Husky Energy Announces 2006 Third Quarter Results

Husky Energy Inc. reported net earnings of $682 million or $1.61 per share (diluted) in the third quarter of 2006, up 23 percent from $556 million or $1.31 per share (diluted) in the third quarter of 2005. Cash flow from operations in the third quarter was $1.2 billion or $2.88 per share (diluted), a 30 percent increase compared with $944 million or $2.23 per share (diluted) for the same period in 2005. Sales and operating revenues, net of royalties, were $3.4 billion in the third quarter of 2006, compared with $2.6 billion in the third quarter of 2005.

"Husky achieved solid financial and operational results for the third quarter," said Mr. John C.S. Lau, President & Chief Executive Officer, Husky Energy Inc. "The results demonstrate Husky's ability to effectively execute our strategy while maintaining an emphasis on financial discipline and integration, building a quality asset base for future growth."

Production in the third quarter of 2006 was 364,700 barrels of oil equivalent per day, up 20 percent compared with 303,200 barrels of oil equivalent per day in the third quarter of 2005. Total crude oil and natural gas liquids production was 253,200 barrels per day, compared with 190,000 barrels per day in the third quarter of 2005. Natural gas production was 669.1 million cubic feet per day, compared with 679.2 million cubic feet per day in the third quarter of 2005.

In Western Canada, Husky has successfully implemented an enhanced oil recovery project to extend the production life of the Taber South Mannville B Pool. The $70 million project, which is the first of its kind in Canada, has been awarded with funding support up to $10 million from the Alberta Government's Innovative Energy Technologies Program.

The Tucker Oil Sands Project, located 30 kilometers northwest of Cold Lake, Alberta, was completed on-schedule and under its $500 million budget. First steam was achieved on August 20, 2006 with first oil anticipated in November 2006. During the 35-year life of the project, Husky expects peak production of more than 30,000 barrels per day.

The Sunrise Oil Sands Project continues with front-end engineering design work targeted to be complete by the third quarter of 2007. The Company continues to evaluate alternatives for the downstream portion of the project.

Development planning continues for the Saleski and Caribou Oil Sands Projects. At Saleski, appropriate bitumen recovery processes are being evaluated.

During the third quarter, Husky successfully acquired 46,080 acres of oil sands leases through Alberta land auctions, which added to our holdings in the Saleski area. The acquired leases are estimated to contain 3.3 billion barrels of original bitumen in place within the Grosmont and Nisku carbonates. Husky's holdings at Saleski now total 239,200 acres with original bitumen in place estimated at 24.1 billion barrels.

At the White Rose oil field, gross production in the third quarter averaged 104,700 barrels per day, with 75,900 barrels per day net to Husky. A sixth production well, which is scheduled to come on-stream at the end of 2006, is expected to increase reservoir production capacity to 125,000 barrels of oil per day. Throughput tests were conducted on the White Rose FPSO and plans are being put in place to debottleneck the facility to around 140,000 barrels of oil per day during the scheduled turnaround next summer.

The Terra Nova FPSO returned to the oil field in late September after undergoing repairs and modifications to improve operational efficiency. Hook-up and start-up will proceed during October and oil production is expected to resume at the end of the month.

In the Jeanne d'Arc Basin, approximately 900 square kilometers of 3-D seismic was completed during the third quarter. This program was shot in the vicinity of the White Rose and Terra Nova oil fields to evaluate future exploration opportunities.

Internationally, Husky signed three petroleum contracts with CNOOC (China National Offshore Oil Corporation) for exploration blocks in the South China Sea. The three exploration blocks cover approximately 16,871 square kilometers. Blocks 35/18 and 50/14 are located in the Ying Ge Hai Basin, west of Hainan Island and cover a combined 7,606 square kilometers.

Block 29/06, located in the Pearl Mouth Basin, is adjacent to Block 29/26, which contains the Liwan 3-1-1 discovery. This discovery contains an estimated resource of four to six trillion cubic feet of natural gas. In the third quarter, Husky successfully sidetracked and cored the Liwan 3-1-1 well confirming the pay zones encountered in the original well. Husky also completed a 400 square kilometer 3-D seismic program over the Liwan discovery in September. Further drilling is planned to delineate the discovery.

Regarding midstream and refined products, Husky announced expansion of its mainline crude oil pipeline between Lloydminster and its terminal at Hardisty, Alberta. The expansion will accommodate increased production from the Tucker Oil Sands Project, and shipments from third parties.

Construction at the Lloydminster Ethanol Plant adjacent to the Upgrader was completed. Husky's facility is the largest plant of its kind in Western Canada and will produce annually 130 million litres of ethanol and 134,000 tonnes of Distillers Dried Grain with Solubles, a high protein feed supplement. Construction of a second ethanol plant at Minnedosa, Manitoba is approximately 37 percent complete and should become operational in mid-2007.

At the Prince George Refinery, production throughput increased from 9,600 barrels per day in the third quarter of 2005 to 11,600 barrels per day in the same period of 2006. This increase marks the successful start-up of the low sulphur diesel facilities and completion of the expansion project.

Standard and Poor's Rating Services raised the Company's long-term corporate credit and senior unsecured debt ratings to BBB+ with a stable outlook. Standard and Poor's based its decision on Husky's successful execution and completion of the White Rose project and the Company's very good internal growth prospects, competitive full cycle cost profile and consistently moderate financial risk profile.

The Company has continued to improve its financial strength and flexibility. Debt to capital employed was reduced to 15.6 percent at September 30, 2006 compared with 20.1 percent at December 31, 2005. Debt to cash flow from operations decreased to 0.4 times at September 30, 2006 compared with 0.5 times at December 31, 2005.

Returns on equity and average capital employed have strengthened. Return on equity and return on average capital employed reached 34.2 percent and 28.7 percent respectively for the period ended September 30, 2006.

Husky's net earnings for the first nine months of 2006 were $2.2 billion or $5.15 per share (diluted), compared with $1.3 billion or $3.15 per share (diluted) for the same period in 2005. Cash flow from operations for the first nine months of 2006 was $3.3 billion or $7.76 per share (diluted), compared with $2.6 billion or $6.11 per share (diluted) for the same period in 2005.

Production in the first nine months of 2006 was 354,100 barrels of oil equivalent per day, compared with 310,500 barrels of oil equivalent per day in the same period in 2005. Total crude oil and natural gas liquids production was 241,500 barrels per day, compared with 196,900 barrels per day during the first nine months of 2005. Natural gas production was 675.7 million cubic feet per day, compared with 681.6 million cubic feet per day in the first nine months of 2005.

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