Hilcorp Alaska LLC: entering the Alaska oil and gas industry.

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Ever since the discovery of oil and natural gas in Alaska, companies have come to the 49th state to try to take advantage of these natural resources. Hilcorp Alaska LLC, now based in Anchorage and with operations on the Kenai Peninsula, has recently made its first foray into the state through its acquisition of Cook Inlet oil and gas assets.

In July 2011, Hilcorp Alaska LLC and Chevron's wholly owned indirect subsidiary, Union Oil Co. of California, began the process of transferring Union's oil and gas assets located in Cook Inlet to Hilcorp, with Hilcorp assuming operation of these assets on Jan. 1. The amount of the sale was not disclosed.

Hilcorp Energy Co., which is the parent company of Hilcorp Alaska LLC, was founded in 1989 by Jeffery D. Hildebrand and a partner whom he later bought out. It is now the third largest privately held oil and gas company in the United States. Headquartered in Houston, Texas, the company has operations in Texas, Louisiana, the Gulf of Mexico, Wyoming, Colorado, Mississippi, Alabama and now Alaska. According to the company's website, its mission is "to efficiently develop energy that would otherwise be lost while providing an enjoyable and challenging work environment where long-term personal wealth can be created for all."

EXPANDING FOOTPRINT

Hilcorp continues to grow by actively acquiring and developing conventional assets while expanding its footprint into a number of new resource plays. In recent rankings of privately held US producers by IHS Herold Inc., in 2010 year-to-date production ranked by barrels of oil equivalent (BOE), Hilcorp was third with 28.8 million BOE and 1,788 wells. The company prides itself on excelling in the core competencies of engineering, geological expertise and operational excellence.

"While this is our first foray into Alaska, the purchase of the Cook Inlet assets fits our business model very well," said John A. Barnes, senior vice president of exploration and production in Alaska at Hilcorp Alaska LLC. "Our success has been built on the acquisition and development of mature legacy oil and gas fields; areas where we know that the oil is in place, and we are able to produce the remaining oil. This is our bread and butter."

ACQUIRED ASSETS

Assets in the sale include Union Oil contracts and interests in the Swanson River, Granite Point, Middle Ground Shoals, Trading Bay and MacArthur River fields; interests in 10 offshore platforms; interests in onshore gas fields including the Beluga River Unit and the Ninilchik Unit, which will still be operated by Conoco Phillips and Marathon Oil, respectively; and two gas storage facilities. Current net production from these assets is roughly 6,400 barrels of oil and 74 million cubic feet of natural gas per day. The sale also includes interests in the Cook Inlet Pipe Line Co. and Kenai Kachemak Pipeline LLC.

According to Barnes, Hilcorp has added 235 new Alaska employees in Anchorage and Kenai to its rosters, in addition to the 735 employees that it employs in the Lower 48.

"We've hired a lot of great employees, as well as retained a significant portion of Chevron staff with the goal of building a great team," Barnes said.

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In a recent press release, Hilcorp also acknowledged the effort put forth by Chevron employees as well as the state and federal agencies that assisted in the regulatory approval process for making the sale successful.

SHORT-TERM FOCUS

In the short term, Barnes said that the company will focus on continuing to develop and produce Cook Inlet resources in a safe and environmentally sound manner. "We're currently working to establish good relationship with vendors, stakeholders, regulators and members of the communities in which we operate," he said. "In the long-term, we will be reviewing every well and field and looking at ways to increase production and recovery and to create reliable gas producing operations.

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"Our goal is to develop these assets to their full potential and to provide reliable energy to Southcentral Alaska, as well as to create value for our employees and the communities in which we're operating," he added.

While the company's short-term focus is on managing the assets in Cook Inlet, Hilcorp will also begin building an inventory of exploration and development opportunities for the future. "We will act on opportunities for growth if it complements our company culture and objectives," said Barnes, adding that it was inappropriate to identify any investment plans at the current time.

CORE VALUES

According to Barnes, every aspect of the business is determined through its five core values: integrity (do the right thing), urgency (act today, not tomorrow), ownership (work like you own the company), alignment (when Hilcorp wins, we all win) and improvement (get better every day). "We know that this culture has driven us to the success we've achieved to date," he said.

These values also determine how the company treats its employees and the communities in which it operates. For example, when hired, each employee is given $2,500 to donate to a US-based 501(c)3 charitable organization of his or her choice. Each subsequent year, Hilcorp will match any employee contribution up to $2,000 annually. To date, in excess of $3 million has been given to charities through this program.

Another example is the Hilcorp Future Leaders of America Scholarship Program, which gives $10,000 scholarships to outstanding high school students in the communities where Hilcorp operates. Students can receive up to $2,500 per year, which is renewable on an annual basis.

"We've recently expanded this program to include five schools on the Kenai Peninsula: Kenai Central High School, Soldotna High School, Skyview, Ninilchik School and Nikiski High School," Barnes said. "Materials have gone out to these schools, and we will be awarding the first scholarships to graduating seniors this May."

Despite being a new entry into Alaska's oil and gas industry, it looks like Hilcorp has big plans for doing business on the Last Frontier.

"The main thing to know is that we're happy to be here," Barnes said. "We're here to stay, grow and produce, because that is what makes our company successful."