Oil spill overshadows Husky Energy earnings
Husky Energy Inc. crews worked Friday to contain a spill of oil into the North Saskatchewan River, overshadowing earnings results that highlighted the company’s improving balance sheet and operating performance.
A Husky pipeline began leaking near the banks of the North Saskatchewan on Thursday and spilled about 250,000 litres, or 1,500 barrels, of heavy oil onto land and into the water east of Lloydminster, a city on the Alberta and Saskatchewan border. Chief operating officer Rob Peabody said on the company’s earnings call Friday that barriers and booms were in place to contain the oil on the water and prevent it from flowing towards cities downstream of the spill, including North Battleford, Sask.
By mid-day, however, North Battleford confirmed it had shut down its water intake plant after an oil slick was seen on the river. City spokesperson Susanne Abe said the city was now relying on its water treatment plant and using groundwater for residents’ needs.
“There is nothing to be concerned about with us running out of water,” she said, adding that Husky crews were en route to the city to build another barrier in the water around the water intake plant ahead of the oil reaching the city.
The pipeline has been shut down and Peabody said the company would investigate the cause of the pipeline leak in the coming weeks after the area is cleaned up.
The spill forced Husky management to defend its response and cleanup efforts on the earnings call, in which Husky highlighted its financial achievements in the second quarter, including its rampup of the Sunrise oilsands project after wildfires in Fort McMurray forced the company to shut down production.
Husky president and CEO Asim Ghosh also said the company had constructive discussions with CNOOC Ltd. over a natural gas supply contract dispute. He said the fight, which has weighed on Husky’s stock, has now “progressed to a framework for resolution.”
Ghosh said Husky now had a “rock-solid balance sheet” after multiple asset sales in recent months — including the sale of pipeline assets around Lloydminster — resulted in proceeds of $3 billion, which the company is using to pay down debt.
Husky posted a $196 million net loss (20 cents a share) in the second quarter, compared with net earnings of $120 million (10 cents) during the same period a year earlier. The net loss revealed Friday was made worse by writedowns and non-cash charges totalling $105 million.
Excluding items, the company’s loss was nine cents per share, according to Thomson Reuters I/B/ E/S. Analysts’ on average had estimated a loss of 21 cents per share.
Cash flow from operations more than halved to $488 million in the latest quarter.
While two other major oil and gas producers — Canadian Natural Resources Ltd. and Encana Corp. — have recently announced they would increase spending over the course of the year, Husky said Friday it would not adjust its spending plans as oil prices have stabilized around US$45 per barrel.
“We don’t see that balancing of the oil market being quite achieved,” Ghosh said during the conference call.