Is a Husky Energy Spin-Out Coming?

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Includes: CVE, ECA, HUSKF
by: Streetwise Blog

By Andrew Willis

Is Husky Energy (OTCPK:HUSKF) about to follow in EnCana's (NYSE:ECA) footsteps, and spin out its $900-million-plus international oil and gas holdings?

Husky brass gave a presentation to analysts this week that pointed to the potential for a corporate split that would see the Calgary-based company’s portfolio of Asian assets spun out as an independent publicly traded entity.

EnCana did much the same thing earlier this year, creating a pure play on its Canadian heavy oil holdings in Cenovus Energy (NYSE:CVE), while EnCana kept the original name and natural gas assets. This friendly corporate divorce was well received by investors.

The concept of a split at Husky is drawn from remarks made by the company’s chief financial officer, Alister Cowan. One of the issues Mr. Cowan addressed was the planned retirement of long-time Husky CEO John Lau. According to RBC Dominion Securities energy analyst Greg Pardy: “With leadership of its Asian business (which includes the giant Liwan gas field in the South China Sea), delegated to John Lau following his retirement later this year as Husky's CEO, we believe the stage is set for a corporate split – provided that market conditions are supportive.”

The Liwan gas field alone is worth more than $890 million as a stand-alone entity, by Mr. Pardy’s calculation.

Husky is controlled by Hong Kong billionaire Li Ka-shing and his family, and Mr. Lau has been a trusted advisor to the clan for many years.