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By Ron Bousso and Tanishaa Nadkar
Aug 27 (Reuters) - British oil major BP Plc onTuesday agreed to sell all its Alaskan properties for $5.6billion to privately held Hilcorp Energy Co, exiting a regionwhere it operated for 60 years.
The deal, which includes interests in the most prolific oilfield in U.S. history at Prudhoe Bay, and the 800-mile(1,300-km) Trans Alaska Pipeline, is part of BP's plan to raise$10 billion over the next two years through asset sales tofurther strengthen its balance sheet, it said.
For years, BP has been reducing its role in Alaska, whereoil production has fallen with declines at the Prudhoe Bayfield. BP, which began working in Alaska in 1959, is theoperator and holds a 26% stake in Prudhoe, where productionbegan in 1977.
In 2014, BP sold Hilcorp half its share of an Alaskanproject. This year, the two were due to decide whether to goahead with an ambitious $1.5 billion offshore project thatrequires construction of a man-made island.
The acquisition fits Hilcorp's historical strategy ofacquiring mature fields from major oil companies and slashingcosts. The company, founded in 1990 by Texas oilman JefferyHildebrand, has operations across the United States.
Hilcorp spokespeople did not reply to requests for comment.
"This deal vaults Hilcorp to be the second-largest Alaskaproducer and reserves holder, behind only ConocoPhillips," said Rowena Gunn, a Wood Mackenzie energy analyst.Hilcorp must show it can maintain output at Prudhoe Bay, whereBP has been the operator, she said.
Prudhoe has to date produced over 13 billion barrels of oiland is estimated to have the potential to produce more than onebillion further barrels. BP's net oil production from Alaska in2019 is expected to average almost 74,000 barrels per day.
The deal calls for a $4 billion initial payment to BP withthe remaining $1.6 billion in earnout payments over time.
"We are steadily reshaping BP and today we have otheropportunities, both in the U.S. and around the world, that aremore closely aligned with our long-term strategy and morecompetitive for our investment," BP Chief Executive Officer BobDudley said.
The Alaska sale pushes BP closer to its goal of selling $10billion of properties following the 2018 acquisition of BHP'sU.S. shale assets, a $10.5 billion deal that catapultedthe London-based company into a major Texas shale producer.
BP previously had said that most of the disposals would comefrom its shale assets, particularly natural gas fields. The salewould help BP reduce its debt, which rose to 31% of its marketcapitalization by the end of June.
The sale faces regulatory approvals, including by the stateof Alaska.
State Senate Minority Leader Tom Begich said he expects thelegislature to hold hearings and review Hilcorp's environmentaland safety record, which included a natural gas pipeline leak inAlaska's Cook Inlet that lasted for months in the winter of2016-17.
"I want to make sure they're not just pumping hard andwalking away," said Begich. "I don't want to be left with a messto clean up."
The divestment comes months after BP agreed to sell itsinterests in the Gulf of Suez oil concessions in Egypt toDubai-based Dragon Oil for an undisclosed sum. It also hassought to sell U.S. shale assets in Colorado, Texas, Oklahomaand Wyoming.
BP said about 1,600 employees are currently part of itsAlaskan business, adding that it was "committed to providingclarity about their future as soon as possible as part of thetransition process with Hilcorp."(Reporting by Ron Bousso, Jennifer Hiller in Houston, TanishaaNadkar and Muvija M in Bengaluru, and Yereth Rosen in Anchorage;Editing by Gary McWilliams, Marguerita Choy and Richard Pullin)
