CALGARY — Husky Energy Inc. (TSX:HSE) plans to spin off its southeast Asian oil and gas assets off into a new company, CEO John Lau said Tuesday after the firm’s annual general meeting.
The new company would have a completely separate board of directors and management team from the Calgary-based energy company, which currently has seven exploration blocks covering nearly 33,000 square kilometres off the Chinese coast.
A decision on where the new company’s headquarters will be located has not been made yet.
“It depends on where we are going to list, because we are always thinking about the company’s base,” Lau said, adding the firm is contemplating a dual listing in Toronto and Hong Kong.
Husky’s Southeast Asia spinoff will continue to work closely with its partner in the region, China National Offshore Oil Co.
Husky has signed 11 production sharing with CNOOC contracts since 2001, which allow the Chinese firm to exercise up to a 51 per cent working interest.
Husky operates the nearly 3,000-square kilometre Liwan deep water field in the South China Sea about 300 kilometres southeast of Hong Kong, which is estimated to contain four to six trillion cubic feet of natural gas.
It also has a 40 per cent interest in the in the Wenchang field southwest of Hong Kong, a full stake in an the East China Sea offshore block near Shanghai, as well as operations in Indonesia’s Madura strait.
Most of Husky’s resources in Southeast Asia have not been booked yet, so the spinoff will have no impact on the Canadian company’s reserves.
The timing of the split will depend on when economic stability returns, said Husky spokesman Graham White.
“We want to be well positioned so that we can execute on it when markets improve, even if that’s in the short term,” he said
“At the same time if markets don’t recover for an extended period of time, we’re also prepared to be disciplined and patient.”
Tristone Capital analyst Chris Feltin said Husky has had a lot of success with exploration in its Liwan property.
“This may be a way for them to fully recognize that value in a standalone entity versus keeping it within a larger integrated oil and gas platform,” he said.
“To split that off from the larger Husky would probably be relatively easy.”
A year ago, EnCana Corp. (TSX:ECA) announced plans to split into separate oilsands and natural gas-focused companies in order to better reflect the value in both sides of the business.
The split has been put on hold for the time being, but the company has said the underlying reasons for the transaction remain valid.
In addition to the Southeast Asian assets, Husky also has leases in the oilsands, offshore oil and gas platforms off Canada’s East Coast, refineries in the United States and Canada and a chain of retail gas stations across Western Canada.
Husky brought in $24.7 billion in sales and operating revenues last year and net earnings of $3.75 billion.
Husky shares rose about 1.75 per cent, or 50 cents, to $29.10 on the Toronto Stock Exchange Tuesday.