Page 10 - NorthAmOil Week 17

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BP revises terms of Alaska asset sale
ALASKA
SUPER-MAJOR BP has reaffirmed its commit- ment to closing the sale of its Alaska business to Hilcorp Energy, but said that the two companies had renegotiated the financial terms of the deal in response to the current market volatility.
The total consideration for the sale remains $5.6bn, BP said in an April 27 statement, unchanged from what the two companies had agreed in August 2019. However, the structure of the consideration and the phasing of payments under the deal has now been amended.
Under the original agreement, privately owned Hilcorp was due to pay BP $4.0bn ini- tially and $1.6bn through an earn-out thereafter.
“The revised agreement adjusts the structure and phasing of the remaining consideration to include lower completion payments in 2020, new cash flow sharing arrangements over the near term, interest-bearing vendor financing and, potentially, an increase in the proportion of the consideration subject to earn-out arrange- ments,” BP said.
Hilcorp had already paid a $500mn deposit when the initial agreement was finalised.
The amended agreement is expected to main- tain most of the value of the transaction, but has flexibility built in to manage current and poten- tial future oil price volatility, according to the super-major.
BP still anticipates completing the deal in mid-2020. On the company’s first-quarter earn- ings call on April 28, BP’s upstream chief finan- cial officer, Murray Auchincloss, said federal approval for the transaction had been received. BP and Hilcorp were now working with the Reg- ulatory Commission of Alaska (RCA) and the state’s Department of Natural Resources (DNR)
to obtain the required approvals for the transac- tion at the state level.
Auchincloss also told analysts on the call that of the $1.1bn in upstream impairment charges that BP had incurred during the first quarter, $400mn was related to the Alaska transaction. He attributed the $400mn impairment largely to the adjustment upfront as a result of the collapse in oil prices, with a “fairly mild haircut” on net present value (NPV) also contributing.
BP has been targeting $15bn worth of asset sales by mid-2021, with the Alaska transaction accounting for a major portion of this. The super-major had been counting on these asset sales to help pay down debt and allow it to main- tain its dividend. However, the revised deal and the new phasing of payments means that the transaction will have a less immediate impact on BP’s deleveraging efforts.
Once the transaction closes, BP will have racked up $10bn in asset sales, and company officials on the earnings call reiterated their commitment to the $15bn target, which they still expect to achieve by the middle of 2021.
“The $5bn that we’re going after now are more in the non-upstream, downstream-type spaces,” Auchincloss said. “So it’s more about infrastructure plays. It’s about real estate. It’s about buildings. It’s about things where yield is hunted. And it’s probably a very different set of purchasers than we normally see inside our business.”
BP’s Alaska business includes interests in the prolific Prudhoe Bay oilfield and the Trans Alaska Pipeline System (TAPS). No further details of how the sale to Hilcorp will now be phased have been disclosed as yet.™
BP’s Alaska business includes interests in the prolific Prudhoe Bay oilfield and the Trans Alaska Pipeline System (TAPS).
The super- major had been counting on these asset sales to help pay down debt and allow it to maintain its dividend.
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w w w . N E W S B A S E . c o m Week 17 30•April•2020