Hilcorp Energy’s bottom line grew year-over-year during 2020, driven in part by its recent acquisition of BP’s assets, according to two sources familiar with the situation. Management has also guided investors to expect an increase for 2021 production and capex, the sources added.
For 2020, consolidated adjusted EBITDA came in at roughly USD 1.105bn compared to USD 1.07bn in 2019. The results peg LTM leverage at 3.98x, based on USD 4.4bn of total debt, the sources continued.
Hilcorp generated roughly USD 700m of free cash flow in 2020, the sources said.
For 2021 production, Hilcorp is guiding 230 mBoe/day compared to an average of 188 mBoe/day in 2020, factoring in holding BP Alaska for the whole year as compared to 2020 in which they only held the acquired assets for roughly half the year, according to the sources.
The company is guiding 2021 capex at USD 425m-475m, compared to USD 350m in 2020, the sources added.
One of the sources is expecting USD 1.92bn in adjusted EBITDA and more than USD 1bn of free cash flow for 2021.
Hilcorp’s improved earnings came after its USD 5.6bn purchase of BP’s midstream and upstream assets in Alaska. Those assets were deemed attractive because of their 100% oil production and 3% decline rate, as reported.
While the company planned to issue USD 1bn in bonds to back the transaction, it pivoted to a direct loan with BP amid uncertainties tied to the COVID-19 pandemic.
At 2Q-end, it closed the transaction through a USD 2.1bn term loan with BP. Hilcorp paid a USD 491m deposit and USD 209m in closing.
The USD 5.6bn price tag includes a base price of USD 4bn payable through 2020 and USD 1.6bn of additional earnout consideration after July 2021.
The company tapped the market in January 2021 for dual-tranche USD 1.2bn senior unsecured notes to fund the tender of its 5% notes due 2024 and 5.75% notes due 2025 and repay debt under its senior secured facility.
Hilcorp’s recently placed USD 600m 5.75% senior unsecured notes due 2029 traded at 102.595 to yield 5.337% on 8 April, compared to trades at 101.25 to yield 5.549% on 31 March, according to MarketAxess.
The USD 233m 5.75% senior unsecured notes due 2025 traded up to 102 to yield 4.609% on 5 April after the earnings report from trades at 100.25 to yield 5.615% on 31 March, according to MarketAxess. The bonds have since settled at 101.72 to yield 4.82% yesterday (12 April).
Hilcorp did not respond to a request for comment.