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A small privately held oil and gas company from Tulsa, Oklahoma, is suing Continental Resources over a deal from which Continental withdrew after oil prices plunged in early March, Reuters reported on Tuesday, citing a lawsuit filed with the Tulsa County District Court.
According to the plaintiffs, Casillas Petroleum, Continental Resources backed out of a deal to buy oil and gas properties from Casillas. According to the lawsuit filed on April 15, the two companies struck the agreement on March 6. They expected the deal to be closed some three weeks later.
March 6, however, was the day on which the OPEC+ deal collapsed. Oil prices went into a tailspin after Saudi Arabia promised to flood the market with oil, which it did for most of March and April, before promising to curtail supply as part of the new OPEC+ agreement to prevent further price slides.
It was Continental Resources’ founder Harold Hamm who said in early March that the Saudi move to flood the global market with crude oil was illegal.
According to the lawsuit filed by Casillas Petroleum, Continental first proposed a delay in the closing date of the deal. It then terminated the agreement on March 24. In the lawsuit, the smaller firm is asking the court to order Continental to complete the acquisition and pay attorneys’ fees and other costs to Casillas.
The price crash of the past month and a half has upended deals for several major companies, including from BP, which changed some of the terms of a $5.6 billion sale of its Alaskan business, which analysts think may see the supermajor receive lower cash component for the deal this year.
Continental Resources, for its part, is said to have stopped drilling operations and shut in most of its wells in North Dakota in light of the dire market conditions in the U.S. shale patch.
Earlier this month, Continental said it plans to cut its April and May production by around 30 percent. It also suspended its quarterly dividend until further notice as part of its “proactive strategy to manage cash flow in a challenging commodity price environment.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.