Husky Energy Reports 2004 2nd Quarter Results

Husky Energy Inc. reported net earnings of $239 million or $0.54 per share (diluted) in the second quarter of 2004, compared with net earnings of $441 million or $1.09 per share (diluted) in the second quarter of 2003. Included in earnings of the second quarter of 2003 are tax rate changes of $161 million or $0.38 per share and a net gain of $66 million or $0.16 per share on U.S. denominated debt translation. Cash flow from operations was $588 million or $1.37 per share (diluted) in the second quarter of 2004, compared with $540 million or $1.27 per share (diluted) in the second quarter of 2003.

                                                      Second Quarter

        ($ millions) (loss/(gain))                   2004        2003
        --------------------------------------------------------------
          Net earnings                              $ 239       $ 441
          Tax rate changes                              -        (161)
          Net U.S. denominated debt translation         8         (66)
        --------------------------------------------------------------
                                                    $ 247       $ 214
                                                   -------     -------

Production in the second quarter of 2004 rose five percent to 326,400 barrels of oil equivalent a day, compared with 310,600 barrels of oil equivalent a day in the second quarter of 2003. Total crude oil and natural gas liquids production was 212,200 barrels per day, compared with 209,000 barrels per day in the second quarter of 2003. Natural gas production was 685.4 million cubic feet per day, compared with 609.4 million cubic feet per day in the same period last year.

During the second quarter of 2004, Husky made progress on several initiatives. Husky received Alberta Energy and Utilities Board approval for the Tucker oil sands project and will proceed with the Tucker Project, which is expected to achieve a peak production rate of 30,000 to 35,000 barrels of oil per day. The acquisition of Temple Exploration Inc., will add approximately 4,400 barrels of oil equivalent per day for the remainder of 2004 and undeveloped gas prospects in northwestern Alberta. The White Rose FPSO ("Floating Production, Storage and Offloading") arrived at Marystown, Newfoundland in April 2004 for topside module integration. Husky received submissions from more than 40 interested parties in response to the Company's invitation for expressions of interest to evaluate the possibilities of developing the White Rose natural gas.

"Husky continues to develop its portfolio of assets and improve its operating performance," said Mr. John C.S. Lau, President & Chief Executive Officer, Husky Energy Inc. "Solid progress is being made on the White Rose project on Canada's East Coast and on the Tucker oil sands project in northern Alberta. We will continue to work on acquisition opportunities and financial restructuring of our midstream assets."

Husky's net earnings for the first six months of 2004 were $502 million or $1.14 per share (diluted), compared with $849 million or $2.10 per share (diluted) for the same period in 2003. Cash flow from operations for the first six months of 2004 was $1,171 million or $2.72 per share (diluted), compared with $1,287 million or $3.03 per share (diluted) for the same period of 2003. Operating results were influenced by stronger upstream volumes offset by slightly lower upstream net prices and the impact of hedging. Husky's operational results were $479 million before foreign exchange losses on U.S. denominated debt translation and tax rate changes in the first half of 2004, compared to $530 million before foreign exchange gains on U.S. debt and tax rate changes in the first half of 2003.

Production in the first six months of 2004 was 325,400 barrels of oil equivalent a day, compared with 311,300 barrels of oil equivalent per day in the same period in 2003. Total crude oil and natural gas liquids production was 212,100 barrels per day, compared with 211,300 barrels per day in the first six months of 2003. Natural gas production was 679.5 million cubic feet per day, compared with 600.4 million cubic feet per day in the same period last year.

Second Quarter of 2004 Compared with the First Quarter of 2004

Total production from Husky's properties in Western Canada in the second quarter of 2004 averaged 290.1 mboe per day, up one percent from the 286.9 mboe per day in the first quarter of 2004.

Natural gas production was up two percent from first quarter of 2004 levels, averaging 685.4 mmcf per day. The increase in natural gas production related to the addition of 51 mmcf per day from new natural gas wells partially offset by natural reservoir declines.

Total crude oil and NGL production in Western Canada in the second quarter of 2004 was 175.9 mbbls per day, up one percent from 174.6 mbbls per day in the previous quarter. The higher crude oil production during the second quarter of 2004 was due to additional primary production, the continued expansion of the Bolney/Celtic thermal project and recovery of productive capacity that was down in the first quarter of 2004 due to adverse weather conditions partially offset by natural reservoir declines.

Husky's share of production from the Terra Nova oil field averaged 15.7 mbbls of oil per day in the second quarter of 2004, down 11 percent from 17.6 mbbls per day in the previous quarter. The lower production in the second quarter of 2004 was due primarily to down-time in April and May to undertake repairs.

In the South China Sea, Husky's share of production from the Wenchang oil field averaged 20.6 mbbls of oil per day during the second quarter of 2004, up four percent from 19.9 mbbls per day in the previous quarter.

Exploration

Western Canada
During the second quarter of 2004, 17 net exploration wells were drilled in the Western Canada Sedimentary Basin, resulting in five net oil completions and 11 net natural gas completions.

Wildcat exploration during the second quarter was restricted to the foothills and deep basin areas of western Alberta due to spring surface restrictions in other areas. During the second quarter one net natural gas well was completed and at June 30 three net wells were drilling in the deep basin.

South China Sea
During the second quarter of 2004, the Changchang 12-1-1 deep-water exploratory test well located on Block 40-30 was plugged and abandoned without testing. The data acquired from the well will be incorporated in further developing the geological character of this portion of the basin.

Corporate Acquisition

On June 18, 2004, Husky agreed to acquire all of the issued and outstanding shares of Temple Exploration Inc. ("Temple") for a cash purchase price of $101.5 million. In addition, Husky will assume a working capital deficiency of $13.5 million. The purchase closed on July 15, 2004. Temple's estimated production is approximately 4,400 boe per day before royalties for the remainder of 2004 and is located in the Alberta deep basin near Grande Prairie and at Inga approximately 65 kilometers northwest of Fort St. John, British Columbia. Temple also has a land position with both exploration and development opportunities, which has the potential to add production and reserves.

Major Projects

Shackleton/Lacadena
During the second quarter of 2004, five natural gas development wells were brought on stream bringing the total number of producing wells to 230. Current plans call for an additional 30 wells to be drilled and 45 wells to be tied-in by the fourth quarter of 2004. Husky plans to increase compression in the third quarter of 2004 to a total capacity of 60 mmcf per day.

Thermal Projects
A battery expansion at the Bolney/Celtic thermal project was commissioned and brought on stream during the second quarter. Husky's thermal operations at Bolney/Celtic and Pikes Peak averaged 19.1 mbbls per day during the second quarter of 2004, up five percent from the previous quarter.

Oil Sands

Tucker, Alberta
The Company announced project sanction of the Tucker oil sands project, which is expected to achieve a production rate of 30,000 to 35,000 bbls per day. Construction is scheduled for completion in 2006, with commissioning planned for the third quarter of that year.

Sunrise, Alberta
During the second quarter, the stratigraphic drilling program at the Sunrise oil sands project was completed and analysis of the data is currently nearing completion. With the pending completion of the Environmental Impact Assessment study, Husky expects to submit a commercial application to the Government of Alberta in the third quarter of 2004.

White Rose
Since the arrival of the SeaRose FPSO in Marystown, Newfoundland, activity has focussed on the installation of the various topside modules. The heavy lift process began in June with the first four of 16 lifts completed. Integration of the topside modules will continue over the next few months.

At the White Rose oil field, components of the vessel mooring system were installed during the second quarter. During the remainder of the summer the subsea production facilities and flowlines will be installed. Two water injection wells were completed during the second quarter and the first production well is on schedule to be completed and tested during the third quarter of 2004. The project timing for first oil remains unchanged at late 2005 or early 2006.

Husky Lloydminster Upgrader
A major debottleneck program is underway at the Husky Lloydminster Upgrader. This program is expected to increase the throughput capacity of the plant from 77,000 barrels per stream day to 82,000 barrels per stream day of synthetic crude oil and diluent. Nine projects have been identified of which six are underway. The full scope of the debottlenecking program is expected to be completed within the next two years. Engineering studies to identify further debottleneck opportunities are continuing.

Lloydminster Ethanol Plant
During the second quarter of 2004 the Lloydminster ethanol plant progressed with detailed engineering to establish cost, schedule and execution plans. The project received environmental approval from the Saskatchewan Government. The 130 million litre per year plant is expected to commence production by the end of 2005.

Prince George Refinery
During the second quarter of 2004 the clean fuel project at the refinery in Prince George, British Columbia progressed to the construction phase. The upgrade will increase processing capacity by 10 percent and allow the refinery to produce low sulphur gasoline and diesel fuels that meet the Government of Canada's new fuel specifications. Construction is expected to be completed and the plant on stream by the end of 2005.

The Prince George refinery produces a full slate of light refined petroleum products and has a current design rate capacity of 10,000 barrels per day which has been consistently exceeded.