CH2M Hill calls off Alaska unit sale

  • By Tim Bradner
  • Thursday, February 12, 2015 10:06pm
  • News

Senior managers of CH2M Hill were in Alaska Feb. 4 meeting with the company’s employees.

Their message: The company’s oil and gas business is no longer for sale and it’s business as usual.

CH2M Hill Senior Vice President for Corporate Development Matt McGowan and Senior Vice President and Regional Managing Director Patrick O’Keefe said the company wanted to test the market’s reception on a possible sale when it was announced last October.

There were a lot of inquiries and a lot of interest but the unexpected oil price plunge affected the outlook and increased uncertainty among potential buyers, McGowan said in a Feb. 4 interview with the Journal at the company’s Anchorage office. In mid-January, the company announced the sale was off.

It was still a worthwhile exercise, McGowan said, because it validated CH2M Hill’s sense that its Alaska-based oil services division, the former Veco Corp., was a valuable business. CH2M is happy to continue owning it, he said.

“We’re back to business, developing our long-term strategy and making sure the Alaska division has the allocations of capital that it needs,” McGowan said.

“We did a lot of work on the sale and we learned a lot about the business. Then, oil prices changed, dramatically. The price change has not affected us — our own (engineering and oilfield construction) business is holding up — but the price change caused a lot of turmoil among the parties we were dealing with.

“There was a lot of interest, however, and it confirmed the value of the (Alaska oil services) business.”

It was unusual for a company to announce in public that it was putting a major division up for sale, McGowan said, but CH2M Hill wanted to be as transparent as possible about it.

Terry Bailey, the company’s Alaska manager, said it was also done to control the rumors that would inevitably have started among employees and customers.

“We wanted to get ahead of this,” Bailey said.

CH2M Hill is a major employer in the state and a big player on the North Slope as well as non-petroleum infrastructure projects in the state.

Across the Slope, the company is now providing engineering services, construction and oilfield maintenance, from the ExxonMobil-led Point Thomson in the east to ConocoPhillips’ CD-5 project in the west.

The company employs about 1,900 on the Slope and this will increase to 2,000 or more as work on the $4-billion Point Thomson project peaks this summer, Bailey said. CH2M Hill is playing a key role in that project as manager of the installation of four huge gas production and process modules that will arrive on the 2015 summer sealift.

The company is doing a lot of other work on Point Thomson, too, including the fabrication of smaller “truckable” modules and facility components in fabrication shops in Anchorage, he said.

Point Thomson will begin production of liquid condensates in 2016. Natural gas produced in the process will be injected back underground.

CH2M Hill is also managing the installation of production facilities at CD-5, a $1-billion ConocoPhillips project near the Alpine field on the western North Slope. CD-5 is expected to begin production late this year. A large non-petroleum infrastructure project CH2M Hill is managing is the plan for completing the Port of Anchorage reconstruction. This is being managed by the Alaska Division, Bailey said, but the project teams are drawing on CH2M Hill divisions elsewhere that have special expertise in port development.

Patrick O’Keefe, the company’s regional director, said CH2M Hill purchased U.K.-based Halcrow Group three years ago, a veteran engineering company specializing in port and harbor infrastructure.

Halcrow already had a U.S. base but the acquisition strengthened the company in this country and added to CH2M Hill’s infrastructure work in Europe and the Middle East, where Halcrow was active.

CH2M Hill acquired VECO Corp. in 2007, which now constitutes the oil services division, but the company has had a presence in Alaska for more than 50 years in its traditional water, sewer and power generation infrastructure projects. The company opened its office in 1964 to aid in earthquake reconstruction.

In addition to the direct oil field services provided in Alaska and Sakhalin Island, Russia, it also does a lot of work in oilfield infrastructure worldwide. Using its water and wastewater expertise the company provides maintenance management in water and sewer utilities, for example in a Denver suburb.

O’Keefe said the company’s work on nonpetroleum infrastructure in the state has been stable, and the company hopes to grow that segment of its work.

Meanwhile, CH2M Hill is heavily engaged in natural gas project development. On the state-led 36-inch Alaska Stand-Alone Pipeline, or ASAP, CH2M Hill is the program manager, and is also engaged in pre-FEED engineering and design work for the larger Alaska LNG Project, the 42-inch pipeline,large natural gas liquefaction plant and marine terminal.

The company’s share of that large project is the marine infrastructure facilities at Nikiski, which is the proposed site of the LNG plant.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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