Hilcorp Increasingly Alone in Alaska

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Hilcorp Energy (Anchorage, Alaska) is getting lonelier in Alaska after Italian energy company Eni SpA (NYSE:E) (Rome, Italy) unloaded its entire stake in the Nikaitchuq and Oooguruk oil fields to the company for $1 billion.

Eni announced the sale closed on Monday. It was first announced in July.

"The transaction, which received the approval of all relevant authorities, is in line with Eni's strategy focused on the rationalization of the upstream activities by rebalancing its portfolio and divesting non-strategic assets," it stated.

Both offshore fields combined for around 22,000 barrels per day (BBL/d) of oil for the Italian energy major, which is working to raise $8.7 billion in proceeds by 2027 through asset sales. Hilcorp, for its part, is the largest oilfield operator in Alaska with net production of around 135,000 BBL/d.

The company inherited BP plc's (NYSE:BP) (London, England) entire upstream and midstream portfolio in Alaska in 2019 for $5.6 billion. The sale included assets in Prudhoe Bay, once considered one of the most prolific oil basins in the country with billions of barrels of output since operations began in the late 1960s.

Alaskan operations are not for the faint of heart, however. Then-Royal Dutch Shell (now Shell plc (NYSE:SHEL) (London, England)) was an early entry to Alaska, drilling its first wildcat well in the 1950s. A wildcat well is one drilled into an area not yet proved to contain hydrocarbons.

A string of problems with Shell's offshore drilling infrastructure in Alaska during the 2010s sparked backlash from an environmental advocacy community that was still on edge from the Deepwater Horizon oil spill. Shell forked over $39 billion in a 2007 lease, but the company wound up leaving the state altogether less than a decade later.

Hilcorp was the lone bidder for a Cook Inlet lease last year. Its high bid of a meager $64,000 for a 2,304-acre parcel was just a tiny slice of the 1 million acres put on the auction block by the federal government.

But in July, a federal court in Alaska suspended the sale for the rights to drill for oil and gas, arguing the government failed to adequately assess the impact on the environment.

The Interior Department in 2022 initially balked on a lease sale on the Cook Inlet, citing a lack of industry interest. Congress later called for the lease to take place as part of a compromise for passage of the Inflation Reduction Act.

ConocoPhillips (NYSE:COP) (Houston, Texas) is the other major player in Alaska, bolstering its position last month by spending around $300 million to acquire acreage from Chevron (NYSE:CVX) (San Ramon, California) in the Kuparuk River and Prudhoe Bay production areas. Conoco said it expects 5,000 net barrels of oil equivalent per day from the assets.

The Prudhoe Bay alone was considered one of the most prolific oil basins in the country. Harsh climate and associated costs have created major headwinds for production, however.

Total Alaskan crude oil production averaged 430,000 BBL/d last year and should slump to 400,000 BBL/d by next year. In contrast, total U.S. crude oil production should increase by about a quarter million barrels to average 13.5 million BBL/d next year.

Hillcorp had no public comment on the acquisition from Eni.

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