Husky Energy Increases 2010 Cash Flow to $3.5 Billion (Canada)

Husky Energy Inc. recorded a 42 percent increase in 2010 cash flow compared to 2009. The Company reported a 58 percent improvement to fourth quarter cash flow compared to the same period of 2009.

Net earnings in the quarter were higher by 19 percent compared to the third quarter 2010 on the strength of higher light oil crude prices, improved refining margins and settlement of the Terra Nova re-determination process.

‘‘2010 was a transitional year as we undertook a comprehensive portfolio review. From this, we developed and implemented a strategic plan setting out clear financial and operational milestones,’’ said CEO Asim Ghosh. ‘‘We successfully implemented near-term steps to stabilize production and accelerate value, while providing clear direction around our mid and long-term initiatives. We developed a comprehensive financing plan, allowing us to build on our momentum and provide the disciplined capital investment to develop our growth pillars: the Oil Sands, the Atlantic Region and South East Asia.’’

Financial

* Cash flow from operations of $3.5 billion, or $4.16 per share (diluted) compared with $2.5 billion, or $2.95 per share

in 2009.

* Net earnings for the year of $1.2 billion, or $1.38 per share (diluted), compared to $1.4 billion, or $1.67 per share

in 2009.

* Cash flow from operations in the fourth quarter was $1,037 million, or $1.21 per share (diluted), compared with $657 million or $0.77 per share in the same period of 2009.

* Net earnings in the fourth quarter of $305 million, or $0.35 per share (diluted), compared to $320 million, or $0.38 per share in the same period of 2009.

* Increased capital spending, including acquisitions, to approximately $4.0 billion. 80 percent of the capital was directed at the Upstream business.

* Developed and executed on a comprehensive financing plan by:

o Closing a common share offering in the fourth quarter, raising a total of $1.0 billion in equity capital.

o Announcing the intention to allow common shareholders to elect to receive dividends in cash or common shares.

GROWTH PILLARS

* Oil Sands

In the fourth quarter, Husky sanctioned Phase I of the Sunrise Energy Project for development, which is an important first step in unlocking the full potential of the Company’s extensive oil sands portfolio. Also in the quarter, the Company awarded major engineering and construction contracts for the central processing facilities and the field facilities. Husky mobilized personnel for detailed engineering in December 2010 and development drilling commenced on schedule in January 2011.

The Company initiated conceptual development engineering for subsequent Sunrise phases and expects a comprehensive full field development plan to be in place by the end of 2011. At Tucker, based on a successful perforation program, Husky exited 2010 with production of 6,100 bbls/day. The Company drilled 32 wells (16 pairs) in 2010 and is expecting to drill another eight wells (four pairs) in 2011. Three well pairs commenced production in September and are meeting performance expectations.

Cold production at Husky’s McMullen lease reached 2,500 bbls/day at year-end 2010, compared to 330 bbls/day for 2009. Six slant development wells and 12 evaluation wells were drilled in the fourth quarter.

In alignment with the Company’s strategy to focus on in-situ oil sands development, Husky agreed to divest 23 sections of oil sands leases suitable for mining for $200 million, realizing a $177 million pretax gain on these assets as accounted for under International Financial Reporting Standards. The transaction closed on January 14, 2011.

* South East Asia

In the fourth quarter, Husky announced the retention of the South East Asian assets. The Company’s comprehensive financing plan will enable Husky to capitalize on the significant growth opportunities that are available in the region. In December 2010, the Company announced it signed a Heads of Agreement with CNOOC, specifying the key principles of cooperation for funding and operation of the Liwan 3-1 deep water gas field development and the shallow water facilities.

The Company currently has a Petroleum Contract in place with CNOOC for Block 29/26 which covers the fiscal framework for exploration and development of oil and gas. Under the Heads of Agreement, Husky has agreed to operate the deep water portion of the project involving development drilling and completions, subsea equipment and controls, and subsea tie-backs to a shallow water platform. CNOOC has agreed to operate the shallow water portion of the project including a shallow water platform, approximately 270 km subsea pipeline to shore, and the onshore gas processing plant. Husky’s net working interest in the deepwater development is 49 percent and 38.71 percent in the shallow water facilities.

The Company has made considerable progress in advancing the Liwan natural gas project. Husky and CNOOC expect to submit the Liwan development plan in the first quarter of 2011 and first gas is anticipated in late 2013, ramping up through 2014.

The Company has built a high-quality asset base in South East Asia, including further natural gas discoveries on Block 29/26 at Liuhua 29-1 and Liuhua 34-2, and the producing Wenchang oil field offshore China.

In October 2010, Husky announced it received Indonesian Government approval for a 20-year extension to the existing Madura Strait PSC. This PSC includes the Madura BD and MDA fields, as well as numerous other prospects and leads. The Madura BD field, which contains natural gas and natural gas liquids, is located in the Madura Strait, offshore East Java, Indonesia.

Husky and its partner (CNOOC) agreed to sell a 20 percent (gross) interest in the Madura PSC holding company to Samudra Energy Ltd., a local Indonesian group. This transaction closed in January, 2011.

* Atlantic Region

The Company continued to ramp up production at the North Amethyst satellite oil field through the quarter with production averaging 18,160 bbls/day (gross). The field is currently producing approximately 30,000 bbls/day (gross) following completion of the second injector well. A total of eleven wells are currently planned for North Amethyst.

Husky continues to progress plans for a staged development of the West White Rose reservoir. In August 2010, the Company received regulatory approval for a two well pilot-project to be drilled from existing infrastructure at the White Rose field. These wells will provide additional information on the reservoir to refine development plans for the full West White Rose field. A production license for the West White Rose pilot was received in the fourth quarter of 2010 and first production is anticipated in mid 2011.

Husky was successful in acquiring one new significant discovery license (“SDL”) and three additional exploration licenses in the Canada-Newfoundland and Labrador Offshore Petroleum Board’s November land sale. The exploration properties are adjacent to other Husky land holdings in the Jeanne d’Arc Basin and Flemish Pass. The new SDL extends the previous Mizzen discovery SDL which was awarded in the first quarter of 2010. Husky holds a 35 percent working interest in the Mizzen property, with an appraisal well planned in the third quarter of 2011.

Offshore Greenland, the Company is continuing the evaluation of the 2-D and 3-D seismic inventory. Final processing of the 3-D seismic for Block 7 was completed in the fourth quarter of 2010 and processing of the Block 5 data is expected to be completed in early 2011.

In December 2010, the Terra Nova re-determination process concluded and Husky’s pooled interest in the field increased to 13 percent from 12.51 percent. The re-determination resulted in a one time gain of $32 million, net of tax, for Husky’s share of the production during the re-determination period.

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Source: huskyenergy ,February 15, 2011;