Hilcorp to raise Milne Point field's oil production in Alaska

Anchorage — Hilcorp Energy will increase oil production to 40,000 b/d at the Milne Point field on Alaska's North Slope by the end of 2020, a company official said Tuesday, compared with 34,000 b/d currently.

Milne Point production increased 14% in 2019, unlike other North Slope fields, which tended to see declines, state officials said in recent briefings.

"This is an important milestone for the state of Alaska and Hilcorp. By empowering our employees closest to the wellhead, driving efficiencies and innovating, we're increasing production at Milne Point and putting more oil in TAPS," said Jason Rebrook, Hilcorp president.

Milne Point is operated by Hilcorp, which also owns a 50% stake, with BP owning the other 50%. Hilcorp is purchasing BP's assets in Alaska and will own 100% of Milne Point when the transaction is completed, which is expected in the middle of the year.

The $5.6 billion purchase also includes BP's share in the large Prudhoe Bay field near Milne Point as well as BP's stake in the Point Thomson gas and condensate field and its share of the Trans Alaska Pipeline System.

Hilcorp is a Texas-based independent with a reputation for purchasing mature, declining fields, investing and rebuilding production. That script was followed at Milne Point, which was producing 18,400 b/d in November, 2014 when Hilcorp acquired 50% of the field and took over as operator.

In 2012, Hilcorp purchased aging offshore oil platforms in Cook Inlet from Chevron and in 2013 bought producing assets in the inlet from Marathon Oil. Crude production was about 11,000 b/d in Cook Inlet at the time, and by 2016 Hilcorp had rebuilt oil production to about 16,000 b/d.

At Milne Point, Hilcorp has invested more than $700 million, with 60 wells drilled since 2014 and another 29 planned this year.

A major development in the field is Moose Pad, a $270 million viscous oil project completed in April 2019 with facilities to produce and process up to 85,000 b/d. There are currently 10 producing wells at Moose Pad.

PRUDHOE BAY

In the statement, Rebrook said: "Our goal is to apply these successes at Prudhoe Bay and beyond." Prudhoe produces about 299,000 b/d and while 43 years old, still produces over half the about 500,000 b/d of oil moving off the North Slope through the Trans Alaska Pipeline System.

BP, which currently operates Prudhoe, was able to stem the field's long-term production decline of about 6% annually and to hold production generally flat in 2016 and 2017.

But by 2018 and 2019 the decline returned. In December, Prudhoe Bay output dropped 8,852 b/d compared with December 2018. Average January 2020 production by Prudhoe fell 5,990 b/d compared with the same month a year earlier.

Alaskan officials hope Hilcorp can achieve similar results at Prudhoe as it did with Milne Point and Cook Inlet, but they point out that Prudhoe is a much larger field than Hilcorp has operated before and has more complex waterflood and enhanced oil recovery programs in operation.

Meanwhile, the BP deal is still being reviewed by Alaskan agencies including the Department of Natural Resources for the upstream field operations part of the deal and the Regulatory Commission of Alaska for midstream assets, mainly BP's ownership share in TAPS.

The companies hope to complete the transaction in mid-2020, but state officials will not commit themselves to a deadline. "We are deep into our analysis of this deal and are focusing mainly on Hilcorp's financial assurances," that it can handle a major accident or other disruption, state resources commissioner Corri Fiege said in an interview.

Hilcorp officials are upbeat. "We are excited about our future in Alaska and look forward to continuing to safely and responsibly develop Alaska's natural resources," Rebrook said in his statement.