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.

[oilandgasmick]

Great post--thanks for the info especially for those who couldn't get through to IR. I knew that substantial capex cuts were coming, no point expanding production for the next few years. Agree that divy will have to be cut, not much choice in a mess like this. Yes, cash flow is king here and I like the notion that the new model will be based on 35 buck WTI. That's probably a bit

[onec007]

Thanks for your comment. I didn't ask about pricing but they were entertaining few opposing offers so was trying to get the best pricing and term. From the sound of things it might have been discussed just too much trying to dot the Is and Ts hence why it didn't get done. Like I said it could still happen but given today's environment just don't think it will happen unless they are

[oilandgasmick]

I think they do have some debt due this year but point well taken. A little bit of optimism on a day like today sounds good, apparently the biggest single drop on the markets since the day that Hitler invaded France.

[display_name]

With 1.8 bn cash on hand and 1.5 bn recievable I dont think debt will be an issue for them for the foreseeable future :) Picked some up today at $3 and set up laddered limit buys all the way down, I'm not missing this sale.

[oilandgasmick]

Yeah, I think the bottom is somewhere around 2 bucks. Cash on hand is about 2 bucks a share and I can't see it sliding much beyond that point. I have the same plan as you but still think that Friday and Monday will both be very tough days for the market.

[investoil9]

Thanks for Posting; Excellent Info.

[Seppelt]

I thought, gas stations are more attractive when prices are low. Not sure about margins (probably higher for refineries) but motorists most likely to drive more when fuel is less costly. People also avoid public transportation because of the coronavirus and drive instead. Business travelers also prefer driving instead of flying. I know a guy who recently chose to drive to New York from Toronto

[onec007]

Wasn't referring to gas stations I was referring to their Asia Pacific gas assets - long term contracts. Read the report that just came out it was highlighted there. As expected, they no cuts were made to their downstream (refinery) capex. In this environment they need Superior back up , built and running ASAP so that they can contd to capture more of their additional capacity and not settle

[mrbb]

I'm hearning china was not meeting contractual gas demand (russia, foreign LNG) under the clause force majeure but knew husky wouldn't be affected and didn't post my thought about it because scottie99 will say i'm pumping hse.  Thanks for confirming about the liwan gas/wencheng oil being safe from cut. The partnership with CNOOC has its advantage.  China will not cut