizontal drilling.
“Their rig count went from about 50 to 300 in no time. And they’re in the northern half of the same basin. And we saw that, and we in the industry set up what we called the Williston Basin [Petroleum] Conference,” Hamm says.
The Williston Basin Petroleum Conference gathered leaders across the state to discuss drilling challenges in North Dakota. The conference included the state’s Senate Leader, Speaker of the House, members of the North Dakota Industrial Commission, and the Governor.
During this conference, Hamm’s group spoke of the vast benefits of North Dakota oil production. They explained that in order to compete with the growth in Canadian oil production that was made possible through tax breaks, North Dakota should encourage, not hinder, production growth.
The Governor of North Dakota, Ed Schafer, also spoke at the state legislative committee hearing about the dramatic change occurring in Canada strictly due to a tax cut, and the lawmakers concurred. A bill removing the North Dakota state tax — and thus halving that 11.5 percent — was passed unanimously (county taxes remained) and went into effect in April 1995.
The American energy renaissance was officially ready to launch. And Harold Hamm was leading the charge.
Save Domestic Oil
Harold Hamm isn’t one to play around when it comes to American oil production. Similar to the current oil price recession resulting from overproduction in the Middle East, he witnessed another event in the late 1990s. At the time, Venezuela began producing at record speed and selling oil in America for approximately $4 per barrel (far below its production cost of approximately $7 per barrel), and took away our market share.
Soon, Saudi Arabia, Iraq and Mexico joined the race to crush American production. But Hamm would have none of it. He and a group of about 30 other industry leaders created a group called Save Domestic Oil. Together, they filed a lawsuit in international trade court against Saudi Arabia, Venezuela and Mexico to charge the countries with dumping and demand them to disclose their costs and pricing data. The case was dismissed on a technicality, but not before the story went public. The case may have been dismissed, says Hamm, but those countries “dropped it like a hot rock.” They were fearful of the worldwide repercussions should such a case reach a courtroom and international press. “It’s a case we actually won just by filing it,” he says.
Global Supply and Demand
The current oversupply of crude oil around the world has spurred one of the worst oil crises in modern times. In attempt to protect market share, some countries continue to produce at record rates and refuse to cooperate with other producers’ attempts to temper the flow. Saudi Arabia just came off its highest ever production rate: a near-record rate of 10.2 million barrels per day.
U.S. producers, on the other hand, have been cutting back on production and dropping rigs to keep supply in line with demand. While the U.S. oil and gas industry has experienced massive layoffs and bankruptcies, some producers, like Continental Resources, have been able to use this period to reduce costs, build greater efficiencies and fine-tune the industry.
According to Hamm, Saudi Arabia’s policy of producing flat out at record rates is working well for American producers. The man who foresaw in early 2016 that prices would rebound to $60 by the end of the year also foresees a dismal future for those countries trying to break the American oil and gas industry — in the long run. These countries are producing at a breakneck speed and, yes, America is experiencing the pain of lower oil prices, but Hamm also knows that the demand for oil is only rising.
In 2017, Hamm expects to see a shortfall between demand and supply of up to 200,000 barrels per day. Eventually, the tide will turn and America will be the only country left with unlimited resources, while the countries who are trying to break our industry will run out and become dependent on our oil. “When they run out, it’s going to be a different day and age,” he says.
“They’re going to go from being a relevant force to becoming totally irrelevant.”
When will that happen? Hamm says, “We’re getting really close to that point.”
You might ask how Hamm can be so confident. He will tell you it’s in the numbers. Many people are not looking at the bigger picture: the refineries, storage and other aspects of the industry that are all tied together.
There is no surplus, according to Hamm, as we still aren’t meeting the demand, and that demand is constantly rising. The U.S. Energy Information Administration recently reported a loss of at least 200,000 barrels of U.S. crude oil inventories. He says it will be a lot more than that. The demand will just keep rising.
So let those other countries overproduce, sell their oil and deplete their reserves. We’ll be waiting.
Just ask Jack Coleman, he says. Managing Partner and General Counsel of Energy North America LLC, an energy consulting firm, and former member of the House of Representatives, Coleman spoke before Congress in 2011 concerning our dependence on foreign oil. Or lack thereof.
At the time, Coleman said that Americans consumed 19 million barrels of oil per day and imported 58 percent of it: 4.2 billion barrels each year. He quoted 2006 assessments of 15 billion barrels discovered on federal offshore sites but not yet produced, as well as an estimated 86 billion barrels not yet discovered. And that doesn’t even take into account the natural gas reserves. This man, Hamm says, is telling us that just in the offshore region alone, we have enough oil to eliminate all oil imports for nearly 25 years.
If only the government would understand.
The Political Landscape
Harold Hamm’s support of his industry doesn’t stop at the local and state level. You’ll often find him inside influential circles, espousing the importance of a country free of dependence on foreign oil.
When Mitt Romney was making a bid for the White House, he selected Hamm as his energy advisor. Hamm made quite an impact on the presidential candidate. His energy plan called for fixed timetables for approving energy projects, removing carbon dioxide from the list of regulated pollutants and handing control of drilling permitting over to the states. Were those Hamm’s ideas?
“Yes, they were,” he says. “And at that time, the Feds were killing any projects they didn’t like by just sitting on them, refusing to bring them up for discussion.” A change in the rules such that any proposed project must be dealt with within a reasonable amount of time just seemed logical to him. And Romney agreed.
In Hamm’s view, regulatory control was one of the first things that needed to be changed. The Feds are always trying to regulate industry, but that’s the state’s job. Such issues are so state-specific that one blanket set of rules simply can’t effectively, or correctly, oversee and protect this country.
Harold Hamm is widely recognized as the man who led the charge on lifting the 40-year-old ban on U.S. crude oil exports and, in effect, changing the world. In 2013, Harold launched the national discussion for lifting the ban at a Washington, D.C., media dinner, where he laid out the need for exports to help America achieve energy independence by 2020. Shortly thereafter, he was invited to testify at the first congressional hearing on crude oil exports in 25 years.
With over 30 trips to Washington, more than 250 meetings with members of Congress and countless other efforts, Harold rallied the troops, created the greatest bipartisan collaboration in Congress in recent memory and did something that no one thought was possible.
A Decade of Death by a Thousand Cuts
Harold Hamm believes that President Obama’s weakness toward taking a stand for America against outside aggressors has set us up for terrible consequences. Obama’s premise that climate change is the biggest problem in the world is just wrong. It’s global terrorism. Had Romney won, we’d have had 3 percent growth and north of 5 percent to 6 percent GDP growth, according to Hamm. “Romney would have tapped into the nation’s pent-up energy and economic potential that’s not been unleashed because of the anti-owner, anti-business sentiment in our courts in D.C. and all the regulatory overreach across every single sector.”
“We’re having to steal parts off of airplanes in museums to keep our jet fighters going. That’s the shape of our military today,” Hamm adds.
Let’s be clear. Harold Hamm is a businessman, not a politician. But I just had to ask: What if he were running things? What would his agenda look like?
American Energy Policy
Federal lands, of course, were on Hamm’s list. He says there’s been a long-standing bias against drilling in federal lands, and that what the typical American thinks of when you say federal lands are parks, wildlife and beautiful scenery that takes your breath away. And then there’s eastern Montana.
“Those same people have never been to eastern Montana,” Hamm says. “It’s a bunch of land that nobody wanted; nobody cared to try to farm it, and nobody even tried to live on it. So the government made it federal land, and there it stays.”
That’s the type of land that he would open up to development. And it would be done respectfully, carefully, with every precaution taken to avoid damage. In fact, he says, if Romney had been elected president, he had hundreds of ways at his disposal to develop such land without harm.
New York is another example. There is a lot of oil to be drilled there, Hamm says, “but nobody’s beating the door down to do it.” A state regulation now forbids hydraulic fracturing, following a moratorium in place since 2008 while studies of the effects of the practice took place. There is quite a bit of controversy in the state over it. Imagine you are a New York state citizen and you had bought mineral rights as your neighbor had across the state line. Once the moratorium took effect, you watched your friend continue to collect royalties while you were stuck sitting on precious land with no way to obtain the return on investment.
They feel cheated, duped, Hamm says, because their hard-earned money — valued at up to $25,000 an acre just across the state line in Pennsylvania — was invested in a project that was later turned off on the whims of Gov. Andrew Cuomo. Many, however, have been calling for the Governor to reverse his stance. U.S. Rep. Tom Reed, for example, has stated that current regulations provide more than enough oversight and protection against any potential damage; and he cites new studies — including ones from the EPA — that show hydraulic fracturing to be safe.
2016 Presidential Election
It’s a turbulent year in the political arena. An especially thought-provoking year, one might say. So much seems to be at stake. So I wanted to get Hamm’s take on what we should really be focusing on. What are the components of the bigger picture, as far as he’s concerned?
Fossil fuels, not surprisingly, are at the top of the list.
“Paramount here is the fact that, with [Hillary] Clinton, her philosophy is to eliminate all fossil fuels,” he says. “They got the coal out already, basically. Now they’re out to get rid of oil and gas. Don’t they realize natural gas is the cleanest fuel available?”
As far as presidential support, Hamm believes Donald Trump is the best choice for president. Speaking at the Republican National Convention, Hamm passionately stated, “President Donald Trump will unleash America’s pent-up energy potential, eliminate foreign oil imports, trash these punitive regulations, create millions of jobs and develop our most strategic geopolitical weapon, crude oil. He will restore America’s rightful place as the energy leader of the world.”
Harold believes Donald Trump is the man who will fuel America’s future.
If it’s about fueling America’s future, how does Hamm feel about possibly being nominated as Trump’s Energy Secretary? “It’s a very important job,” he says. “But, look. I have a full-time job at Continental. And all that talk about that position, it didn’t even come from the two of us. That was a lot of stuff coming out of Reuters; we had no input into it.”
Hamm says his future is with Continental. “I’m an explorationist. It’s what I do.”
And just when you think you have Harold Hamm pegged, he brings up Ames Hole. Ames is a small town near Enid, Oklahoma. Ames Hole wasn’t his first find, nor was it the first play he developed, but it seems to have a bit of a soft spot in his heart. It was 1991, and he and his team at Continental were exploring this new find. The geological anomalies appeared to form a large underground crater, with rings of differing geology. Intrigued, they continued using enhanced computer capabilities and realized they were working with a large astrobleme that would turn out to be one of only six oil-producing craters in the United States.
The astrobleme is 8 miles wide and is approximately 450 million years old. The enormous pressures created beneath the area perhaps aided in the creation of quite prominent oil and gas resources.
One of Continental’s exploration managers, Rex Olson, noticed the odd pattern and showed it to Hamm, who was immediately intrigued. They discovered gas in the outer ring, but drilling for gas was far from economical at the time. Eventually they discovered oil by drilling deeper than normal, past 9,000 feet, and began producing. It was their most significant find to date, and it pushed Continental Resources into the next level. As Hamm says, “We are risk takers, and it was one of our first successful plays.” Hamm was in the big leagues now.
A museum was later erected at the site, where a unit still pumps at his inaugural Gregory Well.
Today, the Ames community proudly claims the crater as its own — and as an important contributor to the geological knowledge of the nation’s petroleum industry. Hamm was the primary developer of the museum, which opened in 2007. Since Hamm’s discovery, many more wells have been completed in the Ames crater, some producing more than a million barrels of oil.
To learn more about Harold Hamm and his company, Continental Resources, visit www.clr.com.
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Copyright 2016 SHALE Oil & Gas Business Magazine