Hilcorp still ready to buy assets as it looks to cost control
KENAI — As other oil and gas companies seek to trim expenses with layoffs and stalling development, Hilcorp Alaska has no plans to stop acquisitions.
The company will continue to buy properties in Alaska, said Chad Helgeson, the Kenai area operations manager, in an update to the public at the annual Industry Outlook Forum in Kenai on Jan. 28.
“Hilcorp is a growth company, acquisition-based,” Helgeson said. “That’s been our model.”
The company’s workforce has also steadily increased. Of the approximately 520 employees statewide, 240 live on the Kenai Peninsula, Helgeson said.
Aggressive purchases have left Hilcorp as the largest producer in Cook Inlet and with holdings on the North Slope. The company has no plans to downsize, either, and will take advantage of properties coming up for sale as other companies hit the rocks, Helgeson said.
“Right now, pretty exciting times — a lot of properties are probably going to be available for sale,” Helgeson said. “What are we going to buy next? I have no idea.”
At the same time, the company is feeling the impacts of sliding oil prices, though it continues to purchase and spend. Between 2014 and 2015, Hilcorp’s spending in Alaska decreased from $443 million to $281 million, a direct reflection of the decline in oil prices, Helgeson said. This year, the company expects to spend about $220 million, he said.
The allocations of investment changed as well. In 2014, most of the money went to capital projects and drilling; in 2015, that changed to be majority maintenance and operations.
As oil prices continue to decrease, the company will continue to monitor it and adjust its operations accordingly, Helgeson said.
“As the price of oil continues to drop down, our goal is to be responsible and sustainable,” Helgeson said. “Our goal is to be here for the long-term. Our oil and gas contracts are going eight years out … we’ve got to be responsible.”
The focus for the Kenai area this year is to control costs, Helgeson said. One of the questions is how the company can look at its Cook Inlet assets and continue to make them profitable, he said.
The company applied earlier this year to drill two new wells in its Happy Valley pad southeast of Ninilchik and is in the process of applying to expand the boundaries of its lease in the Deep Creek Unit.
The current pool boundaries, defined by the Alaska Oil and Gas Conservation Commission in 2004 when Marathon Oil leased the property, do not adequately include the majority of the gas in the formation, according to the application.
This is still in process but is something the Kenai area team will work on this year, Helgeson said. If the commission approves the motion, Hilcorp’s rights under the lease would expand by about 400 acres, according to the application.
Helgeson said the company is also exploring a project on the southern Kenai Peninsula and is planning to do seismic work on it later this year. However, the permitting process takes time, so it may be 2017 before any work actually begins, he said. He said there would be public meetings on any exploration the company does but did not give a more exact location of the exploration.
“(We’re asking) ‘What can we do to extend the life of our fields?’” Helgeson said. “We’re planning to do some exploration type of activity. … What we’re finding is that it takes somewhere between 12 and 18 months to fully permit a project.”
Reach Elizabeth Earl at [email protected].