Husky Energy has two core businesses: Integrated Corridor and Offshore. The former operates in Western Canada and the US, where thermal heavy oil production is integrated with downstream operations. In the Offshore, the company is focused in the Asia-Pacific and Atlantic regions.
Husky Energy’s integrated corridor business physically connects assets across North America, from the wellhead to the refinery, enabling the company to maximise value per barrel produced. Accounting for c 70% of Husky’s cash flow, the integrated corridor underpins its five-year plan, which envisages cumulative group free cash flow (FCF) of C$8.7bn from FY19 to FY23. Coupled with high/fixed-price contracts in Asia and high-margin offshore assets in the Atlantic, this enables Husky to maximise operational margins and be resilient through the cycles. Excess FCF is to be directed towards increasing shareholder returns and strategic growth projects. These are Husky’s main objectives, along with becoming a high-reliability organisation in terms of safety. Net debt remains below a targeted 2x funds from operations when stress tested at US$40/bbl WTI. Husky trades at 2.4x FY20 P/CF vs the North American large-cap E&P average of 3.5x and North American integrated average of 6.0x.