Mr. Asim Ghosh reports

HUSKY ENERGY ANNOUNCES 2016 THIRD QUARTER RESULTS

Husky Energy Inc. continued to grow its deep portfolio of high-quality production in the third quarter while delivering $175-million in free cash flow and approximately $1.4-billion in net earnings.

"Amidst persistent volatility in oil prices over the past two years and sustained pressure on refined product prices, we have built a strong balance sheet with net debt now in line with our target," said chief executive officer Asim Ghosh. "We have achieved, ahead of schedule, our target of having more than 40 per cent of production generated by low-sustaining-capital projects by the end of 2016. And we have many more such projects in the wings."

Husky's structural transformation over the past six years has increased its resilience and enhanced its ability to generate free cash flow even in this low-oil-price environment. Strong performance from thermal projects is now contributing more than 115,000 barrels per day, a fivefold increase to overall thermal production since 2010. These projects represent resilient, long-life production with lower operating costs and reduced sustaining capital requirements.

In addition, a new pricing agreement for the Liwan gas project was finalized. "This was a successful outcome, providing for an attractive price over the life of the fields," said Mr. Ghosh.

Third quarter results

Average upstream production was 301,000 barrels of oil equivalent per day compared with 333,000 boe/day in the third quarter of 2015, primarily reflecting asset dispositions in Western Canada and reduced volumes at Liwan. This was partially offset by increasing volumes from three new low-sustaining-capital Lloyd thermal projects, the Sunrise energy project and initial production from the Hibernia formation well at North Amethyst in the Atlantic region.

Throughputs at the refineries and the Lloydminster upgrader averaged 320,000 bbl/day, which included one week of a 10-week turnaround at the Toledo refinery, compared with 293,000 bbl/day in the same period last year.

West Texas Intermediate prices averaged $44.94 (U.S.) per barrel compared with $46.43 (U.S.) per barrel in the third quarter of 2015. Average realized pricing for total upstream production was $33.11 per boe, compared with $39.45 per boe in the third quarter of 2015.

U.S. refining crack spreads continued to be challenged by a historically high level of finished product inventories. The Chicago 3-to-2-to-1 crack spread averaged $14.29 (U.S.) per barrel, one of the lowest seasonal prices in recent years, compared with $23.87 (U.S.) per barrel in the third quarter of 2015. Average realized U.S. refining margins were $7.34 (U.S.) per barrel compared with $8.10 (U.S.) per barrel a year ago, reflecting the increased cost of RINs and the impact of ramp-ups following major turnarounds in U.S. refining.

In Canada, steady performance at the asphalt refinery and Lloydminster upgrader led to refining margins of $22.99 per barrel and $17.00 per barrel, respectively, compared with $27.16 per barrel and $7.16 per barrel in the third quarter of 2015.

Cash flow from operations was $484-million, including a pretax first-in, first-out loss of $64-million and a pretax RIN cost of $34-million. In addition, cash flow did not include $146-million in cash that was received as prepayment for future gas volumes at Liwan.

Net earnings were approximately $1.4-billion. This included a $1.3-billion after-tax gain from the sale of select mid-stream assets and a $167-million after-tax gain associated with the closing of the Western Canada dispositions. The adjusted net loss was $100-million.

                                       HIGHLIGHTS

                                              Three months ended      Nine months ended
                                  Sept. 30,   June 30,  Sept. 30,   Sept. 30,  Sept. 30,
                                      2016       2016       2015        2016       2015
Daily production, before
royalties
Total equivalent production
(mboe/day)                             301        316        333         319        342
Crude oil and NGLs
(mbbl/day)                             214        228        223         227        226
Natural gas (mmcf/day)                 521        529        658         556        699
Operating netback ($/boe)(1)        $15.70     $17.30     $20.72      $14.09     $23.67
Refinery and upgrader
throughput (mbbl/day)                  320        255        293         296        302
Cash flow from operations ($M)        $484       $488       $674      $1,406     $2,689
Per common share -- basic
($/share)                             0.48       0.49       0.68        1.40       2.73
Per common share -- diluted
($/share)                             0.48       0.49       0.68        1.40       2.73
Net earnings ($M)                    1,390       (196)    (4,092)        736     (3,781)
Per common share -- basic
($/share)                             1.37      (0.20)     (4.17)       0.71      (3.87)
Per common share -- diluted
($/share)                             1.37      (0.20)     (4.19)       0.70      (3.92)
Adjusted net earnings
(loss)                                (100)       (91)      (101)       (649)       214
Capital investment,
including acquisitions ($M)            309        595        817       1,314      2,364
Dividend per common share
($/share)                             0.00(2)    0.00(2)    0.30(3 )    0.00(2)    0.90
Net debt ($B)                          4.1        6.3        6.8         4.1        6.8

(1) Operating netback includes results from upstream exploration and production and
excludes upstream infrastructure and marketing.
(2) The quarterly common share dividend remains suspended.
(3) Dividends declared for the third quarter of 2015 were issued in the form of common
shares.

Area summary

Heavy oil

The last of three Lloyd thermal projects scheduled for completion this year was brought on production:

• The Edam West Lloyd thermal project achieved its 4,500 bbl/day design capacity in October and continues to ramp up.
• The Vawn Lloyd thermal project reached its 10,000 bbl/day design capacity in September and continues to ramp up.
• The Edam East Lloyd thermal project continues to produce above its 10,000 bbl/day design capacity with current volumes exceeding 15,000 bbl/day.

The Tucker thermal project near Cold Lake, Alta., averaged about 20,000 bbl/day. Heavy oil thermal production, including Tucker, averaged 88,300 bbl/day in the third quarter.

At the 10,000 bbl/day Rush Lake 2 Lloyd thermal project, site preparation is under way with long-lead equipment ordered. First oil is expected in 2019.

Husky is assessing a substantial inventory of 17 additional Lloyd thermal projects representing approximately 150,000 bbl/day of additional higher-quality production to be brought on over time. This includes three 10,000 bbl/day projects expected to be sanctioned soon.

Western Canada

The company closed several outstanding Western Canada asset sales, in line with its objective to progressively build a more capital-efficient business with reduced sustaining capital requirements.

In aggregate, about 27,000 boe/day, including royalty interests, has been sold in 2016 for gross proceeds of $1.3-billion.

Downstream

The company closed a $1.7-billion transaction to create the new Husky mid-stream limited partnership, which has assumed ownership of select mid-stream assets. Husky retains a 35-per-cent interest in the partnership.

The Lima refinery is now processing about 8,000 bbl/day of heavy crude feedstock following completion of the first phase of the crude oil flexibility project.

A planned feedstock optimization project was completed at the partner-operated Toledo refinery. The refinery is now able to process about 65,000 bbl/day of Hi-TAN crude oil, with its overall nameplate capacity remaining at 160,000 bbl/day.

Asia-Pacific region

China

Gross sales volumes from Liwan averaged 220 million cubic feet per day, with associated liquids production of 10,600 bbl/day. Gross take-or-pay gas volumes remain in the range of 300 million to 330 million cubic feet per day.

The installation of the second 22-inch subsea pipeline at Liwan was completed to provide additional operating flexibility and redundancy over the life of the project.

Indonesia

The company continues to progress its natural gas field developments offshore Indonesia in the Madura Strait.

At the liquid-rich BD field, pipeline construction is continuing and the project is about 90 per cent complete, with all four development wells drilled and cased to target depth. Construction of an FPSO (floating production, storage and offloading) vessel to process gas and liquids is nearing completion, with preparation under way for transportation and installation at the field location.

First production from the BD field is expected to commence in 2017 with a net production target of 40 million cubic feet per day gas and 2,400 bbl/day of associated liquids.

At the shallow-water MDA-MBH fields, the engineering, procurement and construction work is about 20 per cent complete, and tendering is nearing completion for an FPU (floating production unit). At the MDK field, the EPCI tendering process has been completed. The fields will be developed in tandem and are scheduled to come on production in the 2018 to 2019 time frame.

Combined net sales volumes from BD, MDA-MBH and MDK are expected to be approximately 100 million cubic feet per day of gas (net to Husky) and 2,400 bbl/day of associated liquids once production is fully ramped up.

Oil sands

The Sunrise energy project has resumed its ramp-up following the restart of operations after the Fort McMurray wildfires.

Gross production is currently about 33,000 bbl/day with steam chambers continuing to build as expected.

Atlantic region

Average net production was about 24,800 bbl/day, reflecting the turnaround on the SeaRose FPSO vessel.

In the Jeanne d'Arc basin, first oil was achieved at the Hibernia formation well at North Amethyst in mid-September. The well recently reached production rates of 5,000 bbl/day (net to Husky).

At South White Rose, a third infill well has been spudded and first production is anticipated around the end of the year.

The assessment of West White Rose is progressing with a focus on increased capital efficiency and improved resource capture.

Husky and its partner are planning the next steps in the Flemish Pass basin. Husky holds a 35-per-cent working interest in the Bay du Nord, Mizzen, Harpoon, Bay de Verde and Baccalieu discoveries.

Corporate developments

Regular dividend payments on each of the cumulative redeemable preferred shares -- Series 1, Series 2, Series 3, Series 5 and Series 7 -- will be paid for the three-month period ended Dec. 31, 2016. The dividends will be payable on Jan. 3, 2017, to holders of record at the close of business on Nov. 28, 2016.

                        DIVIDEND PAYMENTS

Share series     Dividend type        Rate      Dividend paid
                                        (%)          ($/share)

Series 1               Regular       2.404           $0.15025
Series 2               Regular       2.242           $0.14089
Series 3               Regular        4.50           $0.28125
Series 5               Regular        4.50           $0.28125
Series 7               Regular        4.60           $0.28750

Conference call

A conference call will take place on Thursday, Oct. 27, at 10 a.m. MT (12 p.m. ET) to discuss the company's third quarter results. Mr. Ghosh, chief operating officer Rob Peabody, chief financial officer Jon McKenzie and downstream senior vice-president Bob Baird will participate in the call.

To listen live:

Canada and the United States:  toll-free 1-800-319-4610

Outside Canada and the U.S.:  1-604-638-5340

To listen to a recording (after 11 a.m., Oct. 27):

Canada and the U.S.:  toll-free 1-800-319-6413

Outside Canada and the U.S.:  1-604-638-9010

Passcode:  0746

Duration:  available until Nov. 27, 2016

Audio webcast:  available for 90 days at the company's website under investor relations

We seek Safe Harbor.