(Reuters) - Husky Energy Inc (HSE.TO), Canada’s No. 3 integrated oil company, reported a better-than-expected quarterly profit as production rose and the company realized higher prices.
Husky, however, said reduced volumes due to a planned shutdown at the Terra Nova oil field, off Newfoundland, will hurt third-quarter production.
Heavy oil producer Husky holds a 13 percent working interest in Terra Nova, which is operated by Suncor Energy Inc (SU.TO).
Husky, controlled by Hong Kong billionaire Li Ka-shing, said the C$6.5 billion Liwan Gas project in the South China Sea was on track to start production between late 2013 and early 2014.
The field lies 300 kilometers (186 miles) southeast of Hong Kong and will supply as much as 500 million cubic feet of gas per day to the Chinese market.
All nine wells at Liwan 3-1 are complete and ready for production, the company said.
Husky has been developing Liwan 3-1, the largest ever natural gas discovery offshore China, in partnership with CNOOC (0883.HK).
Husky’s net income in the second quarter rose to C$605 million ($588.1 million), or 59 Canadian cents per share, from C$431 million, or 43 Canadian cents per share, a year earlier.
On an adjusted basis, the company earned 62 Canadian cents per share, topping analysts’ average expectation of 57 Canadian cents per share, according to Thomson Reuters I/B/E/S.
Cash flow, a key measure of the company’s ability to pay for new projects and drilling, rose 26 percent to about C$1.45 billion, or C$1.47 per share.
Total production in the quarter was 310,000 barrels of oil equivalent per day (boe/d), up 10 percent from a year earlier. Production weighted 73 percent towards oil and liquids, said the company, which owns refineries in Alberta, British Columbia and Ohio.
Average realized prices for crude oil, natural gas liquids and bitumen rose to $77.98 per barrel in the quarter from $71.61 a year earlier, the company said.
U.S. realized refining margins averaged $20.24 per barrel, compared with $14.79 per barrel a year earlier.
Husky is also building the C$2.7 billion Sunrise oil sands project in northern Alberta. The 60,000-barrel-per-day project, co-owned with BP Plc (BP.L), is expected to begin operations next year.
The company said the first phase of the project was about 70 percent complete, with first production on track for 2014.
Preliminary design work on the next phase of Sunrise has been completed and regulatory approvals are in place for a total of 200,000 barrels per day of production, Husky said.
Shares of the company, which has a market value of about C$29.40 billion, closed at C$29.58 on the Toronto Stock Exchange on Wednesday.
Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Rodney Joyce and Joyjeet Das