Page 10 - NorthAmOil Week 43 2020

NorthAmOil COMMENTARY NorthAmOil

Construction on Husky’s
stalled West White
Rose extension project
offshore Newfoundland
and Labrador will not
resume in 2021and its
fate remains uncertain.

had long been an idea that investment bank- project is key to extending the life of the White
ers had been pitching, as it matches Cenovus’ Rose field,” the statement said. “As we have said
Alberta heavy oil production to Husky’s Mid- before, all options are on the table and accelerat-
west refineries. ing abandonment remains a possibility.”
Husky is currently is owned by Hong Kong Husky stopped construction on the fixed
billionaire Li Ka-Shing through Hutchison wellhead drilling platform for West White Rose
Whampoa Europe Investments, which owns in March, during the worst of the first global
a 40.1% stake in the company, and LF Invest- wave of the coronavirus (COVID-19) pan-
ments, which holds 29.32% of Husky’s com- demic. At the time, the company said construc-
mon shares. The entities, which have agreed to tion would remain suspended for the remainder
support the transaction, will own about 27.2% of 2020. It subsequently said that it would review
of the merged company once Cenovus has the project as a result of reprioritising its capital
absorbed Husky. in the wake of the industry downturn, which
was severely exacerbated by the pandemic.
Next steps Husky asked the Newfoundland and Labra-
Some of the implications of the merger in terms dor and federal Canadian governments to buy
of the combined company’s operations have equity stakes in West White Rose in a bid to
already been disclosed. On October 27, CBC save the project, but both levels of government
News confirmed that up to 25% of the combined rejected the request. However, Newfoundland
company’s workforce would be cut. and Labrador already owns a 5% stake in the
“The estimate is that the reductions will be project through Nalcor, its provincial energy
approximately 20% to 25% of the combined corporation.
workforce, which is about 8,600 employees and The project is around 60% complete, but
contractors,” Cenovus’ senior media advisor, Husky has said it would not add debt to its bal- Up to 25% of
Reg Curren, told CBC News. Around 1,720- ance sheet in order to fund the remainder. How
2,150 positions are expected to be cut in Cal- Cenovus will treat the project is not known, but the combined
gary, where both firms are headquartered. CBC News cited sources as suggesting a range company’s
“As with any merger of this type, there will of possible scenarios. These include a sale of
be overlap and there will be some difficult deci- Husky assets in Newfoundland and Labrador, workforce would
sions as we work to create a combined organ- which also includes a 35% equity stake in the
isation best positioned for the future,” Husky’s prolific Bay du Nord discoveries in the Flemish be cut.
communications manager, Kim Guttormson, Pass Basin.
told CBC News. Husky is also still hoping that federal aid
Separately, CBC News reported this week funding aimed at supporting offshore workers
that construction on Husky’s stalled West White following the downturn can be used to revive
Rose extension project offshore Newfoundland West White Rose. The company said discussions
and Labrador would not resume in 2021. on the matter with the Canadian government
“The 2021 construction season has been can- were continuing.
celled,” a Husky official told the news service. Trade and labour groups in Newfoundland
In an additional statement, Husky said that and Labrador have voiced concerns over the
following the closing of the merger, there would cost cuts that the combined company will seek
be an additional review of all of the combined to make after the merger is completed, however.
company’s assets. Given how hesitant oil companies have become
“Regarding Husky’s Newfoundland and to make major capital outlays, their concerns
Labrador operations, the [West White Rose] could prove to be justified.™

P10 www. NEWSBASE .com Week 43 29•October•2020