Husky Energy will hold its Investor Day in Toronto today to present a five-year plan expected to grow funds from operations at a compounded rate of nine percent a year.
Husky’s plan includes continued cost structure reductions and provides for returns-focused growth.
“We have transformed Husky to grow profitably in this new, lower commodity price era,” said CEO Rob Peabody. “With a significantly reduced break-even and one of the strongest balance sheets in the industry, we are set to further develop a deep portfolio of investment opportunities that will allow us to compound returns, generate increased free cash flow and return cash to shareholders.”
Under Husky’s plan, funds from operations are expected to grow from about $3.3 billion in 2017 to about $4.8 billion in 2021. Free cash flow is expected to grow at a compound annual growth rate of 12 percent, rising from about $750 million in 2017 to about $1.2 billion in 2021.
“Production will increase steadily over our five-year plan, with funds from operations and free cash flow growing at much higher rates as a result of ongoing reductions in our cost structure,” added Peabody.
As a result of continued cost efficiencies, capital spending guidance for 2017 has been reduced by $100 million to $2.5 - $2.6 billion.
Husky’s Five-Year Plan Highlights:
Two Core Businesses
Husky’s go-forward strategy focuses on two core businesses: an integrated Canada-U.S. upstream and downstream corridor and offshore production in the Asia Pacific and Atlantic regions. Both businesses have strong prospects to generate increased free cash flow over the five-year plan, with built-in measures to mitigate volatility.
Integrated Corridor – North American Upstream and Downstream
Husky has a large and growing inventory of heavy oil thermal projects in the Lloydminster region of Saskatchewan and Alberta, as well as the Tucker Thermal Project near Cold Lake and the Sunrise Energy Project north of Fort McMurray. These projects are physically integrated with the Downstream business, which provides for increased margin capture, secured U.S. market access and free cash flow growth.
Thermal bitumen production at the end of 2016 was approximately 120,000 barrels per day (bbls/day), a 55 percent increase since 2015. Husky expects to add 40,000 bbls/day of new thermal bitumen nameplate capacity over the next five years. A 10,000 bbls/day thermal bitumen project is under construction at Rush Lake 2, and three additional 10,000 bbls/day thermal bitumen projects are progressing in Saskatchewan at Dee Valley, Spruce Lake North and Spruce Lake Central. Husky has identified at least 14 additional Lloyd thermal developments for potential advancement.
Tucker thermal bitumen production is currently averaging about 23,000 bbls/day and with new wells being commissioned, production is expected to ramp up towards 30,000 bbls/day in 2018. At Sunrise, gross production is now about 40,000 bbls/day, with 14 new well pairs in the process of being tied-in and placed on production by the end of 2017.
Supporting this thermal growth is Western Canada production, which is now more than 70 percent gas-weighted. This provides a supply and natural hedge for Husky’s energy requirements at its thermal projects and refineries.
The final leg of the corridor is Husky’s Downstream assets consisting of its storage facilities, Lloydminster Upgrader, asphalt plant and refining capacity in the PADD II district of the U.S. Midwest, which creates processing and marketing options. Husky’s five-year plan includes targeted investments to increase feedstock flexibility, optimize the product slate and increase margin capture:
Husky currently invests in two offshore production regions – Asia Pacific, offshore China and Indonesia; and Atlantic, offshore Newfoundland and Labrador. Each region provides for high netback production, with robust near-term investment opportunities and the ability to generate immediate free cash flow growth.
2017 Investor Day
Members of Husky's senior management team will meet with investors and analysts today to discuss the Company’s five-year plan. Presentations will be webcast and will be available at www.huskyenergy.com
Civic Ballroom, Sheraton Centre Toronto Hotel
123 Queen St. W, Toronto, Ontario
Presentations begin at 10 a.m. Eastern Time. The webcast may be accessed approximately 10 minutes before the scheduled start time. A webcast archive and transcript will be available for 90 days following the presentation.
Husky Energy is a Canadian-based integrated energy company. It is headquartered in Calgary, Alberta, Canada and its common shares are publicly traded on the Toronto Stock Exchange under the symbol HSE. More information is available at www.huskyenergy.com
SOURCE: Husky Energy
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