Husky Energy targets low-risk developments
Leaner thermal projects part of strategy to keep output levels steady, reduce costs
Integrated oil company Husky Energy Inc. recorded a smaller-than-expected quarterly loss Friday, as the company refocuses its operations around shorter-cycle and less costly heavy oil developments.
Calgary-based Husky said most of its new heavy oil production would come from a series of thermal assets in the Lloydminster, Alta. region, which the company is developing in 10,000 to 15,000 barrel-per-day increments.
Husky CEO Rob Peabody said in a conference call with analysts the company has targeted 18 “of these low-risk, copy-and-pastetype projects,” as a way to keep its production levels steady while lowering capital costs.
The shift comes as Husky, among other heavy oil producers, favour leaner thermal developments over the 100,000 bpd oilsands growth projects that were popular when oil prices were above US$100 per barrel. “We used to look at new well pads—including the wells, the pads, the pipelines to them— at over $100 million per pad; costs are now in about the $70 million range,” Peabody said.
Each of the incremental projects amount to a total of roughly 150,000 bpd of new production, Peabody said, 40,000 bpd of which is under development. The company recorded a 28,000-bpd increase in steam-driven oil production over the quarter.
Meanwhile, the company posted net earnings of $186 million in the fourth quarter, or 19 cents per share, compared to a loss of $69 million, or nine cents per share, a year ago.
The loss was less than analyst expectations, helped by higher refining margins at its downstream facilities. Total refinery capacity utilization over the quarter was 92 per cent, up from 81 per cent in the fourth quarter of 2015.
Meanwhile, production over the quarter dropped to 327,000 barrels of oil equivalent per day, down from 357,000 boed in the fourth quarter of 2015.
Husky, which is majority-owned by Hong Kong billionaire Li Kashing, has been divesting of assets in recent years to withstand a prolonged slump in oil prices beginning mid-2014.
In April 2016, the company sold off a 65 per cent stake in oil and gas processing assets near Lloydminster, Alta., worth $1.7 billion. In May, it sold a cluster of light oil assets in southwest Saskatchewan for $595 million, as well as various royalty lands in Western Canada worth $163 million.
But Peabody declined to respond to a Reuters report Friday, citing anonymous sources, that it was weighing the sale of its offshore Atlantic Canada assets. The company operates three separate assets in the region, composed of its flagship White Rose project, Flemish Pass and Terra Nova. “I can’t comment on that rumour, but we continue to move forward with our business in the Atlantic,” he said.