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BP Alaska says $5.6 billion deal with Hilcorp will be completed despite oil market tumult

The BP building in midtown Anchorage on Tuesday, Aug. 27, 2019. BP plans to sell all of its Alaska assets to Hilcorp Alaska for $5.6 billion. (Loren Holmes / ADN)

The sale of BP Alaska’s North Slope assets to Hilcorp Energy have been renegotiated to ensure the deal remains on track during a plunge in oil prices and concerns about Hilcorp’s ability to finance the deal, BP said in a statement Sunday.

“The future will be tough 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,” Janet Weiss, BP Alaska president, said in a statement emailed to media.

Parent company BP said in a statement that it had “renegotiated the financial terms of the deal to respond” to recent turmoil in the industry.

Weakened demand for oil during the coronavirus crisis and a production war between Russia and Saudi Arabia sparked an oil price plunge. Companies have cut back spending in Alaska and globally, and Alyeska Pipeline Service Co. recently cut 10% of North Slope oil production to fight growing oil stockpiles.

“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,” said Jason Rebrook, president of Hilcorp Energy. "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.”

BP announced in August it would sell its Alaska assets to BP for $5.6 billion sale. The companies planned to complete the deal by June. Hilcorp has already committed to hiring many BP workers, and others have retired after working in BP’s Alaska fields for decades.

BP said the overall size of the deal remains the same. It still expects the acquisition to end in June, though the separate statement from BP Alaska’s Weiss expressed uncertainty around the timing of part of the assets.

Weiss said Sunday that the portion of the deal involving BP’s upstream assets, the oil fields and production facilities on the North Slope, will be completed in June. But if needed, the midstream portion of the deal involving the 800-mile trans-Alaska pipeline will be completed later.

The Regulatory Commission of Alaska is overseeing the portion of the transaction involving the pipeline. The agency has asked for additional clarity from Hilcorp about its finances during the recent market challenges.

The phasing of payments from Hilcorp, which made $500 million in early payments last year, has been modified, BP said. Hilcorp will make lower “completion payments” this year than originally planned, among other changes, BP said.

“Under the revised agreement, the total consideration for the sale remains unchanged at $5.6 billion, subject to customary closing adjustments,” BP said. “However, the structure of the consideration and phasing of payments has been modified.”]

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