BP agrees to sell all Alaska operations and interests to HilcorpPosted & Edited By MARY KAUFFMAN
August 28, 2019
The sale will include BP’s entire upstream and midstream business in the state, including BP Exploration (Alaska) Inc., that owns all of BP’s upstream oil and gas interests in Alaska, and BP Pipelines (Alaska) Inc.’s interest in the Trans Alaska Pipeline System (TAPS). Bob Dudley, BP group chief executive, said: “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. 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.
“However, we are steadily reshaping BP and today we have other opportunities, both in the US and around the world, that are more closely aligned with our long-term strategy and more competitive for our investment. This transaction also underpins our two-year $10 billion divestment programme, further strengthening our balance sheet and enabling us to pursue new advantaged opportunities for BP’s portfolio within our disciplined financial framework. “As a highly-capable operator with extensive Alaskan experience, Hilcorp is ideally-placed to take this important business on into the future, continuing to optimize its performance and maximize its value for the State of Alaska. We are committed to a safe and smooth transition of operations so that our employees, partners and local, state and federal government officials all feel that we have handed over these important assets in the right way.” Under the terms of the agreement, Hilcorp will pay BP a total consideration of $5.6 billion, comprising $4.0 billion payable near-term and $1.6 billion through an earnout thereafter. Subject to state and federal regulatory approval, the transaction is expected to be completed in 2020. The deal forms a significant part of BP’s plan to divest $10 billion of assets over 2019 and 2020. Janet Weiss, regional president, BP Alaska, added: “[Yesterday’s] announcement marks the start of an exciting new chapter for Prudhoe Bay. Alaska has been a core part of BP for 60 years and saying goodbye will not be easy. Our people have achieved incredible success over the decades developing and maintaining these hugely important assets, but we are confident this sale is in BP’s and the state’s best interests and the business will be best positioned for the future with Hilcorp. We will do all we can to ensure they are able to quickly build on the strong foundation that we and others have built here.” “[Tuesday’s] announcement – a passing of the torch within the Alaska oil and gas sector – is significant news for our state, the future of North slope energy production, and the Trans-Alaska Pipeline. While we are only just reading of this announcement, we look forward to learning more and seeing operational details,” said Governor Dunleavy in a prepared statement. “We welcome Hilcorp to their next phase in Alaska operations and thank BP for their decades long commitment in bringing Alaska’s mineral wealth to market. “As Alaska’s Governor, I will continue pushing to make Alaska ‘Open for Business’ with a vision for new investment, added production, and a regulatory environment that ensures safe and responsible development to Alaska’s fullest potential,” said Dunleavy. After Hilcorp announced it has reached agreement to acquire substantially all of BP’s assets and interests in Alaska, U.S. Senator Lisa Murkowski (R-AK) in a prepared statement said, “We thank BP for its long-standing partnership on resource production in our state and for the many significant and lasting philanthropic contributions it has made in our communities.” Murkowski said, “I’m looking forward to learning more details and am encouraged that an enterprising company like Hilcorp sees so much opportunity in Alaska and is willing to make such significant investments in one of the most prolific and under-explored basins in the world. Hilcorp has a strong record of hiring Alaskans and I hope they will continue and strengthen our record of responsible production on the North Slope.” Alaska Congressman Don Young (R-AK) in a prepared statement said, “For over 60 years, BP has been an important part of Alaskan communities and a significant contributor to our state’s economy. I would like to thank them for their decades of service.” Young said, “Alaskans are committed to responsible energy development, and BP has been a steadfast partner in this important cause. It is difficult to see a great company leave, not only because of our strong shared history in Alaska, but more critically because so many of our family members and friends have built great careers with this company. I am greatly looking forward to working with Hilcorp as Alaska continues producing the affordable energy our country depends on. Throughout this transition, Alaskans have my commitment that I will continue doing everything in my power not only to strengthen our energy development sector, but to support the current BP employees working on the North Slope and across our great state.”
“I am excited to see Hilcorp expand its investment in Alaska. At the same time, BP’s exit raises significant concerns and questions, in my mind, about the impact of Alaska’s political instability on BP’s business decision. BP has been a ‘legacy’ investor in Alaska, shaping communities and job opportunities for a couple generations," said Alaska Senate President Cathy Giessel (R-Anchorage) in a prepared statement. Giessel said, “If our state is to realize its full economic potential, we must have the patience and long-term vision to be a reliable partner with the private sector. Alaska’s families, businesses and jobs depend on it.” "While the relationship has sometimes been contentious, the partnership with BP in Alaska has been critical to the growth of our state. We look forward to a good working relationship with Hilcorp and continued collaboration with the industry. Together we can move forward towards a sustainable budget, a strong infrastructure that supports economic growth, and provides educational opportunities and safe environments that will continue to attract and retain business in Alaska,” said Alaska Senate Democratic Leader Tom Begich (D-Anchorage) in a prepared statement. Alaska House Minority Leader Lance Pruitt (R-Anchorage) also released a statement saying, “We were excited to learn [Tuesday] of the sale of BP Alaska to Hilcorp. We are confident that Hilcorp’s expanded presence and reputation for efficiency will be hugely beneficial as we continue to responsibly leverage our natural resources. We also want to thank BP for decades of investment in our state, our people, and our economy.” “Even with this great news, the departure of one of the world’s largest oil and gas companies should cause us all to be concerned that renewed conversations on oil tax changes are causing great anxiety among producers. Tens of thousands of jobs are at stake. We must remain focused on cutting expenses and not trying to tax our way to prosperity as a state,” said Pruitt. Co-chair of the Alaska House Resources Committee Rep. Geran Tarr (D-Anchorage), in a statement said, “[Tuesday’s] announcement represents a major shift in North Slope oil production. I am hopeful that Hilcorp will achieve the same level of success they’ve had increasing production at Milne Point, thereby extending the life of the Prudhoe Bay field. Tarr said, "I am also pleased to know that BP will continue as a contributor for the Alaska LNG Project to secure an important Federal Energy Regulatory Commission license. BP’s participation is an important part of why the project has advanced to this stage. While the future of AKLNG is unknown, it is good news for Alaska that the company remains committed to finishing the process.” BP began working in Alaska in 1959, drilling the confirmation well for the Prudhoe Bay oilfield in 1968 and in the mid-1970s helped build the 800-mile Trans Alaska Pipeline. BP began producing oil from Prudhoe Bay in 1977. The giant oilfield – the most prolific in US history – has to date produced over 13 billion barrels of oil and is estimated to have the potential to produce more than one billion further barrels. BP’s net oil production from Alaska in 2019 is expected to average almost 74,000 barrels a day. BP operates Prudhoe Bay, with a working interest of 26%, and holds non-operating interests in the producing Milne Point and Point Thomson fields. It also holds non-operating interests in the Liberty project and exploration lease interests in the Arctic National Wildlife Refuge (ANWR). In addition to shares in TAPS and its operator the Alyeska Pipeline Service Company, BP is divesting its midstream interests in the Milne Point Pipeline and the Point Thomson Pipeline. Approximately 1,600 employees are currently associated with BP’s Alaska business and BP is committed to providing clarity about their future as soon as possible as part of the transition process with Hilcorp. Hilcorp has been operating in Alaska since 2012 and is today the largest private oil and gas operator in the state, currently operating more than 75,000 barrels of oil equivalent a day (boe/d) gross production. In 2014 Hilcorp purchased interests from BP in four operated Alaska North Slope oilfields. BP continues to develop its business in the US, where between 2005 and 2018 it invested over $115 billion, more than any other energy investor. In the second quarter of 2019, BP’s net oil and gas production from the US averaged over 921,000 boe/d, from major interests in Alaska, onshore Lower 48 and deepwater Gulf of Mexico. In late 2018, BP acquired a portfolio of high-quality onshore US oil and gas interests from BHP for $10.5 billion, adding 190,000 boe/d net production. BP also continues to develop its business in the deepwater Gulf of Mexico, bringing on a series of new projects on its major producing assets. The new $9 billion Argos platform on the Mad Dog field is expected on stream in 2021. Bob Dudley added: “Our exit from Alaska does not in any way diminish BP’s commitment to America. We remain very bullish on the US energy sector. In just the last three years we have invested more than $20 billion in the US and we will continue to look at further investment opportunities here.” Hilcorp is one of the largest privately held oil and gas exploration and production companies in the world. BP is a major multinational oil and gas company headquartered in London. Hilcorp has produced oil and gas in the Cook Inlet of Alaska since 2012 and acquired significant North Slope assets from BP in 2014. Interests included in the transaction:
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