Husky Energy Inc. reported net earnings of $1.36 billion or $1.61 per share in the second quarter of 2008, an increase of 89% from $721 million or $0.85 per share in the same quarter of 2007. Cash flow from operations in the second quarter of 2008 was $2.1 billion or $2.46 per share, a 66% increase compared with $1.3 billion or $1.48 per share in the same quarter of 2007. Sales and operating revenues, net of royalties, were $7.20 billion in the second quarter of 2008, an increase of 128% compared with $3.16 billion in the same quarter of 2007.
"Husky achieved record results in the second quarter of 2008 in terms of earnings, cash flow and revenue in a strong commodity price environment," said John C.S. Lau, President & Chief Executive Officer, Husky Energy Inc. "In the second quarter, our U.S. refining facilities also contributed to our strong results. In addition, excellent progress was made in the development of our major growth projects and we continued to strengthen our financial position."
In the second quarter of 2008, total production averaged 359,100 barrels of oil equivalent per day, compared with 379,100 barrels of oil equivalent per day in the second quarter of 2007, a reduction of 5 percent. Total crude oil and natural gas liquids production was 256,100 barrels per day, compared with 276,500 barrels per day in 2007. The decrease in crude oil production was mainly due to the suspension of operations at White Rose for 11 days due to severe ice pack and iceberg conditions and the advancement of a scheduled 14 day turnaround at Terra Nova. Natural gas production was 618 million cubic feet per day, compared with 616 million cubic feet per day in the same period of 2007.
For the first six months of 2008, Husky's net earnings were $2.3 billion or $2.65 per share, compared with $1.4 billion or $1.61 per share in the first six months of 2007. Cash flow from operations was $3.6 billion or $4.28 per share in the first six months of 2008, compared with $2.6 billion or $3.04 per share in the same period of 2007. Sales and operating revenues, net of royalties, were $12.3 billion in the first six months of 2008, compared with $6.4 billion in the first six months of 2007.
Production for the first six months of 2008 was 354,700 barrels of oil equivalent per day, compared with 384,600 barrels of oil equivalent per day in the same period in 2007. Crude oil and natural gas liquids production was 253,900 barrels per day, compared with 279,900 barrels per day in the first six months of 2007 reflecting the advancement of scheduled turnarounds at Terra Nova and White Rose originally planned later in 2008 and the severe ice pack and iceberg conditions off the East Coast of Canada. Natural gas production was 604 million cubic feet per day, compared with 628 million cubic feet per day during the same period of 2007 as a result of a strategic decision in 2007 to reduce natural gas drilling due to weak gas prices.
Work on area infrastructure and site preparation, including roads and well pads, progressed on schedule for the Sunrise Oil Sands Project. Phase one of the Sunrise Project for 60,000 barrels per day of bitumen is expected to be operational in late 2012, subject to corporate sanction.
Planning for the development of the McMullen property located in the west central region of the Athabasca oil sands of northern Alberta progressed. Husky plans to develop production through a multi-well drilling program in 2008 using cold production technology.
The White Rose, North Amethyst satellite development off Canada's East Coast remains on schedule for a late 2009 or early 2010 start up. The West White Rose satellite development is planned for production in 2011.
Offshore China, Husky increased its holdings by signing a petroleum contract for a new exploration block, Block 63/05. Husky also completed the acquisition of 3-D seismic data on Blocks 29/26, 29/06 and 35/18 in the second quarter. The drilling rig Seadrill West Hercules is currently undergoing commissioning in South Korea. Husky plans to commence delineation drilling on the Liwan 3-1 discovery in the third quarter of 2008.
In Indonesia, Husky completed an agreement with CNOOC Ltd. to jointly develop the Madura BD gas and natural gas liquids field located offshore East Java, Indonesia. The agreement covers the development and further exploration of the Madura Strait Production Sharing Contract ("PSC"). The Madura BD field development plan was approved and the PSC extension has been submitted to the regulatory authorities for approval.
In the downstream business, Husky completed the conceptual stage of the reconfiguration for the Lima refinery to process heavier feedstocks. With the completion of the BP/Husky joint venture, Husky is working with BP on the reconfiguration of the Toledo refinery to process bitumen feedstock.
Following the completion of the turnarounds at White Rose and Terra Nova in the first half of 2008, crude oil production is expected to increase from current levels in the second half of the year. However, the severe ice conditions which suspended production at White Rose during the first half of the year and the ramp-up of production at the Tucker Oil Sands project will impact our annual production. Production for 2008 is now expected to be five to seven percent below our guidance range.
Husky continues to strengthen its financial position and balance sheet. Total long-term debt including current portion at June 30, 2008 was $2,129 million compared with $2,814 million at December 31, 2007. Debt to capital employed improved to 14 percent at June 30, 2008 from 19 percent at December 31, 2007. Debt to cash flow from operations decreased to 0.3 times at June 30, 2008 compared with 0.5 times at December 31, 2007.
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