UPDATE 3-Husky Energy sees higher costs for Sunrise project

Mon Dec 3, 2012 12:56pm EST

* Sees rise in oil sands project costs
    * Forecasts higher production for 2013
    * Focuses on boosting oil output
    * Targets 5 to 8 pct/yr production growth through 2017
    * Shares edge higher


    CALGARY, Alberta, Dec 3 (Reuters) - Husky Energy Inc
, Canada's No. 3 integrated oil company, said on Monday
its 60,000 barrel per day Sunrise oil sands project, now under
construction, will cost C$2.7 billion ($2.72 billion), 8 percent
above previous estimates.
    Husky, controlled by Hong Kong billionaire Li Ka-shing, did
not say the why the cost of the Sunrise project, a joint venture
with BP Plc, was on the rise but said 85 percent of the
costs of the northern Alberta project, slated to open in 2014,
are now fixed. 
    The increase is modest by the standards of Alberta's oil
sands, the world's third-largest crude oil reserve. Rising
material costs, weak planning and a tight supply of skilled
labor have added billions of dollars to the costs of some
large-scale projects. 
    Analysts said the cost increase was minor and less than some
had expected. 
    "This is the first overrun announced to-date and a fairly
small one relative to what we have seen out of other projects,"
Menno Hulshof, an analyst at TD Securities, said in a research
note.   

    RISING OIL PRODUCTION 
    Husky also said it expects to produce 310,000 to 330,000
barrels of oil equivalent per day (boepd) in 2013, up from an
expected average for this year of 301,000 boepd. 
    The 2013 forecast includes a planned decrease in natural gas
production and an increase in more profitable light, medium and
heavy oil output. 
    "For 2013, I would fully expect Husky to maintain its
ongoing focus on conventional heavy oil development, which
includes the typical cold heavy oil production from western
Saskatchewan and eastern Alberta," Macquarie analyst Chris
Feltin said.     
    The company, known for its Husky and Mohawk-branded gas
stations, said its Pikes Peak South and Paradise Hill heavy oil
projects in Saskatchewan were producing above their designed
capacity.
    Husky has chopped dry gas development spending and, like
numerous other producers, is concentrating on gas prospects that
offer higher-value liquids opportunities, Husky Chief Executive
Asim Ghosh said earlier this year. 
    Overall, the company said it expects to spend C$4.8 billion
in 2013, C$100 million more than its expected outlay this year.
It is targeting annual production growth of between 5 and 8
percent through 2017, up from its previous target of 3 to 5
percent.  
   Husky shares were up 8 Canadian cents at C$27.98 late on
Monday morning on the Toronto Stock Exchange.
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