Hilcorp takes ownership of BP’s Alaska assets

It’s now official: Houston-based major independent Hilcorp Energy took ownership of BP’s “upstream” Alaska assets and became operator of the Prudhoe Bay field July 1 after state regulators gave their approval two days earlier.

A second part of BP’s $5.6 billion sale of Alaska holdings, the “midsteam” assets that are mainly its share of the Trans Alaska Pipeline System, is expected to conclude this fall after approval by the Regulatory Commission of Alaska.

Hilcorp made the announcement in a press release.

Upstream assets in the deal include BP’s share of the large 43-year-old Prudhoe Bay field along with the smaller Milne Point and Point Thomson fields as well as Liberty, an undeveloped offshore project planned for development.

ConocoPhillips and ExxonMobil are also major owners at Prudhoe Bay.

Hilcorp’s acquisition also includes BP’s ownership of exploration drilling data from a lone test well, drilled in the early 1980s, in a private land inholding in the Arctic National Wildlife Refuge in northeast Alaska, an area believed to have high potential for major new discoveries.

Hilcorp already owns and operates the small Endicott and Northstar fields acquired from BP in 2014, and is operator at Milne Point, which was co-owned by BP until Wednesday.

“Today we are significantly growing and strengthening our footprint in Alaska,” said Jason Rebrook, Hilcorp Energy president. “I’m proud of the team that has worked diligently over the last 11 months to close this transaction and put us in a position for day one operations.”

William Lin, BP’s executive vice president, regions, cities & solutions, said: “Today marks a new era for Prudhoe Bay. It is a world-class field and Hilcorp is well-positioned to take it into the future and maximize value for the State of Alaska. We wish them the very best for this next phase of Prudhoe Bay’s long life.”

BP readjusted the terms of the $5.6 billion transaction to help Hilcorp in a period of high uncertainty in energy markets. This included a lowering of early front-end payments and an arrangement for BP to essentially aid Hilcorp in financing the acquisition.

Fifty BP field supervisors and operators will also remain at Prudhoe Bay for 90 days to assist in the transfer of operations, BP managers told state legislators in the recent briefing.

About 900 former BP workers, mostly North Slope staff, are now employed by Hilcorp, which has increased its Alaska workforce from about 550 to 1,450. The Prudhoe Bay workforce is approximately the same as under BP but Hilcorp will have fewer support and management staff in Anchorage than did BP.

Hilcorp is expected to undertake an aggressive redevelopment program at Prudhoe Bay, the largest of the North Slope fields that still produces over half of total Alaska production. The company has a track record of finding new oil in aging fields and hopes to duplicate at Prudhoe its success in rebuilding production at Milne Point after 2015 and in Cook Inlet after 2013 when it took over aging oil fields there.

After becoming operator at Milne Point Hilcorp invested $700 million and doubled its production from 18,000 barrels per day to 36,000 barrels per day as of April 2020. The company expects to reach 40,000 b/d at Milne Point by the end of 2020., it said.

In Cook Inlet, Hilcorp increased production from mature, declining fields by about two thirds, from 10,000 barrels per day, after taking over from Chevron Corp. and Marathon Oil Co. Today Hilcorp is the dominant gas producer in Cook Inlet and the largest gas supplier to regional utilities in Southcentral Alaska.

“We look forward to continuing to drive economic growth, create Alaskan jobs and contribute to local economies for decades to come,” said Greg Lalicker, CEO of Hilcorp Energy.

“Hilcorp is committed to safety and responsibly developing Alaska’s resources,” he said in the company’s statement.

Janet Weiss, BP’s regional president, said, “I am proud of our employees and contractors who have done extraordinary work to make this a safe and seamless transition. Thank you. And to the State of Alaska, we deeply value our role in Alaska’s history, and thank the governor and his team for positioning Prudhoe Bay for many more years of competitive production.”