Hilcorp to 'hit ground running' on North Slope

Hilcorp Energy will move aggressively to ramp up production at three North Slope fields it will be operating in early January.

“We will hit the ground running on Jan. 1,” Hilcorp CEO Greg Lalicker said.

The company expects to close its acquisition of three North Slope producing assets and a share of the undeveloped Liberty field from BP before the end of the year, Lalicker told the Alaska Support Industry Alliance in a briefing Oct. 9.

“Our goal is to get the (North Slope field) rates up as quickly as possible. BP has already moved a rig into the Milne Point,” one of the fields Hilcorp will be operating.

BP said it is selling the fields, which are small producers, in order to focus on development in the large Prudhoe Bay field, which it will still operate, and to work on the large North Slope gas project.

When the purchase closes Hilcorp will own 50 percent of the onshore Milne Point field and 100 percent of two small offshore fields, Northstar and Endicott. Hilcorp will be operator of all three fields.

About 200 former BP workers and contractors now employed in the fields being purchased will work for Hilcorp.

The company also has an option on acquiring 50 percent of Liberty, an undeveloped oil offshore oil deposit in federal waters five offshore, with BP retaining the remaining 50 percent.

When the sale is completed about 35 percent of Hilcorp’s assets will be in Alaska with the remainder in Texas and Louisiana, the company’s traditional operating areas.

The Northstar and Liberty purchases aren’t final until the transfer of federal outer continental shelf leases are approved by the U.S. Bureau of Ocean Energy Management. That is expected in November.

In his presentation Lalicker referred to Liberty as an option.

“We’re still trying to figure out whether there are viable development scenarios. We have a team working on it,” Lalicker said.

John Barnes, Hilcorp’s Alaska manager, said, “We are looking at all the options that have been put forward in the past, and trying to figure out a way forward on Liberty.”

In the past BP has considered building an artificial gravel island and a submerged pipeline to shore, as its did at the small Northstar field, along with drilling into the Liberty reservoir with long-distance horizontal wells from a drill rig on shore.

Lalicker also commented on Hilcorp’s operations in Cook Inlet, where the company is the largest oil and gas producer.

Overall, things are going well but it will still be a while before the investment will pay out, he said.

Hilcorp’s oil production is now approaching 14,000 barrels per day, more than double the 6,000 b/d the properties were producing in 2012 when they were acquired from Chevron, Lalicker said. About 170,000 thousand cubic feet of gas per day is also being produced.

However, the investment overall is still under water. The company, which is privately-held, paid $879 million to Chevron and Marathon Oil Co. in 2012 and 2013 to acquire the mature producing fields in the Inlet.

About $890 million has been invested since the acquisitions in new drilling and production facility upgrades, Lalicker told the Alliance. Another $360 million has been spent in operations since the takeover.

Revenues have so far totaled $1.529 billion, leaving Hilcorp about $600 million in the red so far, he said.

“With the track we’re on we still see six or seven years before payout on this, and we think we still need to invest another $1 billion to $2 billion,” Lalicker said.

Still, Hilcorp’s Cook Inlet play is turning out to be “pretty good,” so far, although the slide of crude oil prices in recent weeks is a concern.

Lalicker also said Hilcorp is also studying a possible redevelopment of shut-in oil wells on the Baker platform, which was hit Oct. 3 by a fire in the living quarters.

One gas production well was active at the time, which was shut-in, and four crewmembers were evacuated.

The fire appears to have been caused by an overheated space heater in the living quarters that overheated and short-circuited, although that conclusion is not yet official, Lalicker said. The living quarters unit on the platform were constructed in 1965.

Updated: 
11/23/2016 - 2:55pm

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