CALGARY, Canada – Husky Energy says it will raise its 2017 capex program by more than $500 million.
Capex for 2016 is expected to be around $2 billion, and the capex program for 2017 will be in the range of $2.6-2.7 billion.
CEO Rob Peabody said: “Our vitals are strong, including a solid balance sheet, a low breakeven and a high return portfolio. Our investment program will generate higher margins, further lower our corporate breakeven, and increase our free cash flow.”
The company said that its planned 2016 capex program was completed under budget with additional scope, and is anticipated to be about $100 million below the guided range. The figure reflects the ongoing cost reduction program, significant procurement savings, and improved productivity throughout 2016.
Capital spending is expected to be fully funded within cash flow from operations.
The company also expects to increase its annual average production, which it expects to be in the range of 320,000-335,000 boe/d. Production for 2016 is expected to be within guidance at 318,000-320,000 boe/d.
Husky said that production levels in 2016 were achieved despite the sale throughout the year of more than 30,000 boe/d. Also, that figure does not include 47 MMcf/d of deferred revenue from production at the Liwan gas project offshore China, for which cash has been received.
Currently, the company said that more than 40% of production is now being generated from low sustaining capital projects. The target was reached ahead of schedule this year and has resulted in a significant reduction in operating costs and sustaining and maintenance capital.
As a result of the company’s ongoing transformation program, overall sustaining and maintenance capital requirements have decreased about 25% over the last two years and are forecast to be in the range of $2.2-2.3 billion for 2017, said Peabody.
Looking ahead, Husky says it also plans to add return production and categorized growth plans as near-term and mid-term growth catalysts.
In the near term, the company plans on adding about 45,000 b/d of new higher return production, with average production for the year expected to be in the range of 320,000-335,000 boe/d. It added that the liquids-rich BD field offshore Indonesia is scheduled to ramp up to its full gas sales rate by 2H 2017, with a fixed-price contract and a net production target of 40 MMcf/d of gas and 2,400 b/d of liquids.
In addition, two new infill wells are planned in the Atlantic region, with expected combined net peak production of about 15,000 b/d.
In the mid term, Husky reported that its board of directors had sanctioned several new projects that will provide growth while further lowering the company’s cost base.
Also offshore Indonesia, four additional gas fields are being progressed in the Madura Strait. The MDA-MBH and MDK fields will be developed in tandem and are scheduled to come on production in the 2018-2019 timeframe. In addition, a plan of development has been approved for the MAC field.
The company is continuing engineering design and subsurface evaluation work at West White Rose to increase capital efficiency and improve resource capture; the project will be considered for sanction next year.
Husky also covered some of 2017’s planned maintenance and turnarounds. In 3Q 2017, three-week turnarounds are planned at both the SeaRose FPSO and Terra Nova FPSO.