Husky Energy shares at 10- year low

Stock plunges sharply in morning before bouncing back in afternoon

Shares in Husky Energy Inc. continued to probe new 10- year lows Monday as shareholders and financial analysts roundly panned its plan to issue its next dividends in shares instead of cash.

In early trading Monday, the Calgary- based integrated company with assets in Alberta, the Canadian East Coast and AsiaPacific plunged as low as $ 16.80, a level not seen since July 2005.

Husky shares bounced back in the afternoon, closing at $ 18.40, up four per cent.

On Friday, the shares closed at $ 17.37, down 13 per cent on the day and 41 per cent from this year’s peak of $ 29.48 last February.

Husky announced its new dividend policy on Friday as it reported a third- quarter net loss of $ 4.1 billion due to asset impairments based on its bearish twoyear planning forecast of US$ 40 per barrel oil and $ 3 per thousand cubic feet for Alberta gas.

It said it would be reviewing its dividend decision on a quarterly basis.

“What threw the market ( on Friday) — and ourselves — was Husky’s election to pay its common share dividend entirely in script until further notice,” wrote analyst Greg Pardy of RBC Dominion Securities in a note to investors on Sunday.

“To be clear, we are not fans of using common shares to fund dividends because of their dilutive impact on per share metrics and expansionary effect on absolute dividend requirements down the road.”

He chopped his 12- month target price by $ 2 to $ 24 per share.

Analyst Arthur Grayfer of CIBC World Markets of CIBC World Markets also lowered his target price, to $ 23.50 from $ 27.

“We get the impression the shareholder base wants their dividend maintained ... ,” he wrote in a note published Sunday.

“While’s Friday’s price drop is likely overdone, we believe the unexpected and confusing implementation of the stock dividend will place Husky in the penalty box for a period of time.”

Peters & Co. analysts said in a note late Friday they rank Husky behind other large- cap stocks because of its lower oil exposure. It carries a $ 16 target price. “Husky should arguably trade at a discount to its peers given the relative ranking of its assets, debt levels and free cash flow profile,” it noted.

“The higher dividend level was one reason for the support the shares have received and, with the dividend moving to all- shares, it diminishes one of the reasons to own the stock while also raising questions on the strategy.”

Husky also revealed Friday it has chopped 1,400 jobs as of Sept. 30, representing 22 per cent of its worldwide staff, and announced it will continue to downsize its workforce while identifying legacy

We believe the unexpected and confusing implementation of the stock dividend will place Husky in the penalty box for a period of time.

western Canadian assets to sell.

It said it will also continue a salary freeze that was implemented last year.

Analysts said its asset sales, expected to happen over the next two years, could affect 50,000 barrels of oil equivalent per day of current production of 333,000 boe/ d.

About 70 per cent of the company’s shares are controlled by Hong Kong billionaire Li Ka- Shing.