Husky cuts 2016 budget, defers drilling in western Canada

Husky Energy Inc., Calgary, has revised its capital spending plans for 2016 to $2.1-2.3 billion from $2.9-3.1 billion, primarily reflecting a deferral of discretionary activities in western Canada.

The company’s assets in western Canada stretch 2 million acres from northeastern British Columbia to southeastern Saskatchewan, targeting oil from the Bakken, Viking, Lower Shaunavon, Cardium, Muskwa, and Canol formations; and gas from the Duvernay, Montney, Cardium, and Wilrich formations.

Companywide production in 2016 is now expected at 315,000-345,000 boe/d, down from the previous guidance of 330,000-360,000 boe/d.

The company’s overall earnings breakeven point is expected to be in the sub-$40/bbl range for West Texas Intermediate by yearend 2016.

“Within the updated capital plan, the transition into a low sustaining capital business continues unabated,” said Asim Ghosh, Husky chief executive officer. “Deferral of capital is in those areas that can be quickly switched on as commodity prices recover.”

In addition to western Canada drilling, other deferred activates include the pacing of discretionary activities throughout the portfolio, and an adjusted schedule for the mobilization of an offshore drilling rig in the Atlantic.

The company says the updated plan allows for the on-time completion of three Lloyd thermal projects in 2016 that will add 24,500 b/d, a Tucker thermal extension adding 5,000 b/d, 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 (OGJ Online, Sept. 2, 2015). Downstream turnarounds will be completed as scheduled.

Planned divestments

Husky is assessing the potential partial sale of select midstream assets in the Lloydminster region, which includes pipelines and storage facilities. The company, however, intends to retain operatorship to maintain integration between its upstream production and downstream facilities.

The company is continuing its planned dispositions of select legacy oil and gas assets in western Canada. Late last year, the company realized about $100 million in proceeds from the sales of assets.

The planned divestitures, which produce 55,000 boe/d, do not include heavy oil or oil sands assets.

The assessment of a sale of royalty interests in western Canada, representing 2,000 boe/d of production, is continuing as well.

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