Husky Touts 135% Increase in 2011 Net Earnings
Husky Energy Inc. recorded a 135 percent increase in net earnings and a 69 percent increase in cash flow from operations in 2011, driven by strong production growth, higher realized crude oil prices and improved upgrading and refining margins. Production for the year was at the high end of guidance at an average of 312,500 barrels of oil equivalent per day (boe/day), compared to 287,100 boe/day in 2010.
Results in the fourth quarter contributed to the momentum, with net earnings increasing 194 percent compared to the same period a year ago, as production grew 14 percent. Production in the fourth quarter averaged 318,900 boe/day.
"The positive results in the fourth quarter capped a solid year of performance for the Company," said CEO Asim Ghosh. "We were able to capitalize on improved crude oil prices and refining margins by increasing production and by maintaining high operational performance in our upgrading and refining facilities."
In addition to the strong financial performance, the Company achieved a number of key milestones in bringing forward major projects in its three growth pillars in the Asia Pacific Region, Oil Sands, and the Atlantic Region. The Liwan Gas Project in the South China Sea was sanctioned with significant progress made towards production; major construction and drilling activity commenced on the Sunrise Energy Project in the oil sands; and first production was achieved at the West White Rose satellite field offshore Newfoundland.
Key 2011 and fourth quarter highlights include:
Performance Targets Achieved
- Annual production increased nine percent, compared to target of compound annual growth of three to five percent.
- Reserves replacement ratio is expected to be in the range of 170 percent, compared to target of 140 percent.
- Netbacks increased 23 percent year over year, driven by higher crude prices and refining margins and strong operational performance.
- Return on capital employed (ROCE) increased five percentage points this year, aided by higher commodity prices and refining margins and strong operational performance.
- Net earnings for the year of $2.2 billion, or $2.34 per share (diluted), compared with $947 million, or $1.05 per share (diluted) in 2010.
- Cash flow from operations of $5.2 billion in 2011, or $5.58 per share (diluted), compared to cash flow of $3.1 billion, or $3.60 per share (diluted) in 2010.
- Net earnings in the fourth quarter of $408 million, or $0.42 per share (diluted), compared to $139 million, or $0.16 per share (diluted) in the year-ago period.
- Cash flow from operations in the fourth quarter of $1.2 billion, or $1.24 per share (diluted), compared to $685 million, or $0.80 per share (diluted) in the same quarter of 2010.
- Items of note impacting results in the fourth quarter include an impairment charge related to natural gas properties in Western Canada and higher exploration and evaluation expense. Excluding these two items, the underlying earnings for the quarter would be $532 million.
- Production for the year averaged 312,500 boe/day, compared to 287,100 boe/day in 2010.
- Fourth-quarter production of 318,900 boe/day, represents a 14 percent increase over the 280,500 boe/day average for the fourth quarter of 2010.
- Combined throughput at the Company's refineries and upgrader averaged 317,000 bbls/day in 2011, compared to 304,000 bbls/day in 2010. Fourth quarter throughput was 324,000 bbls/day.
- Achieved significant progress at the Liwan Gas Project in the South China Sea with construction accelerating on major onshore and offshore facilities.
- More than half of the planned 49 steam-assisted gravity drainage (SAGD) wells for Phase 1 of the Sunrise Energy Project completed, and full drilling program on track for completion in second half of 2012.
- Filed an application to include the Hibernia reservoir in the development plan for the North Amethyst field in the Atlantic Region, utilizing existing infrastructure.
Annual average production of 312,500 boe/day was at the high end of the guidance range of 290,000 to 315,000 boe/day. In the fourth quarter production averaged 318,900 boe/day as a result of increased production at the North Amethyst field and additional volumes coming on stream from a pilot at the West White Rose field, both in the Atlantic Region.
"We are pleased with the progress we made to increase near-term production and our 2012 capital expenditure program is designed to build on that momentum," said Ghosh. "As we have previously indicated, production will be impacted in 2012 as a result of scheduled offstations for the SeaRose Floating Production Storage and Offloading (FPSO) vessel and for the Terra Nova FPSO. Our production growth will not be in a straight line as a result of such maintenance events and new major projects coming on stream, but overall, we remain comfortable with our target of compound annual growth of three to five percent through 2015."
Fourth-quarter earnings and cash flow were higher compared to the same quarter in 2010, driven by increased production, higher realized crude oil prices and stronger refining margins. This was partially offset by continued weakness in natural gas prices.
Average realized crude oil pricing in the fourth quarter was $88.97 per barrel, compared to $68.87 in the same period of 2010. U.S. refining market crack spreads were stronger in the quarter with the realized refining margin averaging U.S. $14.80 per barrel, compared to U.S. $10.97 per barrel a year ago. U.S. realized refining margins were significantly higher for the year as a whole, at U.S. $17.60 per barrel, compared to U.S. $7.29 per barrel in 2010.
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