Husky Energy is cutting its capital spending by another $700 million in response to the current market conditions.
The company plans to reduce production and refinery throughput until the supply and demand stabilizes. It also plans to reduce discretionary capital spending in an effort to improve liquidity.
“As the market rebalances supply with demand over a very short period in North America, negative cash margins before operating costs are occurring. Reducing production minimizes our negative cash margin exposure,” says CEO Rob Peabody.
Husky Energy expects to spend between $1.6 to $1.8 billion for the year which is about half of their early estimates. The company also says it will reduce production by more than 80,000 barrels per day, most of it being heavy oil.
The planned turnaround at the Lloydminster Upgrader is still being deferred to late Q3 2020 while maintenance work will continue with operations being modified for safety reasons.
Thermal bitumen production in the area, such as the Tucker Thermal Project, has been reduced due to anticipated production backlogs in Western Canada. The company says these projects are flexible and can be safely ramped down to minimum rates and picked back up when conditions improve.
Construction on the Spruce Lake North thermal project has been suspended and additional Lloydminster projects expected to be completed in 2020 have been deferred.
Western Canada oil and gas production is being reduced or shut in and no further capital expenditures are planned in 2020.
The company has also suspended the strategic review on its retail and commercial fuels business.
Husky Energy cut its 2020 spending budget by $1 billion in March with a $900 million reduction in capital expenditures and $100 million in cost-saving measures.