Husky Energy Inc. delivered a strong performance in the first quarter of 2012. Net earnings for the quarter were $591 million, or $0.60 per share (diluted). This compared to $626 million, or $0.70 per share in first quarter of 2011, when the Company recorded an after-tax gain of $143 million on the sale of non-core assets. Excluding the after-tax gain and related taxes, net earnings increased 22 percent on a normalized basis compared to a year ago.
"The first quarter demonstrates we are sustaining the momentum we achieved in 2011," said CEO Asim Ghosh. "Consistent execution of our business plan and strong operational performance enabled us to capitalize on the crude oil pricing environment."
Higher production and stronger crude oil prices offset impacts from lower natural gas prices and tighter refining margins. The Company's integration strategy provided for the capture of differentials between light and heavy crudes and Western Canadian and West Texas Intermediate pricing.
Growth highlights included advancing the subsea well infrastructure at the Liwan Gas Project in the Asia Pacific Region, the completion of drilling of all 49 well pairs planned for Phase 1 of the Sunrise Energy Project, and the contracting of engineering design work to advance evaluation of a wellhead platform for White Rose satellite field development in the Atlantic Region.
Planned maintenance programs in 2012, including an offstation program in the Atlantic Region, will influence production over the next two quarters. The planned White Rose offstation program is important for maintaining high facility uptime and supporting future potential development activity.
Highlights include the following:
First quarter production averaged 320,000 boepd, a three percent increase over the 310,000 boepd produced in the first quarter of 2011, and comparable to the 319,000 boepd in the fourth quarter of 2011. The increase was primarily due to higher production volumes in Heavy Oil, at the Tucker Oil Sands Project, and in Western Canada where an acquisition was completed in early 2011.
The SeaRose Floating Production Storage and Offloading (FPSO) vessel is scheduled to begin its offstation program in May. The entire program, including disconnect, dry dock and reconnecting activities, is expected to last approximately 125 days.
"The SeaRose had a 98 percent uptime performance in 2011, due in large part to our commitment to maintain operational integrity," said COO Rob Peabody. "We have been planning this offstation for more than a year and are using the opportunity to complete a full slate of work while the vessel is in dry dock and on the voyage to and from the field."
The impact of the SeaRose offstation program, as well as an offstation for the partner-operated Terra Nova FPSO scheduled later in the year, has been factored into the annual production guidance of 290,000 to 315,000 boepd.
First quarter earnings growth was driven by higher production and upgrading volumes and higher realized crude prices. This was partially offset by continued weakness in natural gas prices and lower U.S. refining margins due to higher-priced feedstock.
Average realized crude oil pricing in the first quarter was $87.11 per barrel, compared to $78.27 a year ago. U.S. refining market crack spreads were weaker in the quarter, with the realized refining margin averaging $14.14 per barrel, compared to $16.83 per barrel in the first quarter a year ago.
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