Husky Energy, Inc. Earnings Call Nuggets: Western Canada Strategy, Downstream

On Thursday, Husky Energy, Inc. (TSE:HSE) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Western Canada

Joe Citarrella – Goldman Sachs: Curious on the oil resource plays in Western Canada with a number of the wells drilled here across the quarter. Any update you’re able to provide in terms of how you’re thinking about the long-term contribution from the various plays in light of how the results are trending here? I think you’ve suggested in the past that you can get to 30,000 barrels a day in aggregate by 2015. I am curious where you stand today in terms of how you’re feeling; whether better or worse at this point than the 30,000 that you’ve suggested before?

Robert J. Peabody – COO: Okay, I’ll take that. This is Rob Peabody. We’re continuing to work the agenda, of course, on the low resource plays. Good progress being made to-date. Just remind you of the overall strategy in our Western Canada business. We are transitioning that business over time to oil resource and liquids-rich gas resource plays. As we’ve said before, we expect over the planning period to move that business strongly in that direction, but it takes time to achieve this process with ultimately moving about a-third of our oil production into that area. What I’d say is we’re on track on that and we’re seeing good results today.

Asim Ghosh – President and CEO: I think, Joe, it would be fair to say that at this point in time we are pleased with our land position. We are where we are at this point in our exploration, and in our plan it does not call for us to have firm definitive conclusions on where we stand, but there’s nothing we’ve got that leads to any concerns about our long-term plan. Our strategic plan continues to be that we will reposition this basin and we have confidence in the ability to execute against that strategic plan.

Joe Citarrella – Goldman Sachs: May be more on a similar plan, just on a more micro level, are there any results you can share at this point across any of the different plays in terms of average production rates per well or EURs that you are expecting that you are able to share?

Asim Ghosh – President and CEO: I think basically, you know the resource play game. You drill around, you frac it and you don’t really know for a year what a dependable type curve is. So, early into the exercise would really be very premature for us to draw any conclusions. But clearly, as I said, we’ve got land positions and we’ve got enough optionality out here that we have some sense, some confidence that we’re not chasing a (indiscernible).

Downstream

George Toriola – UBS: My question is really around the Downstream. If you could provide some insight into couple of things; first of all, have you all processing capacity in your Downstream business? Secondly, you talk about higher input costs that impacted the quarter here. If you can sort of give a little bit more color around that in the context of what we’ve seen some of the other – some of your peers do here that will be very helpful?

Alister Cowan – CFO: Bob, you want to take that.

Robert J. Peabody – COO: George to answer your question. Basically our heavy oil capacity in Canada is primarily the upgrader and the asphalt plant, which is presently 110,000 barrels a day. In the U.S. operations, we run a very high volume through our Toledo BP Refinery, and Lima does take a small portion of the heavy crudes that we can run in Lima. As to your second part, the issue that we have it really is around the Lima Refinery. At this point we do have all the WTI type price barrels going into Lima. There is a percentage of our barrels that are still Brent price.

George Toriola – UBS: Okay. And are you able to – you did provide some insight on the U.S., can you put numbers around that or not? I mean, you did put numbers around Canada?

Alister Cowan – CFO: George, I’ll answer that. Yes, on the Lima side very small, I mean few thousand barrels of heavy are going through there. That’s about the maximum we can take in the current configuration. And on the Lima, on Toledo side, I mean it’s a heavy refinery. The majority of the throughput is going through the areas of heavy barrels.

George Toriola – UBS: And so the impact for the quarter was that in Toledo, I assume then?

Alister Cowan – CFO: No, it’s Lima where we were buying Brent base barrels to process.

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