LONDON: The British Petroleum Company (BP) today confirmed its commitment to completing the sale of its Alaska business to Hilcorp, first announced in August 2019.
Subject to regulatory approvals, the parties expect to complete the transaction in June 2020.
Reflecting recent significant market volatility and oil price falls, BP and Hilcorp have successfully renegotiated the financial terms of the deal to respond to the current environment.
William Lin, BP chief operating officer, Upstream regions said: “We have worked closely with Hilcorp to reconfirm our commitment to completing this deal. The agreed revisions respond to market conditions while retaining the overall consideration. We look forward to progressing swiftly to completion and for Hilcorp to take over the operation of this important business. We are confident that completion of this sale is the right thing for both parties, for the business and for Alaska.”
Under the revised agreement, the total consideration for the sale remains unchanged at $5.6 billion, subject to customary closing adjustments. However, the structure of the consideration and phasing of payments has been modified.
The original agreement provided for Hilcorp to pay BP $4.0 billion near-term and $1.6 billion through an earnout thereafter. Hilcorp paid BP a $500 million deposit on signing of the transaction in 2019.
The revised agreement adjusts the structure and phasing of the remaining consideration to include lower completion payments in 2020, new cash flow sharing arrangements over the near-term, interest-bearing vendor financing and, potentially, an increase in the proportion of the consideration subject to earnout arrangements.
The revised agreement is expected to maintain the majority of the value of the transaction. It is also structured with flexibility to phase and manage payments to accommodate current and potential future volatility in oil prices.
BP and Hilcorp have developed detailed transition plans to deliver a smooth handover of operations upon completion to allow Hilcorp to focus on embedding planned operating efficiencies as rapidly as possible.
This transaction is part of BP’s divestment programme to deliver $15 billion of announced divestments by mid-2021. Further information relating to this transaction will be included in BP’s first quarter 2020 results scheduled for release on 28 April 2020.