Husky Energy says it will boost its downstream capacity, which will insulate the company from recent large heavy oil discounts, if it is able to complete its hostile takeover effort of MEG Energy Corp.  CP photo by Jeff McIntosh.

Husky Energy 2018 third quarter earnings up compared to 2017 Q3

In the third quarter of 2018, Husky Energy reported $545 million in net earnings, up significantly from $136 million in Q3, 2017.  The increase is due to the company’s average real price per barrel of upstream production increasing by $10 per barrel of oil equivalent.

For shareholders, this means a profit of 53 cents per share, compared to a profit of 13 cents per share at this time last year, according to Thomson Reuters Eikon.  Analysts had predicted Husky Energy profit would hit 50 cents per share.

The CEO of Husky Energy says the company will boost its downstream capacity and “insulate” itself from heavy oil price discounts if it can complete its hostile takeover effort of oil sands producer MEG Energy Corp.

Rob Peabody made the comments on Thursday on a conference call after the Calgary-based company announced its third quarter results.

Husky has more capacity to refine, upgrade or ship heavy oil than it produces and Peabody says this allows the company to profit by buying Alberta crude which is undervalued due to pipeline bottlenecks.

Peabody says MEG Energy is refusing to discuss Husky’s $3.3 billion cash-and-share offer, but he says he is optimistic that the deal will go through by the January deadline for shareholders to tender.

“We’re a little bit short on the upstream now, but we move to be a little bit long on the upstream post the MEG acquisition,” Peabody said during a conference call.

“We’re going to have about 400,000 barrels a day of heavy and bitumen blend and about 375,000 barrels between upgrading, refining and committed pipeline capacity to take that away.”

Should the MEG Energy deal succeed, Peabody said Husky may revisit its deferred plan to double capacity at its Lloydminster asphalt plant to 60,000 b/d.  The CEO added that Husky’s Superior, Wisconsin, asphalt refinery, shuttered by an explosion and fire in April, is expected to be back online in 2020 and should have 5,000 b/d of extra capacity.

Husky’s Lima, Ohio, light oil refinery is undergoing an upgrade which will boost its heavy oil processing capacity to 40,000 b/d, up from its current 10,000 b/d by the end of 2019.

The pipeline bottlenecks may force some heavy oil producers to shut down wells to ease the supply glut, according to Peabody.  He adds the discounts on Western Canadian Select bitumen blend are expected to last for two to three more years until pipeline capacity is expanded.

Peabody says he agrees with Alberta Premier Rachel Notley’s proposal that would see government aid boost crude-by-rail capacity from Western Canada.

Husky reports a production in the third quarter hit 297,000 boe/d, down from 318,000 boe/d.  The decline is due to maintenance on the Tucker and Sunrise thermal oil sands operations and slowed production at the company’s cold heavy oil wells.

According to Bloomberg, analysts were disappointed with the company’s slight miss on production and its decline of 2018 production guidance by 10,000 to 15,000 boe/d as well as increased capital spending expectations for 2018.