Sign of the Times: Husky Cuts 2009 Budget
Husky announced today the Company's capital expenditure program and production guidance for 2009. The capital program of $2.6 billion focuses mainly on maintaining upstream production, midstream and downstream developments and progressing major projects offshore Canada's East Coast and South East Asia.
"The global financial turmoil and huge volatility in commodity prices has resulted in a challenging period for our industry. While 2008 is another record year for Husky, the economic uncertainty will require the company to be prudent in weathering the financial crisis. The Company is expecting to be in a minimum debt position," said John C.S. Lau, President & Chief Executive Officer. "The 2009 capital budget has been established with a view to maintaining the strength of Husky's balance sheet."
In preparing the capital expenditure program and guidance for 2009, Husky has taken into account the prevailing economic environment and market conditions. Capital expenditure will be directed to those areas offering the highest potential for returns and long term growth, in particular, Canada's East Coast, offshore China and Indonesia developments.
Capital expenditure for Western Canada upstream development and exploration has been estimated at $725 million. Husky will also spend $65 million on its oil sands business as it proceeds with moderately ramping up production at Tucker and optimizing development planning for its Sunrise Oil Sands Project.
The Company's Canadian East Coast and Frontier Operations will receive $800 million for capital expenditure. A large portion of the East Coast spending will be made towards the completion of the White Rose satellite tie-back project at North Amethyst and to progress work on the West White Rose satellite field.
For projects offshore China and Indonesia, a capital expenditure program of $500 million has been allocated. Delineating and evaluating the Liwan discovery on Block 29/26 in the South China Sea, which began in November 2008 with the arrival of the West Hercules deepwater drilling rig, is the major focus of the 2009 program. The remainder of the capital expenditure will be used for additional exploration in the South and East China Seas, and the development of the Madura BD field, offshore Indonesia.
In Midstream, Husky will spend $165 million, largely on plant maintenance, pipelines, infrastructure and related operations.
"With a diverse asset portfolio, Husky is well positioned to respond to opportunities in acquisition, development and exploration activities in excess of this guidance," said Mr. Lau.
For production guidance, Husky anticipates that the 2008 production will average approximately 356,000 barrels of oil equivalent per day reflecting a decline in natural gas production and ice management issues off Canada's East Coast. Reduced production levels in 2009 are expected due to facility turnaround activities at White Rose and Terra Nova, a period of reduced production at White Rose to allow for the tie-in of the North Amethyst satellite and reduced spending in Western Canada.
The North Amethyst satellite tie-back project and the South East Asia developments are anticipated to contribute to production growth commencing in 2010 and 2012/13 respectively.
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