BP Sells Alaska Business To Hilcorp In $5.6bn Deal

(WoodMac, 27.Aug.2019) — Speaking after BP announced the sale of its Alaska business to Hilcorp in a US$5.6 billion deal, Wood Mackenzie analyst Rowena Gunn said: “The Majors are making progress with their divestment campaigns. This will mean long-held assets and territories will be let go. BP made such a deal today with its sale of all US Alaska assets to privately-owned Hilcorp.

“The sale includes a 26.4% stake in Prudhoe Bay and 48.4% interest in the Trans Alaska Pipeline. We value the assets at a slight premium to the US$5.6 billion consideration. Prudhoe Bay makes up over 60% of the consideration, but other assets like TAPS, Milne Point and Point Thomson are significant at over US$2 billion NPV10.

“This is an important deal for Alaska as it changes the operator of the flagship Prudhoe Bay field. Growth is coming westward from ConocoPhillips and Oil Search-operated projects. But all North Slope barrels rely on the infrastructure established at Prudhoe Bay.”  

Hilcorp entered Alaska Cook Inlet in 2011 and the North Slope in 2014. Hilcorp already holds interests in 31 assets across the Cook Inlet and North Slope – producing 41,000 barrels of oil equivalent per day.

Ms Gunn said: “This deal vaults Hilcorp to be the second-largest Alaska producer and reserves holder, behind only ConocoPhillips. Continued investment in maintaining Prudhoe Bay will be the company`s main endeavour.

“But the assets are not without upside. A 2019 3D seismic campaign will reveal further targets to prolong the legacy field while the company is also growing Milne Point production and considering a potential FID at the Liberty field (now 100% owned).”  

BP had made a series of regional assets divestments (mostly to Hilcorp) since 2014 as focus shifted to deepwater and tight oil assets. Alaska used to account for over 5% of the Major`s worldwide production volumes. That has since fallen to 2% following the Kuparuk-asset swap with ConocoPhillips last year.

Ms Gunn added: “This will not be the last deal in the region. ExxonMobil may be next to follow BP, Anadarko, Pioneer and Marathon in the list of companies having sold out of Alaska. So far ConocoPhilips and Hilcorp have played the consolidating roles – now controlling over 72% of Alaska’s production.”

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