CALGARY, ALBERTA–(Marketwired – Dec. 11, 2013) – Husky Energy (TSX:HSE) is on track to achieve substantial production growth in 2014, supported by consistent performance from all segments of the business and commencement of production from the landmark Liwan Gas Project.
Liwan is the cornerstone of Husky’s Asia Pacific growth pillar and the first of several major projects across the Company to come on stream. Husky’s latest heavy oil thermal development, the 3,500 barrels per day (bbls/day) Sandall project, is expected to begin producing in the first quarter of the year and the Sunrise Energy Project, a 60,000 bbls/day (30,000 net to Husky) oil sands development, remains on track to achieve first oil in late 2014.
“Three years ago we laid out a balanced growth strategy,” said CEO Asim Ghosh. “The strategy was built on transforming and rejuvenating our foundation in Heavy Oil and Western Canada, supported by our Downstream assets. This platform provided a solid foundation on which to create our three growth pillars in the Asia Pacific Region, the Oil Sands, and the Atlantic Region.
“We have consistently delivered results against that strategy. The transformation of our Heavy Oil business is well underway, the stage is being set for a similar transformation in Western Canada, and all three of our growth pillars are achieving significant milestones. As we enter the higher growth phase of our business plan, we will stay the course and remain focused on execution.”
NEW ANNOUNCEMENTS FOR 2014
Corporate
- Production in 2014 is expected to be in the range of 330,000 to 355,000 barrels of oil equivalent per day (boe/day), compared to an estimated average annual production of 312,000 boe/day in 2013.
- The Company is on track to meet its five-year compound annual production growth target of 5-8 percent through 2017.
- The capital expenditure program for 2014 is $4.8 billion, compared with a forecast of $5.0 billion for 2013. Approximately $4 billion of the budget is expected to be spent in Upstream.
Foundation
- The 3,500 bbls/day Sandall heavy oil thermal project is expected to begin production in the first quarter of 2014. The 10,000 bbls/day Rush Lake thermal development is also under construction and is advancing towards first production in mid-2015.
- Husky will invest approximately $300 million at the Ansell liquids-rich natural gas development as it looks to more than double production from the multi-zone play over the next several years.
- The Company plans to drill a total of about 865 wells in 2014 with a focus on oil and liquids-rich natural gas plays.
Growth Pillars
- In the Asia Pacific Region, the Liwan Gas Project is in the final stages of commissioning. It is anticipated first gas will come on stream in early 2014. The completion of the first stage of the project, the largest investment in the Company’s history, marks a significant milestone in the development of the Asia Pacific growth pillar.
- Husky has made a new natural gas discovery in the Madura Strait offshore Indonesia. The well is in the vicinity of a planned shallow water development and can be tied directly into the infrastructure. This follows on the four shallow water gas discoveries made in the Strait in the 2012 drilling program.
- In Oil Sands, the Sunrise Energy Project remains on target for first oil production in late 2014. Field facilities are now complete and commissioning of all eight well pads is expected to be finished by year end. The overall project is approximately 85 percent complete.
- The Company has filed an amendment application for Phase 2 of Sunrise (Husky working interest is 50 percent) to incorporate efficiencies learned from Phase 1. The next phase, which is subject to Company and partner approvals, will bring total production capacity to 200,000 bbls/day. It is anticipated Phase 2 will be developed in two 70,000 bbls/day capacity stages.
- In the Atlantic Region, gas injection is expected to begin in the coming weeks at the South White Rose extension and first oil production is on track for late 2014.
- Husky and its partner are pursuing the opportunity to conduct additional drilling in 2014 in the Flemish Pass Basin to further assess the economic potential of an oil development. In 2013, the Company announced two new discoveries at Bay du Nord and Harpoon, in addition to a previous discovery made in 2009 at Mizzen. Best estimate contingent resources at Bay du Nord are estimated by Husky at 400 million barrels (on a 100 percent W.I.) as of September 23, 2013. Best estimate contingent resources at Mizzen are estimated by Husky at 130 million barrels (100 percent W.I.) as of December 31, 2012. Husky has a 35 percent working interest in all three discoveries.
FORECASTED 2013 PERFORMANCE AGAINST TARGETS ALL ON TRACK
In 2010, Husky laid out a set of key performance targets designed to increase shareholder value. Three years into the plan, the Company remains on track to deliver against its targets and in several cases, raised the bar.
Production
2013 production is forecast to be within guidance at approximately 312,000 boe/day. This reflects the unplanned Terra Nova Floating Production, Storage and Offloading (FPSO) vessel offstation program, a deliberate reduction in dry gas production, and production constraints in Western Canada due to third-party outages and downtime.
With the expected increase in production in 2014 and the pipeline of projects under development, the Company is on pace to achieve its compound annual production growth target of 5-8 percent from 2012-2017.
Cash Flow from Operations
Husky remains on target with its goal to increase cash flow by 6-8 percent on a compound annual growth rate basis through 2017.
With the Liwan Gas Project coming on stream in early 2014, the Company expects to see a significant increase in cash flow from operations. The Company will also recover its partner’s 51 percent share of exploration expenses from initial production.
Reserves Replacement
Husky remains on pace to achieve an average reserves replacement ratio greater than 140 percent through the 2017 plan period and will announce its reserves replacement results in early 2014.
Return on Capital in Use and Return on Capital Employed
The Company has set a target of 14-15 percent for Return on Capital in Use and a target of 11-12 percent for Return on Capital Employed, and is on track to achieve both of these by 2017.
2014 PRODUCTION GUIDANCE
Husky’s compound annual production growth rate target is 5-8 percent through 2017.
Production in 2014 is expected to be in the range of 330,000 to 355,000 boe/day. This takes into account new production from the Liwan Gas Project and new production from the Sandall heavy oil thermal development.
The 2014 forecast includes an ongoing planned decrease in Canadian dry gas production and an increase in light, medium and heavy oil production, reflecting the shift in capital to higher netback opportunities.
| Production | |||
| Guidance 2013 |
Forecast 2013 |
Guidance 2014 |
|
| Light / Medium Oil and NGLs (mbbl/day) |
110 – 115 | 104 | 110 – 115 |
| Heavy Oil and Bitumen (mbbl/day) | 110 – 120 | 123 | 120 – 130 |
| Natural Gas Asia Pacific (mboe/day) | N/A | N/A | 25 – 30 |
| Subtotal – Crude Oil, NGLs and Asia Pacific Gas | 220 – 235 | 227 | 260 – 275 |
| Natural Gas Canada (mboe/day) | 90 – 95 | 85 | 70 – 80 |
| Total Production (mboe/day) | 310 – 330 | 312 | 330 – 355 |
2014 CAPITAL EXPENDITURE PROGRAM
The 2014 capital expenditure program is estimated at $4.8 billion and reflects ongoing investment in the Company’s growth pillars, development of new heavy oil thermal projects, and ongoing investments in Downstream infrastructure to increase the flexibility of crude feedstocks, product range and market access.
Husky is working with its partner Statoil to secure a rig to accelerate drilling activities in the prospective Flemish Pass Basin. If successful, Atlantic Region capital investment may increase by approximately $150 million.
| Capital Expenditure Guidance(1) | Guidance 2013 ($billions) |
Forecast 2013 ($billions) |
Guidance 2014 ($billions) |
|
| Upstream | ||||
| Western Canada Sedimentary Basin | 1.2 | 1.4 | 1.2 | |
| Heavy Oil | 0.9 | 1.0 | 1.3 | |
| Sunrise | 0.5 | 0.5 | 0.4 | |
| Atlantic Region | 0.6 | 0.7 | 0.6 | |
| Asia Pacific | 0.8 | 0.6 | 0.5 | |
| Upstream Total | 4.0 | 4.2 | 4.0 | |
| Downstream | 0.7 | 0.7 | 0.7 | |
| Corporate | 0.1 | 0.1 | 0.1 | |
| Total | 4.8 | 5.0 | 4.8 | |
| Notes: | |
| (1) | All amounts exclude capitalized interest and administration. |
2014 DRILLING PLANS
Husky plans to drill a total of approximately 865 wells in 2014, compared to a forecast of about 930 wells in 2013. The decrease reflects a deliberate reduction in dry gas, a shift to heavy oil thermal production and a focus on a smaller, more proven portfolio of oil and liquids-rich resource plays.
2014 TURNAROUND SCHEDULE
Production from the Liwan Gas Project will go offline in the second half of 2014 for approximately six to eight weeks to tie in the Liuhua 34-2 field.
In the Atlantic Region, the partner-operated Terra Nova FPSO is scheduled to undergo a 28-day turnaround in the third quarter.
The Lloydminster Upgrader will undergo a partial outage in the fall of 2014 for planned maintenance. Plant rates are expected to remain at about 80 percent during the anticipated 42-day turnaround.
CORPORATE DEVELOPMENTS
The Board of Directors has decided to discontinue the payment of dividends by way of the issuance of common shares. The change will become effective with the fourth quarter dividend declaration in February of 2014. This change will not impact the third quarter dividend that was declared in October and payable in January of 2014.
CONFERENCE CALL
A conference call will be held on Wednesday, December 11 at 9 a.m. Mountain Time (11 a.m. Eastern Time) to discuss today’s announcements. To listen live, please call one of the following numbers:
| Canada and U.S. Toll Free: | 1-800-319-4610 |
| Outside Canada
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