Oil & Gas Product News Logo

Husky Energy announces 2019 budget and production update

Capital spending $300 million less than previously forecast

"Husky's portfolio is designed to manage risk effectively and we are disappointed with government intervention given the market's natural ability to remove uneconomic barrels. We are focused on curtailing production in the most efficient and cost-effective way possible."
"Husky's portfolio is designed to manage risk effectively and we are disappointed with government intervention given the market's natural ability to remove uneconomic barrels. We are focused on curtailing production in the most efficient and cost-effective way possible."

Company info

707-8th Avenue SW
Box 6525, Station "D"
Calgary, AB
CA, T2P 3G7

Website:
huskyenergy.com

Read more

Husky Energy plans to spend approximately $3.4 billion on its capital expenditure program in 2019 as it continues to invest in a deep portfolio of higher-margin, longer-life projects. This is about $300 million less than forecast at the Company's Investor Day in May 2018, and includes capital spending reductions resulting from Alberta's mandated oil production cuts.

The Company retains further flexibility to reduce capital spending depending on market conditions.

"Husky continues to attain global pricing for the vast majority of our production. Our low-cost integrated model in North America and high-margin offshore business shield us from the commodity discounts realized by many of our peers," said CEO Rob Peabody. "We built this robust business model to capture value through commodity cycles, whether it comes from refining margins in the Downstream or from improved prices in the Upstream.

"Husky's portfolio is designed to manage risk effectively and we are disappointed with government intervention given the market's natural ability to remove uneconomic barrels. We are focused on curtailing production in the most efficient and cost-effective way possible."

Including estimated Alberta Government curtailment requirements for the full year, and reduced capital expenditures, Husky's average annual 2019 production is expected to be approximately 300,000 barrels of oil equivalent per day (boe/day). This does not include any production associated with Husky's proposed acquisition of MEG Energy.

Q4 OPERATIONAL UPDATE

Husky achieved several important operational milestones in the fourth quarter.

  • Gas production in the Asia Pacific region continues to benefit from strong demand and is on track to deliver record gross quarterly production in Q4.
  • The Sunrise Energy Project achieved nameplate capacity and record rates of 61,900 barrels per day (bbls/day).
  • Following the completion of a turnaround in the third quarter of 2018, the Tucker thermal bitumen project achieved its nameplate capacity of 30,000 bbls/day.
  • The 10,000 bbls/day Rush Lake 2 thermal bitumen project, which came online in October, has ramped up to full production and is seeing sustained volumes at full capacity.

In the Atlantic region, Husky is progressing plans to retrieve a failed flow line connector at the White Rose field and will work closely with the regulator to resume operations. The Company expects to be able to resume operations in a phased approach. Terra Nova has resumed production operations.

In the Downstream, the Company has completed a heavy turnaround season and the Lloydminster Upgrader and all refineries, with the exception of the Superior Refinery, are currently operating at normal rates. The Lima Refinery 2018 turnaround included work related to the Crude Oil Flexibility Project, which will increase heavy crude oil capacity to 40,000 bbls/day by the end of 2019. The Superior Refinery is expected to resume operations in 2020. The Company has insurance to cover asset damage and repair costs as well as business interruption.

The Company continues to take advantage of its extensive storage and pipeline connectivity to source discounted feedstocks from the Permian and Bakken basins. 

2019 PRELIMINARY GUIDANCE

Husky will provide a more detailed 2019 production and capital guidance update in the first quarter, following resolution of the proposed acquisition of MEG Energy.

Capital spending in 2019, excluding any combination with MEG, is expected to be in the range of $3.3 -$3.5 billion. The middle of the range is approximately $300 million less than the $3.7-billion forecast provided at the May 2018 Investor Day and includes reduced spending related to Alberta's curtailment program and lower global oil prices. 

Spending is being reduced in areas where Husky has the most capital flexibility, including heavy oil and Western Canada resource plays.  The Company retains further flexibility to reduce capital spending, including the ability to pace development of growth projects that are currently in flight.

Sustaining capital, the amount required to maintain operations and keep production flat, is estimated at $1.8 billion. The Company can fund sustaining capital and the current level of the dividend at about $40 WTI. In addition, Husky has one of the strongest balance sheets in the industry, with net debt at the end of Q3 2018 of $2.6 billion, representing 0.6 times net debt to trailing 12 months funds from operations.

Growth capital includes spending for development of the Liuhua 29-1 field offshore China, construction of five Lloyd thermal projects in Saskatchewan and the West White Rose Project in the Atlantic region.

Construction at the 10,000 bbls/day Dee Valley thermal bitumen project in Saskatchewan has been advanced, with first oil now expected in the fourth quarter of 2019.

In addition to the thermal projects under development, the Board has sanctioned a new 10,000 bbls/day thermal project at Spruce Lake East in Saskatchewan, with first oil anticipated around the end of 2021.

Production Guidance and Curtailment Measures

Excluding any combination with MEG, Husky's production in 2019 is expected to be approximately 300,000 boe/day, including reductions associated with Government of Alberta curtailments and suspended operations at the White Rose field in the Atlantic region.

Husky's January production cut mandated by the Alberta Government is considerably higher than the 8.7 percent industry-wide target despite Husky's ability to process and transport its production to markets unimpeded, and profitably. Curtailment rules disproportionately impact companies, like Husky, with significant Downstream and midstream investments relative to producers who have not made these investments.

Furthermore, the government's curtailment formula does not consider Husky's production growth over the year at Sunrise and Tucker, which are now at full capacity, and does not consider costs related to marketing commitments, or the closure, restart or early abandonment of wells and facilities.

Husky continues to engage with the Alberta Energy Regulator and Alberta Government to address the inequities, costs and other unintended consequences of production curtailment.

MEG ACQUISITION UPDATE

Husky recently announced it has met all regulatory requirements for its full and fair offer to acquire MEG Energy, including approval granted under the Investment Canada Act.

As was previously stated, the offer announced on September 30, 2018 includes a condition that at least 66 2/3 percent of MEG shares must be tendered before Husky will take up shares to successfully complete the transaction.

Husky's offer will be open for acceptance until 5 p.m. Eastern Time (3 p.m. Mountain Time) on Wednesday, January 16, 2019. Intermediaries likely have established tendering cut-off times that are prior to the offer expiry time. Shareholders must instruct their intermediaries promptly if they wish to tender.

More from Industry News

Suncor Energy releases 2019 Report on Sustainability

Suncor has released its annual Report on Sustainability which details the company's environmental, social and economic performance. Suncor's perspective on the challenges and opportunities of climate change, and the transition to a low-carbon economy are contained in its third Climate Risk and Resilience Report available within the Report on Sustainability and as a stand-alone downloadable PDF. The annual Report on Sustainability is available both online and as a downloadable PDF.

FortisBC secures first export contract for Tilbury LNG facility

FortisBC has entered into its first term supply agreement to produce liquefied natural gas (LNG) for Top Speed Energy Corp. to export to China. This term supply agreement is an unprecedented development in Canada's LNG export industry and was made possible by the completion of the Tilbury LNG expansion project in Delta, B.C. earlier this year.

New chief executive takes COSIA's helm

Canada's Oil Sands Innovation Alliance (COSIA) is pleased to announce the appointment of Wes Jickling as the organization's next Chief Executive, effective August 6, 2019. The appointment aligns with COSIA's updated strategic plan, focused on accelerating environmental performance through collaborative action and innovation, while sharing its story with Canadians and beyond.

Encana signs agreement to sell Arkoma Basin natural gas assets

Encana Corporation wholly owned subsidiary Newfield Exploration Mid-Continent Inc. has signed an agreement to sell its natural gas assets in Oklahoma's Arkoma Basin to an undisclosed buyer. Total cash consideration to Encana under the transaction is $165 million. The agreement is subject to ordinary closing conditions, regulatory approvals and other adjustments and is expected to close in the third quarter of 2019.  

TC Energy to sell Columbia Midstream assets in US$1.275 billion deal

TC Energy Corporation has entered into an agreement to sell its U.S. midstream assets held by its subsidiary, Columbia Midstream Group, to UGI Energy Services, LLC, a subsidiary of UGI Corporation, for approximately US$1.275 billion (Cdn$1.7 billion). The transaction is expected to close in the third quarter of 2019 subject to closing adjustments and customary regulatory approvals.

Subscribe to our free newsletter

Get our newsletter

Learn more

Shell sells Foothills sour gas assets to Pieridae Energy Limited

Shell announced that it has sold its Foothills sour gas assets to Pieridae Energy Limited, an experienced Canadian operator. The assets include three distinct sour gas plants (Waterton, Jumping Pound and Caroline) and the gas fields which feed them. Combined, they produce approximately 29,000 barrels per day of natural gas, natural gas liquids and condensate. 

Woodfibre LNG signs agreement with foundation customer

Pacific Oil & Gas Limited wholly-owned subsidiary Woodfibre LNG has signed a binding LNG Sales and Purchase Agreement (SPA) with BP Gas Marketing Limited, a wholly-owned indirect subsidiary of BP Plc, for the delivery of liquefied natural gas (LNG) from PO&G's Woodfibre LNG export facility in Squamish, British Columbia. 

Metso introduces new mine tailings management approach

Water conservation, efficient tailings management and responsible mine reclamation are becoming increasingly important for mines to ensure their license to operate. Spearheaded by the launch of the new Metso VPX filter for tailings dewatering, Metso introduces its comprehensive tailings management concept to enable and support environmentally and economically sustainable mining.

NETZSCH celebrates 50th anniversary of North American operations

NETZSCH Pumps North America, LLC, experts in solutions designed specifically for difficult pumping applications, announces it is celebrating its 50th anniversary in business. As a mid-sized, family-owned German company, NETZSCH manufactures machinery and instrumentation with worldwide production, sales, and service. The global company began its North America operations as a one-person office 50 years ago, and has since grown to more than 180 employees, with over $75 M in revenue for its three North American business units, Analyzing & Testing; Grinding & Dispersing; and Pumps & Systems. NETZSCH marked the milestone year with a gala celebration, held May 11, 2019 at the historic SunnyBrook Ballroom in Pottstown, PA.

Stork Consortium awarded 4-year turnaround framework agreement by Ecopetrol in Colombia

Fluor Corporation announced that Stork, part of Fluor's Diversified Services segment, together with its consortium partners, was awarded a 4-year framework agreement for plant turnaround services by Ecopetrol S.A. for its Barrancabermeja and Cartagena refineries in Colombia. The Colombia-based consortium includes Stork as the international lead partner, Rampint as the local partner in Barrancabermeja and Servimant as the local partner in Cartagena. The agreement also includes two extension options for an additional two years each. Both refineries supply fuel to meet Colombia's national and export product needs. Fluor booked the undisclosed contract value in the second quarter of 2019. 

Subscribe to our free magazine

Get Our Magazine

Paper or Digital delivered monthly to you

Subscribe or Renew Learn more

Three ways electrical technology improves oil and gas plant reliability and availability

As electrical machinery evolves and matures at an exponential pace - alongside increasingly available power grids to supply them - the oil and gas (O&G) landscape is witnessing major change. This is a positive shift as electrification not only meets ever tougher demands for lower global emissions, but also ticks boxes for improving O&G's availability and reliability. What's more, alongside greater productivity for operators, it adds up to greater safety for plant workers and the wider public too.

Pembina partners with Ducks Unlimited for prairie wetlands

A landmark gift from Pembina Pipeline Corporation is ensuring working landscapes across the Canadian Prairies also work for conservation. Its $1-million investment in Ducks Unlimited Canada's (DUC) Revolving Land Conservation Program will protect approximately 2,000 acres (809 hectares) of important wetland habitat. At the same time, communities across Alberta and Saskatchewan will benefit from a host of environmental benefits. The joint announcement was made and celebrated by Pembina and DUC at a ceremony held at one of DUC's conservation project sites located east of Camrose. 

CIRCOR initiative targets integrated solutions for oil and gas

CIRCOR Industrial Valves, a leader in designing and manufacturing flow control technology, features its commitment to ONE CIRCOR, ONE Solution, an initiative to provide the right solution for each customer by effectively drawing on the technical capabilities of CIRCOR's trusted brands, like Leslie Controls, Spence, RTK, Nicholson, and more. With a broad range of products to match to requirements and the technical expertise to design optimized systems for specific customer applications, CIRCOR engineers and provides integrated critical steam solutions for process industry, oil and gas, district energy and power systems.

Subscribe to our free newsletter

Get our newsletter

Learn more

Encana provides interim update on strength of operations

Encana Corporation has provided an update on its share buyback program and disclosed its intention to execute a substantial issuer bid (SIB) to fulfill its previously announced 2019 share buyback. In addition, the Company signed an agreement to exit China, strengthened its production outlook for the second quarter of 2019 and reiterated its original capital investment plan.

Oil sands forecast shows production increase but lower annual growth: IHS

Canadian oil sands production is set to enter a period of slower annual production growth compared to previous years. Nevertheless, total production is expected to reach nearly four million barrels per day (mbd) by 2030 - nearly one million more than today, according to a new 10-year production forecast by business information provider IHS Markit.

CAPP says Canada can play a key role on world stage if Canadians 'vote for energy'

Canada's next federal government has an opportunity to help define a strategic, long-term vision for the growth of Canada's oil and natural gas sector, one that promotes jobs and a healthy economy for all Canadians, while being part of the solution to meet growing global energy demand with responsibly developed energy, according to the Canadian Association of Petroleum Producers (CAPP).

nVent introduces new standardized design for mineral insulated heating units

nVent Electric plc has introduced a new standardized design for its nVent RAYCHEM Mineral Insulated (MI) heating units; industry-leading equipment designed to provide superior freeze protection and process temperature maintenance for high-power, high-exposure industrial heat-tracing applications. The new heating units ensure greater operational reliability and corrosion resistance in harsh environments.

AltaGas celebrates grand opening and first cargo from Ridley Island propane terminal

AltaGas Ltd. has celebrated the grand opening of its Ridley Island Propane Export Terminal (RIPET), located in Prince Rupert, British Columbia - the first marine export facility for propane in Canada. The facility began introducing propane feedstock in mid-April, and the first shipment departed the terminal on May 23, 2019 bound for Asia.

Capital spending shifts and increased free cash flow generation included in Husky five-year plan update

With a focus on generating increased free cash flow, the updated Husky Energy five-year plan shows reduced capital spending to achieve an annual average of $3.15 billion for 2019 - 2023 versus the previously planned 2018 - 2022 annual average of $3.5 billion. Total capital spending over the 2019 - 2023 five-year period is reduced by about $1.7 billion, with total free cash flow before dividends expected to reach $8.7 billion at a flat $60 US WTI planning price.

Subscribe to our free magazine

Get Our Magazine

Paper or Digital delivered monthly to you

Subscribe or Renew Learn more