HOUSTON – BP is selling off stakes in four Alaskan oil fields near the gigantic Prudhoe Bay, a move that would cut about 15 percent of its crude production in the state, the company said late Tuesday.
The British oil company did not disclose the price it would get from Hilcorp, a private Houston-based oil producer that has been jockeying for Alaska’s natural gas basins.
In the deal, which is expected to close by the end of the year, Hilcorp would receive all of BP’s interest in the offshore Endicott and Northstar fields and half of its stakes in the Milne Point and Liberty oil fields.
BP’s stakes in those four fields, where the company began pumping oil between 1994 and 2001, have a daily production of 19,700 barrels of oil equivalent. They sit three to 25 miles north of the Prudhoe Bay oil field that BP discovered four decades ago, shortly before Saudi Arabia and other oil-rich states began to siphon off its Middle Eastern crude reserves to state-owned oil companies.
Now one of the largest oil producers in Alaska, BP is letting go of its fields in the North Slope even as it plans to pump $1 billion into Prudhoe Bay, the second-largest oil field in North America, over the next five years. It expects to add two rigs in the field by 2016 — bringing its rig count there to nine, the highest point it has been in seven years.
Janet Weiss, president of BP’s Alaska region, pointed to last year’s state-level tax law changes as a main driver of an influx of capital into Alaskan oil fields. Last May, Alaska killed a law that had fixed oil company taxes to the price of oil and set a flat 35 percent tax rate in its place, effectively handing operators a $750 million tax cut in the state.
“Thanks to tax reform, Alaska is now on course for increased investment and production and even the possibility of LNG,” Weiss said in a written statement.
State officials say Alaska will see a steep decline in production over the next decade, as its daily output falls by 219,000 barrels of oil per day from last year. Those projections do not figure in new projects that BP and others like ConocoPhillips and Repsol are planning in the state, Kara Moriarty, president and CEO of the Alaska Oil and Gas Association, said in a recent interview with Fuelfix.
Big Oil companies are putting financial muscle behind a fight to thwart a state ballot measure – up for a vote later this year – that would reinstate the old tax laws.
“It’s a very important to keep the new tax structure in place for legacy companies” and to attract new investors, Moriarty said.
Overall, BP produces 140,000 barrels per day in Alaska. Most of the 250 workers that BP employs at the four fields will receive offers from Hilcorp, the company said. BP also said it expects Hilcorp to boost production in the two fields where it is keeping 50-percent stakes, Milne Point and the offshore Liberty field.
The deal would make BP’s business in Alaska “more competitive and sustainable,” allowing it to better manage its stake in Prudhoe Bay and its plans to export liquefied natural gas from Alaska, BP’s Upstream CEO Lamar McKay said in a written statement.
“It will allow us to play to two of our great strengths, managing giant fields and gas value chains,” McKay said.
On Monday, Alaskan lawmakers voted for the state to bolster a $45 billion LNG export project on the North Slope, where Exxon Mobil, BP, ConocoPhillips and others are planning to plunk down big money.
Technology advancements in recent years have allowed BP to blow past its original projections of how much oil the Prudhoe held, around 9 billion barrels. The British oil giant scooped its 12-billionth barrel out of the field in October 2012, Weiss said in a recent interview with Fuelfix.
BP shares rose 5 cents in afterhours trading Tuesday to $49.04 on the New York Stock Exchange.