UK major BP has reiterated its commitment to sell its Alaska business to Hilcorp Energy of the US for the original price of $5.6 billion despite the industry downturn. The deal includes the North Slope feed gas resources for the Alaska LNG export project and Prudhoe Bay oil.
The deal is subject to regulatory approvals but BP states that the completion of the transaction, first put forward in mid-2019, is expected to be achieved in just over a month, in June 2020.
“Reflecting recent significant market volatility and oil price falls, BP and Hilcorp have successfully renegotiated the financial terms of the deal to respond to the current environment,” said BP.
William Lin, BP Chief Operating Officer for Upstream, said the company had worked closely with Houston, Texas-based Hilcorp. “We look forward to progressing swiftly to completion and for Hilcorp to take over the operation of this important business,”Lin said. Hilcorp will also acquire BP’s one-third share of the Point Thomson gas field on the North Slope, which is operated by ExxonMobil and will underpin the proposed $40 billion Alaska LNG export project.
Among its other Alaska assets, BP holds a 26 percent stake in the Prudhoe Bay oil field and facilities while ConocoPhillips and ExxonMobil each hold a 36 percent share and Chevron has the remaining 1.1 percent interest.
“Under the revised agreement, the total consideration for the sale remains unchanged at $5.6 billion, subject to customary closing adjustments,” said BP.“ However, the structure of the consideration and phasing of payments has been modified. “The original agreement provided for Hilcorp to pay BP $4.0 billion near-term and $1.6 billion through an earnout thereafter. Hilcorp paid BP a $500 million deposit on signing of the transaction in 2019,” BP explained. Revisions were added to include lower completion payments in 2020.
BP and the other Alaska companies had decided in 2016 to withdraw as co-developers of the Alaska LNG joint venture after an earlier oil price drop that made the project seem too expensive to build. Then BP decided to re-engage with the project when it agreed to provide technical assistance to the state-owned Alaska Gasline Development Corp., now in overall control of the LNG project.