BP Exploration and Conoco Inc. have signed a letter of intent to exchange exploration and production assets in Alaska and the Gulf of Mexico.
Under terms of the deal, BP will acquire all of Conoco's interests on Alaska's North Slope and some interests in 54 mainly deepwater blocks in the gulf. In exchange, BP will assign Conoco a 33% interest in its wholly owned Gulf of Mexico Amberjack oil field.
BP will acquire Conoco's 64% interest in Milne Point oil field and 40% of the Badami oil discovery on the eastern North Slope.
Under a separate deal, BP agreed in principle to buy Chevron U.S.A. Production Co.'s 27% interest in Milne Point field and related pipeline interests. Price was not disclosed.
Negotiations on formal agreements for the exchange of assets and the purchase from Chevron are under way. Both are expected to be complete by yearend.
WHAT BP WILL GET
As a result of the two transactions, BP will own 91% and become operator of Milne Point field.
Currently, Milne Point produces 19,000 b/d of oil. Chevron at present holds a 27% interest in the field and Occidental Petroleum Corp. 9%.
BP currently is earning a 35% interest in Badami, about 60 miles east of Prudhoe Bay, by drilling an appraisal to the discovery (OGJ, May 31, p. 15). Together with the interest being acquired from Conoco, BP's stake in Badami will be 75%. Petrofina Delaware Inc. holds the remaining 25%.
The 54 gulf exploratory blocks, in which Conoco's interest averages 50%, are located mainly in the Mars fairway in water depths of about 4,000 ft. Conoco will retain an overriding royalty interest in four of the 54 blocks. BP currently has interests in 314 federal leases in the gulf, of which 282 are in deep water.
BP said the transactions will help further extend its strong position on the North Slope, where economies of scale from its other operations provide cost advantages to develop and produce more North Slope oil. It's adding a significant amount of strategic acreage to its deepwater gulf portfolio.
WHAT CONOCO WILL GET
Amberjack field in Mississippi Canyon Blocks 108 and 109 produces about 22,000 b/d from a platform in 1,030 ft of water 20 miles off Louisiana.
Completion of the deal will represent a major step in restructuring Conoco's North America asset base, the company said.
Acquiring an interest in the two Mississippi Canyon producing blocks will provide Conoco one of its largest, most profitable producers in the U.S., Conoco said. In addition, access to Block 109's recessing equipment and infrastructure could improve the economic viability of Conoco's oil discovery in nearby Mississippi Canyon Block 243.
Conoco said the exchange will allow it to obtain maximum value for its Alaskan assets while continuing its program of building a portfolio of assets in core production areas with the greatest potential for growth. The company noted that its prospects for profitable long term growth in Alaska are more limited than elsewhere.
MILNE POINT HISTORY
Conoco discovered Milne Point in 1969 and brought the field on stream in 1985. Smallest of the producing oil fields on the North Slope, Milne Point did not provide Conoco the economies of scale that apply to late neighboring giants Prudhoe Bay and Kuparuk River oil fields. Conoco had to resort to a "warm" shut-in of the field during January 1987-April 1989 after oil prices collapsed in 1986 and the field became unprofitable.
For much of the time Milne Point was on stream, it was Conoco's biggest producing oil field.
Conoco is still developing the upper Cretaceous Schrader Bluff oil pool in the Milne Point Unit. It began a Schrader Bluff waterflood last year (OGJ, Jan. 20, 1992, p. 23).
Most of Milne Point's more than 30 million bbl of production has come from lower Cretaceous Kuparuk River sand, the same main productive reservoir in Kuparuk River field.
Copyright 1993 Oil & Gas Journal. All Rights Reserved.
