Alaska Natural Resource Month
Hilcorp Energy continues to grow its Alaska business despite the slump in oil prices. The company has increased its Alaska production and plans additional investments of $300 million to $350 million this year in spite of the skid in prices, Hilcorp President and CEO Greg Lalicker told state legislators Feb. 24 in Juneau.
The company’s Cook Inlet production has reached about 40,000 barrels of oil equivalent per day, or boe/day, a measurement includes crude oil and natural gas values expressed, in energy content, as barrels of oil.
Meanwhile, Hilcorp’s acquisition of interests in three North Slope producing fields last November has added another 20,000 boe/day, Lalicker said.
Alaska now contributes 60,000 boe/day to the company, or about 40 percent of Hilcorp’s total production, he said.
Hilcorp is the nation’s largest privately-owned independent producer and specializes in buying mature producing properties and rejuvenating them to add production.
The company also has to deal with some of the problems that come with acquiring older production properties, however. On Saturday, Feb. 28, a breach occurred in a 10-inch production line in the Milne Point field, one of the older North Slope fields where Hilcorp is now operator, resulting in a spill of undetermined size.
Four adjacent production pads were shut in while response crews struggled through blizzard conditions. A plug was inserted in the pipe and spill cleanup operations were underway March 1 as the weather improved.
Meanwhile, a bypass line was installed to reestablish the flow of oil through the pipe, eliminating the danger of a freeze-up and adding additional protection against a further spill. Production was restored to normal levels the same day.
So far, Cook Inlet has been a success for Hilcorp. Before the company purchased the aging Inlet producing properties from Chevron Corp. and Marathon Oil in 2012 and 2013, production averaged about 18,000 boe/day.
By January 2014, after two years of new investment and intense activity, production had reached 32,000 boe/day. By July it had passed 40,000 boe/day, according the materials Lalicker presented to state legislators.
“Our business strategy is straightforward. We buy old producing assets, we figure out how to operate them most efficiently and we find ways to increase production. We don’t just cut costs. We find ways to produce more,” Lalicker said.
Hilcorp is now applying a similar strategy on the North Slope. In November it took ownership of the Northstar, Endicott and Milne Point producing fields after purchasing them from BP last November. Liberty, a non-producing offshore discovery, was included in the purchase.
Hilcorp now owns 100 percent of Northstar and Endicott and 50 percent of Milne Point, but Hilcorp is operator in all three fields.
The company’s immediate focus is on Milne Point, Lalicker said, because there are a larger number of wells there than at the Northstar and Endicott fields.
Hilcorp’s strategy of doing aggressive workovers on older wells should have immediate benefits in production at Milne Point, he said.
Hilcorp has already put one workover rig to work at Milne Point and is now constructing a new workover rig for the field that will be shipped to the North Slope in late summer, he said.
The company is taking a cautious approach, however, in developing Liberty, a nonproducing offshore deposit also purchased from BP in November. Hilcorp owns 50 percent of Liberty with BP owning the other half, with Hilcorp as operator.
Hilcorp presented a possible development plan to the U.S. Bureau of Ocean Energy Management but the company is still studying the project, Lalicker said.
“We haven’t sanctioned development. It’s still up in the air,” he said. “We need to do a lot more on the development plan before we start pouring money into Liberty.”
Liberty is about five miles offshore in federally-owned submerged lands beyond the state’s territorial limit, with the U.S. BOEM as the managing agency.
Read more: http://www.alaskajournal.com/Alaska-Journal-of-Commerce/March-Issue-2-2015/Hilcorp-Energy-keeps-up-spending-despite-oil-price-slide/