Husky Energy reports third-quarter profit and revenue up from year ago

CALGARY – Husky Energy Inc. (TSX:HSE) says the cost of developing the first phase of its Sunrise oilsands project in northern Alberta has risen by nearly 19 per cent, with start-up expected toward the end of this year.

The Calgary-based oil and gas producer said Thursday the price tag of the project’s first 60,000-barrel-per-day phase is now $3.2 billion, up from its previous estimate of $2.7 billion.

Production at Sunrise, which uses steam to soften the bitumen deep underground, is expected to ramp up over two years. One 30,000-barrel-per-day plant is on track to start generating steam toward the end of the year and a second is expected to be up and running six months later.

Sunrise is part of a 50-50 joint venture with BP PLC, which also includes interests in U.S. refineries.

CIBC World Markets analyst Arthur Grayfer said in a note to clients that the first steam at Sunrise is coming on a few months later than expected.

Shares in Husky were off 1.9 per cent at $27.38 in late morning trading on the Toronto Stock Exchange.

The update came as Husky reported Thursday it earned $571 million in its third quarter, up from $512 million from the same period a year ago.

Grayfer said operating earnings per share of 49 cents came in 26 per cent CIBC’s estimate of 67 cents, mainly due to lower volumes at the Liwan natural gas field in the South China Sea and overall liquids volumes, higher operating costs, interest and cash taxes and higher stock-based compensation. Analysts polled by Thomson Reuters had been on average expecting operating earnings of 59 cents per share.

Revenue, net of royalties, climbed to $6.43 billion, up from $5.8 billion, while daily production averaged 341,000 barrels of oil equivalent per day, up from 309,000 boepd in the same quarter last year.

Husky said the increased production reflected increased volumes from its Liwan Gas Project, which started earlier this year, and its heavy oil thermal projects.

The average realized price for the company’s total upstream production was $68.35 per barrel, compared with $72.13 in the third quarter of 2013.

Husky, controlled by Hong Kong billionaire Li Ka-Shing, produces oil and gas in Western Canada, off Canada’s east coast and in southeast Asia.