BP says sale to Hilcorp is still on, but under revised terms

BP’s operations center at Prudhoe Bay. (Elizabeth Harball/Alaska’s Energy Desk)

Oil and gas company BP says it expects to complete the sale of its Alaska business to Hilcorp in June, but under revised financial terms.

In a statement late Sunday, BP confirmed its commitment to close the multi-billion dollar sale. It says the June timeline is subject to regulatory approvals. The statement follows reports that the deal was in jeopardy as the coronavirus has crushed demand for oil and oil prices have collapsed.

The two companies have renegotiated the financial terms of the deal, BP says. The price is still $5.6 billion, but the structure and phasing of the payments have changed.

“The agreed revisions respond to market conditions while retaining the overall consideration,” William Lin, BP chief operating officer of upstream regions, said in the statement.

Originally, Hilcorp had to pay $4 billion in the near term, and $1.6 billion later. Hilcorp paid BP a $500 million deposit last year.

The revised agreement includes lower payments this year, plus “new cash flow sharing arrangements over the near-term, interest-bearing vendor financing and, potentially, an increase in the proportion of the consideration subject to earnout arrangements,” BP’s statement says.

It says the two companies have developed detailed transition plans.

Hilcorp President Jason Rebrook said in a statement Monday that the company is excited about its future in Alaska, “and we look forward to continuing to safely develop Alaska’s natural resources.”

“In the weeks ahead, we will continue to work with BP, the State of Alaska, and others to ensure a seamless transition process as we complete this transaction,” he said. “We are proud of the work we have done in Alaska over the last eight years, and plan on being an important part of the Alaska economy and community for many years to come.”

The deal includes BP’s stakes in the massive Prudhoe Bay oil field and the trans-Alaska pipeline. The Regulatory Commission of Alaska is still reviewing a key piece of the deal involving pipeline assets. The state regulators have asked Hilcorp to disclose whether and how the pandemic-driven crash in oil prices will affect its ability to close the deal, and the company’s response is due by May 4.

BP Alaska President Janet Weiss said in a statement late Sunday that the company will continue to work with regulators “and demonstrate that BP remains committed to completing the sale, even in these volatile and difficult market conditions.”

“If necessary due to timing of approvals, we will complete part of the deal in June, transferring the upstream business to Hilcorp, while continuing to work with regulators for approval of the sale of the midstream,” Weiss said.

“The future will be tough,” she said, “and I believe the best thing for a more rapid economic recovery for Alaska is the timely completion and approval of this deal, enabling more competitive oil down TAPs.”

The sale is part of BP’s plan to divest $15 billion by mid-2021.

This is a developing story. Check back for updates.

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