End of an era as Hilcorp buys out BP for $5.6B

  • Nabors Drilling rigs are seen standby at Prudhoe Bay in this 2017 file photo. BP announced Aug. 27 that it is selling all of its Alaska assets to privately-held Hilcorp for $5.6 billion, ending more than a half-century history in the state that dates back to the discovery of oil at Prudhoe Bay. (Photo/Michael Dinneen/For the Journal)

Alaska is going to have a new “big three.”

BP is selling all of its Alaska assets to Hilcorp Energy in a $5.6 billion deal announced Tuesday morning.

For years, BP, ConocoPhillips and ExxonMobil have dominated North Slope oil production. Houston-based Hilcorp will now be taking BP’s place in that group.

The sale means the iconic Prudhoe Bay oil field will have a new operator. Hilcorp will also assume BP’s 49 percent stake in the Trans-Alaska-Pipeline System through its pipeline subsidiary Harvest Alaska, according to statements from the companies.

Hilcorp will additionally take BP’s 50 percent interests in the North Slope Milne Point and Liberty projects, which Hilcorp currently operates in partnerships with BP, as well as its 32 percent stake in the Point Thomson gas field operated by ExxonMobil.

BP CEO Bob Dudley said the sale out of Alaska is a big part of the company’s broader objective to divest approximately $10 billion of assets worldwide this year and next.

“Alaska has been instrumental in BP’s growth and success for well over half a century and our work there has helped shape the careers of many throughout the company,” Dudley said in a formal statement. “We are extraordinarily proud of the world-class business we have built, working alongside our partners and the State of Alaska, and the significant contributions it has made to Alaska’s economy and America’s energy security.”

Hilcorp executives highlighted the company’s work to revitalize mature oil and gas fields in the state — it’s the primary operator in the Cook Inlet basin — and its workforce in the state, in prepared statements. 

“With several years of operational experience in Alaska and an Alaska workforce made up of nearly 90 percent Alaskan residents we understand the importance of this asset to the state,” Hilcorp CEO Greg Lalicker said. “We’re excited about the opportunity ahead and are fully committed to the safe and responsible development of natural resources in such a special place. This commitment is a top priority as we work to ensure a seamless transition process.”

The deal includes about $4 billion in near-term payments and $1.6 billion in longer-term payments. It is pending both state and federal approvals and is expected to close next year, according to BP.

As a privately held company, Hilcorp has largely tried to avoid the spotlight while in Alaska and kept the details of its financial situation private. 

Hilcorp was founded in 1989 by Jeffrey Hildebrand and operates in nine states, including Alaska. The company produced approximately 325,000 barrels per day of oil and gas equivalent in 2018, according to a presentation on its website.

In Alaska, Hilcorp currently has more than 500 employees and produced more than 75,000 barrels per day of oil and gas equivalent last year.

Company-wide, Hilcorp has more than 2,300 full-time employees, according to a company statement.

It has invested roughly $4 billion in Alaska over the past seven years, according to the Alaska Oil and Gas Association.

Hilcorp spokesman Justin Furnace wrote via email that BP’s current Alaska workforce of approximately 1,600 employees is vital to operating Prudhoe and conducting other work.

“Our plans for that workforce will develop as we determine how we will integrate the acquisition into Hilcorp’s existing operations and we receive a list of eligible employees from BP so we can begin the interview process,” Furnace said in response to questions about how current BP employees will be handled.

Hilcorp will assume the lease for BP’s midtown Anchorage office building, according to BP Alaska spokeswoman Meg Baldino.

Hilcorp came to Alaska in early 2012 when it bought the Cook Inlet assets of Chevron and Marathon Oil. In 2014 it moved north to the Slope with a $1.25 billion purchase of BP’s offshore Northstar and Endicott oil fields. That deal also gave Hilcorp its 50 percent operator roles in Liberty and Milne Point, which had been solely owned by BP.

Hilcorp has been lauded for stabilizing Cook Inlet natural gas production — which supplies Southcentral Alaska with heat and electricity — but also had a prolonged gas leak in late winter 2017 from an old pipeline on the Inlet seafloor. That incident drew widespread criticism for how the company handles the often aging assets it buys, but did not result in significant regulatory action.

The existing relationship between BP and Hilcorp helped fuel rumors about a potential sale of Prudhoe Bay, so the announcement does not come as a shock to those within the industry, despite BP Alaska leaders’ recent emphasis on “40 more years at Prudhoe,” a reference to the 40th anniversary of startup at Prudhoe in 2017.

Baldino said the deal is in line with that message because Hilcorp specializes in revitalizing declining assets.

Oil production at Prudhoe peaked way back in 1988 at just more than 1.6 million barrels per day. Production from Prudhoe and associated satellite fields steadily declined for nearly three decades until stabilizing at about 280,000 barrels per day for the past few years. BP’s ability to stem the production decline is something the company has touted of late. 

Cumulatively, more than 13 billion barrels of oil have been pulled out of Prudhoe, making it the most prolific oilfield in the country’s history, according to BP.

Last winter BP conducted the first 3-D seismic shoot of the entire Prudhoe Bay field, which was seen by some industry observers as a sort of sales pitch to potential buyers.

“This really is about 40 more at Prudhoe. This is what Hilcorp does in investing in mature fields,” Baldino said.

She said it’s a tough day for BP employees, but added that they are proud of the work they’ve done in Alaska.

“You have an energetic buyer and a valuable asset,” Baldino said.

Elwood Brehmer can be reached at [email protected].

Updated: 
08/27/2019 - 11:34am

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