BP and Hilcorp have revised their previously announced $5.6bn transaction involving the sale of the former’s upstream and midstream business in the US state of Alaska to the latter.

A revised agreement has been executed by the parties to reflect the significant market volatility and oil price falls in recent times.

Although the total consideration remains the same at $5.6bn, the changes have been made in its structure while phasing of payments have been modified.

Background of the deal between BP and Hilcorp

The transaction includes the sale of BP Exploration (Alaska), which holds BP’s upstream oil and gas interests in Alaska, and the stake held by BP Pipelines (Alaska) in the 1,287km long Trans Alaska Pipeline System (TAPS).

As per the original agreement, Hilcorp is to pay $4bn near-term and $1.6bn through an earnout thereafter to BP. Upon signing the deal in August 2019, Hilcorp paid a $500m deposit to BP.

The consideration’s structure and phasing of the remaining consideration has now been adjusted to cover lower completion payments in 2020. The remaining consideration will also include new cash flow sharing arrangements over the near-term, interest-bearing vendor financing and, possibly, an increase in the proportion of the consideration, depending on earnout arrangements.

According to BP, the revised agreement is anticipated to maintain the majority of the value of the deal. It has also been flexibly structured to phase and manage payments to facilitate the present and potential future volatility in the prices of oil.

BP upstream regions chief operating officer William Lin said: “We have worked closely with Hilcorp to reconfirm our commitment to completing this deal. The agreed revisions respond to market conditions while retaining the overall consideration.

“We look forward to progressing swiftly to completion and for Hilcorp to take over the operation of this important business. We are confident that completion of this sale is the right thing for both parties, for the business and for Alaska.”

Subject to receipt of regulatory approvals, the companies expect to close the deal in June 2020.