CK Hutchison : Husky Energy Reports Second Quarter 2017 Results

Calgary, Alberta July 21, 2017

Husky generated funds from operations of $715 million in the second quarter, leading to free cash flow of $135 million.

"Despite a challenging oil price environment and planned turnarounds at the Lloydminster Upgrader and asphalt refinery, we increased funds from operations and realized another quarter of positive free cash flow," said CEO Rob Peabody.

"At the same time, investments to improve margin capture along our Integrated Corridor and high-netback natural gas and oil production in our Offshore business continue to mitigate our exposure to price differentials and increase our netbacks from each boe we produce. We are continuing to invest in a deep portfolio of projects that will further reduce our break- even point."

Adjusted net earnings were $10 million. Including impairment charges and gains on asset sales in Western Canada, net earnings were a loss of $93 million.

Capital expenditures of $580 million remain in line with the Company's recently lowered guidance range of $2.5-2.6 billion for 2017. Net debt at the end of the quarter was $3.5 billion.

• Commenced testing and commissioning of liquids-rich BD Gas Project offshore Indonesia

• Approved the West White Rose development; first oil expected in 2022

• New oil discovery at Northwest White Rose

• Completed planned turnarounds at the Lloydminster Upgrader and asphalt refinery

Average Upstream production was 320,000 barrels of oil equivalent per day (boe/day), compared to 316,000 boe/day in the second quarter of 2016. This takes into account approximately 34,500 boe/day of asset sales in Western Canada over the same period - including approximately 2,600 boe/day during the second quarter - which has been more than replaced by thermal bitumen production growth.

Production in June averaged 325,000 boe/day. Annual production is expected to remain on track with the Company's guidance range of 320,000-335,000 boe/day.

Despite the completion of scheduled turnarounds at the Lloydminster Upgrader and asphalt refinery, total upgrading and refining throughputs averaged 316,000 barrels per day (bbls/day), compared to 255,000 bbls/day in the second quarter of 2016. This was due in part to strong performance at the Lima and Toledo refineries. Normal operations at the Upgrader and asphalt refinery have since resumed.

WTI prices averaged $48.29 US per barrel compared to $45.59 US per barrel in the second quarter of 2016.

Average realized pricing for total Upstream production was $41.58 per boe, compared to $34.59 per boe in Q2 2016.

The Chicago 3:2:1 crack spread averaged $14.36 US per barrel compared to $16.67 US per barrel in the second quarter of 2016. Average realized U.S. refining margins were $7.42 US per barrel, which takes into account a FIFO loss of $1.37 US per barrel. This compared to $16.46 US per barrel a year ago, which included a $8.94 US per barrel FIFO gain.

Funds from operations were $715 million, or $0.71 per common share, compared to $505 million, or $0.50 per common share, in the second quarter of 2016. This included a pre-tax FIFO loss of $25 million, a $20 million expense related to asset retirement obligations, and an $18 million expense related to exploration wells in the Flemish Pass.

Capital expenditures were $580 million and free cash flow was $135 million.

Adjusted net earnings were $10 million, compared to a loss of $91 million in Q2 2016. Including asset impairments and gains on sales in Western Canada, net earnings were a loss of $93 million, or $0.10 per common share, compared to a loss of $196 million, or $0.20 per common share in the year-ago period.

• Average Upstream production of 246,800 boe/day

• Average upgrading and refining throughputs of 316,000 bbls/day

• Upstream operating netback of $15.29 per boe

• Canadian upgrading margin of $22.63 per barrel; U.S. refining margin of $7.42 US per barrel

Overall average thermal bitumen production from Lloyd thermal projects, the Tucker Thermal Project and the Sunrise Energy Project was 117,400 bbls/day, reflecting seasonal maintenance activity.

Construction of the 10,000 bbls/day Rush Lake 2 development continued to advance, with first oil expected in the first half of 2019.

Three additional Lloyd thermal bitumen projects at Dee Valley, Spruce Lake North and Spruce Lake Central are on track to start production in 2020, with a combined design capacity of 30,000 bbls/day.

Drilling was completed on a new 15-well pad at the Tucker Thermal Project. Production from the new pad is anticipated to ramp up in the first half of 2018, with total Tucker production expected to grow towards its 30,000 bbls/day design capacity by the end of 2018.

The Sunrise Energy Project averaged gross bitumen production of 38,300 bbls/day (19,150 bbls/day Husky working interest) in the second quarter, compared to 35,800 bbls/day in the first quarter of 2017. Work is under way to tie in 14 previously drilled well pairs, with steaming now under way and first oil production forecast by the end of the year.

A scheduled seven-week turnaround was completed at the Lloydminster Upgrader in early July. The asphalt refinery in Lloydminster underwent a three-week maintenance program as planned.

Engineering work was advanced on a potential 30,000 bbls/day project to expand asphalt capacity in Lloydminster.

A 16-well program targeting the Wilrich formation in the Ansell and Kakwa areas is under way. Five wells were completed in the second quarter, with seven Wilrich wells drilled to date in 2017.

A four-well drilling program targeting the oil and liquids-rich Montney formation in the Wembley and Karr areas is continuing.

As part of the repositioning of the Western Canada business, the Company closed additional asset sales representing approximately 2,600 boe/day for total proceeds of $123 million.

• Average production of 72,700 boe/day

• Operating netbacks of $51.54 per boe

  • $61.90 per boe in Asia Pacific

  • $42.08 per barrel in Atlantic

    Asia Pacific

    Indonesia

    The liquids-rich BD Gas Project in the Madura Strait began testing and commissioning in the second quarter and is expected to reach commercial production soon. Gas is being provided to the East Java market at contract rates of $7 US per thousand cubic feet (mcf) for a realized price of approximately $9.50 Cdn per mcf, with future escalation factors. Current gross sales are in the range of 30-40 million cubic feet per day (mmcf/day) with approximately 2,500 bbls/day of gas liquids (12-16 mmcf/day and 1,000 bbls/day Husky working interest).

    The BD Gas Project is expected to ramp up throughout 2017 towards full gas sales rates, with a gross sales production target of 100 mmcf/day of gas (40 mmcf/day Husky working interest) and 6,000 bbls/day of associated liquids (2,400 bbls/day Husky working interest).

    Four additional fields in the Madura Strait are being advanced. Shallow water platforms have been installed at the combined MDA-MBH and MDK fields, which are scheduled for first production in the 2019-2020 timeframe.

    All three fields share infrastructure, including a floating production vessel, with the processed gas tied into the existing East Java subsea pipeline.

    Total gross sales volumes from the BD Gas Project and the MDA-MBH and MDK fields are expected to be approximately 250 mmcf/day of gas (100 mmcf/day Husky working interest) and 6,000 bbls/day of associated liquids (2,400 bbls/day Husky working interest) once production is fully ramped up.

    Pre-engineering activities are progressing at the MAC field, where an approved plan of development is in place. Additional discoveries in the region are being evaluated for potential development.

    China

    At the Liwan Gas Project, gross sales gas volumes averaged 272 mmcf/day, with associated liquids averaging 12,500 bbls/day (133 mmcf/day and 6,125 bbls/day Husky working interest.) The Company realized pricing of $13.44 Cdn per mcf for its fixed-price sales gas production. Gross production in June averaged 331 mmcf/day, with associated liquids averaging 15,600 bbls/day. (162 mmcf/day and 7,700 bbls/day Husky working interest).

    Taiwan

    A 3D seismic survey program on Husky's Block DW-1, a 7,700 square-kilometre exploration block offshore Taiwan, is currently about 80 percent complete.

    Atlantic

    The Company is moving ahead with plans for a fixed wellhead platform to develop the West White Rose Project offshore Newfoundland and Labrador.

    Construction of the concrete gravity structure and associated drilling facilities, utilities, support services, and accommodations for personnel, is scheduled to begin in the fourth quarter of 2017. First oil is expected in 2022, with the project anticipated to achieve a gross peak production rate of approximately 75,000 bbls/day in 2025 (52,500 bbls/day Husky working interest) as development wells are drilled and brought online.

    Preparations are under way for a development well at South White Rose in the fourth quarter of 2017, with anticipated net peak production of 4,500 bbls/day Husky working interest.

    Husky and its partner continue to assess a new discovery at Northwest White Rose, where a 100-metre (gross) light oil column was delineated in the second quarter.

    In the Flemish Pass, two recently drilled exploration wells did not encounter commercial quantities of hydrocarbons.

    Q3 MAINTENANCE AND TURNAROUNDS

• A three-week turnaround is planned at the SeaRose FPSO in the third quarter.

• A three-week turnaround at the partner-operated Terra Nova FPSO is scheduled in the third quarter.

Regular dividend payments on each of the Cumulative Redeemable Preferred Shares - Series 1, Series 2, Series 3, Series 5 and Series 7 - will be paid for the three-month period ended September 30, 2017.

The dividends will be payable on October 2, 2017 to holders of record at the close of business on August 28, 2017.