Husky shuffles assets as prices slide

GARY PARK

For Petroleum News

Husky Energy has started emptying a basket of assets in its bid to ride out the collapse of oil and natural gas prices by selling part of its pipeline business for C$1.7 billion.

The 65 percent stake has been acquired by Hong Kong-based Power Assets Holdings (48.75 percent) and Cheung Kong Infrastructure Holdings (16.25 percent), two linked companies.

But the deal is viewed by some as little more than a sleight of hand by Hong Kong’s richest man, Li Ka-shing, whose ownership position gives him control of Husky and the two buying companies.

Michael Dunn, an analyst at FirstEnergy Capital, told Bloomberg News that the transaction “is just them moving money around, but it helps Husky’s balance sheet.”

He said the sale was probably the best offer Husky received, adding the company was unlikely to have sold such a large stake in the assets, which include 1,140 miles of pipelines and storage facilities in the Lloydminster area on the Alberta-Saskatchewan border, to anyone other than a related shareholder.

Li and one of his investment companies own about 69 percent of Husky.

Husky Chief Executive Officer Asim Ghosh said the transaction “unlocks significant value and supports our objective of strengthening the balance sheet.”

He said Husky “set a high bar” to complete the sale with the two companies which hold energy infrastructure assets in China and a number of other countries.

Andy Hunter, deputy managing director of Cheung Kong, said the firm will continue to shop for other holdings, including “suitable investment opportunities in Canada.”

Ghosh told the Financial Post that although oil prices are moving favorably, the stock markets haven’t, adding that before his company invests in growth and restores a cash dividend it wants to see proof that world oil inventories have been used up and that Husky’s balance sheet is strong.

Recent reports say that a number of prospective bidders are eying other Husky assets, including light oil properties in Western Canada, which could land deals over the balance of 2016.

As well, Husky is looking for buyers of pipelines and storage terminals in Alberta and a package of royalty lands in Western Canada.

Properties believed to be on the market produce almost 60,000 barrels of oil equivalent per day, half of which is oil and natural gas liquids.

Holdings in southwestern Saskatchewan offer appeal to companies focused on the shale region, including Raging River Exploration, Whitecap Resources and Spartan Energy - all of them in unusually strong financial shape.