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

RE:RE:RE:RE:What the Huskey?

[Dogsbreakfast4U]

Here is the link:

https://marketsandresearch.td.com/tdwca/Reports/Report?documentKey=2437-20181025_MR_20-CompanyFlashNote&format=PDF:

Husky Energy Inc. (HSE-T) C$18.75 Mixed Headline Results—2018 Prod'n Guidance Down, Capex up
Menno Hulshof, CFA Josie Ho, (Associate)
Event Q3/18 results. Conference call at 11:00 AM ET: 1-800-319-6413/1-604-638-9010 (passcode 2615)/webcast. Impact: SLIGHTLY NEGATIVE

FFOPS beat offsets slight production miss: FFOPS of $1.30 beat our estimate and consensus (Exhibit 1). The FFO beat vs. our estimate was largely driven by higher-than-expected heavy price realizations (drove stronger-than-forecast netbacks).

The 2% production miss was the result of a number of factors. We were aware of some of them (planned Tucker turnaround, maintenance at Sunrise) but it is unlikely that all were captured in Street estimates (decision to slow CHOPS well optimizations, third-party gas and power constraints and weaker-than-expected East Coast well performance).

Tucker volumes have since recovered to 30 mbbl/d. Sunrise utilization averaged 82% of design capacity (flat vs. Q2 due to maintenance activities and associated steam limitations). Design rates are still expected by year-end— while positive, its taken ~3.5 years to achieve this.

2018 guidance revisions: Per Exhibit 1, 2018 production guidance falls 4% due to a slow-down in CHOPS well optimizations and underperformance of East Coast infill well. Capex increases 6% due to accelerated Canadian resource play drilling activity, additional clarity on the timing of the Liuhua 29-1 spend profile (and an increase to HSE's WI to 75%) and a small uptick in Asian exploration capex.

Lloydminster thermal remains a good news story (accelerated timelines, strong rates): Rush Lake 2 starting producing in late July and is expected to reach design capacity in Q1/19. Beyond Rush Lake, HSE has another five 10 mbbl/d Lloydminster projects in the queue. Next is Dee Valley where the timeline has been pushed forward six months to Q4/19.

Solid quarter for Asian operations: BD production is yielding 40% higherthan-expected liquids production. On a longer-dated note (and subsequent to successfully drilling and testing an exploration well on Block 15/33), HSE drilled another exploration well on nearby Block 16/25 which also "encountered hydrocarbons". Blocks 15/33 and 16/25 are increasingly looking like they could add another leg of regional growth.

Superior Refinery remains down: Operations are not expected to resume until 2020. HSE accrued Q3 $110mm in insurance recoveries for asset damage, repair costs and clean-up (pre-tax).