Fire, injuries at U.S. refinery adds to Husky operational woes

don’t know the extent of the injuries,” Husky president and CEO Rob Peabody said following the company’s annual meeting in Calgary on Thursday.

Peabody said he didn’t know what caused the fire and couldn’t confirm what local media in the area were reporting — that the fire was preceded by an explosion that could be felt up to a mile away from the site and that seven ambulances were on the scene.

Husky bought the 50,000-barrels-per-day Superior Refinery last year for $435 million to process more of the company’s heavy oil production. It had been shut down for planned maintenance at the time of fire on Thursday.

Western Canada Select, the Canadian heavy oil benchmark’s discount against the U.S. crude widened to $17.40 per barrel, its highest level since the start of the month.

Peabody also said he didn’t believe there was any connection between Thursday’s fire and other operational issues that have landed Husky in trouble with regulators in recent years, including a near-miss with an iceberg at a platform offshore Newfoundland and a large oil spill in Saskatchewan in 2016.

Husky faces 10 charges from its pipeline spill in Saskatchewan.

“The pipeline incident in Saskatchewan in Saskatchewan was one where the ground shifted and it caused the pipeline to fail, so I’d be surprised if there was any ground shifting involved in this one,” Peabody said. He also said the iceberg near miss in Newfoundland was a different series of events.

The Canada-Newfoundland and Labrador Offshore Petroleum Board also reprimanded the company in January for not evacuating an offshore platform when an iceberg drifted too close to the facility last year.

Thursday’s fire overshadowed the company’s financial results, which were less affected by large discounts for Canadian heavy oil than other domestic producers.

“Husky remains the only heavy oil producer that we believe could be a (modest) net beneficiary from our expectation of persistently wide heavy oil differentials, owing to the company’s sizable refining operations and pipeline capacity, providing excess downstream egress over and above the company’s heavy oil production,” Raymond James analyst Chris Cox said in a research note.

Peabody said the company’s refineries helped “shield” it from the big discounts other Canadian producers face, which have been as wide as $30 per barrel at various points this year.

The discount between Canadian heavy and the West Texas Intermediate benchmark was $21.96 per barrel when markets closed Wednesday, according to GMP FirstEnergy.

“As we expand our heavy oil production, we will look for opportunities downstream,” Peabody said of potentially buying more refining capacity.

Husky reported net earnings of $248 million for the first quarter on Thursday, up 249 per cent from the $71 million in net earnings the company recorded for the same period a year earlier.

At the same time, the company’s oil and gas production dropped 10 per cent to 300,000 barrels of oil equivalent per day in the quarter from 334,000 barrels of oil equivalent per day last year.

While Canada’s exemption from the tariffs have been tied to the successful renegotiation of NAFTA, it is unlikely a comprehensive pact will be signed in time for the May 1 expiry date, said Eric Miller, head of Rideau Potomac Strategy Group, a Washington-based trade consulting firm.

“The U.S. approach to this has been so chaotic it’s hard to see how you get anything other than a pro forma deal now,” he said. “But my sense is the negotiations are chaotic enough that while the tariffs are in the mix, they aren’t the centrepiece of what’s going on.”

Even with the exemption, the uncertainty created by the ongoing threat of the tariffs has already had a detrimental effect on investment in the Canadian aluminum industry, said Jean Simard, president of the Canadian Aluminum Producers Association.

“Plans are either being put on ice or they are being shifted south of the border,” he said.

“We’re all in wait-and-see mode and so is the rest of the world.”