Current HSE Stock Info

Enhanced oil recovery (EOR) is being mentioned with more and more emphasis in the margin-tightened oil price environment, and Husky Energy (ticker: HSE) is employing methods to generate more from its oil sands projects in western Canada.

The Calgary-based company placed online its Rush Lake thermal project this week – nearly two months ahead of schedule. The use of thermal production techniques, which is a steam stimulated method and first began in the 1980s, is a staple of Husky’s near-term growth.

The company plans on placing three more projects online in 2016 as it accelerates its heavy oil segment. “Five years ago, we had two heavy oil thermal projects in production and by the end of 2016, we will have ten projects onstream,” said Asim Ghosh, Chief Executive Officer of Husky Energy. Projects generally take about two years to complete construction and then have an operating life of more than 15 years.

Source: HSE May 2015 Presentation

Source: HSE May 2015 Presentation

According to a company news release, the proven EOR method and repeatable construction templates provide “Low operating costs, good netbacks and low execution risk, these projects offer good returns even in a low price environment.” Husky’s current production from thermal projects is approximately 44.0 MBOPD, and the incoming projects will boost output to a combined total of 78.5 MBOPD. In 2014, the unconventional method provided more than one-third of HSE’s heavy oil volumes.

An article by Reuters places the breakeven cost of thermal projects at around $45 per barrel. “Most of the (thermal) projects are going to have positive netbacks at that price,” said Michael Dunn, an analyst with FirstEnergy Capital. Husky holds a competitive advantage due to its midstream and downstream segments, allowing an integrated refining process. In its Q1’15 conference call, management said additional infrastructure and 600 MBO of storage was added to handle the anticipated production increases.

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