BP Exits Alaska: Update

(Adds comment from Wood Mackenzie)

BP has agreed to sell its entire business in Alaska to Hilcorp Alaska, it said August 27 in a statement.

Under the terms of the agreement, Hilcorp will purchase all of BP's interests in the state for $5.6bn. The sale will include BP's entire upstream and midstream business in the state, including BP Exploration (Alaska), owner of all of BP's upstream oil and gas interests in Alaska, and BP Pipelines (Alaska)'s interest in the Trans Alaska Pipeline System (TAPS).  Subject to state and federal regulatory approval, the transaction is expected to be completed in 2020, BP said. 

BP CEO Bob Dudley said although Alaska has been instrumental in BP's growth and success for well over half a century, the company has other opportunities, both in the US and around the world, that are more closely aligned with its long-term strategy and more competitive for its investment.

“This transaction also underpins our two-year $10bn divestment programme, further strengthening our balance sheet and enabling us to pursue new advantaged opportunities for BP's portfolio within our disciplined financial framework,” he said. 

BP operates Prudhoe Bay oil field, with a working interest of 26%, and holds non-operating interests in the producing Milne Point oil field and Point Thomson gas field. 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. 

Hilcorp now Alaska's second largest producer

Commenting on the deal, Wood Mackenzie said the deal made Hilcorp Alaska's second biggest producer and reserves holder, behind only ConocoPhillips. 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).  

WoodMac said it valued the assets at a slight premium to the price paid. Prudhoe Bay makes up over 60% of the consideration, but other assets like TAPS, Milne Point and Point Thomson are significant at over $2bn 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," it said.

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.

Wood Mackenzie predicted that ExxonMobil might follow suit. So far ConocoPhilips and Hilcorp have played the consolidating roles – now controlling over 72% of Alaska’s production.