Husky reports mixed-bag

For Calgary-based Husky Energy, controlled by Li Ka-shing, Asia’s richest man, it’s a time of good, bad and uncertain.

Speaking at an investor day, company executives delivered the mixed bag, with Chief Executive Officer Asim Ghosh disclosing that Husky is strongly placed to deliver its growing volumes of heavy crude to market - but only if the major transportation proposals moving from the drawing board to the field.

He said the company has signed up for capacity on four proposed pipelines - Enbridge’s Northern Gateway in British Columbia and Flanagan South in the U.S. Midcontinent; Kinder Morgan’s Trans Mountain expansion; and TransCanada’s Energy East.

“Through 2020, we are quite comfortable that we’ve got enough (pipeline capacity) in place with existing commitments,” he said. “Within that time frame, I have a high degree of confidence that at least one or two of these pipelines will come to pass.”

Ghosh also suggested that Husky’s integrated structure - exploration, production, upgrading and refining in Canada and the United States - has eased its commodity-price risk such as the deep crude discounts that are being blamed on the pipeline delays.

Husky’s overall oil and liquids output averaged 242,000 barrels per day in the first quarter, with steam-driven heavy crude production targeted at 80,000 bpd by 2020. It expects to exit 2014 at 330,000-335,000 bpd from its operations in Western and Atlantic Canada and Southeast Asia.

On the down side, Vice President John Myer disclosed that costs are rising at the Sunrise oil sands project, which is due to come onstream and start ramping up to 60,000 bpd later this year.

The first phase of Sunrise was budgeted at C$2.7 billion, but cost overruns are facing the central processing plant.

Chief Operating Officer Rob Peabody said the final costs will not be made public until the estimates are nailed down.

Myer said future expansions at Sunrise will move ahead in “bite-sized” phases by awarding smaller contracts to firms supplying equipment and services.

Ghosh told investors has seriously considered two “transformational deals” in the past four years and is open to a purchase offer at a premium price.

“If something comes along ... that competes with the returns that we are getting, obviously I’d be a fool not to look at it,” he said.

Ghosh said Husky’s operations - which have grown from five projects to more than 50 since 2010 - have been so successful that “more and more we are getting to the position where we don’t need one.”

- Gary Park