Husky Energy focusing on Western Canada, Asia

Husky Energy Inc. (TSX:HSE) says it plans to spend 20 per cent more on its capital budget in 2010 than this year, with the majority of its $3.1-billion spending plan focused on growth in Western Canada and Southeast Asia.

CALGARY — Husky Energy Inc. (TSX:HSE) says it plans to spend 20 per cent more on its capital budget in 2010 than this year, with the majority of its $3.1-billion spending plan focused on growth in Western Canada and Southeast Asia.

“The company is poised to take advantage of the forecast economic cycle and to pursue business growth,” Husky chief executive John Lau said in a statement Monday.

“The 2010 budget has been established to cater for spending on those assets that generate the highest shareholder values in our portfolio.”

The Calgary-based oil and gas producer said it will spend $1.2 billion on its projects in Western Canada, increasing spending in the area by 65 per cent to focus on heavy oil and unconventional gas holdings.

Spending on its Sunrise oilsands project will rise substantially from only $10 million this year to $85 million in 2010. Early engineering and design work is expected to be complete in the first quarter of next year, and first production is expected in 2014.

In Southeast Asia, Husky plans to spend $660 million, up from $520 million in 2009. The company expects its board to give the green light to the Liwan gas project in the South China Sea early next year.

In its East Coast operations, which include interests in the White Rose and Terra Nova oil fields, Husky plans to spend $485 million in 2010, down from $590 million this year. Production from its North Amethyst field is expected to come on in the first quarter of 2010.

The company has also budgeted $170 million on plant maintenance, pipelines, infrastructure and related operations.

Capital expenditures for refining and retail segments of the company are forecast at $465 million and will focus on engineering and maintenance work at the Lima Refinery and the BP-Husky Refinery in Ohio.

Husky expects an increase in annual oil production to offset a reduction in natural gas production due to low gas prices. But Husky said it is ready to adjust its strategy should commodity prices improve.

UBS Investment Research analyst Andrew Potter said 2010 will be a key year for Husky with the company’s board set to give the go-ahead to the Liwan and Sunrise projects.

“These projects will mean that (Husky) has one of the highest long term production growth rates versus its peers, but we note that it is all back end loaded in the 2013/2014 time frame,” he wrote in a note to clients Monday.

Husky, controlled by Hong Kong billionaire Li Ka-shing, operates in the oilsands and has heavy oil properties in Western Canada, refineries in Canada and the United States as well as oil production off the East Coast and in southeast Asia.

Shares in the company gained 47 cents to $28.97 in afternoon trading on the Toronto stock market.

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