BP to sell four smaller North Slope fields
BP announced April 22 that it will sell four of its North Slope assets to Houston-based independent Hilcorp Energy. The agreement includes all of BP’s interests in the Endicott and Northstar fields and 50 percent of BP’s interests in the Milne Point field and Liberty, an undeveloped offshore field still under development planning.
Oil and gas pipelines associated with those fields are included in the sale, BP said in its announcement.
The assets included in the sale represent about 19,700 barrels per day of barrels of oil equivalent, or the value of the combined oil and gas produced. That is about 15 percent of BP’s net production on the slope.
The London-based company will retain its ownership position in the large Prudhoe Bay field, and BP will remain as operator. Hilcorp will become operator of Endicott and Northstar, which it will own, and also the Milne Point field, where it will be 50 percent owner with BP.
Other North Slope assets owned by BP such as its interest in the Kuparuk River field and the large Point Thomson gas and condensate field are not affected by the sale.
“This agreement will help bring a more competitive and sustainable business for BP in Alaska,” said Lamar McKay, BP’s upstream chief executive.
“It will allow us to play to two of our great strengths, managing giant oil fields and gas value trains. We will now concentrate on continuing development and production from the giant Prudhoe Bay field and working to advance the future opportunity of Alaska (liquefied natural gas),” McKay said, a reference to the gas pipeline and liquefied natural gas, or LNG, export project BP is working on with other North Slope producers ConocoPhillips and ExxonMobil, and the State of Alaska.
Janet Weiss, president of BP’s Alaska operating company, said there were big benefits from the transaction.
“BP will be able to focus on maximizing production from Prudhoe Bay and advancing the LNG project,” she said in the statement.
BP also expects to submit a development schedule for the Liberty field to the U.S. Bureau of Offshore Energy Management by the end of 2014, the announcement said.
Hilcorp entered Alaska in 2012 when it purchased aging Cook Inlet oil fields owned by Chevron Corp., and expanded its position in the Inlet in 2013 with the purchase of Marathon Oil Co. assets in the region, which were mainly in natural gas.
Hilcorp began an aggressive redevelopment program, bringing in new drill rigs and equipment and stepping up well renovation work and has nearly doubled the oil production from those fields, from about 6,300 barrels per day to about 10,700 barrels per day in 2013, Hilcorp officials said in presentations earlier this year.
It has also increased gas production from the former Marathon properties.
The company specializes in reinvigorating old oilfields, Hilcorp officials have said.
Among its proposed new North Slope acquisitions the Endicott field fits the category of a once-robust field that has now declined and Northstar is also declining, although it began production only in 2001.
Milne Point, where Hilcorp would only own 50 percent, is still robust, and Liberty has not yet been developed.
BP said it remains committed to its plans for increased investment at Prudhoe Bay, which have resulted from recent oil tax reform by the state, the announcement said. The plans include adding two drilling rigs, one in 2015 and a second in 2016, for a total incremental $1 billion investment over five years.
The deal brought some sniping from industry critics, but others defended BP in making what is essentially a commercial transaction that would likely enhance production from the fields being sold.
In Juneau, Senate Minority Leader Hollis French, D-Anchorage, and a critic, said, “BP was one of the prime advocates for the oil wealth giveaway,” or the oil tax change passed by the Legislature in 2013, French said.
“They testified on numerous occasions before the legislature promoting exciting new development opportunities because of the giveaway. Today, they cashed out in Alaska, proving once again that oil taxes do not dictate the operations of global energy producers,” French said.
However, Sen. Cathy Giesel, R-Anchorage, who chairs the Senate Resources Committee, has another view: “After seeing Hilcorp’s great success in Cook Inlet I believe we will see similar results from their workovers of these acquired fields,” she said.
“One project I expect they will consider is the heavy and viscous oil at Milne Point. I anticipate Hilcorp will approach this with new ideas,” she said.
Approximately 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, BP said.
Together the assets included in the sale represent approximately 19,700 barrels of oil equivalent per day of net production for BP, less than 15 percent of BP’s total net production on the North Slope.
The sale, which will be subject to state and federal regulatory approval, is anticipated to be complete by the end of the year. Financial details of the transaction are not being disclosed.