After launching a big bought deal on Wednesday, Husky Energy Inc. has $1.2-billion more in its kitty, but the new funds won't help to jolt any near-term production.
In recent years the company has been dogged by poor conventional oil performance, high-priced refining acquisitions as well as the failure of its Tucker oil sands project, notes analyst Peter Ogden at Bank of America Merrill Lynch. Because there have been so many problems, the company could use a kick-start some time soon. However, the new money is being put toward developing big projects, and that won't pay off for shareholders in the near future.
Husky's growth is driven by its 50-per-cent working interest in the Sunrise oil sands project (shared with BP), a 49 per cent working interest in the large Liwan offshore gas project in the South China Sea (shared with CNOOC) and some other exploration and development in western Canada. Yet the two big projects aren't expected to come on stream for a while, with first gas at Liwan expected in late 2013 or 2014, and first oil from Phase 2 of Sunrise expected in 2017 or 2018.
At the moment the company is driven by both conventional and unconventional plays in western Canada, but "to provide itself with growth opportunities over the longer term, Husky will need to identify a more sustainable and definable inventory from its testing of unconventional resource plays or pursue acquisitions," noted Peters & Co. analyst Karn Sandhar.
For its part, Husky has stated a target of boosting its production profile by 3 to 5 per cent out to 2015. With the announcement of the financing yesterday, those targets were also extended out to 2021. But there still isn't a big near-term catalyst.
For some shareholders, though, that's just fine, because Husky's dividend currently yields 4.5 per cent.
The latest offering comes in the form of a $1-billion public offering and a $200-million private placement to L.F. Investments (Barbados) Ltd. and Hutchison Whampoa Luxembourg Holdings, the company's two biggest shareholders, both of which are owned by billionaire Li Ka-shing. However, the two private buyers currently own 70 per cent of the company, so they didn't buy their pro-rata ownership, instead taking up about 17 per cent of the total issue.
Husky has now raised $2.5-billion in the last seven months.
Husky currently produces 300,000 barrels of energy equivalent a day, about 70 per cent of which comes from oil. The production breakdown is about one-third heavy oil, one-third light oil and just less than one-third natural gas. Husky's first oil sands project at Tucker came on stream in 2006 and has been viewed as a failure because its wells were placed too low and too close to the water saturation zone.
The latest offering was led by RBC Dominion Securities and included Goldman Sachs Canada, HSBC Securities Canada and JP Morgan Securities Canada