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Asim Ghosh, CEO of Husky Energy.

The Globe and Mail

A chastened Husky Energy Inc. , with a new CEO at the helm, will turn to acquisitions to try to stem the three-year decline in its oil and natural gas production.

For the sixth consecutive year, Husky has slashed its annual production target. Its new goal for 2010 is about 290,000 barrels a day - down almost 10 per cent from its earlier target of about 318,000 barrels - and the lowest output for the company since 2001.

Investors knocked the stock 3.9 per cent lower Wednesday, to a level first reached five years ago.

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Chief executive officer Asim Ghosh, on the job less than two months, outlined a strong long-term picture but said the company is "completely open" to acquisitions to generate production growth more quickly. He said it will likely be early 2012 before declines are reversed.

"We do have - and let's call a spade a spade - some short-term issues around production," said Mr. Ghosh on a conference call Wednesday.

The company on Wednesday announced a small natural gas acquisition in Alberta of 10,000 barrels a day of oil equivalent. Mr. Ghosh said acquisitions would be focused on areas where the company operates or has expertise.

The second-quarter results were "bad numbers," said analyst Michael Dunn of FirstEnergy Capital. "I don't know if it was a complete surprise but the Q2 numbers were definitely disappointing."

Husky is also pushing to get more oil and gas out of its own land, with more drilling rigs currently operating than any other firm in Western Canada. Mr. Dunn expects the company to aggressively drill through the rest of the year.

Mr. Ghosh replaced long-time CEO John Lau, who oversaw a more than doubling of production from 2000 to a peak in 2007. The decline to this year's production level is almost 25 per cent.

Mr. Lau this week stepped down from the board of directors to become CEO of the company's Asia Pacific arm, which controls a large natural gas discovery in the South China Sea. The division might be established as a separate company, with the decision set for the end of the year.

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Husky is majority owned by Hong Kong billionaire Li Ka-shing. Mr. Ghosh previously ran Mr. Li's Vodaphone mobile phone business in India, generating massive growth. Yet some investors are skeptical that he is the person to reinvigorate Husky.

Late last year, according to FactSet Research Systems, large shareholder RBC Asset Management Inc. nearly halved its holdings.

One of the world's largest funds, Capital Research of Los Angeles, recently bought a 10.5-million-share stake, currently worth about $270-million, to become the company's second-largest outside investor.

Mr. Ghosh said Husky will be able to produce strong long-term growth, particularly in the oil sands. Husky, with partner BP Plc, is set to embark on the building of a 60,000 barrel a day oil sands project called Sunrise, which injects steam into wells to recover bitumen.


Close: $25.40, down 99¢

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