BP Farms Out 4 Alaskan Fields - Analyst Blog

UK oil and gas supermajor BP plc BP has decided to farm out four operated oilfields on the North Slope of Alaska to privately held Hilcorp. The parties, however, did not reveal the financial terms of the transaction.

The sale agreement comprises the entire interest of BP in the Endicott and Northstar oilfields and a 50% stake in each of the Liberty and the Milne Point fields.  Included in the agreement is BP's interest in the oil and gas pipelines related to these fields.

BP owns nearly 100% interest in all the fields related to the sale. Located about three miles offshore, Endicott is an exception where ExxonMobil Corp. XOM and Chevron Corp. CVX hold 21% and 11%, respectively.

The transaction will facilitate BP to form a more competitive and viable business in Alaska as well as help it in utilizing its greatest strengths of managing giant fields and gas value chains. BP intends to concentrate on the development and production from the giant Prudhoe Bay field and work on the progress of future opportunity of Alaska LNG.

BP's position as operator and co-owner of the Prudhoe Bay and its other stakes in Alaska remains unaffected consequent to the agreement. The transaction, subject to regulatory approval, will enable Hilcorp to become the operator of the Endicott, Northstar and Milne Point oilfields and their associated pipelines and infrastructure.

BP, which retains the operatorship of Liberty, is expected to submit a development plan for it by the end of 2014. Discovered in 1997, Liberty is estimated to hold estimated recoverable reserves of 100 million barrels of oil. The work on the field was suspended in 2012 due to huge cost overruns.

BP's plan for Prudhoe Bay oilfield involves the addition of a pair of drilling rigs – one in 2015 and another in 2016, respectively. Over the next five years, the company plans to spend $1 billion more.

The sold assets together represent about 19,700 barrels of oil equivalent per day of net production, or around 15% of BP's total net production on the North Slope.

BP carries a Zacks Rank #3 (Hold). A stock in the oil and gas industry looking good with the Zacks Rank #1 (Strong Buy) is Range Resources Corp. RRC.