Husky Energy announced on Thursday that it plans to spend about $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.
The spending is $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 said in a news release. It added that it 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, explained the company.
The company said capital 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,” it said.
“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 Sept. 30, 2018, includes a condition that at least 66 2/3 per cent 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, Jan. 16, 2019.”