* Refineries cushion blow of falling Canadian oil prices
* Q4 EPS C$0.42 vs C$0.16 last year
* Cash flow up 75 pct
* Shares up 1 percent
By Jeffrey Jones
CALGARY, Alberta, Feb 9 Husky Energy Inc's
fourth-quarter profit nearly tripled as production and
oil prices rose, the company said on Thursday, but the results
lagged estimates due to higher-than-expected exploration
expenses and taxes.
Husky, one of Canada's largest producers of heavy crude oil,
also warned that weakness in pricing for heavy crude grades as
well as volatile refining margins have become a factor in 2012.
Still, the company's integrated structure, which in recent
years was bolstered by the addition of two refineries in Ohio,
has meant that weak pricing for heavy oil production can be
counteracted in the processing of the crude, Chief Executive
Asim Ghosh said.
Husky is a dominant producer of heavy crude in Western
Canada and also runs an 82,000 barrel a day plant that upgrades
it into refinery-ready light oil.
This month, discounts for Canadian heavy and light synthetic
oil have widened to the largest in several years as
industry-wide production has surged against a backdrop of
limited pipeline capacity for export. Heavy crude has sold for
as much as $35.50 a barrel under benchmark West Texas
Intermediate this week, about double the discount of a month
"We firmly believe in the merits of a balanced portfolio and
internal hedges," Ghosh said. "I think that diversification of
the portfolio has proven to be a moderating factor in our
results over the past year, and as we get more and more focused
on creating those balances, we just want to (protect) the
company from such volatilities."
Husky, controlled by Hong Kong billionaire Li Ka-shing, said
net income jumped to C$408 million ($410 million), or 42
Canadian cents a share, from C$139 million, or 16 Canadian
cents, a year earlier.
Excluding unusual items, the company earned C$481 million,
or 50 Canadian cents a share.
The adjusted result lagged the average analyst estimate for
the measure of 55 Canadian cents, according to Thomson Reuters
Cash flow, a key indicator of a company's ability to pay for
new projects, climbed 75 percent to C$1.2 billion, or C$1.24 a
share, from C$685 million, or 80 Canadian cents a share.
Production rose 14 percent to 318,900 barrels of oil
equivalent per day, with strong gains from Husky's offshore
fields in the North Atlantic off Newfoundland: North Amethyst
and White Rose.
Output in the region will be tempered in 2012 by scheduled
maintenance on the production vessels for White Rose as well as
the Terra Nova field, the company said.
The results matched operational estimates but lagged in the
financial categories, CIBC World Markets analyst Andrew Potter
said in a research note. He said refining and marketing results
were below his expectations, with weaker than expected Canadian
Still, the stock was up 27 Canadian cents, or 1 percent, at
C$25.15 on the Toronto Stock Exchange on Thursday afternoon.
Husky's averaged realized oil price rose nearly 30 percent
to C$88.97 a barrel, and refining margins in the United States
were lucrative in the quarter, the company said.
Natural gas prices fell 8 percent to C$3.24 per thousand
Chief Financial Officer Alister Cowan told analysts that the
company has no plans to shut in any natural gas production as a
result of chronically weak prices as it is still making money.
Husky has chopped dry gas development spending and, like
numerous other producers, is concentrating on gas prospects that
offer higher-value liquids opportunities, he said. The company
also uses about a third of its gas production at its own
facilities, including the upgrader and at steam-driven heavy oil
Among major projects, Husky's Liwan gas development in the
South China Sea is on track to start production in late 2013 or
early 2014, ramping up after startup to 300 million cubic feet a
Its 60,000 barrel a day Sunrise oil sands project in
northern Alberta, a joint venture with BP Plc, is
targeted for first production of 2014. Husky said more than half
the drilling for the development is complete and construction
activity at the site is accelerating.