Shares of Continental Resources (CLR) have skyrocketed in recent months. The oil company's stock price has more than doubled over the past year, including gaining over 14% at one point on Tuesday. Surging oil prices have been the main fuel driving the oil stock higher. However, its latest upward move came after its founder, billionaire oil man Harrold Hamm, offered to acquire all the outstanding shares he and his family don't already own at $70 apiece.

The oil stock's price quickly surged past that level after analysts and another large investor said they thought the company could be worth more. Here's why they believe Continental Resources has more upside potential even after its buyout offer.

Drilling down into the offer

On June 14, Continental Resources unveiled that it received a non-binding proposal letter from the company's founder Harrold Hamm and his family offering to acquire all the outstanding shares they don't own for $70 apiece. The Hamm Family collectively holds about 83% of the company's total outstanding shares. The offer price represented a 9% premium to Continental's closing price the day before announcing the proposal, an 11% premium over the last 30 days, and 21% above its average price in 2022. 

Continental's board said it would establish a special committee to review the proposal. It also plans to retain independent advisors to assist with the process. The company pointed out that the proposal is only an indication of interest and not a binding commitment. Because of that, there's no guarantee it will lead to a deal.

Why $70 a share might not be enough to get a deal done

Investors quickly bid shares of Continental Resources up to more than $75 per share, showing that they believe $70 isn't enough and that a higher offer will come. One reason for this view is that the stock had traded at over $70 a share on its own merits as recently as last Friday before Monday's decline in oil prices cooled it off a bit. Thus, Hamm and his family need to offer investors a premium over the market price if they want full control of the company. 

Analysts believe it would cost well over $70 a share to get a deal done. For example, Truist analyst Neil Dingmann thinks shares could be worth as much as $95 in a potential takeout, matching his current price target. Meanwhile, RBC analyst Scott Hanold highlighted that the average consensus price target among the analyst community is around $78 to $79 per share. That leads him to believe it will take a higher price to seal a deal. 

Investors in the company seem to agree. Smead Capital, which owns nearly 2% of the company's outstanding shares -- making it the second-largest investor after the Hamm family -- believes the offer undervalues the company. They see $100 a share as the minimum they'd accept. 

Another reason shares could go higher is that an outside bidder might emerge for the company. While the Hamm family's controlling stake in the company might discourage potential buyers, it's also possible that they made the offer to see if there is any third-party interest in acquiring the entire company. Continental has a leading position in the Bakken play of North Dakota, is the largest producer in Oklahoma's Anadarko Basin, and recently acquired positions in the Powder River Basin of Wyoming and Permian Basin of Texas. That would make it a strong strategic fit for a multi-basin producer, especially considering the cash it's producing these days, giving it a growing gusher to return to shareholders.

Does this potential upside make Continental Resources a buy?

Harrold Hamm or an outside bidder might make a higher offer for Continental Resources. However, another bid might not emerge. Some analysts believe the deal will go through at $70. That includes Stifel analyst Derrick Whitfield who thinks the offer represents a reasonable premium, noting that the stock has only closed above $70 eight times in its history. Meanwhile, the Hamm family might not follow through on their initial proposal. If that happens, shares could fall well below $70, especially if oil prices were to cool off considerably. 

While there's certainly more upside potential, there's also significant downside risk if a deal doesn't come to fruition. Because of that, investors shouldn't pile into Continental in hopes of a higher offer emerging.