1ST QUARTER RESULTS
Husky Energy earns $662-million in Q1
2014-05-07 07:46 ET - News Release
Mr. Asim Ghosh reports
HUSKY ENERGY DELIVERS STRONG EARNINGS AND CASH FLOW
Husky Energy Inc. continued its focus on reliable business performance in the first quarter of 2014 as it delivered strong net earnings and cash flow.
"We are consistently hitting our marks as we monetize our extensive portfolio of high-return, long-life projects," said chief executive officer Asim Ghosh. "The landmark Liwan gas project achieved first gas and will be a long-term production, earnings and cash flow contributor. In addition, we began production at the Sandall heavy oil thermal project and are building on our momentum by sanctioning another 3,500-barrel-per-day (bbl/day) thermal project for start-up in 2016."
Net earnings of $662-million increased 24 per cent from $535-million in the first quarter of 2013. Cash flow from operations was $1.5-billion, an increase of 20 per cent over $1.3-billion in the first quarter of 2013.
Upstream production averaged 326,000 barrels of oil equivalent per day (boe/day) compared with 321,000 boe/day in the first quarter of 2013 and 308,000 boe/day in the fourth quarter of 2013, reflecting additions from the Sandall heavy oil thermal development and the Ansell liquids-rich gas resource project.
Highlights include:
- Cash flow from operations was $1.5-billion, or $1.56 per share (diluted), compared with $1.3-billion, or $1.30 per share (diluted) in the first quarter of 2013.
- Net earnings were $662-million, or 66 cents per share (diluted), compared with $535-million, or 54 cents per share (diluted) in the first quarter of 2013.
- Total upstream production averaged 326,000 boe/day, compared with 321,000 boe/day in the first quarter of 2013. Oil and liquids production was 74 per cent, compared with 72 per cent a year ago.
- The company achieved first gas at the Liwan gas project.
- The company initiated production at the 3,500 bbl/day Sandall heavy oil thermal project. Current heavy oil thermal production is now more than 45,000 bbl/day, in line with a target of 55,000 bbl/day by 2016.
- The company sanctioned a new 3,500 bbl/day heavy oil thermal project at Edam West, with start-up scheduled in 2016.
- The company increased production at the Ansell liquids-rich gas resource play to approximately 17,000 boe/day.
- The Sunrise energy project is about 87 per cent complete and progressing toward start-up in the second half of 2014.
- The company commenced gas injection at the South White Rose extension in the Atlantic region, with first oil planned around the end of the year.
FINANCIAL AND OPERATIONAL HIGHLIGHTS Three months ended March 31, Dec. 31, March 31, 2014 2013 2013 Daily production, before royalties Total equivalent production (mboe/day) 326 308 321 Crude oil and NGL (mbbl/day) 242 224 232 Natural gas (mmcf/day) 506 504 537 Operating netback ($/boe) $44.81 $34.29 $31.78 Refinery and upgrader throughput (mbbl/day) 289 324 327 Cash flow from operations (millions) 1,536 1,143 1,283 Per common share -- basic ($/share) 1.56 1.16 1.31 Per common share -- diluted ($/share) 1.56 1.16 1.30 Net earnings (millions) 662 177 535 Per common share -- basic ($/share) 0.67 0.18 0.54 Per common share -- diluted ($/share) 0.66 0.18 0.54 Adjusted net earnings (millions) 716 412 547 Per common share -- basic ($/share) 0.73 0.42 0.56 Per common share -- diluted ($/share) 0.73 0.42 0.56 Capital investment, including acquisitions (millions) 1,269 1,537 1,152 Dividend Per common share ($/share) 0.30 0.30 0.30
First quarter production was 326,000 boe/day, compared with 321,000 boe/day in the first quarter of 2013. This reflected additions from the company's heavy oil thermal projects and the Ansell liquids-rich gas resource project.
Overall production weighting in the first quarter was 74 per cent oil and liquids compared with 72 per cent in the same period in 2013.
WTI (West Texas Intermediate) prices averaged $98.68 (U.S.) per barrel in the first quarter compared with $94.37 (U.S.) a year ago. Average realized pricing for the company's crude oil, natural gas liquids and bitumen in the first quarter was $87.32 per barrel, compared with $68.32 in the first quarter of 2013.
U.S. refining Chicago market crack spreads averaged $18.35 (U.S.) per barrel in the first quarter, compared with $26.87 (U.S.) in the same period in 2013, while the realized U.S. refining margin averaged $21.63 (U.S.) per barrel compared with $20.47 (U.S.) a year ago.
Key area summary
The foundation business
Heavy oil
Production from Husky's heavy oil thermal projects was approximately 41,000 bbl/day during the first quarter.
The 3,500 bbl/day Sandall thermal development was brought on-line in early 2014. Production from seven wells is now averaging 4,500 bbl/day, reflecting the latest in a series of thermal projects that have produced higher than nameplate capacity in their early stages.
A 3,500 bbl/day thermal project has been sanctioned at Edam West, which is scheduled to be brought on production in 2016.
Work continues on advancing the 10,000 bbl/day Rush Lake thermal project toward first oil in the second half of 2015.
Module construction and site clearing have commenced for two new 10,000 bbl/day thermal developments at Edam East and Vawn, with first oil planned for 2016.
Twenty-three horizontal wells were drilled in the first quarter out of a planned 140-well program in 2014, while 73 cold heavy oil production with sand (CHOPS) wells were drilled out of a planned 177-well program.
Western Canada
Production from the company's Western Canada resource plays exceeded 30,000 boe/day during the first quarter.
Gas resource plays
A multirig drilling program at the Ansell liquids-rich gas resource play is delivering strong results, with average volumes of 17,000 boe/day from the multizone play. Eight horizontal wells were drilled and three horizontal wells were completed in the first quarter.
The four-well pad at Kaybob in the Duvernay play continues to produce as expected, and a new two-well pad came on-line in the first quarter.
Drilling has commenced in the Strachan Cardium play, with four liquids-rich horizontal gas wells drilled and four wells completed during the first quarter. Further development drilling is planned later in the year.
Oil resource plays
A total of 18 horizontal wells were drilled and 22 wells completed over the first quarter, with drilling activities primarily focused on the Viking, Oungre Bakken and North Cardium oil resource plays.
A four-well pad was placed on production at Wapiti Cardium, with results as expected.
Downstream
The company completed an expansion of its pipeline system from the Sandall heavy oil thermal development to the existing gathering system that leads to Hardisty, Alta. Construction is under way on two 300,000-barrel tanks and additional piping interconnections at Hardisty to further expand storage capability starting in 2015.
Front-end engineering design for the crude flexibility project at the Lima refinery is approximately 90 per cent complete. The project includes equipment upgrades to allow for the processing of up to 40,000 barrels per day (bbl/day) of heavy crude feedstock starting in 2017, which will support the company's growing heavy oil thermal business in Western Canada.
Work was advanced on a new recycle gas compressor at the partner-operated refinery in Toledo, Ohio, which is expected to improve operational integrity and plant performance when it comes on-line later in 2014.
Downstream throughputs were 289,000 barrels per day (bbl/day), compared with 327,000 bbl/day in the first quarter of 2013, which takes into account a planned turnaround at the Lima refinery in the first quarter of 2014.
Growth pillars
Asia Pacific region
The first of three fields to be developed at the Liwan gas project achieved first gas on March 30. The Liwan 3-1 field and facilities are operating as expected. Gas sales began toward the end of April, with volumes already ramped up to about 175 million cubic feet per day, plus approximately 7,000 boe/day of liquids (gross).
Short-term customer offtake delays, due to reduced demand from three new gas-fired power plants that are undergoing commissioning/operations start-up, will result in some production volumes being deferred.
In Indonesia, the company signed a heads of agreement for sales gas from the MDA and MBH fields in the Madura Strait. Construction continued on the shallow water platform infrastructure for the BD field, with a contract award for an FPSO (floating production, storage and offloading) vessel awaiting approval from the regulator.
Husky has signed a production sharing contract on the Anugerah block in the East Java basin offshore Indonesia and is planning to commence initial exploration activity later in 2014.
Oil sands
The Sunrise energy project is approximately 87 per cent complete and advancing as planned toward start-up in the second half of 2014.
Twelve stratigraphic wells were drilled and an additional 38 square kilometres of 3-D seismic work was acquired in the first quarter to support additional development. Subject to approvals, the second phase of the central plant facility will be developed in two 70,000 bbl/day stages (each with two 35,000 bbl/day plants), bringing total capacity to 200,000 bbl/day (100,000 bbl/day net to Husky.)
Atlantic region
Husky is further extending the utilization of the SeaRose FPSO through near-field satellite developments in the Jeanne d'Arc basin offshore Newfoundland and Labrador.
Drilling is set to resume on a Hibernia formation well that will target a deeper zone beneath the main North Amethyst field, with first production planned later in 2014.
Gas injection commenced in the first quarter at the South White Rose extension in the White Rose field, with production equipment scheduled for installation in the third quarter and first oil anticipated around the end of the year.
Construction is continuing on a graving dock to support construction of a fixed wellhead platform at West White Rose. Subject to final approvals, first production is scheduled for the 2017 time frame.
The company and its partner have secured the West Hercules drilling rig to begin an exploration and appraisal program in the deepwater Flemish Pass basin beginning the fall of 2014. A seismic program is set to commence in the second quarter of 2014 in the area of the Bay du Nord discovery. Husky holds a 35-per-cent working interest in the Bay du Nord, Harpoon and Mizzen discoveries in the Flemish Pass.
Corporate developments
The board of directors has declared a quarterly dividend of 30 cents per share on its common shares for the three-month period ended March 31, 2014. The dividend will be payable on July 2, 2014, to shareholders of record at the close of business on June 5, 2014.
A regular quarterly dividend on the 4.45-per-cent cumulative redeemable preferred shares, Series 1, will be paid for the period April 1, 2014, to June 30, 2014. The dividend of 27.813 cents per Series 1 preferred share will be payable on June 30, 2014, to holders of record at the close of business on June 5, 2014.
Following feedback from investors, the board of directors has decided to reinstitute a stock dividend program, which allows shareholders to accept dividends declared on the common shares in cash or in common shares.
Shareholders who would like to accept to receive their dividends in the form of common shares are instructed to inform Husky's transfer agent, Computershare, in prescribed form on or before May 28, 2014. A link to an electronic copy of the prescribed stock dividend confirmation notice is available on-line. Even if a shareholder has previously provided a stock dividend confirmation notice to Computershare, they must provide a new one to receive their dividends in the form of common shares.
Conference call
A conference call will take place on Wednesday, May 7, at 8 a.m. Mountain Time (10 a.m. Eastern Time) to discuss Husky's first quarter results. To listen live, please call one of the following numbers:
Canada and U.S. toll-free: 1-800-319-4610
Outside Canada and U.S.: 1-604-638-5340
Asim Ghosh, chief executive officer, chief operating officer Rob Peabody, chief financial officer Alister Cowan and downstream senior vice-president Bob Baird will participate in the call. To listen to a recording of the call, available at 10 a.m. Mountain Time on May 7, please call one of the following numbers:
Canada and U.S. toll-free: 1-800-319-6413
Outside Canada and U.S.: 1-604-638-9010
Pass code: 2658 followed by the number sign
Duration: available until June 8, 2014
Following the conference call, Husky will hold its annual meeting of shareholders at 10:30 a.m. Mountain Time in the Palomino room at the BMO Centre, Stampede Park in Calgary, Alta. A live webcast of the meeting will be available on the company's website under investor relations.
The archived webcasts of the meeting and the conference call will be available for approximately 90 days.
We seek Safe Harbor.
© 2014 Canjex Publishing Ltd. All rights reserved.