Husky Energy Inc. cumulative redeemable preferred T.HSE.PR.B

Spoke with Leo Villegas from IR

[onec007]

I highly encourage everyone to call for those that are simply ready to sell and move on. The market acts irrationally both ways on the upside and downside. For example, should the cannabis market (Tilray) jump up to $200 in one day? It is now under $8. Anyway back to Husky. Few key points from my conversation that I would like to share: 1. Break even cost model - Company is working to rework their model to $35 WTI this year, and $40 next year. There will be substantial cuts to capex (Western Canada assets, some thermal and even Wild Rose although that is a bit tricky since contractors and many parts are already progressing this project forward). They were already exploring capex cuts back in Jan when prices were starting to look shaky. 2. Cash flow (cash is king) - hence $35 WTI is the new model. They are working on to protect the cash flow. So expect losses (due to impairment and non cash charges), but what will be important is how well they can generate cash. 3. Dividend - won't know until next board meeting in April. My guess is either a cut down to 5 cents or suspension again. 4. Retail sale - was near the final stages, but then corona and oil war happened. Still progressing but get a sense that buyer(s) will most likely pass at this point unless they need the assets asap or have the finance in place. Pretty doubtful here... Would you buy in this environment? Some few positives : * Husky is getting good prices for their gas as well as their refinery and marketing are holding up well which will protect their net back * They understand the situation and will be releasing a revised outlook shortly but have notified first in field of signifcant changes * Confident that they will get out of this environment and thrive as they are highly diversified. When oil markets tank gas and refinery/marketing do well * Big shareholder with significant war chest (LKS) still very much involved One point I should highlight is that Husky did not release capex cuts day after the oil war like Cenovus is because they are planning and ensuring that numbers make sense. Apparently AP had to cut his trip short (flew via private) to announce a massive cut to capex. Husky flies on charter. Cenovus might very well be a low cost producer but it has too much debt and takeaway issues. Since they can't get their product down to the 2 co-owner refineries they won't be able to get better value. Definitely will see which companies survive this but SU, CNQ, IMO and HSE are my bet. Integrated models and low debt are key factors to low prices. Many of the oilsands producers will be gone or will have to sell for pennies on the dollar. If anyone wants Leo's direct email just ping me and I will share. When market acts like this just don't even look at it and just stay calm would be my advise.