Husky Energy Cuts 500 Retail Operations Amidst Low Oil Prices

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Husky Energy

Canadian oil companies have been having a tough time over the past few months. With prices for Western Canadian oil sands bitumen falling well below profitable extraction levels, and with recent provincial intervention by restricting supply only mildly increasing price levels, even well-established giants in the industry are struggling to stay afloat.

Canadian oil giant Husky Energy (TSE: HSE) has announced that it will be cutting 500 retail stores and seeking a new buyer for it’s Prince George Refinery as it takes a step out of the retail game.



Our retail network and the Prince George Refinery are excellent assets, with exceptional employees, which had made solid contributions to Husky over the years,” said CEO Rob Peobody in the company’s press release. “However, as we further align our Heavy Oil and Downstream businesses to form one Integrated Corridor, we’ve taken the decision to review and market these non-core properties. We expect the businesses will be highly marketable, attracting strong interest and valuations.”

It marks a massive departure for the energy giant, which for the past 80 years has been retailing fuel to customers in Canada. With over 500 service stations and facilities spread across the country and with a loyalty program of over 1.6 million members, Husky’s departure signals a big shift in marketplace as the firm transitions to more profitable, heavy oil refining facilities.

We believe the retail network naturally has a couple strategic buyers that should be interested, while the refinery has a smaller list of potential purchasers given the scale, size and location of the facility,” said CIBC analyst Jon Morrison in light of the news. He would add that the combined value of these assets to be around $835 million.

Currently, the companies Lloyd facility as well as it’s three refineries in the US Midwest run on 48% heavy oil, which will move up to 55% in the next few years. They also made investments in a 50,000 bbl/day refinery in Wisconsin for US $435 million last year. Overall, the company’s strategy is to increase its heavy oil processing capacity at their various facilities while they divest away from simple, light-oil refineries, such as the Prince George facility that’s now going to go on auction.

Last month, the Albertan government announced that it would be cutting 325,000 barrels a day in production across the province in a bid to raise oil prices and tackle a looming storage glut. With 35 million barrels sitting in storage, estimates predict that the Canadian economy is losing US $60 million a day, according to The National Post.

Husky Energy shares went up 1.7 percent today, reacting little to the news. However, share prices over the past couple of weeks have been the lowest in a year, and quite close to breaking a 5-year low. Overall sentiments remain bearish for this Canadian giant.

Husky Energy Company Profile

Husky Energy is a Canadian-based integrated energy company. It is headquartered in Calgary, Alberta, and its common shares are publicly traded on the Toronto Stock Exchange under the symbol HSE. Husky has two core businesses. Its Integrated Corridor operates in Western Canada and the United States, where thermal production is integrated with the Downstream business and supported by Western Canada operations. Offshore the Company is focused in the Asia Pacific and Atlantic regions. The Company’s business strategy is to focus on returns from investment in a deep portfolio of opportunities that can generate increased funds from operations and free cash flow.Husky’s focus on safety helps to protect the public, its employees and contractors, the environment and its assets while providing for efficient and productive operations. –Husky Energy



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