EX-99.1

EX-99.1 8 d492321dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

Disclosure about Oil and Gas Producing Activities – Accounting Standards Codification 932, “Extractive Activities – Oil and Gas” (unaudited)

The following disclosures have been prepared in accordance with FASB Accounting Standards Codification 932, “Extractive Activities – Oil and Gas”. In December 2009, Husky adopted revised oil and gas reserve estimation and disclosure requirements that conformed the definition of proved reserves to the SEC Modernization of Oil and Gas Reporting rules, issued by the SEC in 2008. An accounting standards update revised the definition of proved oil and gas reserves to require that the average, first-day-of-the-month price during the 12-month period before the end of the year rather than the year-end price, must be used when estimating whether reserve quantities are economic to produce. This same 12-month average price is also used in calculating the aggregate amount of (and changes in) future cash inflows related to the standardized measure of discounted future net cash flows. The rules also allow for the use of reliable technologies to estimate proved oil, natural-gas, and natural-gas liquids (NGLs) reserves if those technologies have been demonstrated to result in reliable conclusions about reserve volumes.

The unaudited supplemental information on oil and gas exploration and production activities for 2012, 2011, and 2010 has been presented in accordance with the revised reserve estimation and disclosure rules, which were not applied retrospectively.

Husky completed a transition to International Financial Reporting Standards in 2011 and all 2012, 2011 and 2010 financial information has been prepared using IFRS as issued by the International Accounting Standards Board.

Oil and Gas Reserves

Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations.

Proved undeveloped oil and gas reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

Canadian provincial royalties are determined based on a graduated percentage scale, which varies with prices and production volumes. Canadian reserves, as presented on a net basis, assume prices and royalty rates in existence at the time the estimates were made, and Husky’s estimate of future production volumes. Future fluctuations in prices, production rates, or changes in political or regulatory environments could cause Husky’s share of future production from Canadian reserves to be materially different from that presented.

Subsequent to December 31, 2012, no major discovery or other favourable or adverse event is believed to have caused a material change in the estimates of developed or undeveloped reserves as of that date.

Note that the numbers in each column of the tables throughout this exhibit may not add due to rounding.

Results of Operations for Producing Activities ⁽¹⁾ (unaudited)


	Year Ended December 31, 2012
($ millions)	Canada		International		Total
Revenues, net of Royalties		5,367		264		5,631
Production and Operating Expenses		1,798		31		1,829
Depreciation, Depletion, Amortization & Impairment		2,093		11		2,104
Exploration & Evaluation Expenses		305		45		350

Earnings Before Taxes		1,170		177		1,347
Income Taxes		339		51		391

Results of Operations		831		126		956


	Year Ended December 31, 2011
($ millions)	Canada		International		Total
Revenues, net of Royalties		5,884		241		6,125
Production Expenses		1,647		25		1,672
Depreciation, Depletion, Amortization & Impairment		1,976		20		1,996
Exploration & Evaluation Expenses		372		98		470

Earnings before Taxes		1,889		98		1,987
Income Tax Expense		519		26		545

Results of Operations		1,370		72		1,442

⁽¹⁾	The costs in this schedule exclude corporate overhead, interest expense and other operating costs, which are not directly related to producing activities.

Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities (unaudited)


($ millions)	Canada		International			Total
2012
Property Acquisition
Proved		6		—			6
Unproved		15		—			15
Exploration		338		25	⁽¹⁾		363
Development		4,075		834	⁽²⁾		4,909

Total Costs Incurred		4,434		859			5,293

2011
Property Acquisition
Proved		792		—			792
Unproved		82		—			82
Exploration		457		266			723
Development		2,389		546			2,935

Total Costs Incurred		3,720		812			4,532

2010
Property Acquisition
Proved		327		—			327
Unproved		62		—			62
Exploration		306		381			687
Development		1,985		63			2,048

Total Costs Incurred		2,680		444			3,124

⁽¹⁾	Total international exploration costs of $25 million pertain entirely to Indonesia.

⁽²⁾	Total international development costs of $834 million pertain to the following countries: China – $833 million and Indonesia – $1 million.

Acquisition costs include costs incurred to purchase, lease, or otherwise acquire oil and gas properties.

Exploration costs include the costs of geological and geophysical activity, retaining undeveloped properties and drilling and equipping exploration wells.

Development costs include the costs of (i) drilling and equipping development wells and (ii) facilities to extract, treat, gather and store oil and gas.

Exploration and development costs include administrative costs and depreciation of support equipment directly associated with these activities.

The following table sets forth a summary of oil and gas property costs not being amortized at December 31, 2012, by the year in which the costs were incurred:

Withheld Costs (unaudited)


($ millions)	Total		2012		2011		2010		Prior to 2009

Property Acquisitions
Canada		173		25		148		—		—
International		—		—		—		—		—

		173		25		148		—		—

Exploration
Canada		365		339		26		—		—
International		275		17		235		23		—

		640		356		261		23		—

Development
Canada		2,811		662		2,053		96		—
International		2,061		939		539		8		575

		4,872		1,601		2,592		104		575

Capitalized Interest
Canada		110		54		24		16		16
International		259		118		62		79		—

		369		172		86		95		16

		6,054		2,154		3,087		222		591

Capitalized Costs Relating to Oil and Gas Producing Activities (unaudited)


($ millions)	Canada			International			Total
2012
Proved Properties ⁽¹⁾		36,362			2,464			38,826
Unproved Properties		496			314			810

		36,858			2,778			39,636
Accumulated DD&A		(17,629	)		(318	)		(17,947	)

Net Capitalized Costs		19,229			2,460			21,689


2011
Proved Properties ⁽¹⁾		32,101			1,539			33,640
Unproved Properties		421			325			746

		32,522			1,864			34,386
Accumulated DD&A		(15,586	)		(312	)		(15,898	)

Net Capitalized Costs		16,936			1,552			18,488


2010
Proved Properties ⁽¹⁾		28,247			896			29,143
Unproved Properties		252			220			472

		28,499			1,116			29,615
Accumulated DD&A		(13,628	)		(287	)		(13,915	)

Net Capitalized Costs		14,871			829			15,700

⁽¹⁾	Capitalized costs related to proved properties include the ARO. The ARO for the years presented were as follows:


($ millions)	Canada		International		Total
2012		2,363		129		2,491
2011		1,369		20		1,389
2010		836		15		851

Oil and Gas Reserve Information

In Canada, Husky’s proved crude oil, NGL and natural gas reserves are located in the provinces of Alberta, Saskatchewan, British Columbia, and offshore East Coast of Canada. Husky’s international proved reserves are located in China and Indonesia.


	Canada						International						Total
	Crude Oil & NGL			Natural Gas			Crude Oil & NGL			Natural Gas			Crude Oil & NGL			Natural Gas			Total Company
Reserves	(mmbbls)			(bcf)			(mmbbls)			(bcf)			(mmbbls)			(bcf)			(mmboe)
Net Proved Reserves ^{(1) (2) (3) (4)}
End of Year 2009		558			1,513			8			—			566			1,513			818

Revisions		(6	)		(41	)		1			—			(5	)		(41	)		(12	)
Purchases		2			161			—			—			2			161			28
Sales		—			(1	)		—			—			—			(1	)		—
Improved Recovery		4			1			—			—			4			1			4
Discoveries and Extensions		87			129			5			147			92			277			139
Production		(63	)		(175	)		(3	)		—			(66	)		(175	)		(95	)

End of Year 2010		582			1,587			11			147			593			1,734			882

Revisions		(1	)		35			(1	)		(10	)		(2	)		24			2
Purchases		37			342			—			—			37			342			94
Sales		(2	)		(2	)		(1	)		(29	)		(3	)		(31	)		(8	)
Improved Recovery		13			1			—			—			13			1			13
Discoveries and Extensions		87			75			—			—			87			75			99
Production		(65	)		(213	)		(2	)		—			(67	)		(213	)		(102	)

End of Year 2011		651			1,824			7			108			658			1,932			980

Revisions		25			(357	)		3			—			28			(357	)		(30	)
Purchases		—			—			—			—			—			—			—
Sales		(1	)		—			—			—			(1	)		—			(1	)
Improved Recovery		16			—			—			—			16			—			16
Discoveries and Extensions		35			140			8			271			43			411			111
Production		(66	)		(190	)		(2	)		—			(68	)		(190	)		(100	)

End of Year 2012		660			1,417			16			379			676			1,796			976

Net Proved Developed Reserves ^{(1) (2) (3) (4)}
End of Year 2009		360			1,265			8			—			368			1,265			579
End of Year 2010		335			1,327			6			—			341			1,327			562
End of Year 2011		370			1,567			3			—			373			1,567			635
End of Year 2012		381			1,191			6			—			387			1,191			585

Net Proved Undeveloped Reserves ^{(1) (2) (3) (4)}
End of Year 2009		198			248			—			—			198			248			239
End of Year 2010		247			260			5			147			252			407			320
End of Year 2011		281			257			4			108			285			365			345
End of Year 2012		279			226			10			379			289			605			391

⁽¹⁾

Net reserves are the Company’s lesser royalty, overriding royalty and working interest share of the gross remaining reserves, after deduction of any crown, freehold and overriding royalties. Such royalties are subject to change by legislation or regulation and can also vary depending on production rates, selling prices and timing of initial production.

⁽²⁾	Reserves are the estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations.

⁽³⁾

Proved oil and gas reserves are those quantities of oil and gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations.

⁽⁴⁾

Proved developed oil and gas reserves are proved reserves that can be expected to be recovered: (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. Proved undeveloped oil and gas reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

The Company’s reserve replacement ratio^(a) for the last three years was as follows:


Net Proved Oil and Gas Reserves	2012			2011			2010
Excluding Acquisition & Divestiture		96	%		112	%		138	%
Including Acquisition & Divestiture		96	%		196	%		167	%

^(a)	Reserve replacement ratio calculated as net reserve additions during the period divided by total production during the period. Net reserve additions include: revisions, purchases, sales, improved recovery, and discoveries and extensions.

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves (unaudited)

The following information has been developed utilizing procedures prescribed by FASB Accounting Standards Codification 932, “Extractive Activities – Oil and Gas” and based on crude oil and natural gas reserve and production volumes estimated by the Company’s reserves evaluation staff. It may be useful for certain comparison purposes, but should not be solely relied upon in evaluating Husky or its performance. Further, information contained in the following table should not be considered as representative of realistic assessments of future cash flows, nor should the standardized measure of discounted future net cash flows be viewed as representative of the current value of Husky’s reserves.

The future cash flows presented below are based on average sales prices and cost rates, and statutory income tax rates in existence as of the date of the projections. It is expected that material revisions to some estimates of crude oil and natural gas reserves may occur in the future, development and production of the reserves may occur in periods other than those assumed, and actual prices realized and costs incurred may vary significantly from those used.

Management does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including estimates of probable as well as proved reserves, and varying price and cost assumptions considered more representative of a range of possible economic conditions that may be anticipated.

The computation of the standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 2012 was based on the NYMEX 2012 average natural gas cash market price of U.S. $2.78/mmbtu (2011 average – U.S. $4.15/mmbtu; 2010 average – U.S. $4.45/mmbtu) and on crude oil prices computed with reference to the 2012 average WTI spot price of U.S. $95.38/bbl (2011 average – U.S. $95.95/bbl; 2010 average – U.S. $79.43/bbl).


Standardized Measure (unaudited) ($ millions)	Canada ⁽¹⁾						International ⁽¹⁾						Total ⁽¹⁾
Standardized Measure (unaudited) ($ millions)	2012		2011		2010		2012		2011		2010		2012		2011		2010
Future Cash Inflows		43,058		50,824		40,840		5,850		1,510		1,582		48,908		52,334		42,422
Future Production Costs		15,803		18,342		14,682		1,099		503		576		16,902		18,845		15,258
Future Development Costs		8,138		7,932		7,605		1,293		161		182		9,431		8,093		7,787
Future Income Taxes		4,724		6,286		4,752		670		282		255		5,394		6,568		5,007

Future Net Cash Flows		14,393		18,264		13,801		2,788		564		570		17,181		18,828		14,371
Annual 10% Discount Factor		5,747		8,217		6,010		724		199		216		6,471		8,416		6,226

Standardized Measure of Discounted Future Net Cash Flows		8,646		10,047		7,791		2,064		365		354		10,710		10,412		8,145

⁽¹⁾

The schedules above are calculated using year average prices and year-end costs, statutory income tax rates and existing proved oil and gas reserves for 2010, 2011 and 2012. The value of exploration properties and probable reserves, future exploration costs, future change in oil and gas prices and in production and development costs are excluded.

Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves (unaudited)


	Canada ⁽¹⁾									International ⁽¹⁾									Total ⁽¹⁾
($ millions)	2012			2011			2010			2012			2011			2010			2012			2011			2010
Present Value at January 1		10,047			7,791			6,522			365			354			270			10,412			8,145			6,792
Sales and Transfers, net of Production Costs		(3,538	)		(4,239	)		(3,129	)		(235	)		(216	)		(227	)		(3,773	)		(4,455	)		(3,356	)
Net Change in Sales and Transfer Prices, net of Development and Production Costs		(1,353	)		3,281			2,982			(15	)		266			99			(1,368	)		3,547			3,081
Development Cost Incurred that Reduced Future Development Costs		3,093			2,500			2,697			733			7			6			3,826			2,507			2,703
Changes in Estimated Future Development Costs		(2,234	)		(1,921	)		(2,639	)		(1,551	)		26			(1	)		(3,785	)		(1,895	)		(2,640	)
Extensions, Discoveries and Improved Recovery, net of Related Costs		937			1,601			1,235			2,774			10			169			3,711			1,611			1,404
Revisions of Quantity Estimates		(460	)		156			(68	)		426			(47	)		43			(34	)		109			(25	)
Accretion of Discount		1,194			908			911			(101	)		55			39			1,093			963			950
Sale of Reserves in Place		(12	)		(28	)		(4	)		—			(59	)		—			(12	)		(87	)		(4	)
Purchase of Reserves in Place		9			1,096			247			—			—			—			9			1,096			247
Changes in Timing of Future Net Cash Flows and Other		320			(358	)		(579	)		(4	)		(20	)		—			316			(378	)		(579	)
Net Change in Income Taxes		643			(740	)		(384	)		(328	)		(11	)		(44	)		315			(751	)		(428	)

Net Increase (Decrease)		(1,401	)		2,256			1,269			1,699			11			84			298			2,267			1,353

Present Value at December 31		8,646			10,047			7,791			2,064			365			354			10,710			10,412			8,145

⁽¹⁾

The schedules above are calculated using year-end average prices and year-end costs, statutory income tax rates and existing proved oil and gas reserves for 2010, 2011, and 2012. The value of exploration properties and probable reserves, future exploration costs, future changes in oil and gas prices and in production and development costs are excluded.