Hilcorp picks up on BP’s plan for Prudhoe

  • Employees with Parker Drilling take part in the daily safety briefing on Rig 272 at Prudhoe Bay in this 2017 file photo. The Prudhoe Bay operations officially shifted from BP to Hilcorp as the upstream phase of a $5.6 billion sale closed on June 30. (Photo/Michael Dinneen/For the Journal)

The iconic Prudhoe Bay oilfield is now officially in the hands of Hilcorp Energy, the first phase of a $5.6 billion deal to buy BP out of Alaska.

As expected, the companies announced the operator transition at Prudhoe Bay July 1. The upstream portion of the deal also includes BP’s roughly one-third stake in the Point Thomson gas field operated by ExxonMobil as well as the London-based major’s half share of Milne Point, which is already run by Houston-based Hilcorp.

However, Hilcorp Alaska leaders have said Prudhoe Bay was the real prize of the deal.

“We look forward to continuing to drive economic growth, create Alaskan jobs and contribute to local economies for decades to come. Hilcorp is committed to safely and responsibly developing Alaska’s natural resources,” Hilcorp CEO Greg Lalicker said in a prepared statement.

The companies expect to close on the midstream portion of the deal, which includes BP’s 48 percent share in the Trans-Alaska Pipeline System, later this summer. It is under review by the Regulatory Commission of Alaska.

According to Hilcorp, the company has almost tripled its Alaska workforce from about 550 employees pre-deal to about 1,450 workers, with more hires likely.

State regulators in the Division of Oil and Gas expect Hilcorp will work off of BP’s plan of development — the annual state-approved work plan — for Prudhoe Bay, according to spokesman Sean Clifton.

Oil and Gas Director Tom Stokes approved BP’s 2020 Prudhoe Bay POD, which covers July 1 to June 30, 2021, on May 13, so the work planned by BP will be conducted by Hilcorp.

A Hilcorp spokesman declined to comment on the Prudhoe Bay plan of development, or POD, but Clifton wrote via email that Hilcorp had representatives that participated in the POD process both for Prudhoe Bay and its satellite fields, so Oil and Gas officials do not anticipate Hilcorp filing an amended POD for Prudhoe, at least in the near term.

The 2020 POD outlines plans to conduct more than 300 production-adding well work jobs and another 500 non-rate adding well jobs across the 254,000-acre field. BP conducted similar levels of well work in 2019, according to the POD.

Work by Hilcorp in the next 12 months is also expected to include drilling between four and seven new rotary wells across the field and another 15 to 20 coil tubing well sidetracks. Those targets are mostly spread across the eastern and central portions of the field, according to a map submitted by BP.

BP produced an average of 165,000 barrels of oil per day from Prudhoe in 2019, down from 174,200 per day in 2018. BP estimated 2020 production to fall somewhere between flat and an 11 percent decline to 147,000 barrels of oil per day. Another 43,000 barrels per day of natural gas liquids were produced from Prudhoe last year; liquids production is forecasted to generally remain flat in 2020.

BP also conducted five well workovers in the 2019 period, which Hilcorp is likely to increase to six to nine over the next year. The workover activity will focus on returning injector and producer wells that were shut-in due to wellbore integrity issues to service, according to the POD.

The document also calls for merging data from a 2015 seismic survey of North Prudhoe Bay with the field-wide 3D seismic shoot BP conducted last year.

Stokes acknowledged in the May 13 approval letter to BP that some of the work in the plan may have to be deferred because of the coronavirus pandemic.

“The Division therefore assures BP of its support regarding any plan changes necessary to protect the health, safety and welfare of operations personnel, the physical and economic integrity of the facilities and preservation of the surrounding environment,” Stokes wrote.

ConocoPhillips, the other primary North Slope producer, cut its 2020 drilling program short earlier this year. Late-winter exploration drilling was ended early to protect the health of workers at remote drill sites while development drilling was also stopped in response to the oil price collapse that saw the price for Alaska North Slope crude briefly go negative in April.

Elwood Brehmer can be reached at [email protected]

07/08/2020 - 9:12am