Impact of BP’s move to bail out of Alaska

The impact of BP’s move to sell its Alaska holdings in a $5.6 billion deal with Hilcorp got the attention of more than a few analysts and observers of energy in the U.S.

Take for example what Axiom had to say on Wednesday to the announcement.

Why it matters: Pulling up stakes in Alaska — where production has been falling for decades — shows how oil majors are positioning themselves by chasing shale plays in the lower-48 and other opportunities.

  • BP last year bought BHP’s U.S. shale assets in Texas and Louisiana in a $10.5 billion deal.
  • It’s also part of BP’s plan to divest $10 billion of its holdings in 2019–2020.
  • A note from Rystad Energy Wednesday morning says they see this “as part of a strategic shift by BP to focus further on US tight oil assets.”

What they’re saying: The move “reflects just how dramatically the U.S. oil sector has shifted, as the outlook for Alaska, once the largest producing state, has dimmed relative to shale and the Gulf of Mexico,” Jason Bordoff, head of Columbia University’s energy think tank, said in an interview with Axiom reporter Ben Geman..

  • “Consistent with this trend, BP is increasingly shifting to short-cycle shale and to natural gas and LNG, which are poised to grow globally as energy demand rises and countries address air quality and carbon emissions,” he says.

What’s next: “This will not be the last deal in the region. ExxonMobil may be next to follow BP, Anadarko, Pioneer and Marathon in the list of companies having sold out of Alaska,” Rowena Gunn, an analyst with the consultancy Wood Mackenzie, said in a note.

  • Meanwhile Hilcorp, the biggest privately held producer in the country, is poised to get even larger.
  • “Hilcorp is somewhat uniquely following a counter-cyclical strategy, really going after these legacy assets that public companies are selling at pretty attractive price points,” Andrew Dittmar, an analyst with Enverus, tells Bloomberg.