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.