Husky Energy Inc. expects to cut its capital spending in 2019 in anticipation of the Alberta government's mandated oil production cuts.
The Calgary, Alberta-based oil and gas producer said Dec. 20 that it plans to spend between C$3.3 billion and C$3.5 billion in 2019, down from its forecast of C$3.7 billion in May, taking into account spending reductions associated with the Alberta government's curtailment program and lower global oil prices. It will trim spending in areas where it has the most capital flexibility, such as heavy oil and Western Canada resource plays. The company can further reduce spending depending on market conditions.
Earlier in December, Alberta announced that it would rein in oil output by 8.7% starting in January, in response to falling prices affecting government revenues.
Husky expects to produce about 300,000 barrels of oil equivalent per day in 2019, including cuts associated with Alberta's curtailments and suspended operations at the White Rose field in the Atlantic region. The estimate does not include production related to Husky's proposed takeover of oil sands producer MEG Energy Corp.
"Husky's portfolio is designed to manage risk effectively and we are disappointed with government intervention given the market's natural ability to remove uneconomic barrels," said Robert Peabody, president, CEO and director of Husky. "We are focused on curtailing production in the most efficient and cost-effective way possible."
The company projected its sustaining capital to be C$1.8 billion, which, along with current dividends, can be funded at about C$40 West Texas Intermediate, or WTI, benchmark price.
Meanwhile, Husky plans to spend growth capital on development of the Liuhua 29-1 field offshore China, construction of five Lloyd thermal projects in Saskatchewan, Canada, and the West White Rose project.
Husky's upstream operations are located mainly in Western Canada, offshore East Coast of Canada, offshore China and offshore Indonesia.