Husky reports rising production and higher operating costs out of its thermal portfolio

Husky reports rising production and higher operating costs out of its thermal portfolio

In their first quarter earnings release this week, Husky Energy says it continues to work towards growing its thermal portfolio to 192,000 bbl/day of bitumen by 2021, thanks to a series of expansions at its Lloyd, Tucker and Sunrise facilities.

LLOYD THERMAL PROJECTS

The majority of Husky’s heavy oil assets are located in the Lloydminster region of Saskatchewan and Alberta. The Lloyd portfolio consists of six 10,000 bbl/day thermal bitumen projects, for a combined design capacity of 60,000 bbl/day. The company uses repeatable, modular construction templates for each project.

The 10,000 bbl/day Rush Lake 2 is currently under construction and tracking ahead of schedule. Steam-in is expected in the third quarter of this year with first oil due in the first quarter of 2019. 

Three other 10,000 bbl/day phases are planned at Dee Valley, Spruce Lake North and Spruce Lake Central. Construction at Dee Valley began in March 2018, with first oil anticipated in the first half of 2020. Site clearing is under way at Spruce Lake North and Spruce Lake Central, which are scheduled to start production in the second half of 2020. The Edam Central and Westhazel projects are expected to be brought online in the second half of 2021.                  

Husky has identified an additional 14 thermal bitumen projects with a total design capacity of 110,000 bbl/day for potential development sometime in the future.

TUCKER THERMAL PROJECT

Production at Tucker averaged 22,500 bbl/day in the first quarter, roughly unchanged from the previous quarter. The company achieved first oil from a new 15-well pad, with production continuing to ramp up through the first half of this year. 

Tucker is expected to reach its design capacity of 30,000 bbl/day by the end of 2018, after a planned maintenance turnaround is completed in Q3. Tucker is a steam-assisted gravity drainage (SAGD) facility located about 30 km northwest of Cold Lake.

BITUMEN PRODUCTION PROFILE (COURTESY HUSKY ENERGY)

SUNRISE ENERGY PROJECT

Sunrise reached the 50,000 bbl/day milestone in March 2018 and averaged 46,800 bbl/day for the first quarter, up 2% from Q4. The steam-to-oil ratio for the original 55 well pairs averaged 3.4 in Q1 and continues to decline as the SAGD facility ramps up to its nameplate capacity of 60,000 bbl/day towards the end of this year. 

Husky also says it is working towards reducing diluent requirements at Sunrise through its Husky Diluent Reduction (HDR) project. The technology involves mixing bitumen with hot synthetic crude, producing a pipeline-ready product with a slightly better quality than traditional diluted bitumen. The company says it's still early days but the technology has the potential to cut diluent needs in half. A 500 bbl/day pilot plant is currently being tested on site.

Sunrise is a 50/50 joint-venture with BP Canada, located 60 km northeast of Fort McMurray.

OPERATING COSTS ON THE RISE

Thermal bitumen production from Lloyd, Tucker and Sunrise averaged 123,200 bbl/day in the first quarter (net to Husky), up 2,300 bbl/day from the previous quarter. Overall thermal operating costs were reported at $11.54 per barrel in Q1, up from $9.83 in Q4/2017.


SOURCES:
HUSKY ENERGY • FIRST QUARTER 2018 RESULTS • APR 26, 2018
HUSKY ENERGY • CORPORATE PRESENTATION • APR 26, 2018
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