The Company has disclosed best-estimate contingent resources in this document. Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters, or a lack of markets. There is no certainty that it will be commercially viable to produce any portion of the contingent resources.
Best estimate as it relates to resources is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. Estimates of contingent resources have not been adjusted for risk based on the chance of development. There is no certainty as to the timing of such development. For movement of resources to reserves categories, all projects must have an economic depletion plan and may require, among other things: (i) additional delineation drilling and/or new technology for unrisked contingent resources; (ii) regulatory approvals; and (iii) company approvals to proceed with development.
Specific contingencies preventing the classification of contingent resources at the Company's oil sands properties as reserves include further reservoir studies, delineation drilling, facility design, preparation of firm development plans, regulatory applications and company approvals. Development is also contingent upon successful application of SAGD and/or Cyclic Steam Stimulation (CSS) technology in carbonate reservoirs at Saleski, which is currently under active development. Positive and negative factors relevant to the estimate of oil sands resources include a higher level of uncertainty in the estimates as a result of lower core-hole drilling density.
Best estimate contingent resources of 13.1 billion boe is comprised of 12.0 billion barrels of oil and 6.6 tcf of natural gas. Of the total, 10.8 billion boe was economic at year-end 2012. Contingent resources are reported as the working interest volumes and Husky's working interest varies in the properties. The properties assigned contingent resources are Western Canada gas resource plays and EOR projects, Lloydminster thermal projects, Northwest Territories conventional gas, oil sands, East Coast offshore and Asia Pacific gas.
Reserves replacement ratio is determined by taking the Company's yearly incremental proved reserve additions divided by the yearly upstream gross production. The two-year average reserves replacement ratio for 2011 and 2012 was determined based on the sum of the Company's 2011 and 2012 incremental proved reserves additions divided by the sum of the Company's 2011 and 2012 upstream gross production. The estimates of reserves and resources for individual properties in this presentation may not reflect the same confidence level as estimates of reserves and resources for all properties, due to the effects of aggregation. The Company has disclosed its total reserves in Canada in its 2012 Annual Information Form dated March 8, 2013, which reserves disclosure is incorporated by reference herein.
Note to U.S. Readers
The Company reports its reserves and resources information in accordance with Canadian practices and specifically in accordance with National Instrument 51-101, "Standards of Disclosure for Oil and Gas Disclosure", adopted by the Canadian securities regulators. Because the Company is permitted to prepare its reserves and resources information in accordance with Canadian disclosure requirements, it uses certain terms in this document, such as "best estimate contingent resources," that U.S. oil and gas companies generally do not include or may be prohibited from including in their filings with the SEC.
All currency is expressed in Canadian dollars unless otherwise noted.
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