Husky sees lower oil prices, lim­its spend­ing for two years


Cana­dian oil and gas pro­ducer Husky En­ergy Inc said on Mon­day it would lower cap­i­tal spend­ing by $500 mil­lion over the next two years to in­crease free cash flow, in a time of re­duced oil price ex­pec­ta­tions.

Oil pro­duc­ers have been un­der pres­sure to re­turn more cash to share­hold­ers. The 16 largest pro­duc­ers in Al­berta are sub­ject to govern­ment-man­dated pro­duc­tion cur­tail­ments to avoid pipe­line bot­tle­necks.

With such lim­its on growth, com­pa­nies are re­duc­ing spend­ing, in­clud­ing 370 lay­offs by Husky ear­lier this year.

Husky, ma­jor­ity-owned by Hong Kong ty­coon Li Ka-shing, ex­pects 2020 cap­i­tal spend­ing to fall to be­tween $3.2 bil­lion and $3.4 bil­lion, $100 mil­lion lower than its 2019 fore­cast of $3.3 bil­lion to $3.5 bil­lion.

Most cuts next year are fo­cused on Western Canada, but the com­pany said it will con­tinue to spend on high-re­turn Saskatchew­an projects.

For 2021, Husky aims to fur­ther re­duce spend­ing by $400 mil­lion com­pared with 2019.

Cal­gary-based Husky as­sumed a West Texas In­ter­me­di­ate crude oil price of US$55 per bar­rel from 2020-21, down from its pre­vi­ous ex­pec­ta­tion of US$60 per bar­rel.

Husky shares fell slightly to $9.58 on the day in Toronto.

Husky plans to gen­er­ate $500 mil­lion of free cash flow be­fore div­i­dends in 2020, grow­ing to $1.5 bil­lion in 2021.

Al­berta im­posed cur­tail­ments in Jan­uary to ease con­gested pipe­lines and Premier Ja­son Ken­ney has said they may stay in place through 2020.

New ca­pac­ity cre­ated through small im­prove­ments to ex­ist­ing pipe­lines, the startup this week of En­bridge Inc’s Line 3 re­place­ment in Canada, and in­creased rail haul­ing may col­lec­tively add 500,000 bar­rels per day of ex­port trans­port, Husky chief ex­ec­u­tive Rob Pe­abody said.


Firms like Husky are re­duc­ing spend­ing due to govern­ment out­put cur­tail­ments. Husky’s cuts are mostly fo­cused on Western Canada.

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