Husky slashes 2019 spending plans, and blames the Alberta government
Husky Energy announced a major cut in capital spending today, blamed squarely on the Alberta government's recently announced production curtailment program.
Echoing a similar sentiment from Suncor Energy last week, Husky says its integrated business model shields its from the Canadian heavy oil discount. Much of Husky's heavy oil production is processed at its own refineries.
CEO Rob Peabody says he is "disappointed with government intervention," noting that the market was likely to rebalance itself through the removal of uneconomic barrels, which was already in progress. The company claims its cuts are "considerably higher" than the province's 8.7% overall target in light of its midstream and downstream operations.
Husky adds that production at Sunrise and Tucker have just recently reached full capacity, and extra costs will need to be incurred for breaching its existing marketing contracts and shutting down wells. The Sunrise SAGD facility produced a record 61,900 bbl/day in the fourth quarter, while Tucker hit its nameplate capacity of 30,000 bbl/day.
Revised 2019 guidance
The company now says it will spend $300 million less than originally planned, and warns capital spending may be reduced further depending on "market conditions." Full year guidance is now between $3.3 and $3.5 billion, down from an original plan of $3.7 billion, but slightly higher than this year's capital spend.
The company has set a 2019 production target of 300,000 boe/day, roughly unchanged from 2018, including the government's mandated production cuts. Husky says that it will focus on curtailing production "in the most efficient and cost-effective way possible."
An update on MEG Energy
Earlier this week, Husky's planned takeover of MEG Energy was approved by the federal government under the Investment Canada Act. The company requires two-thirds of all MEG shareholders to tender their shares before the offer expires on January 16. Analysts largely expect the deal to go through at the current offer price.