Husky Positioned to Advance Mega Projects in Canada, China


White Rose, Hibernia, and Terra Nova
(Click to Enlarge)

Husky reported net earnings of $338 million or $0.40 per share (diluted) in the third quarter of 2009, compared to $1.27 billion or $1.50 per share (diluted) in the same quarter of 2008. Adjusted Net Earnings for the third quarter were $325 million or $0.38 per share (diluted) compared to $1.27 billion or $1.49 per share (diluted) in the same quarter of 2008. Cash flow from operations in the third quarter was $452 million or $0.53 per share (diluted), compared with $2.00 billion or $2.35 per share (diluted) in the same quarter of 2008. Sales and operating revenues, net of royalties, were $3.90 billion in the third quarter of 2009, compared with $7.72 billion in the third quarter of 2008.

"This quarter's financial performance reflects the global economic downturn. Commodity markets remain challenged in the third quarter of 2009, with oil prices down sharply from the same quarter in 2008 and natural gas prices at the lowest levels since 2002," said Mr. John C.S. Lau, President & Chief Executive Officer of Husky Energy Inc. "Notwithstanding the economic conditions, Husky maintained its strong balance sheet and achieved solid financial results through consistent focus on financial discipline, operational efficiency and safety. The company has been successful in achieving its reduction in capital expenditure and operating costs. Commodity prices and financial markets are expected to remain volatile. Husky is well positioned to take advantage of its mega project developments as the environment improves."

Financial Performance

Commodity prices and crack spreads were significantly lower in the third quarter of 2009 relative to the same period in 2008. The WTI benchmark crude oil price averaged U.S. $68.30 per barrel in the third quarter of 2009, compared to U.S. $117.98 per barrel in the third quarter of 2008. The NYMEX benchmark natural gas price averaged U.S. $3.39 per million British Thermal Units in the third quarter compared to U.S. $10.24 per million British Thermal Units in the third quarter of 2008. The WTI / Lloydminster Crude Blend heavy oil price differential was lower in the third quarter of 2009 at U.S. $10.26 per barrel, than the U.S. $18.34 per barrel in the same quarter of 2008. The New York Harbor 3:2:1 crack spread declined throughout the quarter to average U.S. $8.03 per barrel compared to U.S. $11.60 per barrel in the same quarter of 2008.

Total long term debt, including current portion and bank operating loans at September 30, 2009 was $3.31 billion compared with $1.96 billion at December 31, 2008. Debt to cash flow and debt to capital employed ratios at September 30, 2009 were 1.5 times and 18.7 percent respectively. The Company's net debt at September 30, 2009 amounted to $2.07 billion.

Husky's capital expenditure is in line with its 2009 capital budget with a focus on mid to long term project developments. In the third quarter of 2009, spending on capital projects was $517 million compared to $1.10 billion in the third quarter of 2008.

In the first nine months of 2009, net earnings were $1.10 billion or $1.29 per share (diluted), compared to $3.52 billion or $4.15 per share (diluted) in the same period of 2008. Adjusted Net Earnings were $1.14 billion or $1.34 per share (diluted) compared to $3.52 billion or $4.15 per share (diluted) in the first nine months of 2008. Cash flow from operations for the first nine months was $1.85 billion or $2.18 per share (diluted), compared with $5.62 billion or $6.61 per share (diluted) in the same period of 2008. Sales and operating revenues, net of royalties, were $11.47 billion, compared with $20.00 billion in the first nine months of 2008.

Upstream Segment

In the third quarter of 2009, total production averaged 276,200 barrels of oil equivalent per day compared with 355,900 barrels of oil equivalent per day in the third quarter of 2008. Total crude oil and natural gas liquids production was 187,000 barrels per day, compared with 256,200 barrels per day in the third quarter of 2008. Liquids production was lower due to reduced production from the Terra Nova field and the planned maintenance and satellite tie-in work in the White Rose oil field offshore Canada's East Coast. Natural gas production in the third quarter was 535 million cubic feet per day compared with 598 million cubic feet per day in the same period of 2008. Gas production was lower mainly due to scale back of capital expenditures on drilling, well completions and tie-ins and shut-in production.

Production for the first nine months of the year averaged 311,600 barrels of oil equivalent per day compared with 355,100 barrels of oil equivalent per day in the first nine months of 2008. Crude oil and natural gas liquids production was 220,600 barrels per day, compared with 254,700 barrels per day in the same period of 2008. Natural gas production was 546 million cubic feet per day compared with 602 million cubic feet per day in the first nine months of 2009.

In Eastern Canada, the North Amethyst satellite development is continuing on schedule with production expected to come on stream in early 2010. The Company completed a successful 31 day planned turnaround at White Rose on the SeaRose FPSO (Floating Production, Storage and Offloading Vessel). The Southern production drill center remained shut down for a further 47 days to allow for the tie-in of the North Amethyst field facilities.

In August of 2009, Husky completed the delineation of the Liwan gas field on Block 29/26 in the South China Sea by successfully drilling and testing the third appraisal well, Liwan 3-1-4. The plan of development is being prepared with expected submission to partner and regulatory authorities in late 2009 / early 2010. Front end engineering design continues with first production targeted in 2013.

In the third quarter of 2009, work continued on the front end engineering and design for the first 60,000 barrels per day phase of the Sunrise Oil Sands Integrated Project. Good progress has been made in optimizing the project to reduce cost and the project is planned for sanction in 2010.
 

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