BP completes sale of its Alaska business
BP plc confirmed on Friday its commitment to complete 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.
Formerly British Petroleum, BP is an energy company, primarily engaged in oil and natural gas, based in London, UK.
Reflecting recent significant market volatility and falling oil prices, BP and Hilcorp have renegotiated the financial terms of the deal to respond to the current environment.
“We have worked closely with Hilcorp to reconfirm our commitment to complete this agreement. Agreed revisions respond to market conditions while retaining general consideration. We look forward to rapidly progressing to completion and for Hilcorp to take over the operation of this important business. We are confident that completing this sale is the right thing for both parties, for the business and for Alaska,” said William Lin, director of operations for BP’s Upstream regions.
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 the payment phase has been modified.
BP and sale
The original agreement provided for Hilcorp to pay BP $ 4 billion in the short term and $ 1.6 billion thereafter. Hilcorp paid BP a $ 500 million deposit by signing the transaction in 2019.
The revised agreement adjusts the structure and phases of the remaining consideration to include lower completion payments in 2020, new arrangements for short-term cash flow sharing, financing from interest-bearing providers, and potentially an increase in the ratio of the consideration subject to earnings arrangements.
The revised settlement is expected to retain the majority of the transaction value. It is also structured with flexibility to stagger and manage payments to accommodate current and future volatility in oil prices.
This transaction is part of BP’s divestment program to make $ 15 billion of divestments announced by mid-2021.