• 16 hours Retail On Pace For Most Bankruptcies And Store Closures Ever In One Year: BDO
  • 10 minutes America Could Go Fully Electric Right Now
  • 3 days Majors Oil COs diversify into Renewables ? What synergies forget have with Solar Panels and Wind Tirbines ? None !
  • 2 hours Clean Energy Is Canceling Gas Plants
  • 5 hours GAME CHANGER: MIT Startup Commonwealth Fusion says Commercial Product by early 2030s ! THIS CHANGES EVERYTHING..
  • 8 hours America's Frontline Doctors - Safely Start Living Again!
  • 19 hours Biden denies fracking ban
  • 19 hours "COVID Kills Another Oil Rally" by Tom Kool 10/16/2020
  • 3 hours OP article : "Trump blasts Biden Fracking Plan . . . "
  • 1 hour Rethinking election outcomes for oil.
  • 2 hours The Leslie Stahl/60 Minutes Interview with President Trump
  • 4 hours Australia’s Commodities Heartland Set for Major Hydrogen Plant
  • 13 hours Is the coal industry on the way out?
  • 1 day Conoco Pledges ‘Net-Zero’ Emissions in Break With U.S. Rivals
An Election Warning For Energy Traders

An Election Warning For Energy Traders

Obvious energy trades such as…

U.S. Gasoline Demand Drops  

U.S. Gasoline Demand Drops  

U.S. gasoline demand is weakening,…

The $4.2 Trillion Trend Taking Over Wall Street

The $4.2 Trillion Trend Taking Over Wall Street

The ESG megatrend has taken…

Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

More Info

Premium Content

Can This Multi-Billionaire Revive Alaska’s Oil Industry?

Oil production in the once-gushing North Slope has been in steep decline for a number of years, with this year set to be the worst on record since the pipeline’s inception in 1977, and the Alaskan government is now drowning in debt from oil and gas tax credits that are no longer bringing much-needed cash flow to the state’s struggling economy. So why on Earth is one of the richest men in the world turning his back on Texas and putting his money into Alaskan oil?

Self-made multi-billionaire and Texas oilman Jeffery Hildebrand has made a career of investing in and revamping old oil and gas fields and steering clear of all of the shale hype that has boomed and now seems to be on the verge of busting in his home state’s Permian Basin. Now, as the West Texan shale boom slows down and the once red-hot Permian Basin becomes “toxic” in investment circles, Hildebrand has already moved on to his next frontier in the Last Frontier. 

The oil industry veteran is making his next big play in Alaska, where his Hilcorp Energy Co. is buying up old wells and pipelines being unloaded at a discount from BP Plc. The British supermajor is leaving Alaska after operating there for 60 years, finally throwing in the towel on what it says is no longer a competitive investment. 

Hildebrand’s Hildebrand’s Hilcorp Energy Co. has purchased $5.6 billion worth of BP’s holdings and infrastructure in Alaska despite the fact that Alaskan wells are all but dried up after years of severe decline as the company “chases fast-growing shale production that has transformed global energy markets over the past decade,” as reported by Bloomberg Related: China Helps Venezuela Boost Oil Production

But what one company (BP) sees as a non-competitive money pit is, in Hildebrand’s eyes at least, simply a particularly attractive buyer’s market. “Hilcorp is somewhat uniquely following a counter-cyclical strategy, really going after these legacy assets that public companies are selling at pretty attractive price points,” Andrew Dittmar, a senior analyst at Enverus (a Texas-based oilfield data services company previously called Drillinginfo), was quoted by Bloomberg following a phone interview. “They will generate cash flow for decades.” 

While $5.6 billion is a hefty sum, it’s less than 4 times the annual cash flow of the assets acquired, meaning that Hilcorp will likely make that money back in a hurry. Even if Alaskan oil wells do continue to decline, however, (as they very likely will), they will decline at a much slower rate than the shale wells that investors have poured hundreds of billions of dollars into in recent years. By comparison, $5.6 billion is a trifling sum, and its money that’s all but guaranteed to secure a return on Hilcorp’s investment.

Shale wells are attractive thanks to their gushing volumes of oil at the very beginning of production, but they decline extremely rapidly, leading to slowdowns like the one we’re currently witnessing in the Permian Basin. “Shale wells lose as much as 70 percent of their production in the first year, meaning that explorers have to constantly pour money into more drilling just to maintain production,” reports Bloomberg. “By contrast, once up and running, conventional wells lose as little as 5 percent each year, providing a much more solid production outlook.”  Related: Huge Crude Oil Draw Sends Oil Prices Higher

While shale oil plays are much more lucrative in the short term, their production levels, and therefore their profit margins, are entirely unsustainable. Looking at the difference between shale wells and traditional wells brings to mind proverbial tortoises and hares--and we all know who won that race. 

“In the past five years, while everyone from Exxon Mobil Corp. to Concho Resources Inc. spent billions to get a slice of the shale boom, Hilcorp picked up assets in New Mexico, Wyoming and other oil properties in Alaska,” says Bloomberg. While it’s not the most common strategy, it is certainly on-brand for Hildebrand, who has made a career of laughing all the way to the bank as the industry questions his business decisions, even ones as seemingly ludicrous as putting billions of dollars into Alaskan oil when the sector seems almost certainly headed for the grave. 

By Haley Zaremba for Oilprice.com

More Top Reads from Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News