Oct. 21 (Bloomberg) -- Husky Energy Inc., the Canadian oil producer controlled by Hong Kong billionaire Li Ka-shing, said third-quarter profit fell 73 percent as crude and natural-gas prices dropped.

Net income fell to C$338 million ($324 million), or 40 cents a share, from C$1.27 billion, or C$1.50, a year earlier, the Calgary-based company said today in a statement. Sales and operating revenue after royalties declined 49 percent to C$3.9 billion.

Husky was hurt by a drop in oil prices as the recession curbed demand for fuel. Oil futures traded on the New York Mercantile Exchange averaged $68.30 a barrel in the third quarter, a drop of 42 percent from a year earlier. More than 70 percent of Husky’s output is oil.

“This quarter’s financial performance reflects the global economic downturn,” Chief Executive Officer John Lau said in the statement. “Commodity prices and financial markets are expected to remain volatile.”

Production of oil and gas fell 22 percent to the equivalent of 276,200 barrels of oil a day. Oil output was hampered by lower volumes from the Terra Nova field and planned maintenance and satellite tie-in work in the White Rose field, both off Canada’s East Coast, Husky said. Gas production fell partly because Husky scaled back spending on drilling.

Sunrise

Husky produces from fields in western Canada, off the nation’s eastern cost and in Asia. BP Plc, Europe’s second- largest oil company, in April said it would delay production from the Sunrise oil-sands project, its joint venture with Husky, for at least a year to 2013 or 2014. Sanctioning is expected in 2010.

Husky also owns fields in China and Indonesia and a chain of about 500 filling stations in Canada. The company, which has partnered with China National Offshore Oil Corp. in developing properties in the South China Sea and the Madura gas project in Indonesia, said in April that it planned to spin off its properties in Southeast Asia.

Husky may make acquisitions as energy prices stabilize, Chief Executive Officer John Lau said in July. Some target companies have been identified, Lau told analysts and investors on July 23.

Hutchison Whampoa Ltd., Li’s biggest company, holds about 35 percent of Husky’s stock. Altogether, Li owns about 71 percent of the Canadian oil producer through shares held by his family plus at least one other company.

Husky is the third-largest Canadian oil and gas company that also owns refineries, after Suncor Energy Inc. and Exxon Mobil Corp.’s Imperial Oil Ltd.

Husky fell 17 cents to C$32.60 today on the Toronto Stock Exchange. The statement was issued after the close of regular Trading on North American markets.

(Husky will conduct a conference call for investors and analysts beginning at 4:15 p.m. tomorrow and accessible at 1- 800-319-4610 or 1-800-597-1419.)

To contact the reporter on this story: Sonja Franklin in Calgary at sfranklin6@bloomberg.net

Last Updated: October 21, 2009 17:29 EDT