[ET Net News Agency, 19 January 2018] Macquarie Research trimmed its target price for
Husky Energy, a Canadian-based integrated energy company, which is 40.18% owned by CK
Hutchison Holdings (00001), to C$16 from C$17 (or HK$100.71 from HK$107), and maintained
its "neutral" rating.
The research house noted that Husky is being forced to suspend production at its Searose
FPSO, which is the hub for its offshore Atlantic Canadian projects, by the regulator
(C-NLOPB) due to "serious issues respecting Husky's ice management, management systems and
organizational decisionmaking."
The Searose FPSO had current production of 27mbbl/d, although the company's Atlantic
Canada FY18 guidance is for 34-35mbbl/d.
Macquarie thinks this issue probably could not have come at a worse time for Husky,
given that Brent-quality crude is trading near its highest levels in three years and the
stock has been riding a recent wave of positive momentum.
The research house estimated that there could be a C$125m impact to cash flow for every
quarter that the FPSO is offline. That would be roughly a 3.7% impact to annual cash flow
for every quarter, or close to 15% annualized.
Macquarie noted that there is no way to know for sure how long this issue could last as
regulatory issues are rarely resolved quickly, and there is no precedent for this issue.
It assumed that the issue will take six months to resolve, Macquarie's 2018 production
forecast thus falls 5% to 309mboe/d, while its 2018 FFOPS (Funds From Operations Per
Share) falls 8% to C$3.11. (KL)