CALGARY, Alberta, Oct 22 (Reuters) - Husky Energy Inc HSE.TO plans to live within its means as it gets set to formulate its 2009 capital budget, but it is under no pressure to make big spending cuts, its chief executive said on Wednesday.
Husky, which reported a 65 percent jump in third-quarter earnings on Tuesday, will not break the bank boosting production as oil and gas prices weaken amid the world financial crisis, CEO John Lau said.
The company, Canada’s second-largest oil producer and refiner by market value, will base spending plans on its expectations for free cash flow, Lau said on a conference call.
“So Husky has no pressure due to liquidity or anything to map out our capital profile,” he said.
The company said it will release its capital spending plans within the next two months.
Some U.S. oil companies have already announced big cuts for 2009 and for the last part of this year as oil prices have tumbled by more than half from highs of about $147 a barrel in July. U.S. crude fell 7.5 percent on Wednesday to close at $66.75 a barrel.
Lau said he expects smaller companies developing oil sands projects in Canada will have the biggest problems completing them due to the credit crunch, falling commodity prices and stubbornly high costs.
Large players with deep pockets are expected to keep developing their operations, he said.
“At this stage, it depends on the market fluctuations, but I‘m quite sure the majors will have the confidence to continue in this cycle,” he said.
Husky is developing its 9 billion barrel Sunrise oil sands project in northern Alberta with partner BP Plc BP.L as part of a venture that also gives Husky a 50 percent stake in BP’s Toledo, Ohio, refinery.
Sunrise is expected to produce 200,000 barrels a day by 2015-20, starting with a 60,000 barrel a day phase in 2012.
Husky shares tumbled C$2.39, or 7 percent, to C$32.93 on the Toronto Stock Exchange on Wednesday, on a day when the TSX energy group fell 9 percent.
Interests controlled by Hong Kong billionaire Li Ka-shing own more than 70 percent of Husky.
$1=$1.25 Canadian Reporting by Jeffrey Jones; Editing by Peter Galloway