Given current market conditions and the Company’s focus on the balance sheet, Husky’s Board of Directors has reduced the quarterly dividend to $0.0125 per common share.<\/p>\n
FIRST QUARTER SUMMARY<\/strong><\/p>\n FIRST QUARTER IMPAIRMENTS & INVENTORY VALUATION IMPACTS<\/strong> <\/p>\n Total non-cash asset impairments were $1.1 billion (after tax) in the first quarter of 2020. These were primarily related to the Company’s upstream assets in North America and were largely due to lower crude oil price assumptions.<\/p>\n FIFO losses related to the significant decrease in commodity prices accounted for $397 million (after tax) and are reflected in the U.S. Refining, Lloydminster Heavy Oil Value Chain and Oil Sands segments. RESULTS<\/strong><\/p>\n <\/td>\n INTEGRATED CORRIDOR<\/strong> Lloydminster Heavy Oil Value Chain<\/strong> <\/p>\n The Lloydminster Heavy Oil Value Chain includes thermal and non-thermal upstream heavy oil production, including cold heavy oil production with sand (CHOPS), enhanced oil recovery (EOR) assets and the Tucker Thermal Project, and the Lloydminster Upgrader and Asphalt Refinery.<\/p>\n The Lloydminster Heavy Oil Value Chain operating margin was $256 million, compared to $364 million in Q1 2019, reflecting reduced commodity pricing and inventory impairments that were partially offset by increased sales volumes and lower operating costs per barrel.<\/p>\n Average sales for synthetic crude oil (SCO) and refined products were 86,500 bbls\/day, up from 67,400 bbls\/day in the year-ago period. Average SCO and refined products realized pricing was $64.13 per barrel, down from $73.83 per barrel in the same period in 2019. Blended crude oil sales averaged 107,900 bbls\/day, up from 88,600 bbls\/day in Q1 2019. Realized pricing for blended crude oil averaged $48.87 per barrel compared to $57.70 per barrel in Q1 2019.<\/p>\n Total Lloydminster Heavy Oil Value Chain thermal bitumen production averaged 111,000 bbls\/day compared to 108,000 bbls\/day in Q1 2019. CHOPS and EOR crude production was 32,200 bbls\/day compared to 29,200 bbls\/day in the year-ago period.<\/p>\n Throughput at the Upgrader and Asphalt Refinery was 106,100 bbls\/day, up from 94,000 bbls\/day in the same period in 2019.<\/p>\n Operating costs per boe were $11.74 per boe compared to $15.06 per boe in Q1 2019. The operating margin per boe was $17.93 per boe, compared to $29.26 per boe in the year-ago period.<\/p>\n Commissioning activities are under way at the 10,000 barrel-per-day Spruce Lake Central project, with enhanced health and safety protocols in place. Startup will be dependent on improved pricing conditions. Construction of the 10,000 barrel-per-day Spruce Lake North thermal project, originally scheduled for completion around the end of 2020, has been suspended and additional Lloyd projects to be delivered beyond 2020 have been deferred.<\/p>\n A planned turnaround scheduled to begin at the Upgrader in April 2020 has been deferred to late Q3 2020, given the current safety and public health risks inherent in mobilizing and maintaining a large construction workforce during the COVID-19 pandemic. Maintenance work will proceed only when necessary and safe to do so, with operations and throughput modified in accordance with maintenance requirements. A project at the Upgrader to increase diesel production from 6,000 bbls\/day to nearly 10,000 bbls\/day has also been deferred to late Q3 2020.<\/p>\n Oil Sands (Sunrise Energy Project)<\/strong><\/p>\n First quarter production averaged 54,000 bbls\/day (27,000 bbls\/day Husky working interest).<\/p>\n A turnaround that was scheduled to start at Sunrise in April has been deferred due to public health and safety considerations. Maintenance work at Sunrise will proceed where necessary and safe to do so.<\/p>\n Western Canada Production<\/strong><\/p>\n Total production in the first quarter of 2020 averaged 62,600 boe\/day. No further capital expenditures are planned in 2020.<\/p>\n U.S. Refining<\/strong> <\/p>\n The operating margin was a loss of $550 million compared to a positive margin of $269 million in Q1 2019, reflecting the FIFO impact and reduced crack spreads.<\/p>\n U.S. refinery throughput averaged 201,700 bbls\/day in Q1 2020, compared to 229,400 bbls\/day in the year-ago period. Average throughput at the Lima Refinery was 131,400 bbls\/day, reflecting the ramp-up following the completion of the crude oil flexibility project, coupled with lower refinery runs as a result of reduced product demand due to COVID-19.<\/p>\n The Chicago 3:2:1 crack spread averaged $8.32 US per barrel compared to $13.08 US per barrel in Q1 2019.<\/p>\n The average realized U.S. refining and marketing margin was a loss of $12.68 US per barrel of crude oil throughput, which includes an unfavourable FIFO pre-tax inventory valuation adjustment of $9.25 US per barrel and inventory write-downs to net realizable value of $11.77 US per barrel. This compared to $18.65 US per barrel a year ago, which included a favourable FIFO pre-tax inventory valuation adjustment of $3.91 US per barrel.<\/p>\n Construction at the Superior Refinery in Wisconsin has been suspended due to the safety and public health risks inherent in maintaining a large construction workforce during the COVID-19 pandemic. A schedule for resumption will be determined in due course. Rebuild costs are expected to be substantially covered by property damage insurance.<\/p>\n U.S. refinery throughput has been reduced by around 100,000 bbls\/day, matching local product demand.<\/p>\n Canadian Refined Products <\/strong> <\/p>\n The Canadian Refined Products operating margin was $5 million compared to $38 million in the same period last year, reflecting compressed retail margins and reduced sales. Canadian retail gasoline sales averaged approximately 6.9 million litres per day compared to 7.5 million litres per day in the first quarter of 2019.<\/p>\n As previously disclosed, due to the current market environment, Husky has suspended the strategic review of its Canadian retail and commercial fuels business, which consists of more than 500 stations, travel centres, cardlock operations and bulk distribution facilities.<\/p>\n OFFSHORE<\/strong><\/p>\n Asia Pacific<\/strong> Construction at the Liuhua 29-1 field is advancing towards first gas by the end of 2020. Target production is 45 mmcf\/day of gas and 1,800 bbls\/day of liquids when fully ramped up, reflecting Husky’s 75% working interest plus exploration cost recovery volumes.<\/p>\n Indonesia<\/em> Atlantic<\/strong><\/p>\n Overall average production in the Atlantic region was approximately 19,600 bbls\/day, Husky working interest. This takes into account the ongoing suspension of production-related operations on the partner-operated Terra Nova<\/em> floating production, storage and offloading (FPSO) vessel, in which Husky has a 13% working interest.<\/p>\n Production from the main White Rose field is continuing, with enhanced workforce control measures in place to provide for continued safe operations on the SeaRose<\/em> FPSO vessel.<\/p>\n Operating costs were $33.49 per boe, which were elevated by the Terra Nova<\/em> shutdown and the operating margin was $19.69 per boe.<\/p>\n West White Rose Project <\/em> PROJECT UPDATE<\/strong><\/p>\n *Startup to be dependent on market conditions.<\/em><\/p>\n All other projects have been deferred and updated timing will be provided in due course. <\/p>\n CORPORATE DEVELOPMENTS<\/strong><\/p>\n The Board of Directors has approved a reduction to the quarterly dividend to $0.0125 per common share for the three-month period ended March 31, 2020. The dividend will be payable July 2, 2020 to shareholders of record at the close of business on June 9, 2020.<\/p>\n Regular dividend payments on each of the Cumulative Redeemable Preferred Shares – Series 1, Series 2, Series 3, Series 5 and Series 7 – will be paid for the three-month period ended June 30, 2020. The dividends will be payable on June 30, 2020 to holders of record at the close of business on June 9, 2020.<\/p>\n\n
Inventory write-downs to net realizable value totalled $274 million (after tax), also reflected in the U.S. Refining, Lloydminster Heavy Oil Value Chain, Oil Sands and Atlantic segments.<\/p>\n\n\n
\n <\/td>\n Three Months Ended <\/td>\n<\/tr>\n \n <\/p>\n Mar. 31
2020<\/td>\nDec. 31
2019<\/td>\nSept. 30
2019<\/td>\nJune 30
2019<\/td>\nMar. 31
2019<\/td>\n<\/tr>\n\n Integrated Corridor1<\/sup><\/td>\n <\/td>\n <\/td>\n <\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n Upstream production2<\/sup> (mboe\/day)<\/td>\n 235<\/td>\n <\/td>\n 241<\/td>\n <\/td>\n 232<\/td>\n 214<\/td>\n <\/td>\n 231<\/td>\n<\/tr>\n \n Upgrader and refinery throughput (mbbls\/day)<\/td>\n 308<\/td>\n <\/td>\n 203<\/td>\n <\/td>\n 356<\/td>\n 340<\/td>\n <\/td>\n 334<\/td>\n<\/tr>\n \n Offshore production2<\/sup> (mboe\/day)<\/td>\n 64<\/td>\n <\/td>\n 70<\/td>\n <\/td>\n 63<\/td>\n 54<\/td>\n <\/td>\n 54<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n <\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n Revenue, net of royalties5<\/sup> ($mm)<\/td>\n 4,068<\/td>\n <\/td>\n 4,833<\/td>\n <\/td>\n 5,292<\/td>\n 5,238<\/td>\n <\/td>\n 4,539<\/td>\n<\/tr>\n \n Operating margin3<\/sup> ($mm)<\/td>\n (169<\/td>\n )<\/td>\n 549<\/td>\n <\/td>\n 931<\/td>\n 885<\/td>\n <\/td>\n 988<\/td>\n<\/tr>\n \n Integrated Corridor<\/td>\n (378<\/td>\n )<\/td>\n 316<\/td>\n <\/td>\n 708<\/td>\n 730<\/td>\n <\/td>\n 824<\/td>\n<\/tr>\n \n Offshore<\/td>\n 253<\/td>\n <\/td>\n 350<\/td>\n <\/td>\n 268<\/td>\n 240<\/td>\n <\/td>\n 207<\/td>\n<\/tr>\n \n Funds from operations3 <\/sup>($mm)<\/td>\n 25<\/td>\n <\/td>\n 469<\/td>\n <\/td>\n 1,021<\/td>\n 802<\/td>\n <\/td>\n 959<\/td>\n<\/tr>\n \n Per common share – Basic ($\/share) <\/td>\n 0.02<\/td>\n <\/td>\n 0.47<\/td>\n <\/td>\n 1.02<\/td>\n 0.80<\/td>\n <\/td>\n 0.95<\/td>\n<\/tr>\n \n Cash flow – operating activities ($mm)<\/td>\n 355<\/td>\n <\/td>\n 866<\/td>\n <\/td>\n 800<\/td>\n 760<\/td>\n <\/td>\n 545<\/td>\n<\/tr>\n \n Capital expenditures4<\/sup> ($mm)<\/td>\n 612<\/td>\n <\/td>\n 894<\/td>\n <\/td>\n 868<\/td>\n 858<\/td>\n <\/td>\n 812<\/td>\n<\/tr>\n \n Free cash flow3 <\/sup>(loss) ($mm)<\/td>\n (587<\/td>\n )<\/td>\n (425<\/td>\n )<\/td>\n 153<\/td>\n (56<\/td>\n )<\/td>\n 147<\/td>\n<\/tr>\n \n Net earnings (loss) ($mm)<\/td>\n (1,705<\/td>\n ) <\/td>\n (2,341<\/td>\n ) <\/td>\n 273<\/td>\n 370<\/td>\n <\/td>\n 328<\/td>\n<\/tr>\n \n Per common share – Basic ($\/share)<\/td>\n (1.71<\/td>\n )<\/td>\n (2.34<\/td>\n )<\/td>\n 0.26<\/td>\n 0.36<\/td>\n <\/td>\n 0.32<\/td>\n<\/tr>\n \n Net debt3<\/sup> ($ billions)<\/td>\n 4.6<\/td>\n <\/td>\n 3.7<\/td>\n <\/td>\n 3.9<\/td>\n 3.7<\/td>\n <\/td>\n 3.4<\/td>\n<\/tr>\n \n Net debt to trailing funds from operations3<\/sup>(times)<\/td>\n 2.0<\/td>\n <\/td>\n 1.2<\/td>\n <\/td>\n 1.1<\/td>\n 1.0<\/td>\n <\/td>\n 0.8<\/td>\n<\/tr>\n \n 1<\/sup><\/em>Includes Lloydminster Heavy Oil Value Chain, Oil Sands, Western Canada Production, U.S. Refining and Canadian Refined Products.<\/em>
2<\/sup><\/em>Refer to advisory for full product breakdown.<\/em>
3<\/sup><\/em>Non-GAAP measure; refer to advisory.<\/em>
4<\/sup><\/em>Includes Superior Refinery rebuild costs; expected to be largely covered by insurance.<\/em>
5<\/sup><\/em>Revenue, net of royalties results reported for 2019 have been recast to reflect a change in reclassification of intersegment sales eliminations and a change in presentation of the Integrated Corridor and Offshore business units.<\/em>
<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
(LLOYDMINSTER HEAVY OIL VALUE CHAIN, OIL SANDS, WESTERN CANADA PRODUCTION, U.S. REFINING, CANADIAN REFINED PRODUCTS)<\/strong><\/p>\n\n
\n
\n
China<\/em>
Gross natural gas sales from the two producing fields at the Liwan Gas Project in the first quarter averaged 355 million cubic feet per day (mmcf\/day), with associated liquids averaging 13,800 bbls\/day (174 mmcf\/day and 6,800 bbls\/day Husky working interest). Realized gas pricing at Liwan was $14.93 per thousand cubic feet (mcf), with liquids pricing of $60.62 per barrel. Operating costs were $5.64 per boe, with an operating margin of $72.92 per boe.<\/p>\n
Gross natural gas sales at the BD Project in the Madura Strait averaged 89 mmcf\/day, with associated liquids production of 6,400 bbls\/day (36 mmcf\/day and 2,600 bbls\/day Husky working interest). Realized gas pricing from BD was $10.05 per mcf, with liquids pricing of $83.68 per barrel. Operating costs were $8.27 per boe, with an operating margin of $47.82 per boe.<\/p>\n
Major construction activities related to the West White Rose Project have been suspended due to COVID-19.<\/p>\n\n\n
\n <\/td>\n <\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 2020<\/strong><\/td>\n Capacity<\/strong>
(Husky W.I.)<\/strong><\/td>\nOriginal Timing\/
Completion<\/strong><\/td>\nStatus (Apr. 29)<\/strong><\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n Lloyd Upgrader diesel capacity increase<\/td>\n 6,000 –> 9,800 bbls\/day<\/td>\n Q2<\/td>\n Deferred to late Q3 ’20<\/td>\n<\/tr>\n \n Spruce Lake Central construction completion*<\/td>\n 10,000 bbls\/day<\/td>\n Mid-Year<\/td>\n On track<\/td>\n<\/tr>\n \n Spruce Lake North construction completion<\/td>\n 10,000 bbls\/day<\/td>\n ~YE<\/td>\n Deferred<\/td>\n<\/tr>\n \n Liuhua 29-1 project first gas sales<\/td>\n 45 mmcf\/day gas
1,800 bbls\/day liquids<\/td>\n Q4<\/td>\n On track<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n