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BP Prudhoe Bay Royalty Trust puts Prudhoe Bay royalty up for sale

BP Prudhoe Bay Royalty Trust is offering its interest in Prudhoe Bay, North America’s largest oil field, as part of its planned dissolution, assisted by RedOaks Energy Advisors for this strategic asset transaction.

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BP Prudhoe Bay Royalty Trust, a financial entity specialising in oil royalties, is currently marketing its overriding royalty interest in the Prudhoe Bay field in Alaska. Discovered in 1968, Prudhoe Bay represents North America’s largest conventional oil field, with cumulative historic production exceeding 13 billion barrels of crude oil.

History and performance of the oil field

The Prudhoe Bay field is currently operated by Hilcorp Energy Company, the leading private U.S. oil and gas operator. This firm is particularly recognised for revitalising mature fields and steadily increasing production. Since its discovery, Prudhoe Bay has remained a key asset within the U.S. energy infrastructure, notably thanks to continuous high-margin production.

The royalty offered by BP Prudhoe Bay Royalty Trust specifically covers Hilcorp’s position in the oil field. Historically, this interest generates significant cash flow, supported by a projected annual decline rate of only 2% for proven developed producing (PDP) and proven undeveloped (PUD) reserves over the next five years.

Financial characteristics of the royalty

The cash flow from this royalty directly depends on the West Texas Intermediate (WTI) crude oil price. This condition explains the absence of royalty payments since the fourth quarter of 2022, as the WTI benchmark price has remained below the required threshold.

Despite this volatile price environment, Hilcorp plans significant strengthening of its activities at the site. The company currently maintains five active drilling rigs and aims for a 5% production increase by 2025. These operational initiatives potentially offer future buyers attractive prospects regarding asset valuation.

Advisor for asset sale

RedOaks Energy Advisors is acting as the exclusive advisor for this strategic sale. The decision to sell this stake occurs as BP Prudhoe Bay Royalty Trust moves towards its planned dissolution.

This transaction is part of a broader trend of recurring deals observed in the North American oil royalty market, where investors closely examine investment opportunities offering both historical stability and growth potential related to mature asset revitalisation activities.

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