Since beginning to acquire oil and gas properties in Alaska in 2011, Hilcorp has become the operator of fields in which it holds a working interest ownership.
Point Thomson, where ExxonMobil is the operator, was an exception.
Hilcorp became a working interest owner in the Point Thomson unit when it acquired BP Exploration (Alaska)’s assets in the state in a 2019 sale which closed in 2020.
The companies say they have reached an agreement whereby Hilcorp will take over as Point Thomson operator, while ExxonMobil retains the WIO majority position it currently holds and its interests in Point Thomson-related assets.
Hilcorp already operates two fields where it is a WIO but is not the majority leaseholder - the Beluga River gas field in Cook Inlet and the Prudhoe Bay field on the North Slope. Chugach Electric Association holds the majority WIO at the Beluga River, 82.85% to Hilcorp Alaska’s 17.14%. At Prudhoe, ExxonMobil Alaska holds a 36.4% WIO, followed by ConocoPhillips Alaska at 36.08%, Hilcorp North Slope at 26.36% and Chevron USA at 1.16%.
At Point Thomson, ExxonMobil Alaska holds 62.36% of the working interest while Hilcorp holds 36.99% and other owners collectively hold 0.65%.
Not stepping away
ExxonMobil will not be stepping away from Alaska, Hans Neidig, ExxonMobil spokesman in Alaska, told Petroleum News in an Oct. 23 email.
“ExxonMobil has had a presence in Alaska for more than 100 years and has been a key player in the development of Alaska’s oil industry.
“As the largest working interest owner in both Prudhoe Bay and Point Thomson and the largest holder of discovered natural gas resources in Alaska, ExxonMobil remains committed to Point Thomson and will continue to have a leadership role in exploring options to monetize its gas resources.
“ExxonMobil will maintain a presence in Alaska and will continue to have employees based here,” Neidig said.
Oct. 19 agreement
Neidig said the companies signed an agreement Oct. 19 transferring Point Thomson operatorship to Hilcorp. Regulatory approvals are required and the change is expected to be effective early next year, he said.
The change in operatorship does not change Point Thomson or Point Thomson export asset ownership or future obligations, Neidig said.
After years of disagreement over development between the unit’s WIOs and the state, a settlement agreement was reached in 2012 governing field development. ExxonMobil brought Point Thomson online in 2016, producing condensates and reinjecting gas.
A 2018 letter of agreement focused future development plans on support of a major gas sale.
Neidig said ExxonMobil is retaining its full WIO in its other Alaska assets, including the Trans-Alaska Pipeline System and Prudhoe Bay.
“We recognize the impact the transfer will have on our employees, and we are committed to keeping an open dialogue throughout the process to ensure our employees are treated with care, fairness and respect,” he said.
The company has 38 employees associated with Point Thomson and some may be placed with Hilcorp or Harvest, Hilcorp’s midstream affiliate, and ExxonMobil is working to reassign those to wish to remain with ExxonMobil to other company assets, Neidig said.
Hilcorp
Neidig said the change in operatorship at Point Thomson “takes advantage of Hilcorp’s scale and experience operating North Slope assets and allows the Point Thomson working interest owners to contribute our respective strengths to the value of the asset.”
Hilcorp, a privately held independent oil and gas company with numerous assets in the Lower 48, has grown from a new entrant in Cook Inlet in 2011, where it began operating in 2012, to one of the state’s major producers. The company is the dominant oil and gas producer in Cook Inlet, accounting for some 78% of Cook Inlet natural gas production (including its share of Beluga natural gas) and just under 90% of Cook Inlet oil production.
On the North Slope, Hilcorp operates several smaller fields - Endicott, Milne Point and Northstar - as well as the Slope’s largest field, Prudhoe Bay, in which its share is less than 30%. Adding in its share of Point Thomson, Hilcorp’s share of North Slope liquids production in September was just under 26%, volumes which dwarf its Cook Inlet production numbers.
In September, the most recent month for which Alaska Oil and Gas Conservation Commission production data are available, North Slope production averaged 472,244 barrels of liquids per day, while Cook Inlet averaged 8,905, representing less than 2% of the state’s total liquids production.
As operator, Hilcorp is, of course, responsible for a far greater volume of production than its own share, more than 65% of North Slope liquids production.
How does Hilcorp view this new operatorship?
“Hilcorp is excited about our continued commitment to Alaska,” Luke Saugier, the company’s senior vice president, Alaska, said in a statement. “We welcome the opportunity to apply our proven record of enhancing legacy conventional assets to Point Thomson. With roughly 1,500 Alaska employees, we look forward to continuing to drive economic growth, create Alaskan jobs and contribute to local economies for decades to come.”
