Hilcorp to acquire BP’s Alaska business in $5.6-billion deal

Hillcorp Alaska has entered into a deal to acquire the entirety of BP Alaska’s operations and interests for $5.6 billion. Under the deal's terms, Hilcorp’s payment will comprise $4 billion payable near-term and $1.6 billion through an earnout thereafter.

Hillcorp Alaska, Anchorage, has entered into a deal to acquire the entirety of BP Alaska’s operations and interests for $5.6 billion.

Under the terms of the agreement, Hilcorp’s payment will comprise $4 billion payable near-term and $1.6 billion through an earnout thereafter. Subject to state and federal regulatory approval, the transaction is expected to be completed in 2020.

For BP, the transaction—which includes interests in giant Prudhoe Bay field and the Trans Alaska Pipeline System (TAPS)—adds to the progress towards the firm’s 2-year, $10-billion divestment program.

The sale includes BP’s entire upstream and midstream business in the state, including BP Exploration (Alaska) Inc., which owns all of BP’s upstream oil and gas interests in Alaska, and BP Pipelines (Alaska) Inc.’s interest in TAPS.

BP Group Chief Executive Bob Dudley, said the company is “reshaping” to focus on “other opportunities, both in the US and around the world, that are more closely aligned with our long-term strategy and more competitive for our investment.”

BP began working in Alaska in 1959, drilling the confirmation well for Prudhoe Bay oil field in 1968 and in the mid-1970s helped build the 800-mile TAPS project. BP began producing oil from Prudhoe Bay in 1977. To date, the giant oil field has produced more than 13 billion bbl of oil and is estimated to have the potential to produce more than 1 billion bbl more.

BP’s net oil production from Alaska this year is expected to average 74,000 b/d. BP operates Prudhoe Bay, with a working interest of 26%, and holds non-operating interests in producing Milne Point and Point Thomson fields. It also holds non-operating interests in the Liberty project and exploration lease interests in the Arctic National Wildlife Refuge. In addition to shares in TAPS and its operator the Alyeska Pipeline Service Co., BP is divesting its midstream interests in the Milne Point Pipeline and the Point Thomson Pipeline.

Roughly 1,600 employees are currently associated with BP’s Alaska business.

Hilcorp has been operating in Alaska since 2012 and currently is the largest private oil and gas operator in the state, operating more than 75,000 boe/d in gross production. In 2014 Hilcorp purchased interests from BP in four operated Alaska North Slope oil fields (OGJ Online, Apr. 22, 2014).

“Our exit from Alaska does not in any way diminish BP’s commitment to America,” Dudley said. “We remain very bullish on the US energy sector. In just the last 3 years we have invested more than $20 billion in the US and we will continue to look at further investment opportunities here.”

In this year’s second quarter, BP’s net oil and gas production from the US averaged more than 921,000 boe/d from major interests in Alaska, onshore the Lower 48, and the deepwater Gulf of Mexico.

Late last year BP acquired a portfolio of onshore US oil and gas interests from BHP for $10.5 billion, adding 190,000 boe/d net production. BP also continues to develop its business in the deepwater gulf, bringing on a series of new projects on its major producing assets. The $9-billion Argos platform in Mad Dog field is expected to come on stream in 2021.

BP’s interests in Alaska include:

• Prudhoe Bay, 26% (operator BP).

• Milne Point, 50% (operator Hilcorp).

• Point Thomson, 32% (operator ExxonMobil Corp.).

• Liberty project, 50% (operator Hilcorp).

• Non-operating interests in exploration leases in ANWR.

• TAPS, 49%.

• Alyeska Pipeline Service Co., 49%.

• Point Thomson Export Pipeline, 32%.

• Milne Point Pipeline, 50%.

• Prince William Sound Oil Spill Response Corp., 25%.

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