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Husky eyeing acquisitions in core areas

CALGARY — Husky Energy Inc. is eyeing acquisitions in its core areas in order to boost its production, the oil and gas producer’s new chief executive officer said Wednesday.

CALGARY — Husky Energy Inc. is eyeing acquisitions in its core areas in order to boost its production, the oil and gas producer’s new chief executive officer said Wednesday.

“The company is extremely well-positioned for the long term, but we do have — and let’s call a spade a spade — some issues around ... production,” said Asim Ghosh, who is less than two months into his new job.

Total production during the second quarter dropped to the equivalent of 283,900 barrels of oil per day compared with 317,000 barrels in the same 2009 period.

The drop was due partly to lower output from the White Rose field off Canada’s east coast . The company also reduced capital spending in the throes of the recession last year, which meant lower natural gas and heavy oil production.

“While we have emerged from the recession in a very strong financial position, we are seeing that impact on the current production levels,” Ghosh told analysts on a conference call.

After reviewing its operations, the company has lowered its 2010 total production guidance to between 285,000 and 295,000 barrels of oil equivalent per day from an earlier estimate of 306,000 to 330,000 barrels of oil equivalent per day.

That was based on delays and a slower-than-forecasted ramp-up of production from the North Amethyst offshore project in Eastern Canada and a higher-than-projected decline at the White Rose offshore field, 350 kilometres east of St. John’s, N.L.

On Wednesday afternoon, Husky shares dropped nearly 4.5 per cent to $25.21 on the Toronto Stock Exchange.

In order to fill the short-term production gap, Ghosh said Husky is looking to grow its “bread and butter” operations in Western Canadian heavy oil.

Ghosh said the company is open to strategic acquisitions that would fit well with what it already has.

“You won’t see us going off to Afghanistan or offshore India,” he said.

“We are going to stick to the knitting because that is what Husky’s good at.”

Earlier Wednesday, Husky said it has signed a letter of intent to purchase unidentified natural gas properties in Alberta that would boost production by 10,000 barrels of oil equivalent per day.

Another major growth area is the oilsands, where Husky has a joint-venture with BP PLC to develop its Sunrise leases and process the crude in Ohio refineries.

BP recently sold about US$3.25 billion in Canadian assets to help pay the cost of a massive oil spill in the Gulf of Mexico, caused by a rig blowout in April. The sale to U.S. energy major Apache Corp. did not include BP’s oilsands holdings.

Husky also has a growing presence in Southeast Asia. The former chief executive officer, John Lau, has moved to Hong Kong to head up that business, which may be spun off into a separate company.

Husky is still mulling the split, Ghosh said.

“We are evaluating in detail whether a spinout and a separate listing of our Asian assets represents the best way to maximize value for all our shareholders,” he said.

“Meticulous attention must be paid to legal, to regulatory, to tax considerations in Canada and also in the countries where these assets are operated.”

Earlier Wednesday, Husky reported a second-quarter profit of $266 million, down from a year-earlier $430 million.

Net earnings for the three months ended June 30 amounted to 31 cents per share, compared with 51 cents per share in the year-earlier period. Sales and operating revenues net of royalties rose to $4.57 billion from $3.92 billion on higher oil prices.

Before joining Husky’s board of directors last year, Ghosh’s curriculum vitae included working on the executive staff of brewer Carling O’Keefe and as founding CEO of the Pepsi Foods startup operations in India. He began his career at Procter & Gamble in Canada.

He is also a former CEO of the AS Watson consumer packaged goods subsidiary of Hutchison Whampoa Ltd., the vast conglomerate chaired by Hong Kong billionaire Li Ka-Shing — Husky’s majority shareholder.

He took the helm of the Calgary-based energy company on June 1 after John Lau ended his 17-year run as top boss.