CALGARY, Alberta (Reuters) - Canadian oil and gas producer Husky Energy Inc (HSE.TO) raised its 2017 production forecast and capital expenditure program on Tuesday, but lowered its outlook for production at the Sunrise oil sands project in northern Alberta.
Husky said it expected average production of 320,000-335,000 barrels of oil equivalent per day (boe/d) in 2017, compared with 318,000-320,000 boe/d in 2016.
The company, controlled by Hong Kong billionaire Li Ka-shing, also forecast 2017 capital expenditure of C$2.6 billion-C$2.7 billion ($1.98 billion-$2.06 billion), up from C$2 billion in 2016.
U.S. benchmark crude prices CLc1 are back above $50 a barrel, doubling since early 2017, after major oil producing countries agreed to cut output to soak up a supply glut and boost prices.
Chief executive Rob Peabody told analysts on a conference Husky’s priority would be growing thermal heavy oil projects in the Lloydminster region of western Canada, but scaled back expectations of when it would reach full capacity at its Sunrise project, a joint venture with BP Plc (BP.L).
Some analysts viewed the 2017 guidance as slightly negative and Husky shares were last down 0.6 percent on the Toronto Stock Exchange at C$16.80.
“The Sunrise oil sands project has been performing below expectations,” BMO Capital Markets analyst Randy Ollenberger said in a note, adding the company plans to bring 14 previously-drilled well pairs into production to lift volumes at a cost of C$50 million.
Sunrise, which was shut down for a few weeks in the second quarter because of wildfires in the Fort McMurray region, is expected to produce 40,000-44,000 barrels per day next year. That is up from 35,000 bpd in 2016 but below Husky’s previous forecast of 60,000 bpd in 2017.
“What we have been doing in the last quarter is looking at (Sunrise) performance on a well by well basis and rebasing everything,” Peabody said. “But nothing in this data is suggesting we won’t actually recover the same amount of oil per well.”
Peabody said once Sunrise reaches full capacity there could be opportunities for further growth if oil trades around $55-$60 a barrel.
Husky has sanctioned three new Lloydminster thermal projects that will bring on 30,0000 bpd of new production by 2020, and development is continuing at the 10,000 bpd Rush Lake 2 plant.
Overall sustaining and maintenance capital requirements are down about 25 percent over the last two years and forecast to be $2.2-C$2.3 billion for 2017.
Additional reporting by Ahmed Farhatha in Bengaluru; Editing by Anil D'Silva and Andrew Hay