trending Market Intelligence /marketintelligence/en/news-insights/trending/9L7iyGW7SCB_8oYxZjbhew2 content esgSubNav
In This List

BP's move to sell Alaskan assets leaves 2 entities producing 72% of state's oil

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


BP's move to sell Alaskan assets leaves 2 entities producing 72% of state's oil

BP p.l.c.'s pending $5.6 billion sale of its Alaskan assets to Hilcorp Energy Co. is a major shift for the Alaskan oil and gas industry that sees two companies controlling 72% of the state's oil production.

For BP, the deal ends a 60-year presence in the state. In 2014, BP sold its interests in the Endicott and North Star fields and half of its interests in the Milne Point and Liberty fields to Hilcorp. In 2018, BP sold its interest in the Kuparuk field to ConocoPhillips while simultaneously expanding its position offshore the U.K.

SNL Image

The deal is part of BP's two-year plan to divest $10 billion in assets as the company targets investments "that are more closely aligned with our long-term strategy and more competitive for our investment."

"Our exit from Alaska does not in any way diminish BP's commitment to America," BP CEO Bob Dudley said in a statement. "We remain very bullish on the US energy sector. In just the last three years we have invested more than $20 billion in the US and we will continue to look at further investment opportunities here."

BP has 240 lease blocks in the deepwater Gulf of Mexico, and the company's operated and non-operated interests that span Colorado, Louisiana, New Mexico, Oklahoma, Texas and Wyoming had a combined 2.4 billion barrels of oil equivalent reserve base at the end of 2018.

Through its Harvest Midstream Co. affiliate, Hilcorp will acquire the U.K.-based oil major's 48.441% stake in Alyeska Pipeline Service Co., which operates the 800-mile Trans Alaska Pipeline System that carries crude oil from Prudhoe Bay on Alaska's North Slope to Valdez, Alaska, the northernmost ice-free port in North America.

Crude oil production at BP's Prudhoe Bay field averaged 270,000 barrels per day in 2018 for a net amount of 70,200 bbl/d given BP's 26% stake in the field. Today, Hilcorp's gross production of 75,000 boe/d accounts for nearly 20% of the company's gross production, which is located entirely within the U.S.

"This deal vaults Hilcorp to be the second-largest Alaska producer and reserves holder, behind only ConocoPhillips," Wood Mackenzie analyst Rowena Gunn said. "Continued investment in maintaining Prudhoe Bay will be the company's main endeavor."

Wood Mackenzie said ConocoPhilips and Hilcorp now control over 72% of Alaska's production.

BP had been working in recent years to extend the life of its Prudhoe Bay field, which began producing oil in 1977. Hilcorp specializes in enhancing production from acquired conventional oil and gas assets.

"The assets are not without upside," Gunn said. "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 [final investment decision] at the Liberty field."

The North Slope could see more deals in the future, Gunn added: "[Exxon Mobil Corp.] may be next to follow BP, Anadarko, [Pioneer Natural Resources Co.], and [Marathon Oil Corp.] in the list of companies having sold out of Alaska."