(Reuters) - Canadian oil and gas producer Husky Energy Inc said on Tuesday 2019 production could be lower than it had previously expected because of mandatory output cuts imposed by the government of Alberta, sending its shares down 3.5 percent.
Husky now expects its output to be in the range of 290,000-305,000 barrels of oil equivalent per day (boe/d). In December, the company said it expects to produce 300,000 boe/d.
The Canadian province of Alberta mandated temporary oil production cuts effective Jan. 1 to deal with pipeline bottlenecks that led to a crude glut and deep price discounts on Canadian crude.
These production cuts hurt Husky all the more, since the company has invested in a number of refineries and in pipeline space, the company said in a statement. The Alberta cuts were partly why Husky scrapped its hostile bid for rival MEG Energy in January.
On Tuesday, Husky said quarterly production was also hit by a shutdown in its White Rose field after an oil spill off the Atlantic coast during the quarter.
“It was a challenging quarter,” said Chief Executive Officer Rob Peabody. “The oil spill on the East Coast was particularly disappointing, and we are continuing to work closely with the regulator to determine the root cause and apply learnings.”
The company resumed its operations at the site in January and now expects to continue the ramp up in production through the second quarter.
For the fourth quarter ended Dec 31, average quarterly production fell to 304,300 boe/d from 320,400 boe/d. Analysts, on average, had expected the company to report 304,365 boe/d.
Capital expenses were above estimates as well, with Husky spending C$1.27 billion in the quarter, while analysts were expecting it to spend C$909.8 million, according to IBES data from Refinitiv.
That drove negative cash flow of about C$720 million pre-dividends, analysts at Tudor Pickering Holt & Co said, all of which were pressuring the company’s shares, which were trading down at C$15.41.
Husky, majority owned by Hong Kong billionaire Li Ka Shing said average realized prices for its production unit were down C$25.47 per barrel of oil equivalent (boe) in the fourth quarter, from C$46.69 per boe a year earlier.
Net income fell to C$216 million ($163.43 million), in the fourth quarter ended Dec. 31, from C$672 million, a year earlier where it recorded a C$436 million deferred tax benefit.
Excluding items, the company earned 19 Canadian cents per share in line with analysts’ estimates.
Reporting by Shanti S Nair in Bengaluru; Editing by Shailesh Kuber