New projects propel Husky into higher growth period
Megaprojects in the Alberta oilsands and the South China Sea that come on stream next year will usher in a five-year period of accelerated growth, says the CEO of Husky Energy Inc.
Asim Ghosh said the integrated Calgary-based major is entering the upswing part of a five-year production growth “hockey stick” chart it introduced in 2010.
“The first part was to stabilize the base and to digest the new projects,” said Ghosh at the Husky annual general meeting at Telus Spark on Tuesday.
“Now that projects are coming on, we start to reap the benefit of that. ... We always said the growth will be lumpy so now we’re coming into the positive part of the lump, if you will.”
He said the company that is majority owned by Hong Kong billionaire Li Ka Shing expects growth to average five to eight per cent from 2012-17, up from three to five per cent from 2010-15.
At its Liwan offshore project about 300 kilometres southeast of Hong Kong, Husky is moving the 30,000-tonne topsides in place to be connected to the 41-metre tall central platform in the next couple of weeks.
“This is the largest offshore platform ever built in the Asia Pacific region ... if you placed the Palliser Hotel on top of the Calgary Tower, that’s about the physical size of what the structure will look like,” Ghosh said on a conference call with analysts.
The project is expected to ramp up to 300 million cubic feet of gas per day (150 mmcf/d net to Husky) to be sold into the mainland Chinese market at an estimated price of $11-$13 US per thousand cubic feet, with first gas produced later this year or early 2014.
Husky expects to recover $700 million in exploration costs from its 51-per-cent partner, China National Offshore Oil Corp., over time.
Meanwhile, the company said the 60,000-barrel-per-day Phase 1 of its Sunrise oilsands project in northern Alberta is about two-thirds complete with first production on track for 2014. The steam-assisted gravity drainage project is to eventually grow to 200,000 bpd.
Husky said it has also filed a regulatory application for a 3,000-bpd pilot at Saleski in the relatively unproven carbonates oilsands formation.
It figures the lease contains 10 billion barrels of contingent resource — it aims to use cyclic steam stimulation through horizontal wells to soften and recover heavy bitumen.
Cash flow from operations at Husky came in at $1.3 billion for the first three months of 2013, compared to $1.2 billion in the same period of last year.
Output rose to 321,000 barrels of oil equivalent per day versus 320,000 boe/d, weighted 72 per cent to oil and liquids versus 59 per cent a year ago.
Net earnings of $535 million, down from $591 million, came despite mounting heavy oil discounts that resulted in average prices for its “foundation” Lloydminster Alberta heavy crude falling 22 per cent from the fourth quarter of 2012.
“There has been some tightening in terms of pricing discounts but our integrated business model continues to provide a safe harbour, in effect capturing world pricing for our Western Canada oil production,” said Ghosh.
The company reported average downstream throughputs of 327,000 bpd at its refineries and upgrader.
CIBC World Markets analyst Andrew Potter said the company’s operating earnings per share of 56 cents were slightly above his estimate and consensus of 54 cents due to stronger downstream and upgrading margins that more than offset lower upstream earnings due to higher costs.
Analyst Phil Skolnick of Canaccord Genuity said there were no surprises and the results generally matched his expectations.
Husky stock in Toronto traded as low as $29.45, down 47 cents, on Tuesday before closing at $29.75, off 17 cents.