Hilcorp completes purchase of BP’s Alaska assets with approval of acquisition of 49 percent of Trans Alaska Pipeline System

Hilcorp Energy completed has its acquisition of BP’s midstream pipeline ownership interests Dec. 18 following approval by the Regulatory Commission of Alaska, the company said

Harvest Alaska, Hilcorp’s midstream subsidiary, now owns BP’s approximately 49 percent interest in the Trans-Alaska Pipeline System (TAPS) and 49 percent of Alyeska Service Company (Alyeska) along with other Alaska midstream interests. Alyeska will continue to operate the pipeline.

“The completion of this acquisition is a critical milestone for Harvest,” said Jason Rebrook, Chief Executive Officer of Harvest Midstream, in a statement issued by the company. “TAPS is an icon of American ingenuity and has a proven track record of safe and responsible operations with strong relationships in the communities it touches.”

“Harvest has achieved several significant milestones this year including this historic acquisition as well as our first public bond offering, raising $600 million in new capital.” Rebrook continued. “

The 800-mile TAPS, one of the largest pipelines in the world, transports oil from the North Slope of Alaska to the northernmost ice-free port in Valdez, Alaska. The system runs from the Prudhoe Bay oilfield to the Valdez Marine Terminal.

The pipeline once moved over 2 million b/d of North Slope oil but that is now down to about 500,000 b/d as output from North Slope oil fields has declined. Since 1977 the system has transported more than 18 billion barrels of product.

In July, Hilcorp completed acquisition of BP’s upstream Alaska assets including its share of the large Prudhoe Bay field. Hilcorp also took over as operator at Prudhoe Bay July 1. ExxonMobil and ConocoPhillips also hold major stakes in Prudhoe Bay.

Hilcorp is a major Texas-based independent but the purchase, valued at $5.6 billion, has stretched the company’s resources. Earlier this year as oil prices crashed Hilcorp had to negotiate a restructured financial deal, essentially lowering the company’s early payments to BP.

Hilcorp has a long track record of acquiring mature assets and investing in aggressive redevelopment. The company came to Alaska when it purchased aging Cook Inlet oil fields from Chevron Corp. in 2012 and gas producing assets from Marathon Oil in 2013. At that time oil production in the Inlet was down to 11,000 b/d from its 1970s heyday of about 200,000 b/d.

Hilcorp refurbished 50-year-old platforms and wells and brought the Inlet back up to 18,000 b/d within three years. The Inlet is still producing about 14,000 b/d, according to state data.

In 2013 the company purchased several small fields near Prudhoe Bay from BP and similarly invested in a rejuvenation. In one of the fields, Milne Point, Hilcorp has doubled production to just under 40,000 b/d.

Alaska officials as well as Prudhoe Bay partners ExxonMobil and ConocoPhillips now hope Hilcorp can stabilize and even increase production from the North Slope’s largest field, which now averages about 280,000 b/d, more than half the slope’s total output.