BP said it has agreed to sell its entire business in Alaska to Hilcorp Alaska, based in Anchorage, Alaska, U.S.A., for a total consideration of USD5.6 billion.
The sale will include BP’s entire upstream and midstream business in the state, including BP Exploration (Alaska) Inc., which 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).
“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. However, we are steadily reshaping BP and today we have other opportunities, both in the U.S. and around the world, that are more closely aligned with our long-term strategy and more competitive for our investment,” said Bob Dudley, BP group chief executive.
Under the terms of the agreement, Hilcorp will pay BP USD4.0 billion in the near-term and USD1.6 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 USD10 billion of assets over 2019 and 2020.
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 U.S. history – has to date produced more than 13 billion barrels of oil and is estimated to have the potential to produce an additional one billion 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.
“Today’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,” said Janet Weiss, regional president, BP Alaska.
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.