Husky Energy’s Upstream Strategy Focused on Acquisitions

Husky Energy says acquisitions are the key part of its near term growth strategy. Husky will see production growth coming from Asia Pacific and from Oilsands in the long term but in the next 24 months, growth will be through acquisitions. Continue reading here..

Husky Seeks JV Partner for Accelerated Development of its Ansell, Liquids Rich, Gas Assets

Husky’s chief executive, Amit Ghosh, said in its 2nd quarter conference call, that the company is seeking a joint-venture partner to accelerate development of an emerging liquids-rich natural gas play in western Alberta.

Husky has created a preliminary development plan which could potentially see up to 2,600 Cardium and deeper Manville formation wells drilled in its Ansell assets, most of which would be horizontal. In the first two quarters of 2011, Husky drilled 21 Cardium Formation wells at Ansell. A further 12 Cardium and nine deeper multi-zone wells are planned to be drilled in the second half of 2011. The company is currently constructing additional offload capacity on its own, which will increase total production capacity at Ansell to 56 MMcf/d and over 2,000 Bbls/d liquids.

As prices for natural gas continue to remain low, North American natural gas producers have shifted focus towards fields rich in natural gas liquids, which trade at prices close to crude oil, and the Ansell property is one such liquids rich gas field, which could benefit from further development. 

Analyst Comment

Assuming a 50% JV for the undeveloped acreage of 150,000 acres, we value the 50% JV to be between $60 - $80 million. This valuation is based on similar recent deals in the vicinity involving the Cardium Formation acreage where the acreage metric was between $1,200/acre - $1,800/acre. 

Derrick 'Deals in Play'

Derrick has aggregated all publicly announced properties for sale. Derrick’ Deals in Play is the most comprehensive data set of its kind in the industry. This special feature includes every deal ranging from the large packages being brokered through investment banks to the much smaller, non-brokered prospects. For more information click here. 

Husky Energy raises $1.2B to fund growth plans; Expects 3 -5% CAGR Production Increase through 2021

Husky Energy Inc, Canada’s No. 3 integrated oil company, said it will raise $1.2-billion though public and private share offerings in order to finance its production growth plans. Husky, said it will sell 36.9 million common shares priced at $27.05 each, to a group of underwriters led by RBC Capital Markets, Goldman Sachs Canada, HSBC Securities (Canada) and J.P. Morgan Securities. The bought deal is expected to raise about $1-billion.

Husky announced a 2011 capital budget of CAD 4.9 billion (US$ 5.02 billion), a 23% increase from 2010. Excluding the acquisition, the bulk of the spending increases will go toward the Sunrise project and Southeast Asia, with reductions in midstream and downstream spending. With the larger capital budget and contributions from the recent acquisitions, Husky expects 2011 total production growth to be slightly above 4%.

Most of the gains will come from an increase in natural gas production of 14%, while expected 5% growth in heavy oil and bitumen volumes should offset a 3% decline in light and medium crude production. To supplement the funding of the capital plan, Husky also announced plans for a CAD 1 billion (US$ 1.02 billion) equity issuance. Current shareholders will have the option of receiving dividend payments in shares instead of cash.

The retention of the Southeast Asian assets is probably a positive step, given the outlook for increased gas demand in the region and the potential for exploration success. Also, moving forward with Sunrise should provide significant growth in oil volumes. However, while the company plans to achieve its previous production growth target of 3%-5% per year, short-term gains rely largely on natural gas acquisitions.

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The move toward natural gas stands in contrast to Husky's peers, which are shifting investment toward oil projects and away from natural gas. Also, the company's natural gas production is coming from Western Canada, a region that falls higher on the cost curve and faces intense competition from U.S. shale plays. As a result, returns may be challenged despite the growth in production.

Husky said the cash will go to boost exploration and development of its properties in Western Canada’s oil sands, offshore Newfoundland and Southeast Asia. It also said that, with the additional capital, it expects production to grow at the high end of its 3-5% annual target though 2015.

Husky Energy’s Exploration Portfolio:

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Source Documents:
Corporate Overview June 2011

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Greenland – A frontier “giant” yet to be awakened!

Greenland is one of the few frontier regions left in the world where there are still large unexplored areas with giant structures and documented prospects. The latest hunt began in July, when the drillship West Navion spudded a well for Statoil and three partners about 145 kilometers offshore of Greenland's capital, Nuuk. The Qulleq-1, a name derived from the Greenlandic word for "oil lamp," marks the first drilling in the region since the 1970s.

Detailed geochemical studies undertaken by the Geological Survey of Denmark and Greenland (GEUS) have recognised five distinct oil types. The most significant of these is the “Itilli” type, which originates from a marine (Type II) oil prone Cenomanian-Turonian source rock.

These findings, in combination with the interpretation of an extensive modern seismic grid have revealed all the required ingredients for a potential “World Class” petroleum basin. As a result there has been significant renewed industry interest in the petroleum prospectivity of offshore West Greenland.

Cairn Energy currently has an interest in 11 areas (blocks) offshore Greenland, covering an area of approximately 81,000 sq km. Cairn has operated interests offshore Greenland at Sigguk, Eqqua, Lady Franklin, Atammik, Sallit, Kingittoq, Saqqamiut, and Uummannarsuaq.

In July 2010, Cairn in July commenced drilling operations on the Alpha prospect (Alpha-1) and T8 exploration prospects in the Sigguk Block, approximately 108 miles (175 km) offshore Disko Island, west Greenland. The  well discovered oil in it. Cairn's West Disko program includes two Sigguk exploration wells and the acquisition of around 2,000 kilometers (1,242 miles) of 2D seismic in Eqqua.

As per an article in the Business Day, Cairn will spend more than $1 billion over the next three years drilling up to 10 wells off Greenland.

Other producers with exploration interests offshore Greenland include Husky Energy, which recently has been interpreting seismic data from its three Greenland exploration licenses.

PA Resources AB on July 15 2010 completed a seismic survey of Block 8 offshore West Greenland. The seismic survey, initiated on June 6, was completed 10 days ahead of schedule. Data processing is now underway.

ExxonMobil and Chevron also hold rights off Greenland and are interpreting their own seismic data to identify potential drilling locations. ''Any exploration drilling campaign is unlikely before 2014,'' said Chevron, which holds 29 per cent equity in Block 4 off western Greenland with the operator Dong Energy.

Scott Kerr, the chief executive at the Norwegian Energy Company, said: ''We believe that with the estimated size of resources in Greenland it would be economic to develop at over $US75-a-barrel oil prices, but this depends on the reservoir quality, the field's size, and distance from shore. There are big differences in the size of resources because little exploration has been done.''

The energy consultancy IHS Cera estimates that technically recoverable undiscovered resources in Greenland could be equivalent to 50 billion barrels of oil.

Challenges….
The basic challenges that Greenland is currently facing at its oil and gas exploration front are the high costs necessary to pay for infrastructure, icy winter conditions which limit the time window for drilling operations and also opposition from different environmentalist groups.

What next?

Amid all these challenges and controversies, Greenlanders believe that an increase in its oil and gas exploration and production efforts will establish political independence from Denmark. If Greenland is successful in generating income from its mineral resources it will decrease its reliance on £500 million ($819 million) a year in subsidies from Denmark by 50 percent. 



.... the battle for a new oil frontier is on!!!!!!