A Look at Husky Energy’s Third Quarter Earnings

This Fool opens the hood on Husky’s third quarter results.

The Motley Fool

Husky Energy (TSX: HSE) is out with its third quarter earnings and Canada’s third largest integrated oil producer delivered solid results that met analyst estimates.

Drilling into the numbers

Husky Energy delivered net income of C$512 million or C$0.52 per share. That’s actually C$14 million or a penny per share less than last year’s third quarter.  However, after adjusting for one-time items, earnings were actually up 6% over
last year, which is exactly what analysts were expecting. Husky also delivered cash flow of C$1.35 billion, which is up 6% from last year as well.

If there was one area of weakness it was in Husky’s refining business. Here the drop in the crack spread, or the difference between the price of crude oil and the refined product, put some pressure on Husky’s earnings. That however is to be expected from an integrated oil company as the refining business tends to be a natural hedge against slumping oil prices, or in this case a headwind when prices rise.

A closer look at production
Total production for the quarter averaged 309,000 barrels of oil equivalent per day (BOE/d). That’s up more than 8% over last year. Production however was actually down about 1,000 BOE/d from last quarter as the company had some production shutdowns due to equipment tie-ins, infrastructure outages and maintenance.

Husky’s heavy oil business continued to do the heavy lifting. The company uses a number of enhanced oil recovery techniques to recover this oil and is very good at what it does. This past quarter the company’s heavy oil business delivered 123,000 barrels per day, up just about 7% over last year.

On the light oil side, Husky continued to drill in light oil locales like the Bakken, Viking and Cardium plays. The Viking and Cardium plays are two that PennWest (TSX: PWT) (NYSE: PWE), for example, is paying much more attention to these days. PennWest has reallocated 10% more of its capital budget to turn these two plays into core growth areas.  Bottom line is that light oil will continue to make incremental gains for Canadian producers like Husky and PennWest.

A look ahead

Husky Energy has three pillars of growth to keep oil production both flowing and growing. In the Asia Pacific region, Husky is nearing completion of the Liwan Gas Project in the South China Sea. Investors should start seeing projection
from this project fueling results in the coming quarters.

By the end of 2014 Husky should begin to deliver initial production from its Sunrise Energy Project. The first phase of this oil sands project, which it has partnered with BP (NYSE: BP) to develop, is about 80% complete. The initial phase will add 30,000 barrels per day net to Husky, with the other 30,000 barrels per day net to BP.

Finally, Husky is expected to deliver future growth from its Atlantic region. One of the highlights of the quarter was the announcement of a significant oil discovery at its Bay du Nord prospect with its partner Statoil (NYSE: STO). Bay du Nord is just one of three discoveries for Husky and Statoil 500 kilometers northeast of St. John’s, Newfoundland. Current estimates suggest that Husky’s 35% interest in the discoveries means it is sitting on 400 million barrels of oil. Needless to say, Husky will be very busy as it continues to develop its operations in the Atlantic region, which already include its White Rose satellite fields.

Investor takeaway
Husky Energy delivered a solid quarter. Even better, its future looks bright as the Sunrise Energy project will begin to add to its production later this year while its offshore oil projects fuel future growth.

More from The Motley Fool
Interested in the top small-cap stock idea from The Motley Fool’s senior investment advisor? Click here to download a FREE copy of “A Top Canadian Small Cap for 2013 — and Beyond.”

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Matt Dilallo does not own shares of any of the companies mentioned at this time.   The Motley Fool has no positions in the stocks mentioned at this time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

Target. Stand out from the crowd
Dividend Stocks

The Best Stocks to Buy With $1,000 Right Now

Canadian Natural Resources stock and another reliable dividend stock could be best buys for high investment return right now.

Read more »

oil tank at night
Energy Stocks

The Best Canadian Energy Stocks to Buy for Dividends

Even growth investors will want to have these high-yielding energy stocks on their watch lists.

Read more »


Buy the Dip: 3 Stocks to Buy Today for a Big Profit in 5 Years

Here are three Canadian stocks you can buy now at a discounted value and hold for the next five years for big…

Read more »

Businessman holding AI cloud
Tech Stocks

Before You Buy NVIDIA, Here’s an AI Stock I’d Buy First

NVIDIA (TSX:NVDA) is a great company, but one TSX AI stock is a better value.

Read more »

Dots over the earth connecting the world

Canadian Stocks Set to Dominate the Global Market

Here's why I would personally overweight Canadian stocks in my portfolio.

Read more »

stock research, analyze data

2 Top TSX Stocks I’m Considering Buying in September 2023

Bank of Montreal (TSX:BMO) and Canadian Pacific (TSX:CP) are intriguing TSX stocks worth consideration, even as they recover off their…

Read more »

Stocks for Beginners

Canadian Investors: 2 Oversold Canadian Stocks to Buy Now

These Canadian stocks continue to trade in oversold territory, creating a prime opportunity for investors to pick them up today.

Read more »

Make a choice, path to success, sign

2 TSX Stocks to Buy This Month — and 1 to Avoid

Are you interested in buying stocks this month? Here are two you should consider and one you should avoid in…

Read more »