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BP exiting Alaska with sale to Hilcorp
ALASKA
SUPER-MAJOR BP announced on August 27 that it had struck a deal to sell the whole of its Alaska business to privately owned Hilcorp Energy for $5.6bn. e sale comprises upstream and midstream assets, including an interest in the Trans Alaska Pipeline System (TAPS) that is owned by BP Pipelines (Alaska). It has also resulted in Hilcorp taking over the operatorship of the Prudhoe Bay oil eld – the largest in North America by size.
BP’s exit from the state comes a er the com- pany operating there for 60 years. In a statement, BP’s group CEO, Bob Dudley, described Alaska as having been instrumental to the company’s growth over the years. “However, we are steadily reshaping BP and today we have other oppor- tunities, both in the US and around the world, that are more closely aligned with our long-term strategy and more competitive for our invest- ment,” he said. “ is transaction also underpins our two-year $10bn divestment programme, further strengthening our balance sheet and ena- bling us to pursue new advantaged opportunities for BP’s portfolio within our disciplined nancial framework.”
Under the terms of the deal, Hilcorp’s pay- ment to BP will comprise $4.0bn payable in the near term and $1.6bn through a subsequent earn-out. e transaction is expected to close in 2020, subject to approval from state and federal regulators.
BP has a 26% working interest in Prudhoe Bay, and also holds non-operating interests in the producing Milne Point and Point omson elds. e sale to Hilcorp includes interests in the Milne Point pipeline and the Point omson pipeline. Other assets being handed over include non-operating interests in the Liberty project, as well as exploration lease interests in the Arctic National Wildlife Refuge (ANWR).
BP’s net oil output from Alaska is antici- pated to average almost 74,000 barrels per day (bpd) in 2019. e sale will make Hilcorp the second-largest producer in the state a er Cono- coPhillips, which achieved average oil output of 171,000 bpd in Alaska in 2018. Once the sale closes, Hilcorp and ConocoPhillips will control nearly 75% of Alaska’s oil and gas production between them.
Hilcorp has had a presence in Alaska since 2012 and is already the largest private oil and gas operator in the state. It currently produces over 75,000 barrels of oil equivalent a day (boepd) on a gross basis. It has previously bought Alaskan assets on the North Slope from BP.
Dudley noted that BP remained committed to the US, though its priorities are in the Lower 48 states. “Our exit from Alaska does not in
BP’s net oil output from Alaska is anticipated to average almost 74,000 barrels per day in 2019.
any way diminish BP’s commitment to Amer- ica,” he said. “We remain very bullish on the US energy sector. In just the last three years we have invested more than $20bn in the US and we will continue to look at further investment opportu- nities here.”
BP’s net oil and gas production from the US averaged over 921,000 boepd in the second quar- ter of 2019, with both onshore and o shore oper- ations contributing to output. Future growth in the US is expected to come from shale – a er BP bought miner BHP’s unconventional portfolio for $10.5bn last year – as well as the deepwater US Gulf of Mexico. Notably, BP is developing one of the few new platforms to be sanctioned in the Gulf in recent years for the second phase of the Mad Dog project. e $9bn Argos platform is expected to enter service in 2021.
“BP’s divestitures in Alaska are in line with the trends seen globally among major oil and gas companies in recent years,” commented Rys- tad Energy’s head of upstream research, Espen Erlingsen. “The largest E&P companies have been steadily divesting mature late-life assets in order to nance exploration and development in new regions.”™
Hilcorp will take on operatorship of the Prudhoe Bay oil eld following the closing of the deal.
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