Canada's Husky Keeps 2016 Budget Tight, Plans Asset Sales

CALGARY, Alberta, Dec 8 (Reuters) - Canadian oil producer Husky Energy Inc said on Tuesday it will keep its 2016 budget nearly unchanged from 2015, joining peers who are focusing on keeping costs under control to cope with a prolonged slump in oil prices, which touched multi-year lows this week.

The company said it will spend C$2.9 billion ($2.14 billion) to C$3.1 billion in 2016, compared with an estimated C$3 billion this year.

Husky is looking at selling some of its midstream assets in western Canada's Lloydminster region, which straddles the Alberta-Saskatchewan border, to strengthen its balance sheet and meet debt obligations.

Chief Financial Officer Jonathan McKenzie said Husky owns about 1,900 kilometers (1,180 miles) of pipe and associated storage in the region and is still evaluating how much of the assets would be sold.

Husky plans to retain operatorship of the midstream facilities as they link the company's thermal oil operations to its heavy oil upgrader and refinery in Lloydminster, neither of which will be put up for sale.

Husky is also looking at selling around 50,000 barrels per day of conventional oil and gas assets and 2,000 bpd of royalty assets.

"We believe the potential monetization of conventional, midstream and royalty assets will likely be viewed favourably as these divestitures could move the company closer to reinstating the currently suspended cash dividend," said BMO analyst Randy Ollenberger.

The company, controlled by Hong Kong billionaire Li Ka-shing, stopped paying a cash dividend and cut jobs and spending this year in a bid to weather the more than 60 percent drop in global oil prices since June 2014.

The company said it was assuming West Texas Intermediate price of $40 per barrel over the next two years. U.S. crude dropped below $37 a barrel on Tuesday, its lowest level since February 2009.

Despite lower prices, Husky has been moving forward with new heavy oil projects in western Canada and is continuing appraisal work on the Flemish Pass discovery offshore Atlantic Canada with its project partner Statoil ASA.

The company expects 2016 production to average between 330,000 and 360,000 barrels of oil equivalent per day (boepd), compared with an estimated 346,000 boepd this year.

Husky shares were last trading flat on the Toronto Stock Exchange at C$15.65.

($1 = 1.3571 Canadian dollars)

(Reporting by Nia Williams in Calgary and Anet Josline Pinto in Bengaluru; Editing by Shounak Dasgupta and Cynthia Osterman)