Billionaire Jeff Hildebrand's 'crowning achievement,' buying BP's Alaska assets

When oil prices collapsed in the spring of 2020 during the COVID-19 pandemic, the BP sale of its Alaska assets to Houston billionaire Jeff Hildebrand was in jeopardy because banks led by JP Morgan were scared off, the Wall Street Journal reported at the time.

The banks had earlier agreed to what would essentially be a loan backed by future oil and gas proceeds, the newspaper said, but the oil panic led them to pull the plug. Hildebrand, the owner of Hilcorp, wanted to fund the purchase with debt.

Hilcorp managers told bond investors there was a chance the deal might fall through, but they wanted to keep things amicable. S&P Global said Hilcorp would have trouble getting back its $500 million down payment from BP if the deal fell apart.

The Regulatory Commission of Alaska asked Hilcorp for details on its financial capabilities and whether it would have trouble borrowing money to buy BP’s assets, but there was never any public disclosure as the agency has kept most of the important information about the transaction secret.

In the end, BP said in April 2020 that it restructured the $5.6 billion sale to Hilcorp with no details other than saying it involved "vendor financing,” a lower payment in 2020 and “cash-flow sharing.”

BP essentially loaned Hilcorp $2 billion to complete the deal, according to a Wall Street Journal article this week on Hildebrand and his company. There was also an agreement that Hilcorp would share profits with BP, probably until 2023 or 2024.

I believe this has never been reported in Alaska, though it was mentioned by the company in an earnings call with investors in early 2021.

The CFO said there were components to a $4 billion item on the balance sheet: “There's a loan for $2 billion that I think has a five-year duration. So I think that's -- that will be a choice of does it get paid out earlier, does it get paid out in five years, and that's a -- obviously a Hilcorp decision. So that's the first component of it. The rest is through your profit-sharing mechanism. I think with the strong prices we're seeing now, you should presume that the balance of payments will occur over the next three, four years. Pretty hard to predict.”

Journal reporter Benoit Morenne writes that the BP purchase was Hildebrand’s “crowning achievement.”

It was Hildebrand who approached BP about selling off its Alaska operations, the story says, quoting Bob Dudley, then the BP CEO.

"Jeff made what I would say was a very fair, aggressive proposal," said Dudley.

The Journal said the deal was “saved when BP agreed to lend Hilcorp $2 billion to fund the $5.6 billion transaction. Under the terms, Hilcorp put down at least $500 million, and agreed to pay the rest with future cash generated by the wells—a risky bet in the midst of the pandemic.”

Dudley said that had oil prices remained low for a longer period, Hilcorp would have been in trouble, but it turned out to be a terrific deal, the Journal said.

That characterizes Jeff, and what he's done with his career, you know—calculated risks, but lots of risk," Dudley said.