Pioneer sells Alaska holdings to Caelus Energy for $550M

Pioneer Natural Resources Co. has sold its Alaska North Slope interests to Caelus Energy LLC for $550 million in cash, the company announced Oct. 25.

The transaction between the Texas-based independents was effective Oct. 1 and will be completed by the end of the year, according to a Pioneer release.

Pioneer Chairman and CEO Scott Sheffield said in an interview in Anchorage Oct. 25 that the company has decided to focus its efforts closer to home on discoveries it has made in the West Texas Permian shale basin. He said the company hopes to invest nearly $300 billion in the major Lower 48 field and that the capital from the sale of its North Slope holdings will be transferred south immediately.

Pioneer entered the Alaska oil and gas scene in 2002 when it made discoveries in its offshore Oooguruk field west of Prudhoe Bay. The field began producing in 2008.

The company produced an average of 4,000 barrels per day in the state through the first nine months of 2013, said the release.

While Pioneer said in August it was pleased with the results fracturing produced on in-production wells in its Nuna field just onshore from Oooguruk, Sheffield said the prospect of 50 billion recoverable barrels of oil in Texas drove the decision.

Caelus President and CEO James Musselman said his company plans to expand Pioneer’s current Oooguruk operations and quickly develop the Nuna field. He called Alaska “one of the oiliest places in the world” and said the state offers ample exploration opportunities.

He will have to learn how to pronounce “Oooguruk,” an Inupiaq work for the bearded seals found in the waters off the North Slope, he added.

Musselman said he expects the company he founded in 2011 to invest about $1.5 billion in Alaska over the next five to six years.

“We have quite ambitious plans,” he said.

Pioneer’s Alaska staff will stay on board and transition to Caelus, Musselman said, with a small staff addition of current Caelus employees.

Pioneer has about 70 full-time employees in the state and contracts with up to 300 more workers during peak periods, company spokesman Casey Sullivan said.

Musselman said the opportunity to take over an operation with established staff familiar with operating in the state especially appealed to him.

Additionally, the spring passage and implementation of oil tax reform in Senate Bill 21 by the state had a direct bearing on Musselman’s decision to enter the Alaska market, he said.

His company was originally investigating the purchase of other assets in the state in late spring before the Pioneer opportunity came up, Musselman said. He added that he had not had a positive view of the climate of the state’s energy business in prior years.

“We hear every day that the major companies — ConocoPhillips, Exxon(Mobil), BP — everybody is really growing up here now because of the passage of SB 21 and that hasn’t happened in the last four or five years,” he said. “You’ve got to look at the direct correlation between the amount of activity that’s been announced and the impact SB 21 has had on that.”

Caelus is also involved in exploration in Southeast Asia, according to Musselman.

Prior to founding Caelus Musselman ran Kosmos Energy Ltd., an exploration-driven company he helped establish in 2007, he said. Since the mid-1990s he has been involved in oil exploration in Colombia and West Africa, he said.

After an Oct. 24 meeting with Gov. Sean Parnell, Musselman said he is impressed with the state’s commitment to increase private investment, but also that the effort to repeal SB 21 is a concern.

A referendum on the oil-production tax will be held in August of next year with opponents hoping to repeal the tax reform.

After 11 years in the state, Sheffield said he would miss working with Pioneer’s Alaska staff but said he is confident Musselman, someone he has known for 30 years, is the right man to take over the work.

He added that he will also miss the relationship the State of Alaska has with independent oil and gas companies and concurred with Musselman when discussing the state’s oil future.

“To remove SB 21 would be the best way to see the pipeline (throughput) continue to decline,” Sheffield said.


Elwood Brehmer can be reached at