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Husky runs with the big dogs Announces two-for-one stock split; looking at stake in U.S. refinery Gary Park For Petroleum News
Once the runt of the litter, Husky Energy is now a full-fledged member of the pack, snapping at the heels of its peers and nuzzling up to its investors.
In quick succession in mid-April it announced a two-for-one stock split, put out word that it is considering swapping equity in its planned Sunrise oil sands project for a stake in a U.S. refinery, served notice to operator Petro-Canada that it believes it is entitled to a larger share of Newfoundland’s Terra Nova project and retained its place among Canada’s leading drillers despite inflationary costs.
In the same league as Imperial Oil, Suncor Energy, Petro-Canada and Shell as a fully integrated (producer, refinery and marketer) producer, Husky — controlled by Hong Kong business tycoon Li Ka-shing — has been on a roll over recent years.
Its shares have climbed 35 percent over the past 15 months, peaking at C$84.85 on the Toronto Stock Exchange — enough to prompt the split.
As it pushes ahead with engineering work on its planned 240,000 barrel-per-day Sunrise project it is also exploring solutions for transporting, upgrading and refining the production, scheduled to start at 60,000 bpd in 2010-11.
Industry sources have identified Husky as one of the 10 contenders to buy the 160,000 bpd Ohio refinery owned by Valero Energy and valued at about US$1.5 billion.
It has also held talks with Marathon and other U.S. refiners as the U.S. refining sector embarks on retrofitting and expanding its operations to handle larger volumes of heavy crude from Western Canada. BP and Koch are seen as potential partners.
“We are looking at various alternatives and quantifying their economic returns to see which way will be better,” said Husky Chief Executive Officer John Lau. “We will announce our solution before the end of the year.”
Lau: acquisitions possible Lau said acquisitions are well within Husky’s grasp, given that the company has debts of only C$400 million and cash flow of C$1.3 billion.
He also let it be known that Husky is eager to expand its working interest in Terra Nova to 15 percent from 12.51 percent. The field operator is Petro-Canada at 34 percent. Other stakeholders are ExxonMobil, Norsk Hydro, Murphy Oil and Chevron.
Lau said an increase would help potential cost synergies between Terra Nova and the nearby White Rose field, which Husky operates with a 72.5 percent stake, the balance held by Petro-Canada.
He sidestepped questions on whether Husky sees itself as Terra Nova’s eventual operator other than acknowledging that the company would be happy “if Petro-Canada offered it.”
In its first-quarter report, Husky said it paid an average C$10.55 per barrel of oil equivalent to operate in the Western Canada Sedimentary basin, up from C$9.31 a year earlier, saying the increase stemmed mostly from production in maturing fields and “more extensive, but less prolific reservoirs.”
It said the basin requires greater infrastructure, such as wells and extensive pipeline systems, crude and water trucking and enlarged gas compression systems.
That results in higher energy consumption, workovers and increased material costs.
Despite these negatives, Husky invested C$466 million on conventional E&P in the three months, trailing only EnCana on the list of operators in Western Canada.
A fast-rising power in the oil sands, the company is pushing ahead with new ventures at Caribou Lake in Alberta’s Cold Lake region and the Saleski lease, where research is exploring different ways of extracting bitumen from carbonate formations.
At Caribou, Husky is testing a hybrid steam stimulation and steam-assisted gravity configuration which it hopes will reduce the time needed to drain a well to 5.5 years from 9 years.
It is working on a 10,000 bpd demonstration project, setting the stage for a second 20,000 bpd to recover 350 million barrels of bitumen.
Seismic has been completed at Saleski and a pilot is scheduled for the next two years to test various methods of developing a formation, leading to a startup phase of 20,000-50,000 bpd, growing to 200,000 bpd by 2015 from a lease estimated to have 24 billion barrels of bitumen in place.
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