BP PLC reported that it will sell certain interests in four of its operated oil fields on Alaska's North Slope to Houston independent Hilcorp.
The agreement includes all of BP's interests in the Endicott and Northstar oil fields and a 50% interest in each of the Liberty and the Milne Point fields. The sale also includes BP's interests in the oil and gas pipelines associated with these fields, the company said.
Together the assets included in the sale represent about 19,700 boe/d of net production for BP, less than 15% of BP's total net production on the ANS.
As a result of the sale and subject to approval, Hilcorp is expected to become the operator of Endicott, Northstar, and Milne Point oil fields and their associated pipelines and infrastructure.
The company said the agreement does not affect BP's position as operator and co-owner of Prudhoe Bay oil field nor its other interests in Alaska. BP also expects to submit a development plan for Liberty by yearend.
"This agreement will help build a more competitive and sustainable business for BP in Alaska," said BP Upstream Chief Executive Officer Lamar McKay. He said the deal also will allow the company to play to two of its "great strengths," namely managing giant fields and gas value chains.
"We will now concentrate on continuing development and production from the giant Prudhoe Bay field and working to advance the future opportunity of Alaska LNG," McKay added.
BP said it "remains committed" to plans for increased investment at Prudhoe Bay, which have resulted from recent oil tax reform by the State of Alaska. The plans include adding two drilling rigs, one in 2015 and a second in 2016, for a total incremental $1 billion investment over 5 years.
These activities are expected to account for 200 Alaska jobs and 30-40 additional wells being drilled each year.
About 250 employees are associated with the assets included in the agreement and the company is committed to providing clarity about their future as soon as possible. The majority of those BP employees at or supporting Milne Point, Endicott, and Northstar are expected to be offered positions with Hilcorp with no break in employment, the company said.
The sale, which will be subject to state and federal regulatory approval, is anticipated to be complete by yearend.
Financial details of the transaction were not disclosed.
The assets
Milne Point field, about 25 miles west of Prudhoe Bay, was discovered in 1969 and began production in 1985. BP became the field's operator in 1994. In 2013, average net BP production from the field was about 15,800 boe/d. BP currently holds 100% interest in the field, and will hold 50% interest after the deal.
Northstar, which lies about 6 miles northwest of Prudhoe Bay in about 39 ft of water, started production in 2001. The unit sits in state and federal waters. Average net BP production in 2013 from Northstar was about 6,800 boe/d. BP currently holds 98.6% interest in the field; Murphy Oil Co. holds 1.4%. BP will hold no interest in Northstar after the deal.
Liberty field lies on federal leases about 6 miles offshore in the Beaufort Sea and east of Prudhoe Bay oil field. BP drilled the Liberty discovery well in 1997. BP currently holds 100% interest in the field, and will hold 50% interest after the deal.
Endicott, which lies about 3 miles offshore, started production in 1987 and was the first continuously producing offshore field in the Arctic. Average net BP production from Endicott in 2013 was about 5,000 boe/d. BP currently holds 68% interest in the field, and will hold no interest in the field after the deal. Other interest holders are ExxonMobil Corp. 21% and Chevron Corp. 11%.
Governor comments
Shortly after the Apr. 22 announcement of the deal, Alaska Gov. Sean Parnell released a statement that said, in part: "Today's announcement means another entrepreneurial company will be working to accelerate production and find additional reserves on the North Slope. Hilcorp has a proven record of improving production in Cook Inlet, and their new North Slope commitment shows the More Alaska Production Act has created the right environment to attract new companies and competition to the North Slope."
The announcement was made just days after the Alaskan Legislature passed Senate Bill 138, which authorized Alaska's participation in the $45-65 billion Alaska LNG project, which would commercialize Alaska's vast, untapped reserves of ANS gas (OGJ Online, Apr. 21, 2014).
"I applaud the thorough and bipartisan deliberations the Legislature had on Senate Bill 138 and believe the process is already bearing fruit," Parnell said, adding, "Today's announcement is important, because it builds on BP's previous commitments of billions of dollars in new oil investments at Prudhoe and Alaska's legacy fields, and reflects a focus on advancing the Alaska LNG project, and unlocking gas from Prudhoe and Pt. Thomson."
