Hunt Becomes Billionaire on Bakken Oil After BankruptcyBrendan Coffey
William Herbert Hunt was once one of the wealthiest men on Earth. With his brother, Nelson Bunker Hunt, the billionaire bought more than 195 million ounces of silver -- 60 percent of the U.S. market -- in the 1970s. By early 1980, their stake was valued at more than $9 billion.
The Hunts’ position imploded when silver prices plummeted 80 percent over the course of a few weeks in March 1980, culminating 33 years ago this week on what traders called Silver Thursday. The crash rattled Wall Street and sent the Texas brothers into bankruptcy.
Hunt is once again a billionaire, this time with oil. In October, he sold 43 percent of the North Dakota petroleum assets owned by his closely held Petro-Hunt LLC for $1.45 billion to Houston-based Halcon Resources Corp. The cash and stock deal made Hunt Halcon’s largest shareholder and boosted his net worth to $4.2 billion, according to the Bloomberg Billionaires Index.
“The numbers are out there,” said Hunt, 84, in a telephone interview from his Dallas headquarters. “We’re a family-owned company -- a private company -- and are really not interested in being out in the public arena.”
Hunt hasn’t appeared on an international wealth ranking in 25 years. He said oil will continue to fuel the U.S. economy.
“The people of the United States don’t recognize it, but the oil industry has given the greatest gift to the people of the nation, and that gift is the low cost of energy,” he said. “Bottom line is this enables the country to be very competitive manufacturing-wise and in the world economy.”
The $9,500 per acre Halcon paid for Hunt’s land is about average for recent deals in the Williston Basin, according to Eli Kantor, Senior Exploration and Production Analyst with Iberia Capital Partners LLC in New Orleans, Louisiana.
“There really is no ability to increase your exposure through grassroots leasing,” said Kantor. “So for these companies to boost their oil exposure, it is going to have been done through M&A. That is putting a premium on undeveloped acres in the Williston.”
The Williston Basin, also known as the Bakken, is a geological formation covering North Dakota as well as parts of South Dakota, Montana and Saskatchewan. The largest contiguous oilfield in the U.S., the Williston has the potential to be the largest producing field in the world over the next 30 years, according to Harold Hamm, the billionaire chairman of oil and gas producer Continental Resources Inc.
An early Bakken wildcatter, Hamm has said in company reports that the area will yield as much as 24 billion barrels of oil. He is worth $12.8 billion, according to the Bloomberg ranking.
“To put things in perspective, with current production at about 700,000 barrels a day, that is almost the size of Qatar’s oil production for the entire country,” said Christian O’Neill, Senior Energy Analyst with Bloomberg Industries in Princeton, New Jersey.
Petro-Hunt extracted 10.8 million barrels of oil and 17.9 billion cubic feet of natural gas last year across 6 states in the U.S., according to data compiled by Bloomberg from individual state production reports, including the assets it sold to Halcon.
The company was the fifth-largest natural gas and eighth largest oil producer in North Dakota in 2012, according to the North Dakota Department of Mineral Resources. It still owns 518,000 acres in the state, producing more than 5.1 million barrels of oil a year. Those fields are valued at about $1.9 billion, based on the terms of the Halcon deal. Hunt’s stake in Halcon is worth about $800 million.
Petro-Hunt’s energy assets outside North Dakota are valued at $875 million, according to data compiled by Bloomberg, applying the average price-to-cash flow multiple of 17 publicly traded peers to Hunt’s 2012 production of 1.8 million barrels of oil and 4.74 billion cubic feet of gas.
The company also has a financial stake in wells it does not operate, such as a minority interest in a series of wells operated by ConocoPhillips on the Alaska North Slope.
Hunt and his older brother, who goes by Bunker, are sons of Lyda Bunker and Haroldson Lafayette Hunt. Their father was a Texas oil tycoon and a bigamist, having three families at once. He split his fortune among the families prior to his death in 1974.
Herbert Hunt’s half-brother, Ray Lee Hunt, is majority owner and chairman of Hunt Consolidated Inc., a Dallas-based company that is the 10th-largest closely held oil producer in the U.S. Its Hunt Oil division has operations in Peru, Iraq and Yemen. He has a net worth of $8.6 billion, according to the Bloomberg ranking.
The trusts of two of Herbert’s deceased siblings, Margaret and Hassie Hunt, controlled another oil company, Hunt Petroleum Corp., which was acquired by XTO Energy Inc. for $3.7 billion in 2008. A legal dispute among Hunt heirs over that company was settled in 2010.
Last week, Bunker sold 90 percent of his closely held Hemco Nicaragua SA, a gold miner, to Mineros SA of Colombia. Terms were not disclosed.
Bunker discovered oil fields in Libya in the 1960s, losing them when Muammar Qaddafi nationalized the fields in 1971. Those losses prompted him to invest in a commodity he could control, according to Jeffrey C. Williams, a professor of economics at University of California at Davis.
Since gold investing was barred by the U.S. government until 1977, Bunker turned to silver, recruiting Herbert -– and, later, another brother, Lamar -- to join him, Williams said by phone.
Williams testified on behalf of the Hunts when they were sued over their silver trading in the 1980s, and has written a book on the market crisis. The brothers accumulated silver positions of a size never seen before or since, in part because U.S. tax regulations discouraged taking short-term gains.
“They liked to take big risks,” Williams said.
By 1980, the Hunts held more than 15 percent of the world’s silver. When silver peaked at $49.45 an ounce in January 1980, the brothers had more than $9.6 billion in bullion and futures contracts, plus hundreds of millions of dollars more in oil assets and other stocks, according to a 1982 report by the U.S. Securities and Exchange Commission.
When the bull market in silver reversed, the brothers received margin calls which some of their brokers, including Merrill Lynch & Co. and Bache Group, helped them meet with more than $475 million in loans, according to the SEC report.
The stakes rose higher for Wall Street when silver fell below $11 an ounce on March 27, 1980 -- Silver Thursday. At that time, the brothers had $1.75 billion in silver-related obligations besides the margin call loans, the SEC report said.
“For six days late in March 1980 it appeared to government officials, Wall Street and the public at large that a default by a single family on its obligations in the plummeting silver market might seriously disrupt the U.S. financial system,” the commission wrote.
The bursting of the silver bubble led to a series of lawsuits against the Hunts. In 1988, a federal court decided Bunker, Herbert and Lamar had attempted to illegally corner the silver market, and were ordered to pay $130 million restitution. A few weeks later, Herbert and Bunker filed for bankruptcy to protect themselves against creditors.
The trust that held their oil companies was protected from creditors and not subject to bankruptcy, leaving the brothers with companies valued at more than $150 million each at the time.
There is no dabbling in silver anymore for Herbert Hunt, who runs Petro-Hunt along with his children.
“Our big effort is oil and based in the Bakken,” Hunt said.