Last year, BP (NYSE:BP) said it would increase its capital spending in Alaska by about 25% this year, with much of that increase in capital going toward new projects designed to boost the company's oil production from the state.

But the British oil major recently announced that it will sell its interests in some of its Alaskan oilfields. Could this mean that BP is retrenching from Alaska?

A segment of the Trans-Alaska pipeline system. Photo Credit: Wikimedia Commons.

BP refocuses Alaska efforts
Last week, BP announced that it has agreed to sell its interests in four oilfields on the North Slope of Alaska to privately held oil and gas producer Hilcorp for an undisclosed sum. As part of the agreement, the British oil giant will sell all of its interest in the Endicott and Northstar oilfields and a 50% interest in each of the Liberty and the Milne Point fields. It will also sell its interests in the oil and gas pipelines associated with these fields.

Though the company's announcement may -- at first glance -- appear to signal a retrenchment from Alaska, where BP is by far the largest producer, accounting for roughly two-thirds of total Alaskan oil production, that's hardly the case. By selling its interests in these marginal fields, BP will be able to focus more fully on its two most promising opportunities in Alaska -- the Prudhoe Bay field and the planned Alaska LNG project.

In any case, the fields up for sale contributed net production of roughly 19,700 barrels of oil equivalent a day last year, representing less than 15% of BP's total North Slope production. Net production from Milne Point in 2013 averaged roughly 15,800 boe/d, while Northstar contributed 6,800 boe/d and Endicott produced about 5,000 boe/d.

BP's biggest opportunities in Alaska
In its press release, BP reaffirmed its commitment to increased investment spending at Prudhoe Bay, where the company has been drilling for several decades. The company plans to boost its spending at Prudhoe Bay by $1 billion over the course of the next five years. It plans to add two new drilling rigs in the field, one in 2015 and one in 2016, which should allow 30 to 40 additional wells to be drilled each year.

Over the past few years, BP's utilization of advanced drilling techniques such as large-scale gas cycling, water flooding, miscible gas injection, and other techniques has helped drastically improve oil recovery at Prudhoe Pay. Thanks to the successful application of these techniques, production from the massive oilfield surpassed the 12 billion-barrel mark in 2012.

The second major project for BP in Alaska is the Alaska LNG project -- a proposed LNG export project being pursued by a consortium that includes BP, ExxonMobil (NYSE:XOM), ConocoPhillips (NYSE:COP), TransCanada (NYSE:TRP), and the state of Alaska, which could produce as much as 18 million tonnes of LNG per year.

The project will involve the construction of an 800-mile, 42-inch-diameter pipeline and a gas treatment plant on the North Slope. Alaska's legislature recently approved a bill that allows the state of Alaska to retain its 25% ownership stake in the project's LNG plant and clears the way for the operators to begin the preliminary front-end engineering and design stages of the project.

The bottom line
As you can see, BP clearly isn't giving up on Alaska; it's simply refocusing its capital toward what it views as its most profitable opportunities in the state. In general, things look brighter for BP in the near term. Having already brought online two major high-margin oil projects so far this year and with plans to bring online an additional four, the company is forecasting a sharp increase in this year's cash flow that should finally allow it to cover both its capital spending and its dividends internally.

With this trend likely to continue over the next few years, BP should be able to comfortably grow its hefty 4.7% dividend. However, investors should be aware that litigation risks related to the 2010 Deepwater Horizon disaster and geopolitical risks associated with BP's 20% stake in Russian state-owned energy giant Rosneft will likely continue to weigh on the company's share price.

Arjun Sreekumar and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.