January 19, 2016 / 10:25 PM / in 2 years

Husky cuts spending and production forecasts, scraps dividend

CALGARY, Alberta (Reuters) - Husky Energy (HSE.TO) cut C$800 million ($549.07 million) from its 2016 capital budget and slashed production guidance by 15,000 barrels of oil equivalent per day on Tuesday in the latest sign that Canadian producers are scrambling to cope with low oil prices.

President and CEO Asim Ghosh of Husky Energy addresses shareholders during the company's annual general meeting in Calgary, Alberta, May 6, 2015. REUTERS/Todd Korol

The company also scrapped its fourth-quarter dividend, just a few months after surprising investors by switching to a stock dividend from cash payments.

Calgary-based Husky said it will spend between C$2.1-2.3 billion this year, down 27 percent from its original capital budget, and produce between 315,000-345,000 boepd.

The company said savings would be achieved primarily through deferring discretionary activities in Western Canada, but its Sunrise oil sands plant and three new heavy oil thermal projects in the Lloydminster region on the Alberta-Saskatchewan border will not be affected.

Spokesman Mel Duvall said about half the reduced production impact would be felt in Alberta and was mostly gas, with the rest being spread across Husky’s portfolio.

“Deferral of capital is in those areas that can be quickly switched on as commodity prices recover,” Husky’s chief executive, Asim Ghosh, said in a statement.

Husky, controlled by Hong Kong billionaire Li Ka-shing, produces oil and natural gas in Canada and Southeast Asia, and holds numerous exploration licenses offshore of Atlantic Canada.

The company said it had adjusted the schedule for deploying an offshore drilling rig in the Atlantic region and was deferring select drilling in Western Canada.

Despite the cut in production and spending forecasts, Husky still plans to add 29,500 barrels per day through its heavy oil thermal projects and the Sunrise oil sands plant, a joint venture with BP Plc (BP.L), which will ramp up to 60,000 barrels per day by the end of 2016.

The company’s overall earnings breakeven point is expected to be below $40 U.S. crude by the end of 2016, and Husky said it expected further gains through reduced operating and sustaining costs.

($1 = 1.4575 Canadian dollars)

(This version of the story corrects C$800,000 to C$800 million in the first paragraph)

Editing by Jonathan Oatis

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