BP exits Alaska in $5.6B business sale to Hilcorp

Oil major BP has decided to sell its entire Alaska operations and oilfields to Hilcorp for $5.6 billion, as part of BP’s target plan to divest $10 billion of assets over 2019 and 2020.

The assets being sold include the Prudhoe Bay oilfield which has since the start of production in 1977 produced over 13 billion barrels of oil. According to BP, the field has the potential to produce over one billion barrels more. BP says that its Alaska oil production in 2019 is expected to average around 74,000 per day.

Apart from Prudhoe Bay, which BP operates with a 26 percent interest, Hilcorp will acquire BP’s interests in the producing Milne Point, Point Thomson fields, the Liberty project and exploration lease interests in the Arctic National Wildlife Refuge (ANWR), Trans Alaska Pipeline System, Alyeska Pipeline Service Company, Point Thomson Export Pipeline, Milne Point Pipeline, and Prince William Sound Oil Spill Response Corporation, 25%

According to BP, around 1,600 employees are currently associated with BP’s Alaska business. BP said it would  provide clarity about their future “as soon as possible as part of the transition process with Hilcorp.”

Bob Dudley, BP group chief executive, said: “Alaska has been instrumental in BP’s growth and success for well over half a century and our work there has helped shape the careers of many throughout the company. We are extraordinarily proud of the world-class business we have built, working alongside our partners and the State of Alaska, and the significant contributions it has made to Alaska’s economy and America’s energy security.”

Woodmac – Hilcorp becomes 2nd largest producer in Alaska

Commenting o the BP-Hilcopr deal, Wood Mackenzie analyst Rowena Gunn said: “The Majors are making progress with their divestment campaigns. This will mean long-held assets and territories will be let go. BP made such a deal today with its sale of all US Alaska assets to privately-owned Hilcorp.

“This is an important deal for Alaska as it changes the operator of the flagship Prudhoe Bay field. Growth is coming westward from ConocoPhillips and Oil Search-operated projects. But all North Slope barrels rely on the infrastructure established at Prudhoe Bay.”

Hilcorp entered Alaska Cook Inlet in 2011 and the North Slope in 2014. Hilcorp already holds interests in 31 assets across the Cook Inlet and North Slope – producing 41,000 barrels of oil equivalent per day, Woodmac says.

Gunn said: “This deal vaults Hilcorp to be the second-largest Alaska producer and reserves holder, behind only ConocoPhillips. Continued investment in maintaining Prudhoe Bay will be the company`s main endeavor.”

“But the assets are not without upside. A 2019 3D seismic campaign will reveal further targets to prolong the legacy field while the company is also growing Milne Point production and considering a potential FID at the Liberty field (now 100% owned).”

According to Wood Mackenzie, BP had made a series of regional assets divestments (mostly to Hilcorp) since 2014 as focus shifted to deepwater and tight oil assets. Alaska used to account for over 5% of the Major`s worldwide production volumes. That has since fallen to 2% following the Kuparuk-asset swap with ConocoPhillips last year.

Wood Mackenzie’s Gunn added: “This will not be the last deal in the region. ExxonMobil may be next to follow BP, Anadarko, Pioneer, and Marathon in the list of companies having sold out of Alaska. So far ConocoPhilips and Hilcorp have played the consolidating roles – now controlling over 72% of Alaska’s production.”

Governor: BP passes the torch to Hilcorp

Alaska Governor Michael J. Dunleavy also took the opportunity to comment on BP leaving Alaska.

He said: “Today’s announcement – a passing of the torch within the Alaska oil and gas sector – is significant news for our state, the future of North slope energy production, and the Trans-Alaska Pipeline. While we are only just reading of this announcement, we look forward to learning more and seeing operational details,” said Governor Dunleavy.

“We welcome Hilcorp to their next phase in Alaska operations and thank BP for their decades-long commitment in bringing Alaska’s mineral wealth to market. As Alaska’s Governor, I will continue pushing to make Alaska ‘Open for Business’ with a vision for new investment, added production, and a regulatory environment that ensures safe and responsible development to Alaska’s fullest potential.”

Offshore Energy Today Staff

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