Husky cuts back

By Geoff Lee

January 27, 2016 2:20 PM

Husky Energy is reducing its 2016 capital expenditure by about $800 million in reaction to the current low commodity price environment.
The new capex of between $2.1 billion to 2.3 billion is 27 per cent less than the previous capital spending range of $2.9-$3.1 billion in December.
The Calgary-based company is also suspending its quarterly share dividend as a cost saving measure.
No cash or share dividend will be issued for the fourth quarter of 2015, but the dividend will be reviewed on a quarterly basis.
Reduced capital spending announced last Tuesday will lower Husky’s production output estimates in the range of 315,000 to 345,000 barrels of oil equivalent a day from the previous estimate between 330,000 and 360,000 boepd.
Select drilling in Western Canada has also been deferred due to low commodity prices.
“These actions are in line with the principles we have established, namely, balancing capital spending with cash flow and maintaining a strong balance sheet,” said Husky’s CEO Asim Ghosh.
“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.“Proceeds from the cost savings will help the company to meet its debt objectives.
Meanwhile, Husky continues to assess the potential partial sale of select midstream assets in the Lloydminster region including pipelines and storage facilities.
Husky intends to retain the rights to operate these assets in order to maintain close integration between its upstream heavy oil production and downstream refining facilities.
The company is continuing its planned sale of select oil and natural gas assets in its Western Canada portfolio focused on natural gas in Alberta.
Husky said the sale 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 this pricing downturn. The company realized about $100 million in proceeds from the sales of assets in late 2015.
The planned divestitures, which produce about 55,000 BOPD (Barrels Of Oil Per Day), do not include heavy oil or oil sands assets.
Husky also plans to sell its royalty interests in Western Canada, representing approximately 2,000 BOPD of production.
Husky’s updated business plan will enable its transition into a low sustaining capital business while providing flexibility to quickly ramp-up production as commodity prices recover.
The company is on schedule to complete three new Lloydminster thermal projects in 2016 which will add 24,500 barrels per day of heavy oil production.

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