CALGARY, ALBERTA–(Marketwired – Dec. 17, 2014) – Husky Energy’s (TSX:HSE) balanced growth strategy and diverse project portfolio continue to support its business objectives and provide significant flexibility in a weak commodity price environment.
“We continue to steer a steady ship through stormy waters,” said CEO Asim Ghosh. “Our strong financial position and resilient portfolio are helping weatherproof our business against current market conditions.”
Production growth in 2015 will be back-weighted towards the end of the year, with volumes averaging 325,000 to 355,000 barrels of oil equivalent per day (boe/day). The forecast reflects natural production declines as well as several planned turnarounds that are expected to impact production by about 8,000 boe/day. It also takes into account rig availability at the South White Rose satellite extension, which is now expected to start up in mid-2015.
Approximately 40,000 barrels per day (bbls/day) in new production is expected to come onstream in the second half of 2015 from the Sunrise Energy Project, the Rush Lake thermal project, South White Rose and the Hibernia-formation well beneath the North Amethyst field.
By the end of 2016, about half of Husky’s total production will be from low sustaining capital cost projects. The Company continues to advance long-life, high quality return projects, including its suite of heavy oil thermal developments and Sunrise. Projects currently in development are expected to add about 85,000 net bbls/day by the end of 2016.
Near-Term Projects | Business | First Production | Forecast Net Peak Production (bbls/day) |
Sunrise Energy Project Plant 1A | Oil Sands | Q1/15 | 15,000 (mid-2016) |
Sunrise Energy Project Plant 1B | Oil Sands | Q3/15 | 15,000 (late 2016) |
South White Rose Extension | Atlantic Region | Mid-Year 2015 | 15,000 |
North Amethyst Hibernia well | Atlantic Region | Q3/15 | 5,000 |
Rush Lake | Heavy Oil Thermal | Q3/15 | 10,000 |
Edam East | Heavy Oil Thermal | Q3/16 | 10,000 |
Edam West | Heavy Oil Thermal | Q4/16 | 3,500 |
Vawn | Heavy Oil Thermal | Q4/16 | 10,000 |
With the Company’s two major capital investments largely complete, namely the Liwan Gas Project and Sunrise, the 2015 capital budget will be $3.4 billion. This reflects prudent capital management and pacing of the Company’s growth projects and exploration plans.
“With a focus on business fundamentals and capital efficiency, we have a clear line of sight to continued production and reserves growth while maintaining financial strength and providing for our strong dividend,” said Ghosh.
RECENT DEVELOPMENTS
Significant Increase to Heavy Oil Resources
Husky has rejuvenated its legacy Heavy Oil business over the past four years through thermal developments. Thermal production has risen from 18,000 bbls/day in 2010 to 45,000 bbls/day in 2014 and is expected to rise to 80,000 bbls/day by the end of 2016.
An updated resource assessment has provided a comprehensive map to further identify and develop additional thermal projects. The independent evaluation conducted by Sproule Unconventional Limited has now significantly increased the overall best estimate contingent resources in the region from 107 million barrels to 1.9 billion barrels, of which 54 percent has the potential to be recovered using thermal technology.
Total heavy oil initially in place is estimated to be 17 billion barrels, of which 16 billion barrels are discovered heavy oil initially in place.
Production Rising at Liwan Gas Project as Liuhua 34-2 Field Comes Online
The Liwan Gas Project in the South China Sea continues to ramp up production, with fixed-price sales gas volumes expected to average between 290 to 320 million cubic feet per day (mmcf/day gross) in 2015. This compares to average gross production of 200 to 220 mmcf/day in the third quarter of 2014.
The Liuhua 34-2 well has been tied into the main Liwan field infrastructure and production has commenced.
Husky’s net share of production from Liwan in 2015 is expected to be 160 to 195 mmcf/day, with an additional 5,000 to 7,000 boe/day of liquids.
Sunrise Energy Project Commences Steam Injection
Steaming operations began earlier this month at the in situ Sunrise Energy Project in northern Alberta. Steam is now being injected into wells with first oil expected towards the end of the first quarter of 2015.
Phase 1 production is expected to ramp up to full capacity of 60,000 bbls/day (30,000 bbls/day net to Husky) over a two-year period.
BUSINESS PLAN
Husky will continue to execute on its balanced growth strategy in 2015. This includes a focus on safe operations, a strong balance sheet, a strong dividend and steady production and reserves growth from a diverse and flexible portfolio.
The Company expects to deliver a series of high quality return projects in 2015, while staging its mid to longer-term projects to further manage risk and provide reliable steady earnings and cash flow.
NEAR-TERM PORTFOLIO HIGHLIGHTS (2015-2016)
Heavy Oil
Husky is advancing a strong pipeline of long-life, high quality return heavy oil thermal projects. Assuming a flat $60 West Texas Intermediate (WTI) price over the life of the projects, full cycle rates of return are approximately 15 percent. New thermals include:
Western Canada
The Company’s near-term focus in Western Canada includes continued activity on a high-graded selection of resource plays. At the liquids-rich Ansell gas play, assuming a flat $60 WTI price over the life of the project, full cycle rates of return are in the low teens.
Downstream
Husky continues to build additional flexibility into its Downstream infrastructure to further improve feedstocks, product range and market access.
Asia Pacific Region
Production at the Liwan Gas Project offshore mainland China has ramped up. Liwan receives a fixed gas price and provides for a full cycle rate of return of about 10 percent.
Oil Sands
Steam injection has commenced at the Sunrise Energy Project.
Atlantic Region
Husky is preparing to begin production from the South White Rose satellite extension. Assuming a flat $60 WTI price over the life of the project, full cycle rates of return are approximately 15 percent. The Company is also advancing an appraisal program to assess the commercial potential of discoveries in the Flemish Pass.
MID-TERM PORTFOLIO HIGHLIGHTS (2017-2019)
The Company’s mid-term objectives include rolling out a suite of heavy oil thermal projects and progressing other high-return developments.
LONG-TERM PORTFOLIO HIGHLIGHTS (2020+)
Husky’s long-term focus is the advancement of key projects in Heavy Oil, Oil Sands and the Atlantic Region to provide for steady earnings and cash flow. These include:
2015 PRODUCTION GUIDANCE
Production in 2015 is forecast to average in the range of 325,000 to 355,000 barrels of oil equivalent per day (boe/day), with the majority of new projects ramping up later in the year. Approximately 40,000 bbls/day in new production is expected by late 2015 from Sunrise, the Rush Lake thermal project, the South White Rose extension and the Hibernia-formation well beneath the North Amethyst field.
The forecast reflects natural production declines as well as several planned turnarounds that are expected to impact production by about 8,000 boe/day. It also takes into account rig availability at the South White Rose satellite extension, which is now expected to start up in mid-2015.
Reserves replacement is expected to continue to outpace production.
Production Guidance | Forecast 2014 | Guidance 2015 | |
Light / Medium Oil and NGLs (mbbl/day) | 105 | 100 – 107 | |
Heavy Oil and Bitumen (mbbl/day) | 132 | 125 – 135 | |
Natural Gas Asia Pacific (mmcf/day) | 114 | 160 – 195 | |
(mboe/day) | 19 | 27 – 33 | |
Subtotal – Crude Oil, NGLs and Asia Pacific Gas | 256 | 252 – 275 | |
Natural Gas Canada (mmcf/day) | 508 | 440 – 480 | |
(mboe/day) | 85 | 73 – 80 | |
Total Production (mboe/day) | 341 | 325 – 355 |
2015 CAPITAL EXPENDITURE PROGRAM
The 2015 capital expenditure program is $3.4 billion, with approximately $1.5 billion for upstream sustaining and maintenance capital.
The plan includes an ongoing focus on safe and reliable operations, business fundamentals and capital efficiency. It also reflects an adjustment to the heavy oil CHOPS program, conventional drilling and a phased exploration schedule in Western Canada.
The planned $1.2 billion US capital contribution payable to Sunrise Energy Project partner BP in 2015 is expected to be refinanced and is currently accounted for on the balance sheet.
Capital Expenditure Guidance(1) | Forecast 2014 ($billions) |
Guidance 2015 ($billions) |
|
Upstream | |||
Western Canada | 1.2 | 0.6 | |
Heavy Oil | 1.3 | 1.0 | |
Oil Sands | 0.6 | 0.2 | |
Atlantic Region | 0.7 | 0.6 | |
Asia Pacific | 0.5 | 0.2 | |
Upstream Total | 4.3 | 2.6 | |
Downstream | 0.7 | 0.7 | |
Corporate | 0.1 | 0.1 | |
Total | 5.1 | 3.4 |
(1) All amounts exclude capitalized interest and administration.
Q4 2014 FORECAST / 2014 MAINTENANCE AND TURNAROUND PLANS
Husky is on target to achieve its annual production guidance for 2014 with production forecast to be approximately 341,000 boe/day, an increase of about nine percent from 2013.
Capital expenditures in 2014 are expected to be approximately $5.1 billion. This reflects the final cost of the Sunrise Energy Project and the start of an appraisal drilling program in the Bay du Nord discovery area in the Atlantic Region.
Maintenance and turnaround events for the fourth quarter of 2014 include:
Upstream
Downstream
2015 MAINTENANCE AND TURNAROUND PLANS
Upstream
Downstream
CONFERENCE CALL
A conference call will be held on Wednesday, December 17 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 and U.S.: 1-604-638-5340
CEO Asim Ghosh, COO Rob Peabody, Acting CFO Darren Andruko and Senior Downstream VP Bob Baird will participate in the call. To listen to a recording of the call, available at 11 a.m. Mountain Time on December 17, please call one of the following numbers:
Canada and U.S. Toll Free: 1-800-319-6413
Outside Canada and U.S.: 1-604-638-9010
Passcode: 2658 followed by the # sign
Duration: Available until Monday, January 19, 2015
An audio webcast of the conference call will be available for approximately 90 days at www.huskyenergy.com under Investor Relations.
Husky Energy is one of Canada’s largest integrated energy companies. It is headquartered in Calgary, Alberta, Canada and its common shares are publicly traded on the Toronto Stock Exchange under the symbol HSE. More information is available at www.huskyenergy.com
[expand title=”Advisories & Contact”]FORWARD-LOOKING STATEMENTS
Certain statements in this news release are forward-looking statements and information (collectively “forward-looking statements”), within the meaning of the applicable Canadian securities legislation, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. The forward-looking statements contained in this news release are forward-looking and not historical facts.
Some of the forward-looking statements may be identified by statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “will continue”, “is anticipated”, “is targeting”, “estimated”, “intend”, “plan”, “projection”, “could”, “aim”, “vision”, “goals”, “objective”, “target”, “schedules” and “outlook”). In particular, forward-looking statements in this news release include, but are not limited to, references to:
In addition, statements relating to “resources” are deemed to be forward-looking statements as they involve the implied assessment based on certain estimates and assumptions that the resources described can be profitably produced in the future. There are numerous uncertainties inherent in estimating quantities of reserves in projecting future rates of production and the timing of development expenditures. The total amount or timing of actual future production may vary from resource and production estimates.
Although the Company believes that the expectations reflected by the forward-looking statements presented in this news release are reasonable, the Company’s forward-looking statements have been based on assumptions and factors concerning future events that may prove to be inaccurate. Those assumptions and factors are based on information currently available to the Company about itself and the businesses in which it operates. Information used in developing forward-looking statements has been acquired from various sources including third-party consultants, suppliers, regulators and other sources.
Because actual results or outcomes could differ materially from those expressed in any forward-looking statements, investors should not place undue reliance on any such forward-looking statements. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predicted outcomes will not occur. Some of these risks, uncertainties and other factors are similar to those faced by other oil and gas companies and some are unique to Husky.
The Company’s Annual Information Form for the year ended December 31, 2013 and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com and the EDGAR website www.sec.gov) describe the risks, material assumptions and other factors that could influence actual results and are incorporated herein by reference.
Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by applicable securities laws, the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. The impact of any one factor on a particular forward-looking statement is not determinable with certainty as such factors are dependent upon other factors, and the Company’s course of action would depend upon its assessment of the future considering all information then available.
Disclosure of Oil and Gas Information
Unless otherwise stated, resource estimates in this news release have an effective date of December 31, 2013 and represent Husky’s share. Unless otherwise noted, historical production numbers given represent Husky’s share.
The Company uses the terms barrels of oil equivalent (“boe”), which is calculated on an energy equivalence basis whereby one barrel of crude oil is equivalent to six thousand cubic feet of natural gas. Readers are cautioned that the term boe may be misleading, particularly if used in isolation. This measure is primarily applicable at the burner tip and does not represent value equivalence at the wellhead.
The analysis of individual properties as reported herein was conducted within the context and scope of an evaluation of a unique group of properties in aggregate. Use of this report outside of this scope may not be appropriate.
The Company has disclosed best-estimate contingent resources in this news release. Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters, or a lack of markets. There is no certainty that it will be commercially viable to produce any portion of the contingent resources.
Best estimate as it relates to resources is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. There is no certainty as to the timing of such development.
Specific contingencies preventing the classification of contingent resources at the Company’s heavy oil discoveries as reserves include: it may not be viable to develop the estimated volumes in an economic manner; the formulation of concrete development plans to pursue development of the large inventory of primary and Enhanced Oil Recovery (“EOR”) opportunities; Company commitment to dedicate the required capital to develop the inventory of opportunities; large inventory of contingent resource opportunities would likely necessitate development over a time frame much greater than the five-year reserve timing window; regulatory submissions and approval would be required for the thermal and major EOR projects to proceed; and verification of sustained economic productivity using CHOPS from zones with limited tests to date and zones with higher viscosity as well as verification of sub-zone continuity and quality that would enable feasible implementation of an EOR scheme.
The Company has disclosed total heavy oil initially in place in this news release. Total petroleum initially in place is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered. There is no certainty that any portion of the undiscovered petroleum initially in place will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the undiscovered petroleum initially in place.
The Company has disclosed discovered heavy oil initially in place in this news release. Discovered petroleum initially-in-place is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially in place includes production, reserves, and contingent resources; the remainder is unrecoverable. There is no certainty that it will be commercially viable to produce any portion of the resources.
Significant positive factors relevant to the estimates of total heavy oil initially in place, discovered heavy oil initially in place and best estimate contingent resources include: extensive well control which reduces geological risk of zone heavy oil initially in place across most of the lands. Significant negative factors relevant to the best estimate contingent resources include: limited demonstrated sustained production in certain zones; potential reservoir heterogeneity in sub-zones which may limit the applicability of EOR schemes and current lack of development plans.
Note to U.S. Readers
The Company reports its resources information in accordance with Canadian practices and specifically in accordance with National Instrument 51-101, “Standards of Disclosure for Oil and Gas Disclosure”, adopted by the Canadian securities regulators. Because the Company is permitted to prepare its resources information in accordance with Canadian disclosure requirements, it uses certain terms in this news release, such as “best estimate contingent resources” and “heavy oil initially in place” that U.S. oil and gas companies generally do not include or may be prohibited from including in their filings with the SEC.
All currency is expressed in Canadian dollars unless otherwise directed.
Investor Inquiries:
Dan Cuthbertson
Manager, Investor Relations
Husky Energy Inc.
403-523-2395
Media Inquiries:
Mel Duvall
Manager, Media & Issues
Husky Energy Inc.
403-513-7602
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