BP Alaska Follows North Slope Asset Sale with 275 Layoffs
Oil giant BP plc’s (BP) subsidiary BP Alaska announced plans to lay off 275 employees and direct contractors in early 2015. The layoff is owing to the previously announced divestment of its interests in four North Slope oil fields to privately held Hilcorp. The divestiture is expected to close later this year. The divestment comprises the entire interest of BP in the Endicott and Northstar oilfields and a 50% stake in both Liberty and the Milne Point fields. Included in the agreement is BP’s interest in the oil and gas pipelines related to these fields.
The layoffs, combined with 200 people whose work was tied to those fields and had accepted jobs with Hilcorp, represent about 17% of the total number of BP employees and contractors in Alaska. BP has 2,725 employees and direct contractors in the state of Alaska; of the total, 2,250 are employees. BP will offer early retirement and severance packages as part of the layoffs.
The transaction will facilitate BP to form a more competitive and viable business in Alaska as well as help it in utilizing its greatest strength of managing giant fields and gas value chains. BP intends to concentrate on the development and production from the giant Prudhoe Bay field and work on the progress of future opportunity of Alaska LNG.
BP’s position as operator and co-owner of the Prudhoe Bay and its other stakes in Alaska remains unaffected consequent to the agreement. The transaction will enable Hilcorp to become the operator of the Endicott, Northstar and Milne Point oilfields and their associated pipelines and infrastructure.
BP, which retains the operatorship of Liberty, is expected to submit a development plan for it by the end of 2014. Discovered in 1997, Liberty is estimated to hold recoverable reserves of 100 million barrels of oil. The work on the field was suspended in 2012 due to huge cost overruns.
The oil major’s plan for Prudhoe Bay oilfield involves the addition of a pair of drilling rigs one in 2015 and another in 2016. Over the next five years, the company plans to spend another $1 billion.
The divested assets together represent about 19,700 barrels of oil equivalent per day of net production, or around 15% of BP’s total net production on the North Slope.
London-based BP plc is one of the world's largest energy companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemical products. It operates in three segments: Exploration and Production, Refining and Marketing, and Other Businesses and Corporate.
In the second quarter, total production of 2.106 million barrels of oil equivalent per day (MMBoe/d) was down 6% year over year. The company sold liquids for $96.90 per barrel in the quarter (versus $94.92 in the year-earlier quarter) and natural gas for $5.67 per thousand cubic feet (versus $5.37). Overall price realization rose to $64.90 per Boe from the year-ago level of $61.27 per Boe.
BP expects third-quarter production to be lower than the second quarter primarily due to planned major turnaround activity, mainly in the higher-margin Alaska and Gulf of Mexico regions. However, fuel margins are expected to improve on the back of a lower level of turnaround. This would be offset by weak petrochemical margins.
Currently, BP carries a Zacks Rank #3 (Hold). Investors interested in the same industry could consider stocks like Cameron International Corp. (CAM), Valero Energy Partners LP (VLP) and Sunoco Logistics Partners LP (SXL). All these stocks sport a Zacks Rank #1 (Strong Buy).
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