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Vol. 16, No. 10 Week of March 06, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

$772M for BPXA in ‘10

Complex corporate structures make year-over-year comparisons challenging

Eric Lidji

For Petroleum News

BP Exploration (Alaska) Inc. earned $772 million in 2010, less than half what the local subsidiary of the British oil giant earned in 2009, a drop caused by events outside Alaska.

Those profit figures paint an incomplete picture of BP’s year in Alaska because several subsidiaries of BP Exploration (Alaska) operate outside the state and BP manages its midstream operations, such as the trans-Alaska oil pipeline, through another subsidiary.

Taking that into account, 2010 appeared to continue two trends for BP and the Alaska oil industry at large: higher revenues as rising oil prices offset declining production, and higher taxes as rising oil prices bump up the base rate for production taxes in Alaska.

BP Exploration (Alaska) brought in $5.4 billion in revenue in 2010, up from $5 billion in 2009, but saw profits fall considerably from $1.9 billion in 2009 because of a $1.5 billion expense related to “impairment and losses on sale of businesses and fixed assets.”

That $1.5 billion charge “has nothing to do with our Alaska oil and gas operations,” BP Exploration (Alaska) spokesman Steve Rinehart told Petroleum News by e-mail on March 2.

BP Exploration (Alaska) paid $1.1 billion in taxes in 2010, roughly similar to 2009, but appears to have paid more to the State of Alaska in oil

Taxes roughly the same

production taxes. BP Exploration (Alaska) paid $998 million in “production and similar taxes” in 2010 compared to $602 million in 2009. That category represents Alaska production taxes, according to Rinehart.

That increase can be explained by the large increase in oil prices between 2009 and 2010.

The production tax in Alaska contains a progressivity element that increases the base tax rate along with the price of oil, starting at a certain threshold. The Alaska Legislature is currently considering a bill that would temper that progressive element. BP and other North Slope companies believe that the tax is curtailing investment in Alaska, while some Democratic lawmakers believe the progressivity is sufficiently balanced by tax credits.

In November 2010, BP laid out an $800 million capital budget and $1.3 billion operating budget for Alaska in 2011, spending it described as being “broadly flat” from 2010.

Production declines continue

Either way, North Slope oil production continues to decline.

Altogether, BP produced 166,000 barrels of oil per day from Alaska in 2010, down from 181,000 bpd in 2009 and 197,000 bpd in 2008. At the field level, BP produced 67,000 bpd from Prudhoe Bay (down from 69,000 bpd in 2009), 42,000 bpd from Kuparuk (down from 45,000 bpd in 2009), 23,000 bpd from Milne Point (down from 24,000 bpd in 2009) and 34,000 bpd from its other fields combined (down from 43,000 bpd in 2009).

BP produced 46 million cubic feet of natural gas per day in Alaska in 2010, down from 58 million per day in 2009, but up from 41 million per day in 2008. North Slope natural gas is stranded from major markets, but is still produced and used for field operations.



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