Heavy Oil

Husky has pioneered the development and production of heavy oil in Western Canada and remains a dominant player. Its position is enhanced by synergies with its heavy oil upgrader and asphalt refinery. The Company holds approximately 1.98 million acres in the Lloydminster area straddling Alberta and Saskatchewan, of which approximately two-thirds is undeveloped. With daily production of nearly 100,000 barrels of oil, extensive midstream and downstream infrastructure, and significant advances in enhanced oil recovery (EOR) technologies, Husky is a leader in heavy oil production.

Heavy oil proved and probable reserves are estimated at 255 million barrels (187 million barrels proved and 68 million barrels probable) as of December 31, 2008. Husky currently has more than 3,000 producing wells in the area, and drilled 532 oil and gas wells there in 2008, including 92 wells in thermal project expansions.

Husky is increasing its heavy oil production utilizing its large undeveloped land position with the application of improved technologies, reduced cost and increased upgrading capacity. Husky owns and operates 19 oil treating facilities tied into its pipeline system in the Lloydminster area.

Production Technology

Nearly 80 percent of the Company’s heavy oil production in the Lloydminster area utilizes primary “cold” production. The remaining 20 percent comes from thermal recovery projects utilizing steam processes including steam assisted gravity drainage (SAGD).

Cold production exploits reservoir characteristics unique to the area, and promotes the production of formation sand from the wells along with the oil. This sand production increases the productivity of the wells by creating a path of least resistance for the oil to flow to the wellbore. The resulting production rates are much higher than would be expected in a conventional reservoir setting. This process has been a successful foundation for the growth of heavy oil production in the region since the mid 1990s. Husky continues to build on its expertise in this area to optimize production and costs.

Husky uses variations of steam injection in several projects in the Lloydminster area, including cyclic steam stimulation and SAGD. Husky has successful steam projects at Pikes Peak and Bolney Celtic. Engineering design work is progressing on an expansion project at Pikes Peak South.

The Company is active in piloting solvent-based recovery processes which may have application in reservoirs which are not suited to steam based methods. The Company’s first solvent EOR pilot yielded excellent technical results and incremental recovery rates. A second pilot was commissioned in 2008. Husky will continue to pursue alternative recovery processes which offer potential for significant incremental production from its existing heavy oil resource base.

Properties

Husky’s heavy oil assets are primarily concentrated in a large producing region around Lloydminster. The Company maintains a land position of more than 8,000 square kilometres. Approximately 92 percent of Husky’s proved reserves in the region are contained in the heavy crude oil producing fields of Pikes Peak, Edam, Tangleflags, Bolney Celtic, Westhazel, Big Gully, Hillmond, Mervin, Marwayne, Lashburn, Gully Lake and Rush Lake; and in the medium gravity crude oil producing fields of Wildmere and Wainwright. These fields contain accumulations of heavy crude oil at relatively shallow depths.

Husky currently produces from oil and natural gas wells ranging in depth from 450 to 650 metres and holds a 100 percent working interest in the majority of these wells. Production from the area totalled 94.4 mbbls/day in 2008.

Of the total production, 71.7 mbbls/day was primary production of heavy crude oil, including cold production techniques; 19.9 mbbls/day was production from Husky’s thermal operations at Pikes Peak (cyclic steam), Bolney Celtic (SAGD) and the Pikes Peak South pilot (SAGD); and 2.8 mbbls/ day was from the medium gravity waterflooded fields in the Wainwright and Wildmere areas.

Growth from this area will be driven by primary heavy oil production, including cold production and new thermal projects.

Husky produces natural gas from numerous small shallow pools in the Lloydminster region. During 2008, Husky’s natural gas production from the Lloydminster region averaged 40.2 mmcf/day.

Husky’s development of the McMullen property, in the west central region of the Athabasca oil sands of northern Alberta, involves a cold production project and a thermal pilot project. In 2008, Husky acquired 440 sq kms of oil sands leases in the McMullen area. The Company identified and high graded an area for pilot development, drilled 25 evaluation wells, initiated a 34-square kilometre 3-D seismic program and completed the front end engineering and design on a small scale thermal pilot. In December 2008, a joint application was submitted by Husky to both the Energy Resources Conservation Board and Alberta Environment for the construction and operation of a 500 bbls/day thermal pilot project. Development of a long-term strategy for the asset is being progressed. The cold production project currently consists of eight wells producing 300 bbls/day, with good potential for expansion in the area.

Heavy Oil Fact Sheet