Hilcorp plans $340M investment in Alaska for 2019
HOMER – After completing its Cook Inlet pipeline project in 2018, Hilcorp is planning to keep its monetary investment about the same in Alaska going into 2019.
More of the investment will be in drilling now that the $90-million Cook Inlet pipeline project is complete, said Hilcorp Senior Vice President Dave Wilkins in a presentation at the Kenai Peninsula Economic Development District’s Industry Outlook Forum on Jan. 9.
“We run things year to year fairly steady,” he said. “We don’t like wild swings … in 2019, we’re going to drill more wells.”
Hilcorp’s Alaska operations are split between Cook Inlet and the North Slope, where it’s spent a lot of time and money rehabilitating old assets purchased from Marathon, XTO and BP.
On the North Slope, Hilcorp operates Milne Point, a field the company purchased from BP, and is working on permitting for the new Liberty offshore project in the Beaufort Sea. Of the $340 million the company plans to spend in 2019, about 55 percent of it will go to projects on the North Slope, with the remaining 45 percent going to Cook Inlet, said Hilcorp External Affairs Manager Lori Nelson in an email.
The company’s normal mode of operation is to rework old wells, Wilkins said. Some of the planned investment is also set aside for maintaining the older equipment the company operates.
“I like to say we recycle old oil fields,” he said. “When other companies are done with assets, we come in and we put new capital into it and reinvent it extend the life of those oil and gas assets.”
Most of Hilcorp’s Alaska assets are in the Cook Inlet region, with a number of offshore platforms and onshore wells. Four new onshore wells in the area are planned for 2018: one in the Beaver Creek field, two in the Swanson River unit and one in the Happy Valley unit. The Beaver Creek well is targeting oil, the Happy Valley well is targeting gas and the Swanson River wells are targeting both.
The company completed a cross-inlet pipeline project in fall 2018, facilitating the decommissioning of the Drift River oil terminal. The terminal is sited at the foot of Mount Redoubt, an active volcano on the west side of Cook Inlet, and has long been controversial because of the risk of oil spills during volcanic activity.
Wilkins said the pipeline is currently transporting about 15,000 barrels of oil per day and will allow Hilcorp to fully decommission the Drift River terminal. The company is working on a plan now to complete the work there.
“Our intent is to decommission Drift River as urgently as we did the cross-inlet pipeline,” he said. “We don’t want to just let it sit there — we want out of it … what’s happening now is we’re pushing the oil to Drift River, and cleaning up all the sludge and dirt at the tank bottoms and get them out.”
Though the company’s planned investment is slightly down from about $360 million in 2018, it’s up from a low of $200 million in 2016, when oil prices hit a crippling bottom of less than $30 per barrel. Hilcorp has continued to purchase assets and drill new wells, including several new wells in the Ninlchik and Anchor Point areas. The newest, the Seaview pad just outside Anchor Point, was finished in December 2018. HIlcorp is still deciding what to do with that well, with possible stratigraphic testing this year, Wilkins said.
In addition to its onshore wells, the company plans to drill a new well at the Monopod platform and to bring a jack-up rig to upper Cook Inlet to work at the Granite Point platform.
The company is also planning seismic work in Lower Cook Inlet, where it won bids on federal oil and gas leases offshore in the Ninlichik and Cosmopolitan units and in the middle of the inlet outside Kachemak Bay. Hilcorp’s leases, purchased in 2017 for $3.03 million, were the first federal leases that attracted any industry attention since 2008.
Wilkins said the company is planning seismic exploration in about 175 square miles for April 2019 and will work with the community to reduce impacts. No oil and gas resources have been developed in the federal waters of Lower Cook Inlet before.
“In the Cook Inlet, as an industry, we have been responsibly developing oil and gas for over 60 years,” he said. “We can still do this, we can still do it responsibly the right way without upsetting the fishing, the water or the air.”
Though companies are continuing to invest in infrastructure and exploration, Alaska continues to lag in oil production behind other states. Alaska Oil and Gas Association President and CEO Kara Moriarty said in her presentation at the Industry Outlook Forum that Texas far and away leads the U.S. in oil and production, with about 4.3 million barrels of oil produced per day.
“If you looked at production today, it is up over 500,000 barrels per day, so we are definitely in fifth (place),” Moriarty said. “But we’ve been hanging onto fifth for over a year, probably, so we have lots of it, we are sitting fifth, and right now we’re producing about 5 percent of that record-breaking U.S. production.”
Some of the slowing may have been connected to the legislative debates over oil and gas tax policy in the state, Moriarty said. However, the new administration of Gov. Michael J. Dunleavy has indicated that they have no intent of altering oil and gas tax policy, she said.
“It’s very encouraging that we have an administration that is saying they want to be open for business and they’re sending that signal,” she said.
Elizabeth Earl can be reached at [email protected].