The Sunrise Project, along with a held lease in the southern Athabasca region called Kirby as well as a project to massively expand refineries in both Ohio and Indiana to take tar sands bitumen, are projects that involve BP (British Petroleum) and would signify a new level of depravity for the former "Beyond Petroleum" company headquartered in London near the Royal Bank of Scotland, Barclays and others investing in these disastrous projects.
--M
Husky earnings 'surprise' affects shares
Analysts predict slow growth for energy firm
By Dina O'Meara, Calgary Herald
October 23, 2009
Weak growth prospects and disappointing production volumes took their toll on Husky Energy Inc., which saw its stock take a five per cent hit a day after releasing its third-quarter results.
Shares of the integrated oil and gas producer fell $1.65 to $30.95 on the Toronto Stock Exchange on Thursday. The market reacted to Husky's warning that annual natural gas and oil volumes likely will come in at the shallow end of expectations.
"The market may have been taken a little bit by surprise that Husky guided them to the lower end of its 2009 guidance," said analyst Lanny Pendill with Edward Jones.
The Calgary-based company forecast production to be in the range of 310 million barrels of oil equivalent per day to 345 mboe per day.
With the spinoff of its South China Sea project Liwan into a separate business, Husky's 200,000-barrel-per-day Sunrise oilsands project represents the next major growth project for the integrated oil and gas company, he said.
The company is expected to sanction the project, a 50-50 venture with BP PLC, in 2010, when it likely will sanction Liwan.
"Outside of Liwan, they really don't have a sizable production growth until Sunrise," Pendill said. "And that's not going to be until 2014 at this point."
Production from the South China Sea project is expected to reach about 500,000 cubic feet per day in 2013, Husky CEO John Lau said in a conference call Thursday.
The company, majority owned by Hong Kong billionaire Li Ka-shing, has signed a memorandum of understanding with various parties, including the Hong Kong government, for a quarter of Liwan production at prices aligned with liquefied natural gas prices, Lau said. The remaining production will flow to four Chinese cities and be subject to market prices determined by the Chinese government.
Investment brokerage house Peters& Co. lowered its rating of the energy company to underperform on a weak growth outlook, on the reduced production volumes, and plans to separate its Liwan project into a different company.
"While this spin-out event will no doubt allow the company to create shareholder value by monetizing that discovery, the assets within Husky will likely not provide material growth in the near-and midterms," analyst Kam Sandhar said in a morning research note.
"Sunrise has yet to be sanctioned, and the performance at Tucker is cause for concern as to the execution capabilities on an even larger oilsands project. In our opinion, the potential spin-out of Liwan is not a sufficient enough value generator to hold the stock."
Husky reported an almost 75 per cent drop in third-quarter earnings Wednesday, falling to $325 million from $1.27 billion a year prior on sharply lower commodity prices due to the global recession and reduced demand.
Analysts also were disappointed about Husky's production volumes, which fell on extended turnarounds on its offshore White Rose east coast operation, and lower-than-expected heavy oil volumes.
Production during the quarter averaged 276,200 barrels of oil equivalent per day, down from 355,900 boe per day in the third quarter of 2008.
Long-term debt, including bank operating loans, jumped 69 per cent to $3.31 billion at Sept. 30 from$1.96 billion at Dec. 31, 2008.Netdebt during the quarter was $2.07 billion. Debt to cash flow and debt to capital employed ratios for the quarter were 1.5 times and 18.7 per cent respectively.
domeara@theherald.canwest.com
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