In its third quarter earnings release this week, Husky Energy CEO Rob Peabody downplayed the company's exposure to widening discounts for Canadian heavy oil, insisting integration is key to Husky's above-average performance, relative to its peers in Alberta.
Most of Husky's heavy oil production out of Alberta and Saskatchewan is processed at its upgrading and refining facilities in BC, Saskatchewan and the US Midwest. Natural gas production out of Western Canada act as a "natural hedge" against gas used for steam production at its thermal operations.
Bitumen production averaged 117,300 bbl/day in the third quarter, roughly unchanged from the same time last year. Overall thermal operating costs were reported at $12.04 per barrel in Q3. Those figures include the Tucker Lake and Sunrise steam-assisted gravity drainage (SAGD) projects in Alberta and its basket of heavy thermal facilities in the Lloydminster area.
Tucker underwent a three-week planned maintenance turnaround during the fall, aimed at boosting the facility's output closer to its nameplate capacity of 30,000 bbl/day. According to the Alberta Energy Regulator, the SAGD facility averaged about 24,000 bbl/day in the summer. Husky says the shutdown took Q3 average production to 18,300 bbl/day, but the facility has since ramped up to 30,000 bbl/day.
Gross production at Sunrise averaged 49,400 bbl/day in the third quarter, dented in part due to maintenance activity on the plant's steam generators. Ten infill wells were drilled this year, which are all expected to come online sometime in the fourth quarter. Husky says Sunrise should come close to hitting its nameplate capacity of 60,000 bbl/day by the end of the year.
Bitumen produced at Sunrise is processed at the company's Toledo Refinery in Ohio. Both the refinery and SAGD operations are a 50/50 joint venture with BP.
Rush Lake 2 achieved first oil in October and is expected to ramp up to design rates by the first quarter of next year.
Construction is also progressing at the Spruce Lake Central and Spruce Lake North Projects, with production expected by the end of 2020.
Two additional 10,000 bbl/day thermal projects were sanctioned at the end of last year, with first oil forecasted in the second half of 2021.
Husky's 165,000 bbl/day Lima Refinery in Ohio processes mostly light oil, with a good potion of that feedstock sourced from Canada. Lima began a maintenance shutdown in the middle of September, during which the plant's heavy oil processing capacity will be increased from 10,000 to 40,000 bbl/day.
The 50,000 bbl/day Superior Refinery in Wisconsin remains offline as an investigation continues into the cause of an explosion last April. The blast occurred in the fluidic catalytic cracking unit, which ruptured a nearby asphalt tank, sparking a massive fire. Husky says reconstruction and repairs will begin once the investigation is complete, but normal operations are not expected to resume until 2020.
During today's webcast, Husky had little to add on its $6.4 billion hostile bid for MEG Energy. MEG's board calls the offer undervalued, but has failed to reach a better deal from Husky or any other company. Husky's calls their $11 a share offer price a good deal for both companies.
MEG shareholders have until January 16, 2019, to tender their shares.