This news release contains references to the non-GAAP financial measures “funds from operations”, “free cash flow”, “net debt”, “operating margin” and “net debt to trailing funds from operations.” Please refer to “Non-GAAP Measures” at the end of this news release.CALGARY, Alberta, April 29, 2020 (GLOBE NEWSWIRE) — Husky Energy (TSX:HSE) recorded funds from operations of $25 million in the first quarter, with cash flow from operating activities, including changes in working capital, of $355 million. Funds from operations were impacted by a first-in, first-out (FIFO) loss of $397 million (after tax) in the quarter.“Severe pricing headwinds, amplified by geopolitical events, COVID-19 and the associated collapse of global oil and refined product demand, impacted our first quarter results,” said CEO Rob Peabody.Husky continues to prioritize its balance sheet, supported by significant liquidity. The Company’s structure also provides insulation from the impacts of oil price and differential volatility. This includes the deep physical integration of its upstream, midstream and downstream assets in the Integrated Corridor business, and long-term contracts in Asia.“We have acted quickly to cut our planned capital spending by half, safely shut in production and reduce refinery throughput to avoid cash-negative margins, with a view that global oil and refined product prices could remain under pressure for a while,” added Peabody. “These capital reductions and additional cost efficiencies are providing further resilience as we manage the business through this unprecedented market cycle.”Husky’s focus remains on process and occupational safety, and increasing the resilience of the Company.DIVIDEND REDUCTIONGiven current market conditions and the Company’s focus on the balance sheet, Husky’s Board of Directors has reduced the quarterly dividend to $0.0125 per common share.FIRST QUARTER SUMMARYFunds from operations were $25 million; reflecting the steep drop in crude oil and refined product prices and the impact of unfavourable inventory valuation adjustments, including a FIFO loss of $397 million (after tax).Cash flow from operating activities was $355 million, including changes in non-cash working capital.Net earnings were a loss of $1.7 billion; including impairments of $1.1 billion (after tax) primarily related to lower crude oil price assumptions, as well as an inventory realizable value write-down of $274 million (after tax) primarily in the U.S. Refining, Lloydminster Heavy Oil Value Chain, Oil Sands and Atlantic segments.Capital spending was $612 million, including $43 million in Superior Refinery rebuild capital; primarily directed towards construction of two 10,000 barrel-per-day Spruce Lake thermal bitumen projects in Saskatchewan, the Liuhua 29-1 field offshore China and the West White Rose Project in the Atlantic region.At the end of the quarter, net debt was $4.6 billion and total liquidity was $4.7 billion, comprised of $1.3 billion in cash and $3.4 billion in available credit facilities. Since the end of the first quarter, Husky has increased its liquidity with the addition of a $500 million term loan.Overall upstream production in the Integrated Corridor business averaged 235,000 barrels of oil equivalent per day (boe/day). Since the end of Q1, more than 80,000 barrels per day (bbls/day) of Integrated Corridor production has been shut in.Downstream throughput in the Integrated Corridor averaged 307,800 bbls/day. U.S. refining throughput has been reduced by 100,000 bbls/day to match local product demand.Offshore production averaged 63,900 boe/day, with operating margins of $55.60 per boe.FIRST QUARTER IMPAIRMENTS & INVENTORY VALUATION IMPACTS Total non-cash asset impairments were $1.1 billion (after tax) in the first quarter of 2020. These were primarily related to the Company’s upstream assets in North America and were largely due to lower crude oil price assumptions.FIFO losses related to the significant decrease in commodity prices accounted for $397 million (after tax) and are reflected in the U.S. Refining, Lloydminster Heavy Oil Value Chain and Oil Sands segments.
Inventory write-downs to net realizable value totalled $274 million (after tax), also reflected in the U.S. Refining, Lloydminster Heavy Oil Value Chain, Oil Sands and Atlantic segments.RESULTSINTEGRATED CORRIDOR
(LLOYDMINSTER HEAVY OIL VALUE CHAIN, OIL SANDS, WESTERN CANADA PRODUCTION, U.S. REFINING, CANADIAN REFINED PRODUCTS)Overall operating margin loss of $378 millionAverage upstream production of 235,000 boe/dayDownstream throughput of 307,800 bbls/dayLloydminster Heavy Oil Value Chain
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