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(Alliance News) - BP PLC on Monday reiterated its commitment to completing the sale of its Alaskan operations to US-based Hilcorp Energy for the same USD5.6 billion consideration, despite the steep fall in oil prices due to the Covid-19 pandemic and overproduction.
Shares in BP were trading 2.1% higher at 315.19 pence each in London.
The company initially agreed to sell its Alaskan operations to Houston, Texas-based Hilcorp for USD5.6 billion in August 2019, as part of its overall USD15 billion divestment programme.
The sale included BP's entire upstream and midstream business in the state, including BP Exploration (Alaska) Inc, which owns all of BP's upstream oil and gas interests in the region, and BP Pipelines (Alaska) Inc's interest in the Trans Alaska Pipeline System.
The FTSE 100-listed oil producer on Monday said it and Hilcorp have renegotiated the financial terms of the deal, while retaining the overall consideration, in light of the recent significant market volatility and oil price falls.
Oil prices have crashed following the virus outbreak due to reduced demand following curtailment of air travel and government lockdowns around the world. Crude oil was trading USD20.26 a barrel on Monday, sharply lower from around USD66 at the start of 2020.
The two companies have amended the structure of the consideration and phasing of payments.
The revised agreement adjusts the structure and phasing of the remaining consideration to include lower completion payments in 2020, new cash flow sharing arrangements over the near-term, interest-bearing vendor financing, and potentially an increase in the proportion of the consideration subject to earnout arrangements.
The original agreement provided for Hilcorp to pay BP USD4.0 billion near-term and USD1.6 billion through an earnout thereafter. Hilcorp paid BP a USD500 million deposit on signing of the transaction in 2019.
Subject to regulatory approvals, the companies expect to complete the transaction in June.
William Lin, BP's chief operating officer for Upstream regions, said: "The agreed revisions respond to market conditions while retaining the overall consideration. We look forward to progressing swiftly to completion and for Hilcorp to take over the operation of this important business. We are confident that completion of this sale is the right thing for both parties, for the business and for Alaska."
By Tapan Panchal; tapanpanchal@alliancenews.com
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