Billion-Dollar Divorce Appealed due to Lower Oil Prices

Both Hamms Appeal Judgment in Oilman’s Divorce

Billion-Dollar Divorce Appealed due to Lower Oil Prices
January 29, 2017

There’s nothing like having a few billion dollars at stake to spice up your divorce proceedings. Such is the case with the split of Oklahoma oilman Harold Hamm and his ex-wife Sue Ann Arnall.

As we reported last year, the divorce settlement was expected to cost Harold Hamm somewhere from $2-$8 billion. However, in November of 2014, Judge Howard Haralson awarded Sue Ann Arnall $972 million. Given the estimated value of Hamm’s holdings at the time ($16.1 billion), Arnall was understandably disappointed and filed an appeal.

In the original judgment, Arnall was to receive an initial payment of nearly $372 million, with the rest supplied in monthly $7 million increments. Arnall was also awarded two homes: a $15 million ranch in California and a $4.7 million home in Oklahoma.

Hamm recently offered $974.8 million to his ex-wife, reportedly in a hand-written check. Arnall refused the check on the grounds that it could harm her appeal efforts.

Arnall believes that she is entitled to a much larger portion of the Hamm fortune, arguing that their joint hard work and Hamm’s business acumen produced the majority of the increase in Hamm’s wealth during their 26-year marriage. Oklahoma divorce law mandates that the assets to be divided must come from “active efforts or skills of either spouse”, but it leaves the definitions open to interpretation.

The original ruling only divided $1.4 billion of the estimated $14 billion rise in Hamm’s fortune during the marriage. Hamm argued that the majority of the wealth increase was due to market factors and other passive factors, such as rising oil prices, and appears to have won most of that argument based on the judge’s decision.

The eventual award was based mostly on the stock price of Hamm’s company, Continental Resources.

Now Hamm is attempting to take the argument even further. The current drop in oil prices has cut Hamm’s fortune to approximately $9.4 billion, and the bottom is not necessarily in sight. Hamm is now appealing the decision he once called “fair and equitable” to reduce Arnall’s share even further.

Essentially, Hamm is arguing that the precipitous drop in oil is proof of how passive factors are dominant in determining his fortune, and that the nearly $1 billion settlement understated that effect to Arnall’s benefit. This seems shaky given the fact that the massive oil price drop took place after the judgment was reached (not to mention Hamm’s previous statement of fairness).

Judge Haralson has already stated in a follow-up hearing that he does not intend to retry the case, which now heads to the appeals court and potentially to the Oklahoma Supreme Court. According to some legal experts, the case in which both sides have appealed may take two more years to resolve. With literally billions at stake, two years may be an optimistic timeline.

In the end, both Hamm and Arnall will still have plenty of money, as will a cadre of lawyers. Investors in Continental Resources may not be so fortunate.

Not only are oil prices taking their toll, but costs and uncertainties associated with the trial are also adding further burdens. Continental has filed complaints with the court about the effects of the cost of the divorce proceedings (estimated in the tens of millions of dollars), but the amount directly affecting Continental shareholders is not known and has not been estimated to the shareholders in any disclosures filed with the SEC.

The overall moral of the story can be summed up in two words: pre-nuptial agreement…or in this case, lack thereof.

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