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Husky Expects to Consolidate Some WCSB Assets

Its claim to fame may be heavy oil production, but Calgary-based Husky Energy Inc. also is strengthening its upstream portfolio, announcing last week that it may consolidate through acquisitions or sales to improve its production output in the Western Canada Sedimentary Basin (WCSB).

Total oil and natural gas production was slightly down from a year ago, and the company blamed the drop on operational issues with its heavy oil Terra Nova floating production, storage and off-loading facility (FPSO). Total production in 1Q2005 averaged 319,600 boe/d, down from 324,400 boe/d in 1Q2004, and total crude oil and NGL production was 206,900 bbl/d, compared with 212,100 bbls/d a year ago. Natural gas production was 676.2 MMcf/d, compared with 673.6 MMcf/d in 1Q2004.

"Our properties throughout the WCSB form the foundation of our upstream business," Husky said in a statement. "Although the WCSB is considered to be mature, with production declines typically over 20% per annum, this resource base will continue to provide cash flow at favorable costs necessary to fund our growth portfolio." The company said it also expects to see additional value in the WCSB "through consolidation via strategic acquisitions and divestitures and improvements in production technology and practice."

In the Northwest Territories, Husky's first well, Summit Creek B-44, which Husky has 29.5% working interest, was tested in two separate zones at a combined rate of nearly 10,000 boe/d. The next steps at this location may include a summer seismic program and further exploration and delineation.

Husky also reported net earnings last week, which were up 51%, to C$384 million (C$0.91/share) in 1Q2005, compared with C$255 million (C$0.60) in 1Q2004. Cash flow from operations was C$816 million ($1.93/share), compared with C$576 million (C$1.36). Sales and operating revenues, net of royalties, were C$2.2 billion, compared with C$2.0 billion in 1Q2004.

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