Husky Energy Inc. is asking the federal government and the province of Newfoundland and Labrador to make a “direct investment” in its partly completed $2.2-billion West White Rose offshore oil project.
The Calgary-based oil and gas producer said Wednesday it is putting the project – and by extension all of its investments in the region – under review as it deals with a one-year construction delay it implemented in March amid low oil prices linked to the COVID-19 pandemic.
“We are asking the government to consider a direct investment in the project, similar to Hibernia,” said Husky spokeswoman Kim Guttormson in an email response to The Canadian Press.
“This isn’t a handout or a loan, it’s an investment that would provide a return to taxpayers.”
The Hibernia offshore project led by ExxonMobil Canada is 8.5 per cent owned by the federal government.
The statement confirms speculation by analyst Phil Skolnick of Eight Capital in a report on Wednesday that the review announcement could be interpreted as a call for the province to inject money to ensure West White Rose is built.
He also suggested that under a “worst-case scenario,” it could also signal Husky’s option to eventually shut down or sell the currently producing White Rose offshore oil project itself.
“West White Rose is critical to the future of the existing White Rose field, which has been producing since 2005 and is in natural decline,” said Guttormson in response to the second point.
“There are no additional wells planned for the main field and, in the near term, the field will hit a point where it’s too costly to produce those fewer barrels. The West White Rose project is the catalyst for any further investment in the White Rose field and the SeaRose FPSO.”
The West White Rose project includes investing in projects that would allow the continued employment of the SeaRose floating production storage and offloading unit to serve the entire field.
If the new project doesn’t go ahead, it raises questions about whether those projects are worthwhile to preserve the 20,000 barrels per day Husky gets from its share of the existing project, Skolnick said, which could lead to a scenario where it attempts to sell or shuts down the project in 2022.
Minister of Natural Resources Seamus O’Regan offered no firm commitment to investment in a supplied comment.
“We are at the table with the province right now, hammering out the concrete steps needed to support the offshore,” he said, adding the government is working “every day” to sustain the competitiveness of the offshore oil sector.
Newfoundland and Labrador is the third-largest oil producer in Canada and its offshore oil industry has been hit hard by crashing global oil prices.
In mid-March, Equinor and Husky announced an indefinite deferral of the Bay du Nord project, slated to be the province’s first deep-water operation.
Drilling on the Hibernia platform was suspended in April, as was a refit for the Terra Nova floating production storage and offloading vessel.
The Newfoundland and Labrador government has been imploring Ottawa to help the sector, even holding a news conference in late May to appeal for federal aid.
West White Rose is expected to produce up to 75,000 barrels of oil per day, with Husky collecting 52,500 bpd from its 69 per cent share. It is partnered on the project with Suncor Energy Inc. at 26 per cent and Nalcor Energy, the province’s Crown energy corporation, with a five per cent stake.
“A full review of scope, schedule and cost of this project is critical, given the minimum one-year delay to first oil caused by COVID-19, and our priority of maintaining the strength of our balance sheet with ample liquidity,” said Husky CEO Rob Peabody in a news release announcing the review Wednesday.
“Unfortunately, the delay caused by COVID-19 and continued market uncertainty leaves us no choice but to undertake a full review of the project and, by extension, our future operations in Atlantic Canada.”
The West White Rose project is about 60 per cent complete, with about $1.1 billion in work left to be done in Newfoundland and Labrador and an expected $11 billion in future capital and operating expenditures over its life, Husky said.
Peabody said it will result in “billions” in government taxes and other public benefits, adding: “We need to find a solution now.”
The White Rose field and satellite extensions are located in the Jeanne d’Arc Basin approximately 350 kilometres off the coast of Newfoundland.
West White Rose is expected to create about 250 full-time platform jobs and thousands of jobs during construction.
Due to the short offshore weather window needed for construction, the suspension in March meant that the project is delayed for at least a year.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
