Asset A&D

BP and Hilcorp Revise Terms for Alaska Deal

By Deepak Sharma
April 28, 2020
2 minutes read
Alaska Mountains Landscape

BP Plc has announced that it has successfully renegotiated the terms of its US$5.6 billion deal to sell its Alaskan assets to an affiliate of Houston-based Hilcorp Energy Co. amidst the back drop of a steep drop in crude oil prices, which has also led to concerns about the privately held U.S. energy firm’s ability to secure financing to close the acquisition.

Under the revised agreement, the total consideration for the sale remains unchanged at US$5.6 billion, but the structure and phasing of payments has been modified. Hilcorp has already deposited US$500 million with BP, and the remaining consideration will now include lower completion payments in 2020, new cash flow sharing arrangements over the near-term, interest-bearing vendor financing, and a potential increase in the proportion of the consideration, subject to earnout arrangements.

The assets include BP’s 26.4% operated interest in the Prudhoe Bay Oil Field, along with non-operated interests in the Milne Point Field (50%, operated by Hilcorp), Point Thomson Field (32%, operated by ExxonMobil), and Liberty Project (50%, operated by Hilcorp). The deal also includes certain exploration leases located within the Arctic National Wildlife Refuge (ANWR). In addition, Hilcorp will acquire BP’s 49% interest in the Trans Alaska Pipeline System (TAPS), 49% stake in Alyeska Pipeline Service Co., 32% interest in the Point Thomson Export Pipeline, 50% interest in the Milne Point Pipeline, and 25% stake in Prince William Sound Oil Spill Response Corp.

The completion of the sale, which remains subject to the final approval of Alaskan state and federal regulators, is critical for BP to achieve it target of US$10 billion in planned asset divestitures by the end of 2020. Following the recent collapse in oil prices, the Regulatory Commission of Alaska (RCA) had asked Hilcorp whether adverse market conditions had impaired its ability to raise funds to finance the deal. A response from Hilcorp on the matter is expected by May 4th, and the deal is still expected to close by mid-year.

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