OREANDA-NEWS. Husky Energy reported solid results in the first quarter, including cash flow from operations of USD 838 million, net earnings of USD 191 million and production of 356,000 barrels of oil equivalent per day (boe/day), reflecting the resiliency of its portfolio in a low oil price environment.

"The structural changes made by Husky since 2010, including the decision to remain an integrated and diversified company, will continue to yield benefits beyond the current commodity price cycle," said CEO Asim Ghosh.

"The balanced growth strategy we set out five years ago repositioned our portfolio towards longer-life projects with low sustaining costs," added Ghosh. "We have since moved the needle considerably, with total production from low sustaining capital projects expected to grow to over 40 percent by the end of 2016 from just eight percent five years ago. As a result, we will require less capital to sustain a larger base of our production."

In addition, progress is being made to lower Husky's overall costs through efficiencies.
* A cost reduction program initiated five years ago by the Company has achieved more than USD 1.3 billion in cumulative supply and procurement savings. A further USD 400-600 million in cost savings was targeted for 2015, of which USD 475 million has been locked in to date.
* Operating costs per barrel decreased more than 13 percent to USD 14.87 per barrel in the first quarter compared to USD 17.21 per barrel in the same period a year ago. This primarily reflects lower cost production coming onstream as well as lower energy input costs.

Average production rose nine percent to 356,000 boe/day from 326,000 boe/day in the first quarter of 2014. This reflected steady production from the Liwan Gas Project, strong performance from heavy oil thermal developments and increased production from the Ansell liquids-rich gas resource play. Production is expected to decline in the second quarter due to a maintenance program on the partner-operated Terra Nova FPSO (floating production, storage and offloading) vessel, a three-week turnaround at the Tucker heavy oil thermal project, and other planned upstream maintenance and third-party turnarounds.

Cash flow from operations was USD 838 million, which takes into account positive Downstream results and strong performance from Liwan facilities, which have operated at 99 percent reliability in the first year.

Net earnings were USD 191 million, which includes recognition of USD 203 million in deferred tax recovery as a result of the partial payment of the contribution payable to BP-Husky Refining LLC. It also reflects lower realized crude oil prices and North American natural gas prices, along with lower U.S. refining and marketing margins resulting from a drop in market crack spreads.

As a result of its diverse portfolio, a portion of the Company's earnings and cash flow are not directly exposed to current oil price challenges. This includes Liwan gas, which is sold at a fixed price, and the margin-based Downstream business.

Husky continues to maintain a strong balance sheet and financial flexibility through the current market cycle. The Company's debt-to-capital employed ratio was about 22 percent at the end of March, with approximately USD 3.2 billion in undrawn committed term credit facilities.

The Company undertook several financing initiatives during the quarter to further strengthen its balance sheet, including a USD 750 million notes offering to refinance existing debt and a USD 200 million preferred shares issuance.