BP BP Plc

By Miguel Bustillo 

BP PLC is exiting Alaska after six decades, selling all of its assets to Hilcorp Energy Co. for $5.6 billion.

The British oil company's departure marks the latest blow to the Alaskan oil sector, which has lost influence globally and domestically as the rise of shale drilling in the continental U.S. has diminished interest in Alaskan operations and exploration.

Under the deal, Hilcorp affiliate Hilcorp Alaska will acquire all of BP's assets in the state, including its share of the giant Prudhoe Bay oil field, and its interests in the Trans-Alaska Pipeline System. Houston-based Hilcorp, which is privately held, is Alaska's largest private operator.

"Alaska has been instrumental in BP's growth and success for well over half a century and our work there has helped shape the careers of many throughout the company," BP Chief Executive Bob Dudley said.

"However, we are steadily reshaping BP and today we have other opportunities, both in the U.S. and around the world, that are more closely aligned with our long-term strategy," he added.

Hilcorp will pay BP $4 billion in the short term and a $1.6 billion earnout from the assets afterward, the company said. The deal is subject to state and federal approval, and the companies expect it to close by next year.

"Energy is a cornerstone of the Alaskan economy and this investment will help drive growth in local energy production, jobs and state and local revenue for many years to come," said Hilcorp Energy President Jason Rebrook. "Hilcorp has a proven track record of bringing new life to mature basins."

The sale is part of a larger BP initiative to divest $10 billion in assets over 2019 and 2020, the company said.

BP said it started working in Alaska in 1959. It drilled the initial confirmation well for the Prudhoe Bay oil field in 1968, and began producing oil from it in 1977. The oil field has to date pumped 13 billion barrels, making it the most prolific in American history, the company said. BP has remained its operator and currently has a 26% working interest in the field.

BP was one of the key players behind the construction of the 800-mile Trans-Alaska Pipeline in the 1970s, and said it owns exploration lease interests in the Arctic National Wildlife Refuge, among other holdings.

But the company's production in the region has fallen over time. BP estimates its net oil production from Alaska will average 74,000 barrels a day this year.

Write to Miguel Bustillo at miguel.bustillo@wsj.com

(END) Dow Jones Newswires

August 27, 2019 15:14 ET (19:14 GMT)

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