Husky Energy Inc. is trimming its budget for 2014 while jacking up its expectations for oil and gas production as it starts churning out natural gas at a project in the South China Sea.
The company expects to spend roughly $4.8-billion next year, down from $5-billion in 2013, according to the 2014 budget it released Wednesday. (Its original spending forecast for 2013, issued last December, was $4.8-billion). It expects the Liwan gas project, the offshore gas project sitting about 300 kilometres southeast of Hong Kong, to begin production early next year.
Husky, which has operations around the world, predicts it will produce between 330,000 and 355,000 barrels of oil equivalent a day in 2014. The company expects its average production in 2013 to hit 312,000 barrels of oil equivalent a day. This forecast is at the low end of its original target of between 310,000 and 330,000 barrels of oil a day.
Meanwhile, Husky changed its dividend policy. It will no longer pay dividends by way of issuing common shares. The change is effective with the fourth-quarter dividend, which will be announced in February, 2014.
Husky blamed its soft production results for 2013 on an unplanned outage at part of the Terra Nova project, which is off the East Coast. The company also said it deliberately pulled back on natural gas production in Canada, and pointed to “production constraints” in Western Canada caused by third-party outages and downtime.
The Calgary-based company, which has assets around the world, pointed to the Liwan gas project as key to increasing cash flow.
“Husky remains on target with its goal to increase cash flow by six to eight per cent on a compound annual growth rate basis through 2017,” the company said in its budget release. “With the Liwan gas project coming on stream in early 2014, the company expects to see a significant increase in cash flow from operations”
Natural gas in Asia is worth significantly more than gas in North America, making projects like Liwan attractive.
The Sandall heavy oil thermal project is also slated to start producing oil in the first quarter. Furthermore, Husky said work at its Sunrise oil sands project is 85 per cent complete and expected to produce its first drops of oil in late 2014.
Plans at the Sunrise project have changed. Husky said it filed an application to amend its plans “to incorporate efficiencies learned” from the first phase of the project.