CALGARY, AB–(Marketwired – January 19, 2016) – Husky Energy (TSX: HSE) is taking additional steps to improve its resilience through the extended low commodity price environment.
“We continue to take decisive action in this period of persistent supply-demand imbalance,” said CEO Asim Ghosh. “These actions are in line with the principles we have established, namely, balancing capital spending with cash flow and maintaining a strong balance sheet. Our fundamental goal remains unchanged – the steps we are taking will see Husky emerge from this cycle as a more resilient and more profitable company.”
Updated 2016 Production and Capital Guidance
The capital plan has been revised to a range of $2.1-2.3 billion from a previous range of $2.9-3.1 billion. Savings will be achieved primarily through deferring discretionary activities in Western Canada.
The Company’s overall earnings break-even point is expected to be in the sub-$40s US WTI oil by the end of 2016. Further gains are expected to be achieved through the ongoing reduction of operating and sustaining costs.
Production is now expected to be in the range of 315,000-345,000 barrels of oil equivalent per day (boe/day), compared to the previous guidance of 330,000-360,000 boe/day.
“Within the updated capital plan, the transition into a low sustaining capital business continues unabated. Deferral of capital is in those areas that can be quickly switched on as commodity prices recover,” said Ghosh.
The Company continues to triangulate its top three business priorities; a strong balance sheet, dividend and transition into a low sustaining capital business. While Husky fully recognizes the importance of the dividend, the balance sheet takes precedence in this environment.
A stock dividend was introduced in the third quarter as an interim measure in lieu of a cash dividend. Given the persistent downward pressure on oil prices and the extended lower for longer outlook, the Board of Directors has suspended the quarterly dividend. No cash or share dividend will be issued for the fourth quarter of 2015.
The Board will continue to review the dividend on a quarterly basis.
Steady Progress on Value Creation Initiatives
Steady progress is being made on several initiatives to unlock incremental value and further strengthen the balance sheet. Proceeds will be used to meet the Company’s internal debt objectives.
The Company is assessing the potential partial sale of select midstream assets in the Lloydminster region, which includes pipelines and storage facilities. Husky intends to retain operatorship of these assets in order to maintain tight integration between its Upstream production and Downstream facilities.
In addition, Husky is continuing its planned dispositions of select legacy oil and natural gas assets in its Western Canada portfolio. This will allow for a more focused capital program so a larger proportion of capital can be deployed to assets that can deliver higher returns in a lower commodity price environment. Late last year, the Company realized about $100 million in proceeds from the sales of assets.
The planned divestitures, which produce about 55,000 boe/day, do not include heavy oil or oil sands assets.
Finally, the assessment of a sale of royalty interests in Western Canada, representing approximately 2,000 boe/day of production, is continuing.
Business Activity Highlights
The updated plan will continue to advance the transition into a low sustaining capital business while providing flexibility to quickly ramp up production as commodity prices recover. It allows for the on-schedule completion of three new Lloyd thermal projects in 2016 which will add 24,500 barrels per day (bbls/day), a Tucker thermal extension adding 5,000 bbls/day, and the continued development of fixed price Asia Pacific projects that will begin to come online starting in 2017. The steady ramp up of the Sunrise Energy Project will continue through the year. Downstream turnarounds will be completed as scheduled.
Activities that have been deferred include select drilling in Western Canada, pacing of other discretionary activities throughout the portfolio, and an adjusted schedule for the mobilization of an offshore drilling rig in the Atlantic Region.
Husky Energy is one of Canada’s largest integrated energy companies. It is headquartered in Calgary, Alberta, Canada and its shares are publicly traded on the Toronto Stock Exchange under the symbols HSE, HSE.PR.A, HSE.PR.C, HSE.PR.E and HSE.PR.G. More information is available at www.huskyenergy.com