Husky sees positive U.S. returns despite economy

CALGARY, Alberta, Feb 5 (Reuters) - Husky Energy Inc (HSE.TO: Quote, Profile, Research), which has quickly become a sizable oil refiner in the U.S. Midwest, expects operations there to generate positive returns despite a weakening economy and shrinking margins, its chief executive said on Tuesday.

With two big deals in 2007, Husky, Canada's No. 3 oil producer and refiner, now has ownership a pair of refineries pumping out a total of about 300,000 barrels a day in Ohio.

Chief Executive John Lau said he did the transactions without assuming refining margins would stay at the wide levels that had led to strong profits in the industry last year.

Those margins have since shrunk along with demand in the weakening U.S. economy, executives have said.

"I wish that refining margins would continue to be as strong as the last couple of years, but from the economics we are using ... we feel comfortable that both refineries will continue to contribute quite significantly to Husky," Lau said in a conference call.

The company, which is majority-owned by Hong Kong billionaire Li Ka-shing, bought the 160,000 barrel a day Lima, Ohio, refinery from Valero Energy Corp (VLO.N: Quote, Profile, Research) last summer for $1.9 billion.

The deal was aimed at securing a processing source for its growing heavy oil and oil sands output in Canada. The company is now poring over engineering studies to find the best way to have it run heavier crude.

Then in December, it struck a deal with BP Plc (BP.L: Quote, Profile, Research) to swap 50 percent stakes in Husky's 9 billion barrel Sunrise oil sands project in Alberta for the British oil majors 155,000 barrel a day Toledo, Ohio, refinery.

The deal is expected to be finalized in this quarter, and will immediately contribute cash flow to Husky, Lau said.