Husky Energy’s capital program for 2020 will be $3.2-$3.4 billion,
with average annual Upstream production forecast to be in the range
of 295,000-310,000 barrels of oil equivalent per day (boe/day),
inclusive of an allowance for curtailment.
The capital program is being reduced by $500
million in the 2020-2021 timeframe compared to Husky’s May 2019
Investor Day plan, reflecting $100 million in reductions in 2020
and $400 million in 2021.
The oil price assumption for 2020 and 2021 is
$55 US WTI per barrel, down from $60 US WTI per barrel in the
Investor Day plan, reflecting changing market conditions. At this
pricing assumption, the Company’s plan generates $500 million of
free cash flow before dividends in 2020, growing to $1.5 billion in
2021.
“We are continuing to focus on safe and reliable
operations as we build on our improved 2019 performance and work
towards our target of becoming a global top-quartile process safety
performer by the end of 2022,” said CEO Rob Peabody.
“The reduction in our capital spending, combined
with the start-up of growth projects including the Liuhua 29-1
natural gas field offshore China, two new thermal projects, and the
Lima Refinery crude oil flexibility project, has set the stage for
significant free cash flow growth beginning in 2021.”
Capital spending in 2020 will be directed
towards advancing the Lloyd thermal project portfolio, completing
Liuhua 29-1, and ongoing construction of the West White Rose
Project in the Atlantic region. Capital guidance does not include
$450-$525 million related to the ongoing rebuild of the Superior
Refinery, which is expected to be substantially covered by
insurance.
2020 PLAN HIGHLIGHTS
- 2020 capital expenditures in the range of $3.2-$3.4 billion
reflect a $100-million reduction compared to the Investor Day
plan
- Average Upstream production range of 295,000-310,000 boe/day
- Takes into account reduced capital investment, an allowance of
5,000 barrels per day (bbls/day) in the first half of the year for
production quotas in Alberta and planned turnarounds
- Total Downstream refining and upgrading capacity of 355,000
bbls/day, not including the Superior Refinery; includes 195,000
bbls/day of processing capacity for heavy oil blend
- Husky continues to benefit from significant long-term
export capacity via multiple pipelines
- First oil from the Spruce Lake Central and Spruce Lake North
thermal bitumen projects in Saskatchewan, representing 20,000
bbls/day of new production, plus continued advancement of three
additional Saskatchewan thermal projects with a combined design
capacity of 30,000 bbls/day through 2023
- First production from Liuhua 29-1 is expected by the end of
2020, with a target production of 45 million cubic feet per day
(mmcf/day) of gas and 1,800 bbls/day of liquids, Husky working
interest
- Crude oil flexibility project onstream at the Lima Refinery;
heavy oil blend processing capacity increased to 40,000
bbls/day
- Ongoing construction at the Superior Refinery, with a return to
full operations expected by the end of 2021
- Advancing the West White Rose Project, which is about 55%
complete with first oil planned around the end of 2022
- As at the third quarter, net debt was 1.1 times trailing 12
months funds from operations; total liquidity was $6.4 billion
(cash and unused credit facilities)
2020
CAPITAL GUIDANCE ($ millions) |
|
2020
PRODUCTION & THROUGHPUT GUIDANCE |
|
|
|
|
|
Total Capital Investment1 |
3,200 – 3,400 |
Total Upstream Production5
(mboe/day) |
295 – 310 |
|
|
|
|
Integrated Corridor |
1,750 – 1,900 |
Total Crude Oil & Liquids
(mbbls/day) |
215 – 230 |
Thermal and Oil Sands |
1,050 – 1,100 |
Thermal and Oil Sands |
138 – 146 |
Conventional heavy & Western Canada |
225 – 250 |
Conventional heavy |
30 – 33 |
Downstream2 |
475 – 550 |
Western Canada segment |
18 – 20 |
|
|
Atlantic |
17 – 19 |
Offshore |
1,350 – 1,450 |
Asia Pacific6 |
9 – 11 |
Atlantic |
1,075 – 1,150 |
|
|
Asia Pacific3 |
275 – 300 |
Total Natural Gas (mmcf/day) |
480 – 500 |
|
|
Western Canada |
270 – 280 |
Corporate
Capital |
50 – 75 |
Asia Pacific6 |
210 – 220 |
|
|
|
|
|
|
Total Downstream Throughput (mbbls/day) |
320 – 340 |
|
|
|
|
OTHER PLANNED SPENDING ($
millions) |
|
OPERATING COSTS |
|
|
|
|
|
Superior
Refinery rebuild4 |
450 –
525 |
Total Upstream ($/boe) |
14 –
15 |
Capitalized interest |
~200 |
Downstream ($/bbl) |
|
|
|
Lima Refinery |
7 – 8 |
|
|
Lloydminster Upgrader7 |
9 –
10 |
1Includes exploration capital in each business unit, excludes
asset retirement obligations and capitalized interest2Excludes
Superior Refinery rebuild capital 3Excludes amounts related to
Husky-CNOOC Madura Ltd. joint venture, accounted for under the
equity method for interim financial statement purposes4Expected to
be substantially covered by insurance proceeds5Includes curtailment
allowance of 5,000 bbls/day in first half of 20206Includes Husky’s
working interest production from the BD Project (40%), which is
accounted for under the equity method for consolidated financial
statement purposes7Includes six-week turnaround in second quarter;
Expected ~$1 per barrel turnaround impact
UPCOMING MILESTONES
2020+
2020 |
Capacity(Husky W.I.) |
Timing/ Completion |
Status |
|
|
|
|
|
|
|
|
Lloyd Upgrader diesel capacity increase |
6,000 –> 9,800 bbls/day |
Q2 |
50% complete |
Spruce Lake Central thermal project |
10,000 bbls/day |
Mid-Year |
88% complete |
Spruce Lake North thermal project |
10,000 bbls/day |
~YE |
48% complete |
Liuhua 29-1 project construction |
45 mmcf/day gas 1,800 bbls/day liquids |
Q4 |
70% complete |
|
|
|
|
2021+ |
Capacity(Husky W.I.) |
Timing/ Completion |
Status |
|
|
|
|
Superior Refinery rebuild |
45,000 bbls/day |
YE ’21 |
In progress |
Spruce Lake East thermal project |
10,000 bbls/day |
~YE ’21 |
11% complete |
MDA-MBH & MDK fields |
10,000 boe/day |
’21 |
In progress |
West White Rose Project |
52,500 bbls/day1 |
~YE ’22 |
55% complete |
Edam Central thermal project |
10,000 bbls/day |
’22 |
3% complete |
Dee Valley 2 thermal project |
10,000 bbls/day |
’23 |
In planning |
1 Expected net
peak production rates
2020 PLANNED MAINTENANCE AND TURNAROUNDS
Integrated Corridor
- Four-week partial turnaround at the Sunrise Energy Project in
the second quarter
- Three-week turnarounds at Ansell and Kakwa in Western Canada in
the second quarter
- Six-week turnaround at the Lloydminster Upgrader in the second
quarter
- Lloyd thermal project maintenance in the second and third
quarters
- Four-week turnaround at the Tucker Thermal Project in the
fourth quarter
Offshore
- Two-week maintenance at the Liwan Gas Project in the second
quarter
- Two-week maintenance at the BD Project offshore Indonesia in
the first quarter; one-week maintenance in the second quarter and
one-week maintenance in the fourth quarter
- Three-week turnaround at the SeaRose floating production,
storage and offloading (FPSO) vessel in the third quarter
- Six to seven-month offstation at the Terra Nova FPSO starting
in the second quarter
INVESTOR PRESENTATION AND CONFERENCE
CALL
An investor presentation is available on the
Company’s website at huskyenergy.com
A conference call will be held on Monday, Dec. 2
at 8 a.m. Mountain Time (10 a.m. Eastern Time) to discuss Husky’s
planned 2020 capital expenditure and production guidance. CEO Rob
Peabody and members of the senior management team will participate
in the call.
To listen live:Canada and U.S. Toll Free:
1-800-319-4610 Outside Canada and U.S.: 1-604-638-5340
Webcast:
http://services.choruscall.ca/links/husky20191202.htmlPlease use
Google Chrome for webcast compatibility |
To listen to a recording
(after 9 a.m. MT on Dec. 2):Canada and U.S. Toll Free:
1-800-319-6413 Outside Canada and U.S.: 1-604-638-9010Passcode:
3859 Duration: Available until January 2, 2020Webcast:
Available for 90 days at huskyenergy.com |
Investor and Media
Inquiries:
Leo Villegas, Senior Manager, Investor Relations403-513-7817
Kim Guttormson, Media & Issues Specialist403-298-7088
FORWARD-LOOKING STATEMENTS
Certain statements in this news release are
forward-looking statements and information (collectively
“forward-looking statements”), within the meaning of the applicable
Canadian securities legislation, Section 21E of the United States
Securities Exchange Act of 1934, as amended, and Section 27A of the
United States Securities Act of 1933, as amended. The
forward-looking statements contained in this news release are
forward-looking and not historical facts.
Some of the forward-looking statements may be
identified by statements that express, or involve discussions as
to, expectations, beliefs, plans, objectives, assumptions or future
events or performance (often, but not always, through the use of
words or phrases such as “will likely result”, “are expected to”,
“will continue”, “is anticipated”, “is targeting”, “estimated”,
“intend”, “plan”, “projection”, “could”, “aim”, “vision”, “goals”,
“objective”, “target”, “schedules” and “outlook”).
In particular, forward-looking statements in
this news release include, but are not limited to, references
to: general strategic plans and growth strategies; Husky’s capital
program for 2020 to 2021; expected 2020 range of production (in
total and broken down by total crude oil & liquids and total
natural gas); target to become a global top-quartile process safety
performer; upcoming milestones for the Company’s thermal projects
(including timing for first oil from the Spruce Lake projects),
Liuhua 29-1 (including timing for first production and target
production), Lloyd Upgrader diesel capacity increase, Superior
Refinery rebuild (including expected return to full operations) and
MDA-MBH & MDK fields; expected free cash flow, before
dividends, at $55 US WTI for 2020-2021; 2020 downstream capacity
and throughput guidance, including processing capacity for Upstream
heavy oil blend production; timing for first oil from the West
White Rose Project; 2020 capital guidance (in total and broken down
by Integrated Corridor, Offshore and Corporate Capital); other
planned spending, including expected costs to rebuild Superior and
expectations that such costs will be substantially covered by
insurance; 2020 operating costs for Upstream and Downstream; and
2020 planned maintenance and turnarounds.
Certain of the information in this news release
is “financial outlook” within the meaning of applicable securities
laws. The purpose of this financial outlook is to provide readers
with disclosure regarding the Company’s reasonable expectations as
to the anticipated results of its proposed business activities.
Readers are cautioned that this financial outlook may not be
appropriate for other purposes.
Although the Company believes that the
expectations reflected by the forward-looking statements presented
in this news release are reasonable, the Company’s forward-looking
statements have been based on assumptions and factors concerning
future events that may prove to be inaccurate. Those assumptions
and factors are based on information currently available to the
Company about itself and the businesses in which it operates.
Information used in developing forward-looking statements has been
acquired from various sources including third party consultants,
suppliers, regulators and other sources.
Because actual results or outcomes could differ
materially from those expressed in any forward-looking statements,
investors should not place undue reliance on any such
forward-looking statements. By their nature, forward-looking
statements involve numerous assumptions, inherent risks and
uncertainties, both general and specific, which contribute to the
possibility that the predicted outcomes will not occur. Some of
these risks, uncertainties and other factors are similar to those
faced by other oil and gas companies and some are unique to
Husky.
The Company’s Annual Information Form for the
year ended December 31, 2018 and other documents filed with
securities regulatory authorities (accessible through the SEDAR
website www.sedar.com and the EDGAR website www.sec.gov) describe
risks, material assumptions and other factors that could influence
actual results and are incorporated herein by reference.
New factors emerge from time to time and it is
not possible for management to predict all of such factors and to
assess in advance the impact of each such factor on the Company’s
business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those
contained in any forward-looking statement. The impact of any one
factor on a particular forward-looking statement is not
determinable with certainty as such factors are dependent upon
other factors, and the Company’s course of action would depend upon
management’s assessment of the future considering all information
available to it at the relevant time. Any forward-looking statement
speaks only as of the date on which such statement is made and,
except as required by applicable securities laws, the Company
undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated
events.
NON-GAAP MEASURES
This news release contains certain terms which
do not have any standardized meanings prescribed by International
Financial Reporting Standards (“IFRS”) and are therefore unlikely
to be comparable to similar measures presented by other issuers.
None of these measures is used to enhance the Company’s reported
financial performance or position. With the exception of funds from
operations and free cash flow, there are no comparable measures to
these non-GAAP measures in accordance with IFRS. The following
non-GAAP measures are considered to be useful as complementary
measures in assessing Husky's financial performance, efficiency and
liquidity:
“Free cash flow” is a non-GAAP measure which
should not be considered an alternative to, or more meaningful
than, cash flow – operating activities as determined in accordance
with IFRS, as an indicator of financial performance. Free cash flow
is presented to assist management and investors in analyzing
operating performance by the business in the stated period. Free
cash flow equals funds from operations less capital
expenditures.
“Net debt to trailing funds from operations” is
a non-GAAP measure that equals net debt divided by the 12-month
trailing funds from operations. Net debt is a non-GAAP measure that
equals total debt less cash and cash equivalents. Total debt is
calculated as long-term debt, long-term debt due within one year
and short-term debt. Funds from operations is a non-GAAP measure
which should not be considered an alternative to, or more
meaningful than, cash flow – operating activities as determined in
accordance with IFRS, as an indicator of financial performance.
Funds from operations equals cash flow – operating activities,
excluding change in non-cash working capital. Net debt to trailing
funds from operations is considered to be a useful measure in
assisting management and investors to evaluate the Company’s
financial strength.
DISCLOSURE OF OIL AND GAS
INFORMATION
Unless otherwise indicated: (i) projected
production volumes provided are gross, which represents the total
or the Company’s working interest share, as applicable, before
deduction of royalties; (ii) all Husky working interest production
volumes quoted are before deduction of royalties.
The Company uses the term “barrels of oil
equivalent” (or “boe”), which is consistent with other oil and gas
companies’ disclosures, and is calculated on an energy equivalence
basis applicable at the burner tip whereby one barrel of crude oil
is equivalent to six thousand cubic feet of natural gas. The term
boe is used to express the sum of the total company products in one
unit that can be used for comparisons. Readers are cautioned that
the term boe may be misleading, particularly if used in isolation.
This measure is used for consistency with other oil and gas
companies and does not represent value equivalency at the
wellhead.
All currency is expressed in this news release
in Canadian dollars.