Husky Energy Might Have to Rethink its Dividend Policy - Peters & Co.

Dec.17.08 | About: Husky Energy (HUSKF)

Times are tough in the oil patch, we know that. Giant, been-there-forever-and-ever companies are slashing budgets and delaying plans. And, given the circumstances, analysts and investors nod in approval. But that doesn’t make it any less painful, especially when beloved dividends are at stake.

Husky Energy Inc.’s (OTCPK:HUSKF) payout could be on the chopping block, warns Kam Sandhar, an analyst at Peters & Co. Ltd. “We anticipate that if current commodity prices persist, the company may have to revisit its dividend policy,” he said in a research note.

Even if Husky cut its C$0.50 quarterly dividend in half, it would still need to find C$600-million more in “capital reduction” in order to maintain its current debt levels, the analyst calculated. Husky’s western Canadian operations would likely fall victim, pushing production down by 12,000 barrels a day.

Mr. Sandhar now predicts Husky will spend C$3.2-billion in 2009, down from his previous guesstimate of C$4.3-billion. Projects on Canada’s east coast and in the South China Sea will proceed as planned, but the western Canadian operation and Husky’s oil sands divisions will not be so charmed.