(Reuters) - Canadian oil and gas producer Husky Energy Inc reported a bigger third quarter profit on Thursday, topping expectations with a boost from higher crude oil prices.
Canadian oil producers have struggled with transportation bottlenecks to U.S. refineries as output has surged, pushing Canadian prices to record-large discounts to U.S. light crude. Husky, majority owned by Hong Kong tycoon Li Ka Shing, is an integrated producer, however, and owns refineries, dedicated pipeline space, and some production offshore where crude transport is less congested.
That integration allowed Husky to tap into higher global oil prices, leaving it “essentially unaffected,” by the wide differential between Canadian heavy and U.S. light crude, Chief Executive Rob Peabody said on a conference call. Such differentials are likely to remain large through 2020, until added pipeline capacity is available, he said.
Even with big discounts on Canadian crude, it does not necessarily make sense to reduce production and instead buy barrels cheaply from other producers struggling to transport them, Peabody said. Shutting down steam-assisted oil sands projects can damage the underground crude reservoir.
Outside of pricing, Husky made an unsolicited formal offer this month to buy MEG Energy Corp, a heavy oil producer, in a deal valued at C$6.4 billion ($5 billion).
MEG has rejected Husky’s offer.
Peabody said Husky and MEG’s board have not spoken directly about a deal since making the offer.
“That doesn’t surprise me, there is a bit of a, I don’t want to say, dance. It is incumbent on their board to understand if there is any potential for competing offers.”
Husky shares dipped 0.9 percent to C$18.58 in Toronto on disappointment with lower production during the third quarter, partly due to well performance problems in Atlantic Canada.
Production decreased to 297,000 barrels of oil equivalent per day (boe/d) from 318,000 boe/d in the same quarter last year.
Net income rose to C$545 million ($418.27 million) from C$136 million a year earlier.
Adjusted for one-time items, earnings amounted to C$568 million or 57 Canadian cents per share, up from C$136 million and 14 Canadian cents per share.
On that basis, analysts had predicted a profit of 48 Canadian cents per share, according to Refinitiv.
(This version of the story corrects to 297,000 barrels of oil equivalent per day (boe/d) from 318,000 boe/d, instead of 297 million barrels from 318 million boe/d in paragraph 10)
Reporting by Rod Nickel in Winnipeg, Manitoba and Laharee Chatterjee in Bengaluru; Editing by Shounak Dasgupta and Chris Reese