Econ 919: Hilcorp planning busy 2018
The state Legislature gavels in amid hopes that increasing oil prices and TAPS line throughput can help quell the state's budget mess, while Hilcorp has big plans for its stake in Cook Inlet.
Gov. Bill Walker gave his State of the State address Thursday night after the state Legislature gaveled in earlier in the week. The state budget — and its continued reliance on oil revenues — will no doubt be the main topic for at least the next three months in Juneau.
With oil prices up to around $70 per barrel and throughput from the North Slope expected to increase for a third straight year, hopes are high that the state economy might finally be turning around. That’s fueling hope that this year will finally see some major steps for the AK LNG project, which promises a big boost to the Kenai.
Earlier this week, Gov. Walker hinted at a possible partnership for the gas line project. His office met with representatives from the North Slope’s major producers. Later, BP CEO Bob Dudley told Axios News that his company is, “Exploring with the state ways to make that resource find a market.”
BP has been established on the North Slope for years. But relatively new to that area is Hilcorp. The independent, Texas-based petroleum exploration company is hoping to play a major role in any turnaround that might come the state’s way from the oil and gas industry, and it has big plans for 2018.
Seven years ago, Hilcorp wasn’t a player in the central Kenai Peninsula's economy, but now they own many of the assets around the Cook Inlet basin and have expanded to the North Slope.
"January 1 of 2012 was our first day in here Alaska. I'm sure a lot of you guys were nervous as I was because we didn't know who Hilcorp was at the time,” said Chad Helgeson, Hilcorp operations manager, addressing the attendees of the recent Kenai Peninsula Economic Outlook Forum.
"Here's kind of a little bit of history of what we've done the last six years: As you can see on the slide, 2012 we came in and spent about $212 million, all on the Kenai Peninsula. And late 2014, we purchased some assets on the North Slope, so all that money there, the $400 million, most of that was spent on the Kenai Peninsula in 2014."
Helgeson says that, last year, the company drilled 24 oil and gas wells — seven on the Kenai Peninsula, five in Cook Inlet and the rest in the Arctic. He expects the company to spend about $300 million in Alaska in 2018, which is almost as much as it spent last year.
"In the cook Inlet for the offshore activity in 2018, we plan to drill five new drill wells. Off of Steelhead and into the MacArthur River Field, Steelhead platform. I believe the project is to start that plan-up in April and kinda drill throughout the year. There's a little bit of gas and oil exploration, not exploration, but development in those fields. And we've got projected about 15 well work-overs."
Helgeson said the company division he heads is concentrating on looking for more natural gas.
"Our big focus on our team is really to chase new reserves of gas within existing fields. We've been challenged by our leadership team to find new untapped and undeveloped gas in the existing fields we have. Many of our fields, if you're not familiar with the reservoir, there could be between depths of 3,000 to 10,000 feet, 60 to 80 different sand zones that could have potential gas in them. And not all of them do."
Of course, all these plans are in addition to Hilcorp's intention to close the Drift River tank farm and transport gas and oil exclusively via pipeline in Cook Inlet.
Gasoline prices are holding steady around $3.11 per gallon across the central Kenai Peninsula, despite the slow rise of oil prices, which hit $69.44 this week. Natural gas is trading at the Henry Hub for $3.23 mcf.