October 24, 2019 / 11:12 AM / 22 days ago

Canada's Husky steers investment away from Alberta due to oil curtailments

CALGARY, Alberta (Reuters) - Husky Energy Inc (HSE.TO) is directing investment away from Canada’s main oil-producing province Alberta and toward other parts of the country because of government production limits, chief executive Rob Peabody said on Thursday.

The Calgary-based company, along with its biggest rivals, is subject to mandatory curtailments in Alberta after the government imposed oil output limits this year to ease pipeline congestion and boost prices.

Husky, which benefited from cheap crude to feed its refineries, has opposed the policy since its inception. Peabody said Husky was directing investment toward neighboring Saskatchewan and offshore Atlantic Canada instead.

“We would love to spend more money in Alberta, but unfortunately in Alberta there are quotas in place that mean we could spend to develop more crude oil but then they would not let us sell it,” Peabody said on a conference call.

The company started production at its 10,000 barrel-per-day (bpd) Dee Valley thermal project in Saskatchewan in the third quarter, and has plans for another five projects in the province totaling 50,000 bpd of new capacity.

Husky reported a 50% drop in third-quarter profit as a result of lower U.S. refining margins and crude oil prices.

Net earnings for the quarter fell to C$273 million ($208.76 million), or 26 Canadian cents per share, from C$545 million, or 53 Canadian cents per share, a year earlier.

Production fell marginally to 294,800 barrels of oil equivalents a day (boepd).

Husky announced layoffs this week, saying the move would better align the workforce with its capital plan.

Peabody declined to say how many employees were affected. Be he said the job cuts announced a day after Canada elected a minority Liberal government were not related to political developments.

Husky’s quarterly average realized U.S. refining and marketing margins were C$12.17 per barrel, compared with C$17.52 a year ago.

Average realized pricing for oil and liquids production was C$47.54 per barrel of oil equivalent (boe), versus C$50.44 in the same period a year earlier.

Upstream operating costs crept higher to C$14.83 per boe from C$14.68, partly because of lower Atlantic production. Husky’s White Rose field was operating at reduced rates after an oil spill in late 2018, but returned to full production in August.

The company also started rebuilding its 38,000 bpd Superior, Wisconsin, refinery following a 2018 fire, and agreed to sell its 12,000 bpd Prince George, British Columbia, refinery.

Husky shares were down 7.9% on the Toronto Stock Exchange at C$8.77.

Additional reporting by Arundhati Sarkar in Bengaluru; Editing by Sriraj Kalluvila and Bill Berkrot

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