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Husky approves $2.2bn West White Rose project

30 May 2017 17:30 (+01:00 GMT)
Husky approves $2.2bn West White Rose project

Houston, 30 May (Argus) — Husky Energy approved its C$2.2bn ($1.6bn) West White Rose extension project, providing the Canadian independent a low-cost outlet to sustain long-term growth.

First oil is expected in 2022, it said. The project, located offshore Newfoundland and Labrador, is expected to touch a gross peak production of about 75,000 b/d by 2025, as more wells are drilled and brought online. Of the total cost, C$180mn has been factored into this year's capital expenditure (capex) of a new guidance of C$2.5bn-C$2.6bn.

"Over the years, the Atlantic business has provided some of the strongest returns in the company's portfolio and West White Rose is the next chapter," chief executive Rob Peabody said in a statement.

The project will tie back to the existing SeaRose floating production, storage and offloading (FPSO) vessel in the field, allowing it to maximize recovery from the area while keeping costs in check. Since the project was first considered for sanction, Husky has achieved a 30pc cost reduction and a 40pc increase in peak output compared with initial estimates.

"Moving forward this project is a significant milestone for Husky," Peabody said.

The company reported another discovery in the northwest part of the White Rose field, which, together with an earlier series of finds and satellite developments have improved the longevity of the field originally discovered in 1984. The White Rose A-78 well was drilled about 6.8 miles (11 kilometers) northwest of the SeaRose in the first quarter and found a light oil column of more than 100 meters. The discovery continues to be assessed, it said.

Separately, Husky Energy also laid a five-year spending and output plan. It expects production to grow by about 4.8pc annually to 390,000-400,000 b/d of oil equivalent (boe/d) by 2021 versus 320,000-335,000 boe/d expected this year. The company has an inventory of projects that can deliver at least 10pc after tax rate of return at $45/bl US WTI prices, and breakeven at WTI $35/bl. It expects to further lower its total cash breakeven cost to $32/bl by 2021 from $33.50/bl in 2017.

Husky also pared its 2017 capex guidance by C$100mn because of continued costs reductions from an earlier plan shared in December, of C$2.6bn-C$2.7bn, and C$2bn in 2016. It expects its five-year capex to average around C$3.3bn, of which it would need C$1.9bn to sustain its output.

Funds from operations are expected to grow from about C$3.3bn in 2017 to about C$4.8bn in 2021.These expectations are based on a WTI price of $50/bl in 2017, $55/bl in 2018 and $60/bl through 2019-2021.