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Investor Day – Husky Energy Inc.

Husky Energy Inc. · Jun 4, 2014 · 115 slides

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Slides

  1. Investor Day – Husky Energy Inc. – slide 1
    Investor Day June 4, 2014
  2. Investor Day – Husky Energy Inc. – slide 2
    Agenda Strategy is Delivering 9:05 - 9:20 Strategy Update Asim Ghosh 9:20 - 9:30 Financial Plan Alister Cowan Foundation Portfolio 9:30 - 9:35 Portfolio Review Rob Peabody 9:35 - 9:45 Heavy Oil Ed Connolly 9:45 9:55 Western Canada Rob…
  3. Investor Day – Husky Energy Inc. – slide 3
    Investor Day June 4, 2014
  4. Investor Day – Husky Energy Inc. – slide 4
    Strategy Update Asim Ghosh
  5. Investor Day – Husky Energy Inc. – slide 5
    Strategy and Portfolio Development Balanced growth strategy delivering Transforming the foundation Focused integration achieving world market prices Delivering major projects Top-quartile dividend Reliable and repeatable…
  6. Investor Day – Husky Energy Inc. – slide 6
    The Way We Were 6
  7. Investor Day – Husky Energy Inc. – slide 7
    Rich Queue of Projects Near-Term (2014-2016) Mid-Term (2017-2019) Long-Term (2020+) Sandall Thermal Pikes Peak North Thermal Lloyd 3 Thermal Rush Lake Thermal Rush Lake 2 Thermal McMullen Thermals Edam West Thermal Lloyd 1 Thermal…
  8. Investor Day – Husky Energy Inc. – slide 8
    Proved Reserves Replacement Outpacing Production On track to exceed 250% 140% annual average through 2017 200% 150% 140% 100% 50% Annual Three Year Average 0% 2009 2010 2011 2012 2013 2014 Values exclude economic…
  9. Investor Day – Husky Energy Inc. – slide 9
    Shaping Risk and Delivering Higher Quality Returns Heres what we mean by higher quality returns predictable outputs, less volatility, and sustainable growth Heres how we create it: Portfolio flexibility Balancing towards…
  10. Investor Day – Husky Energy Inc. – slide 10
    Portfolio Flexibility Broad portfolio Capital allocation 10
  11. Investor Day – Husky Energy Inc. – slide 11
    Balancing Towards Longer Wavelength Projects Long-Wavelength Production Forecast as a % of Total Long wavelength production 100% includes Heavy Oil thermals, resource plays and Oil Sands Conventional Conventional production…
  12. Investor Day – Husky Energy Inc. – slide 12
    Delivering Pricing Reliability Realized Pricing on Upstream Production Processed (March 31, 2014) 160 140 Brent Pricing 120 Benchmark Realized Price /bbl 100 80 US Refining 60 Infrastructure and Marketing 40 CDN…
  13. Investor Day – Husky Energy Inc. – slide 13
    Shaping Execution Risk Liwan Delivered SeaRose Reliability 97% Refinery Uptime Proven Thermal Performance Room to Run at Ansell Flemish Pass Discoveries 13
  14. Investor Day – Husky Energy Inc. – slide 14
    Oilier Pricing Product Pricing Mix as % of Past/Forecast Commodity value Production 100% Higher netback production North American Dry Gas Oil and Oil-Like Pricing 50% 0% 09 10 11 12 13 14 15 16 17 18 19 Year 14
  15. Investor Day – Husky Energy Inc. – slide 15
    Shaping Risk and Delivering Higher Quality Returns Portfolio Flexibility Longer Wavelength Focused Integration Higher Quality Returns = + Sustainable Growth Shaping Execution Risk Oilier Pricing 15
  16. Investor Day – Husky Energy Inc. – slide 16
    The Bottom Line Returns Total Shareholder Return June 1, 2011 June 1, 20141, 2 50% 40% Dividend + Share Buyback Share price 30% 20% 10% 0% HSE -10% -20% -30% -40% -50% 1. TSR Data Sourced from Bloomberg 2. As of June…
  17. Investor Day – Husky Energy Inc. – slide 17
    Financial Plan Alister Cowan
  18. Investor Day – Husky Energy Inc. – slide 18
    On Pace With Our Targets 2012-2017 2010 Actual 2013 Actual Q1 2014 Targets Production (mboe/d) 287 312 326 5 - 8% CAGR (3) Cash Flow from Operations (3) 3.1 billion 5.0 billion 1.5 billion 6 - 8% CAGR (3) Reserve Replacement…
  19. Investor Day – Husky Energy Inc. – slide 19
    Integration Strategy Mitigates Earnings Volatility Upstream E&P Net Operating Earnings 1 700 120.00 600 110.00 100.00 500 90.00 MM 400 Upstream 80.00 300 2 70.00 WCS 200 60.00 100 50.00 0 40.00 Q1 2012 Q2…
  20. Investor Day – Husky Energy Inc. – slide 20
    Integration Strategy Mitigates Earnings Volatility 1, 2 Total Net Operating Earnings 700 120.00 600 110.00 5 100.00 500 90.00 MM 400 Downstream 4 80.00 I&M 300 Upstream 3 70.00 WCS 200 Brent 60.00 100 50.00…
  21. Investor Day – Husky Energy Inc. – slide 21
    Portfolio Management/Capital Allocation Shaping Risk Product type Production by Geography* Geography/markets LloydminsterOil and Asian Gas Capital requirement/timeline Western Canada Return of Asset/IRR Atlantic Canada Asia…
  22. Investor Day – Husky Energy Inc. – slide 22
    Staying Course on Guidance Capital Expenditures (billions) 400 Production (mboe/day) 6 Forecast range Forecast range Midstream/ 350 330 355 mboe/d *5.0 4.8 5.0 Downstream/ 5 312 mboe/d Corporate 300 Natural Gas Asia Atlantic…
  23. Investor Day – Husky Energy Inc. – slide 23
    Strong Balance Sheet and Investment Grade Credit Rating Liquidity Long-term Debt Maturity Schedule Q1 2014 Debt Actual Targets 1,200 Net Debt 2.7 bln N/A 1,000 Net Debt to Cash Flow* 0.5 X Below 1.5X CDN Millions Net Debt to…
  24. Investor Day – Husky Energy Inc. – slide 24
    Focus on Returns Strong balance sheet to see long-lead projects through commodity price fluctuations Portfolio management and flexible capital allocation Reliable cash flow growth Top-quartile dividend 24
  25. Investor Day – Husky Energy Inc. – slide 25
    Foundation Portfolio Review Rob Peabody
  26. Investor Day – Husky Energy Inc. – slide 26
    Shaping Process and Occupational Safety Critical & Serious Incidents 1 Total Recordable Incident Rate 2 6 1.5 of injuries per 100 workers per year 5 of incidents/200k hrs 4 3 1 2 1 0 0.5 2010 2011 2012 2013 2010…
  27. Investor Day – Husky Energy Inc. – slide 27
    Foundation Facelift Project Forecast Net Forecast Net Forecast Production Capex IRR 2014-2019 Expected Production Adds (BOE/D) Near-Term (2014-2016) 300 Heavy Oil Thermals Four sanctioned projects 33,500 1.3 bln 20% 250 Western…
  28. Investor Day – Husky Energy Inc. – slide 28
    Lengthening the Stride in our Foundation Longer wavelength 2014-2019 Expected Production 300 Deep portfolio of high-return projects 250 Competitively advantaged 200 MBOE/D 150 Longer 100 Wavelength 50 0 2014 2015…
  29. Investor Day – Husky Energy Inc. – slide 29
    Heavy Oil Ed Connolly
  30. Investor Day – Husky Energy Inc. – slide 30
    Heavy Oil Advantage Second-to-none land and infrastructure position Over two million net acres Technology fuelling growth Fully integrated Improved quality of returns 120 KMs 200 KMs 30
  31. Investor Day – Husky Energy Inc. – slide 31
    Making Long Wavelengths Longer FY2013 Netbacks/bbl* Higher recoveries 60 Higher netbacks /BOE 30 0 Thermal Non-Thermal Proportion of Thermal vs. Non-Thermal Production Op Cost/bbl 30 /BOE 15 0 Full Year 2009…
  32. Investor Day – Husky Energy Inc. – slide 32
    Thermal Portfolio Heating Up Thermal First Oil Current/ Status Thermal Production Forecast* Project Date Forecasted Net 80 80,000 Production Rate Pikes Peak 1984 4,100 Producing Bolney Celtic 1996 19,000 60 Paradise Hill…
  33. Investor Day – Husky Energy Inc. – slide 33
    Typical Thermal Economics Metric Target 1 Construction time 2 years Start up to peak < 3 months production SOR target 2.0 early years Pikes Peak South Sustaining capital/bbl2 5 - 7 Life of project 15 Years + Recoveries target…
  34. Investor Day – Husky Energy Inc. – slide 34
    Leveraging Thermal Expertise at McMullen Best estimate contingent resources of 644 mmbbls* Development Build on Heavy Oil expertise Several 10,000 bpd projects Timeline One project in mid-term Several others in long-term…
  35. Investor Day – Husky Energy Inc. – slide 35
    Testing Other Technologies Horizontal wells Currently producing 13,000 bpd 140 drills per year Waterflood targeting 15% recovery Horizontal well Cold Solvent EOR Process Targeting old CHOPS reservoirs Uses existing wells and…
  36. Investor Day – Husky Energy Inc. – slide 36
    Delivering Higher Quality Returns Second-to-none land and Forecast Net Production infrastructure Technology fuelling growth 150 Fully integrated Cold EOR Improved quality of returns Horizontal 100 MBOE/D 2013 Non-Thermal…
  37. Investor Day – Husky Energy Inc. – slide 37
    Western Canada Rob Symonds
  38. Investor Day – Husky Energy Inc. – slide 38
    Old Dog, New Tricks Extensive resource play portfolio diversified by product, region and scale Investing in the right projects Breaking down silos to improve efficiencies 38
  39. Investor Day – Husky Energy Inc. – slide 39
    Shaping the Resource Play Portfolio Disciplined capital allocation Average well cost reduction of 30% over last three years Large portfolio allows flexibility 1,500 locations on established resource plays Improving cycle…
  40. Investor Day – Husky Energy Inc. – slide 40
    Ansell Room to Run Large land base Multi-zone potential: 800 locations Fully scalable Ansell Area Wilrich Wells Cumulative Production 3,500 Cumulative Production (mmcf) 3,000 2,500 2,000 1,500 1,000 500 0 0 2 4…
  41. Investor Day – Husky Energy Inc. – slide 41
    The Sweet Spot Kaybob Duvernay Four-well pad and two-well pad onstream Q1 2014 Kaybob Duvernay Products High condensate yields of 200 bbls/mmcf 42.6% Early results encouraging 44.8% Condensate NGL Reducing costs 12.6% Gas Q1…
  42. Investor Day – Husky Energy Inc. – slide 42
    Other Mid-Term Potential Rainbow Muskwa S.W. Saskatchewan Multi-zone 300,000 net developable acres Oil and liquids rich gas potential Assessing effectiveness of different fracs S.W. Saskatchewan multi-zone 140,000 acres Oil…
  43. Investor Day – Husky Energy Inc. – slide 43
    Focus on Higher Quality Returns Extensive resource play Forecast Production portfolio diversified by production, region and 160 scale Lower Netbacks* Investing in the right MBOE/D projects Breaking down silos to 80 improve…
  44. Investor Day – Husky Energy Inc. – slide 44
    Downstream Bob Baird
  45. Investor Day – Husky Energy Inc. – slide 45
    Weatherproofing Upstream and Creating Value Project Scope Forecast Net Forecast Capex IRR Near-Term (2014-2016) Toledo Hydrotreater Recycle Gas Improve operational integrity 20 mm 20% Compressor Project and plant performance Hardisty…
  46. Investor Day – Husky Energy Inc. – slide 46
    Strong Downstream Infrastructure Position (1) Source: Solomon Associates 46
  47. Investor Day – Husky Energy Inc. – slide 47
    Strong Downstream Infrastructure Position (1) Source: Solomon Associates 47
  48. Investor Day – Husky Energy Inc. – slide 48
    Strong Downstream Infrastructure Position 48
  49. Investor Day – Husky Energy Inc. – slide 49
    Strong Downstream Infrastructure Position 49
  50. Investor Day – Husky Energy Inc. – slide 50
    Strong Downstream Infrastructure Position 50
  51. Investor Day – Husky Energy Inc. – slide 51
    Strong Downstream Infrastructure Position 51
  52. Investor Day – Husky Energy Inc. – slide 52
    Stabilize Cash Flow and Improve Returns 1,2 Integrated on 700 Total Net Operating Earnings 120.00 a barrel for 600 110.00 barrel basis 5 100.00 Reduces cash 500 flow volatility 90.00 400 Strong returns 80.00 generated over…
  53. Investor Day – Husky Energy Inc. – slide 53
    Q&A
  54. Investor Day – Husky Energy Inc. – slide 54
    Break
  55. Investor Day – Husky Energy Inc. – slide 55
    Pillars Review Rob Peabody
  56. Investor Day – Husky Energy Inc. – slide 56
    Pillars Portfolio Project Forecast Net Production Forecast Net Forecast Forecast Net Production (boe/d) Capex IRR Near-Term (2014-2016) 200 Asia Pacific Liuhua 34-2 3,300 100 mm 15% Oil Sands Sunrise Phase 1 30,000 1.4 bln 11-13%…
  57. Investor Day – Husky Energy Inc. – slide 57
    Hitting Our Stride Forecast Net Production Strong pipeline of projects with good returns 200 Major identified potential for the future 150 Longer wavelength MBOE/D 100 50 Longer Wavelength 0 2014 2015 2016 2017…
  58. Investor Day – Husky Energy Inc. – slide 58
    Asia Pacific Bob Hinkel
  59. Investor Day – Husky Energy Inc. – slide 59
    Crossing the Threshold Material cash flow Project Current/Forecast Forecast Forecast Net Production Net Capex IRR (boe/d) Focused portfolio Expected 2014 Average Production Long track record Wenchang 5,000 - 20% in region Liwan…
  60. Investor Day – Husky Energy Inc. – slide 60
    Liwan Gas Project Delivered 6.5 billion project for three fields Largest offshore platform in Asia; 1 bcf/d gas terminal About seven years from discovery to production Producing gas and liquids Liwan 3-1 deepwater facilities…
  61. Investor Day – Husky Energy Inc. – slide 61
    Indonesian Discoveries & Developments BD field in construction Net production of 40 mmcf/d gas and 2,400 boe/d liquids (2017F) MBH Field MDA Field MDA and MBH fields in tender BD Field phase Net production of 50 mmcf/d…
  62. Investor Day – Husky Energy Inc. – slide 62
    The Next Chapter Exploration blocks Southern Gas Field Taiwan Madura exploration Anugerah PSC Offshore Taiwan Leveraging our expertise 2013 Acquisition Lines 2014 Planned Acquisition Husky Block boundary Assessing other…
  63. Investor Day – Husky Energy Inc. – slide 63
    Focused Portfolio Material cash flow Forecast Net Production (includes cost recovery) Strong queue of higher 70 return projects Established track record Wenchang MBOE/D Madura BD 35 Madura MDA/MBH Liuhua 29-1 Liuhua-34-2…
  64. Investor Day – Husky Energy Inc. – slide 64
    Oil Sands John Myer
  65. Investor Day – Husky Energy Inc. – slide 65
    Predictable Earnings and Cash Flow Project Forecast Net Forecast Forecast 40-60 year project life Production (boe/d) Net Capex IRR Paced growth with huge upside Near-Term (2014-2016) Technology reducing sustaining Sunrise Phase 1…
  66. Investor Day – Husky Energy Inc. – slide 66
    Sunrise Phase 1 By The Numbers Metric Target Production (net) 30,000 bbls/d Start up to full production 18-24 Months SOR design rate 3.0 Sustaining capital per bbl 1 8 Life of project 40-60 years Operating cost per bbl 16-18…
  67. Investor Day – Husky Energy Inc. – slide 67
    Sustaining Capital Protecting Returns Two-thirds of the cost of a major oil sands project like Sunrise is sustaining capital Evaluating more than 75 technologies to drive down costs, including: Vacuum-insulated tubing Custom rig…
  68. Investor Day – Husky Energy Inc. – slide 68
    Sunrise Plant 1A 68
  69. Investor Day – Husky Energy Inc. – slide 69
    Water Treatment 69
  70. Investor Day – Husky Energy Inc. – slide 70
    Motor Control Centre Plant 1A New photos available May 20 70
  71. Investor Day – Husky Energy Inc. – slide 71
    Well Pad Sunrise Well Pad L 71
  72. Investor Day – Husky Energy Inc. – slide 72
    Ready For Operations 72
  73. Investor Day – Husky Energy Inc. – slide 73
    Sunrise Phase 2 Making Big Projects Smaller Phase 2A scheduled for end of decade; Phase 2B about two years later Greater modularity Reduced plant footprint Leveraging existing facilities and equipment Greater cost savings…
  74. Investor Day – Husky Energy Inc. – slide 74
    Further Upside at Sunrise 60 square kilometres of 3D seismic program shot 209 stratigraphic wells completed Thick reservoir Potential for further development on lease beyond existing approvals 74
  75. Investor Day – Husky Energy Inc. – slide 75
    Growth in the Carbonates Saleski 10 billion barrels best estimate contingent resources1 Filed regulatory pilot project application Infrastructure in place and being developed Growth potential for the 2020s 1 Please see…
  76. Investor Day – Husky Energy Inc. – slide 76
    Longer Wavelength Business 40 60 year project life Forecast Net Production Annuity-type production 35 Paced development with 30 upside potential 25 Technology reducing MBOE/D sustaining capital and 20 operating costs 15…
  77. Investor Day – Husky Energy Inc. – slide 77
    Atlantic Region Malcolm Maclean
  78. Investor Day – Husky Energy Inc. – slide 78
    White Rose A Deep Portfolio High netback barrels Project Forecast Net Peak Forecast Net Forecast Production (boe/d) Capex IRR Production and cash Near-Term (2014-2016) flow through the 2020s North Amethyst Hibernia well 5,000 100…
  79. Investor Day – Husky Energy Inc. – slide 79
    South White Rose Delivering Higher Quality Returns Achieves two objectives: Significant cost savings over standalone gas injection Improves recoverability First gas injection Q1 2014, first oil around the end of the year Pairing…
  80. Investor Day – Husky Energy Inc. – slide 80
    West White Rose Improving Drilling Efficiency SeaRose FPSO processing reduces overall project cost Wellhead platform designed to facilitate other tie-backs Sanction upon development plan approval 80
  81. Investor Day – Husky Energy Inc. – slide 81
    Big Rig, New Technologies Employing established technologies in innovative ways to enhance returns West Mira custom-built to future needs Five-year renewable lease West Mira under construction 81
  82. Investor Day – Husky Energy Inc. – slide 82
    Flemish Pass Stay Tuned Multiple targets identified West Hercules drilling rig secured 18-month drilling campaign starting in Q3 2014 Balancing exploration against development Map courtesy of Statoil 82
  83. Investor Day – Husky Energy Inc. – slide 83
    Generating Cash Flow and Growth Near and medium-term projects staged to fund future growth and provide dependable cash flow Long-term commercial potential in Flemish Pass Net Production 60 40 MBOE/D South White Rose West…
  84. Investor Day – Husky Energy Inc. – slide 84
    Pillars Q & A
  85. Investor Day – Husky Energy Inc. – slide 85
    Wrap-up Asim Ghosh
  86. Investor Day – Husky Energy Inc. – slide 86
    Balanced Growth Strategy Is Delivering Expansive growth portfolio Higher quality returns Hitting five-year targets Top-quartile dividend 86
  87. Investor Day – Husky Energy Inc. – slide 87
    Final Q & A
  88. Investor Day – Husky Energy Inc. – slide 88
    Advisories Non-GAAP Measures This document contains certain terms which do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. None of these…
  89. Investor Day – Husky Energy Inc. – slide 89
    Advisories Note to U.S. Readers The Company reports its reserves and resources information in accordance with Canadian practices and specifically in accordance with National Instrument 51-101, Standards of Disclosure for Oil and Gas…
  90. Investor Day – Husky Energy Inc. – slide 90
    Appendix
  91. Investor Day – Husky Energy Inc. – slide 91
    Reserves Breakdown: Foundation Portfolio Project WI W-I WI- WI Contingent Proved Probable Possible- Resources MMBOE MMBOE MMBOE Best Estimate MMBOE Heavy Oil Non-Thermal (total) 80.1 40.1 24.2 - Heavy Oil Cold EOR 2.4 0.9 1.8 35.0…
  92. Investor Day – Husky Energy Inc. – slide 92
    Reserves Breakdown: Pillars Portfolio Project Working Interest Working Interest Working Interest WI Proved MMBOE Probable MMBOE Possible MMBOE Contingent Resources Best Estimate MMBOE Atlantic Region White Rose S. Avalon Oil 23.9…
  93. Investor Day – Husky Energy Inc. – slide 93
    Appendix: Liwan Economics Operating costs 10% Taxes and royalties 20% Exploration cost recovery 800mm Gross Production Time Offshore platform Field Capacity Price Frame Liwan 3-1 Gas 300 mmcf/d 11-13/mcf Current NGLs 10-14…
  94. Investor Day – Husky Energy Inc. – slide 94
    Gas Resource Play Templates 1. Ansell Cardium Horizontal Wells 2. Ansell Wilrich Horizontal Wells 3. Ansell Falher Notikewin Wells 4. Strachan Cardium 5. Kakwa Wilrich 6. Kaybob Duvernay 7. Kakwa Montney 8. Sinclair Montney 9. Horn River…
  95. Investor Day – Husky Energy Inc. – slide 95
    1. Ansell Cardium Total Liquids Content: 60 bbls/mmcf Husky Estimated Ultimate Recovery/Well: Industry Type Curve 600 MBOE Well Cost (current to steady): 9.5 MM to 7.5 MM Background Facts Drilling Summary Completions Summary…
  96. Investor Day – Husky Energy Inc. – slide 96
    2. Ansell Wilrich Total Liquids Content: 21 bbls/mmcf 6,000 Ansell Wilrich Horizontals Husky Industry Estimated Ultimate Recovery/Well: Cumulative Raw Gas Production (mmcf) 5,000 Type Curve 833 MBOE 4,000 Well Cost…
  97. Investor Day – Husky Energy Inc. – slide 97
    3. Ansell Falher/Notikewin Horizontal Wells Total Liquids Content: 42 bbls/mmcf Ansell Falher/Notikewin Horizontals 3,000 Estimated Ultimate Recovery/Well: Husky Industry Cumulative Raw Gas Production (mmcf) 2,500 778 MBOE…
  98. Investor Day – Husky Energy Inc. – slide 98
    4. Strachan Cardium Horizontal Wells Total Liquids Content: 62 bbls/mmcf 1400 Cardium Horizontal Wells Cumulative Production Husky Estimated Ultimate Recovery/Well: 1200 Industry Cumulative Production (mmcf) Type Curve 507…
  99. Investor Day – Husky Energy Inc. – slide 99
    5. Kakwa Wilrich Total Liquids Content: 27 bbls/mmcf Husky Estimated Ultimate Recovery/Well: Industry Type Curve 1,132 MBOE Well Cost (current): 9.5 MM Background Facts Drilling Summary Completions Summary 24,000 net acres…
  100. Investor Day – Husky Energy Inc. – slide 100
    Duvernay HZ Wells _ Normalized Cumulative Gas Production 6. Kaybob Duvernay 1,000 900 Cumulative Gas Production (mmscf) 800 700 Total Liquids Content: 200 bbls/mmcf 600 500 400 Estimated Ultimate…

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