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Energy Summary for May 11, 2016

2016-05-11 20:41 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for June delivery added $1.57 to $46.23 on the New York Merc, while Brent for July added $2.08 to $47.60 (all figures in this para U.S.). Both benchmarks had been down, but then the U.S. Energy Information Administration released its weekly crude inventory report, showing a surprise drop in domestic stockpiles (analysts and the American Petroleum Institute had expected an increase instead). Western Canadian Select traded at a discount of $12.30 to WTI ($33.93), down from a discount of $11.65. Natural gas for June added 1.5 cents to $2.173. The TSX energy index added 1.78 points to close at 180.07.

Li Ka-Shing's Husky Energy Inc. (HSE) edged down six cents to $15.12 on four million shares, after arranging a $595-million sale of Saskatchewan oil assets to Whitecap Resources Inc. (WCP), up 21 cents to $9.77 on 12.3 million shares. The assets are producing 11,600 barrels of oil equivalent a day. That is roughly 3 per cent of Husky's total production of 341,000 barrels a day in the first quarter, and nearly 20 per cent of the 59,500 barrels a day that Husky recently put up for sale. Based on information from Scotia Waterous (one of Husky's financial advisers), the assets that Whitecap is buying are in Husky's "east package" and make up the bulk of the 13,230-barrel-a-day southwest portion of the east package. That still leaves the southeast portion, the Dodsland portion and the Provost portion of the east package up for grabs, along with the "south package" in Southern Alberta and the "north package" in Northern Alberta and British Columbia. Husky is trying to sell these assets as part of the "rejuvenation" of its Western Canadian business -- its fancy way of saying that it wants to focus on its heavy oil and oil sands operations (and its assets outside Western Canada). The sales will also help improve its balance sheet. Husky's total debt was $6.97-billion as of March 31. In the last three weeks alone, however, it has announced sale agreements worth $2.45-billion. These sales will get Husky closer to its goal (as described in a conference call on April 26) of bringing its net-debt-to-cash-flow ratio down to two times. To put that in perspective, the ratio was 3.5 times in the first quarter, according to a new research note from Scotia Capital analyst Jason Bouvier. Mr. Bouvier reckons that the ratio will go down to 2.0 times in the third quarter thanks to the "early harvest in southwest Saskatchewan" with Whitecap.

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