Looking at the new players in the Cook Inlet you cannot help but run smack dab into Hilcorp. This is a private company and one that none of us had really heard about until earlier this year when they up and bought the Chevron Assets and recently the FTC decided to look into their proposed purchase of Marathon.
So who are these guys and does anyone really think that trading the sleepy little Marathon oil for a highly untransparent Hilcorp is a good idea? And what is the FTC focusing on? If these guys are going to be controlling the majority of the gas that Enstar is selling to us, I thought I would do a little poking around.
With its purchase of nearly 165,000 acres in the Cook Inlet from Chevron (CVX) earlier this year, including ten offshore platforms and two onshore fields, Hilcorp became one of the largest Cook Inlet operators virtually overnight.
"Hilcorp would account for between 60% and 80% of the Alaskan gas market, depending on the season, if it completes the acquisition," said Joe Balash, Alaska's deputy commissioner of Natural Resources. The volume of gas on the market in Alaska fluctuates because some is exported via a ConocoPhillips-owned liquefied natural gas terminal during summer when local demand for the heating fuel declines. Mr. Balash said that he supports Hilcorp's acquisition because he believes the company will invest money to increase production on the fields it acquires.
Hilcorp is already spending major dollars. The company has a $206 million 2012 budget and plans to spend $150 million per year in both 2013 and 2014. The goal is increasing production from the 14,000 barrels per day produced by Chevron in 2011 to 25,000 barrels per day by 2015. That's a lot of oil and that is on top of controlling our natural gas.
Hilcorp is the second largest privately held oil and gas company in the U.S. The company has achieved steady growth, averaging 15 percent yearly, through a strategy of revitalizing old producing fields.
According to their website. "We have a Vision: To be the premier private energy company in the country and a Mission: 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 that set the tone for what we do every day."
It also seems that Marathon Oil is buying big into the shale boom that's driving much of the industry - paying $3.5 billion to double its acreage in South Texas' Eagle Ford play, and setting a record per-acre price. Ok, so they leave the Inlet to play in their own back yard in Houston.
Houston-based Marathon said it will buy 141,000 acres in the Eagle Ford from a venture started just a year ago by Houston's Hilcorp Energy and private equity giant KKR - with the potential for acquiring 14,000 acres more through additional rights and leasing.
All told, Hilcorp is believed to have oil and gas production on the order of 70,000 bpd.
So who owns Hilcorp?
The uber-private Hildebrand, 53, is worth an estimated $5.5 billion at Forbes' most recent reckoning and he is the sole shareholder of Hilcorp
He is the 56th richest American citizen. He was worth $1.9 billion in 2010. Other than the fact he lives in Houston, he is rich and he used to work for Exxon, who knows this guy?
Well the investment house of KKR definitely does.
In 2010, K.K.R. paid about $400 million for a 40 percent stake in Hilcorp Resources, the company's roughly 100,000 acres in the Eagle Ford Shale in south Texas. Last June, less than a year later, Hilcorp and K.K.R. sold the assets to Marathon Oil for $3.5 billion. So who is KKR and who owns that company? One Mr. Henry Kravis and George Roberts are listed as Co CEOs of the company.
So what have we really got here? One guy down in Houston that lives like a king is going to control up to 80% of the Natural Gas Market in Alaska? Didn't the Hunt brothers get in trouble when they tried to take over the silver market back in the age of greed?
I'm not saying that having a really wealthy guy buy into the Cook Inlet is a bad thing, but I would think we would want our destiny spread around a little. In the early days we had Chevron, Phillips, Marathon, Conoco, Exxon, and a smattering of smaller players all taking a pull on the slot machine called the Cook Inlet. Now we are going to have one guy that owns the gas, the platforms, the pipelines and can effectively control the flow of gas to our homes. Shouldn't he at least live here?
Nope, he lives here.