Houston-based private oil & gas producer Hilcorp has agreed to acquire BP’s Alaska business for $5.6 billion consisting of $4 billion payable near-term and $1.6 billion payable through earnouts. The deal adds 74,000 boe/d from a number of fields including a 26% interest in Prudhoe Bay.
“BP was a pioneer in Alaskan drilling and one of the key players in building the Alaskan oil industry, including drilling the confirmation well for the massive Prudhoe Bay field in the 1960s and participating in the Trans Alaska Pipeline in the 1970s,” said Enverus Senior M&A Analyst, Andrew Dittmar. “Their exit and replacement by Hilcorp marks a changing of the guard for the Alaskan petroleum industry.”
For Hilcorp, buying BP’s assets, including assuming operatorship of Prudhoe Bay, is a crowning achievement to the Alaska business they have built since 2012 to become the largest private operator in the state with more than 75,000 boe/d gross operated production.
The deal additionally extends Hilcorp’s lead as the largest private producer in the United States based on gross operated production, which stood at just over 610,000 boe/d as of the end of July 2019. Alaska has played an instrumental role in Hilcorp’s remarkable growth including an earlier $1.5 billion purchase from BP of North Slope interests in 2014. Hilcorp and other private operators have stepped up to take the place of BP as it dialed back exposure to its mature, legacy Alaska portfolio to pursue more growth opportunities elsewhere.
In departing Alaska, BP is choosing to focus on higher growth opportunities elsewhere, including in U.S. unconventionals. The company made a major commitment to growth in U.S. shale by acquiring Permian, Eagle Ford, and Haynesville assets from BHP for $10.5 billion in 2018. That value is being offset by this sale and a U.S. Lower 48 divestment program that targets the bulk of BP’s assets outside of its three key growth shale plays.
The dynamic in Alaska is global IOCs exiting to be replaced by private operators more interested in managing still high-value but largely mature assets. That is very similar to the story in North Sea, which has also seen a series of sales by global companies to private operators. Conoco stands somewhat uniquely among the major international oil producers in retaining its commitment to Alaska as a key growth region including acquisitions from BP and Anadarko in 2018.