Calgary giant Husky Energy announced late Thursday that it was slashing its 2020 capital investment by as much as $900 million in response to challenging global market conditions.
The energy company said current capital investment has dropped to between $2.3 billion and $2.5 billion from the previous $3.2 billion to $3.4 billion.
It also said additional cost reduction initiatives totalling approximately $100 million in 2020 will include a reduction in well servicing activities on uneconomic production, and a halt in exploration activity.
“Husky has three important advantages: a strong balance sheet, an Integrated Corridor which includes a sizeable downstream and midstream segment, and Offshore operations that include long-term gas contracts in the Asia Pacific region not linked to the price of oil,” said CEO Rob Peabody, in a news release.
Given current market conditions Husky will commence the safe and orderly reduction, or shut-in, of production where it is cash negative on a variable cost basis at current prices, added the company.
Husky Energy said its capital reductions include:
- Investment in resource plays and conventional heavy oil projects in Western Canada has been halted, with a focus on optimizing existing production and lowering costs;
- Drilling of sustaining pads at all thermal operations has been suspended;
- Lloydminster thermal projects scheduled to be delivered beyond 2020 have been deferred and will be reconsidered as market conditions improve;
- In the Asia Pacific region, the development of the Block 15/33 oil field offshore China has been deferred by a year. In Indonesia, development of the MDA-MBH natural gas field has been deferred. The Liuhua 29-1 field at the Liwan Gas Project is being advanced as planned, with first production expected by the end of 2020; and
- It continues to review further capital adjustments in response to the current market environment.
