Filed pursuant to General Instruction II.K.
of Form F-9; File No. 333-89714.
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 6, 2002)
[GRAPHIC]
US$400,000,000
HUSKY ENERGY INC.
6.25% NOTES DUE 2012
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The notes will bear interest at the rate of 6.25% per year. Interest on
the notes is payable on June 15 and December 15 of each year, beginning on
December 15, 2002. The notes will mature on June 15, 2012. We may redeem some or
all of the notes at any time. The redemption prices are discussed under the
caption "Description of the Notes -- Optional Redemption." We may also redeem
all of the notes at any time in the event that certain changes affecting
Canadian withholding taxes occur.
-------
INVESTING IN THE SECURITIES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 26 OF THE ACCOMPANYING PROSPECTUS.
Neither the U.S. Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
We are permitted to prepare this prospectus supplement and the
accompanying prospectus in accordance with Canadian disclosure requirements,
which are different from those of the United States. We prepare our financial
statements in accordance with Canadian generally accepted accounting principles,
and they are subject to Canadian auditing and auditor independence standards.
Thus, they may not be comparable to the financial statements of United States
companies.
Owning the securities described herein may subject you to tax
consequences both in the United States and Canada. This prospectus supplement
may not describe these tax consequences fully. You should read the tax
discussion contained in this prospectus supplement.
Your ability to enforce civil liabilities under United States federal
securities laws may be affected adversely because we are incorporated in Canada,
all of our officers and directors and some of the experts named in this
prospectus supplement or accompanying prospectus are not residents of the United
States, and most of our assets are located in Canada.
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PER NOTE TOTAL
-------- -----
Public Offering Price......................... 99.545% US$398,180,000
Underwriting Discount......................... 0.650% US$2,600,000
Proceeds to Husky Energy (before expenses).... 98.895% US$395,580,000
Interest on the securities will accrue from June 14, 2002 to the date
of delivery.
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The underwriters expect to deliver the notes in book-entry form through
The Depository Trust Company to purchasers on or about June 14, 2002.
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Salomon Smith Barney
CIBC World Markets
Credit Suisse First Boston
HSBC
TD Securities
BMO Nesbitt Burns
RBC Capital Markets
Scotia Capital
Tokyo-Mitsubishi International plc
June 7, 2002
IMPORTANT NOTICE ABOUT INFORMATION IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of the notes we are offering and
also adds to and updates certain information contained in the accompanying
prospectus and the documents incorporated by reference. The second part is the
accompanying prospectus, dated June 6, 2002, which gives more general
information, some of which may not apply to the notes we are offering. The
accompanying base prospectus is referred to as the "prospectus" in this
prospectus supplement.
IF THE DESCRIPTION OF THE NOTES VARIES BETWEEN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. WE HAVE NOT, AND THE
UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT
INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION,
YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE UNDERWRITERS ARE NOT, MAKING AN
OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, AS WELL AS INFORMATION IN ANY DOCUMENT
INCORPORATED BY REFERENCE THAT WE PREVIOUSLY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION AND WITH THE ALBERTA SECURITIES COMMISSION, IS ACCURATE ONLY
AS OF ITS RESPECTIVE DATE.
In this prospectus supplement, all capitalized terms and acronyms used
and not otherwise defined herein have the meanings provided in the accompanying
prospectus. In this prospectus supplement, the prospectus and any document
incorporated by reference, unless otherwise specified, all dollar amounts are
expressed in Canadian dollars, and all financial information is determined using
Canadian generally accepted accounting principles which are in effect from time
to time, referred to as "Canadian GAAP". "U.S. GAAP" means generally accepted
accounting principles which are in effect from time to time in the United
States. For a discussion of the principal differences between our financial
results as calculated under Canadian GAAP and under U.S. GAAP, you should refer
to Note 17 of our consolidated financial statements for the year ended December
31, 2001, incorporated by reference into the prospectus. Unless otherwise
specified or the context otherwise requires, all references in this prospectus
supplement, the accompanying prospectus and any document incorporated by
reference to "Husky", "we", "us" and "our" mean Husky Energy Inc. and its
subsidiaries, partnership interests and joint venture investments.
This prospectus supplement is deemed to be incorporated by reference
into the accompanying prospectus solely for the purposes of the offering of the
notes offered hereby. Other documents are also incorporated or deemed to be
incorporated by reference into the prospectus. See "Where You Can Find More
Information" in the prospectus.
ANY STATEMENT CONTAINED IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING
PROSPECTUS OR ANY DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS FOR
THE PURPOSE OF THE OFFERING OF THE NOTES OFFERED HEREBY SHALL BE DEEMED TO BE
MODIFIED OR SUPERSEDED TO THE EXTENT THAT A STATEMENT CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT THAT ALSO IS
OR IS DEEMED TO BE INCORPORATED BY REFERENCE IN THE PROSPECTUS MODIFIES OR
SUPERSEDES THAT STATEMENT. ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE
DEEMED, EXCEPT AS SO MODIFIED OR SUPERSEDED, TO CONSTITUTE PART OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THE MODIFYING OR SUPERSEDING STATEMENT
NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR INCLUDE
ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT WHICH IT MODIFIES OR SUPERSEDES.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Exchange Rate Data.................................................... S-4
Forward-Looking Statements............................................ S-4
Husky Energy Inc...................................................... S-6
Recent Developments................................................... S-9
Selected Financial and Operating Information.......................... S-10
Use of Proceeds....................................................... S-13
Consolidated Capitalization........................................... S-14
Pro Forma Interest Coverage........................................... S-14
Credit Ratings........................................................ S-15
Description of the Notes.............................................. S-16
Certain Income Tax Consequences....................................... S-20
Underwriting.......................................................... S-23
Legal Matters......................................................... S-24
PROSPECTUS
About this Prospectus................................................. 2
Where You Can Find More Information................................... 3
Forward-Looking Statements............................................ 5
Husky Energy Inc...................................................... 7
Use of Proceeds....................................................... 7
Interest Coverage..................................................... 8
Description of Debt Securities........................................ 8
Risk Factors.......................................................... 26
Certain Income Tax Consequences....................................... 28
Plan of Distribution.................................................. 28
Legal Matters......................................................... 29
Experts............................................................... 29
Documents Filed as Part of the Registration Statement................. 30
EXCHANGE RATE DATA
We publish our consolidated financial statements in Canadian dollars.
In this prospectus supplement, unless otherwise specified, all dollar amounts
are expressed in Canadian dollars, references to "dollars" or "$" are to
Canadian dollars and references to "US$" are to United States dollars.
The following table sets out certain exchange rates based on the noon
buying rate of The City of New York for cable transfers in Canadian dollars as
certified for customs purposes by the Federal Reserve Bank of New York (the
"noon buying rate"). These rates are set out as United States dollars per $1.00
and are the inverse of rates quoted by the Federal Reserve Bank of New York for
Canadian dollars per US$1.00. On June 7, 2002, the inverse of the noon buying
rate was US$0.6527 equals $1.00.
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
------------------ ------------------------
MARCH 31,
---------
2002 2001 2001 2000 1999
---- ---- ---- ---- ----
High........................ US$0.6342 US$0.6697 US$0.6697 US$0.6969 US$0.6925
Low......................... 0.6200 0.6336 0.6241 0.6410 0.6535
Average (1)................. 0.6260 0.6511 0.6446 0.6727 0.6746
Period End.................. 0.6266 0.6336 0.6279 0.6669 0.6925
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(1) The average of the inverse of the noon buying rate on the last day of
each month during the applicable period.
FORWARD-LOOKING STATEMENTS
This document contains certain forward-looking statements within the
meaning of the United States Private Securities Litigation Legislation Reform
Act of 1995 relating, but not limited, to our operations, anticipated financial
performance, business prospects and strategies and which are based on our
current expectations, estimates, projections and assumptions and were made by us
in light of our experience and our perception of historical trends. All
statements that address expectations or projections about the future, including
statements about our strategy for growth, expected expenditures, commodity
prices, costs, schedules and production volumes, operating or financial results,
are forward-looking statements. Some of our forward-looking statements may be
identified by words like "expects", "anticipates", "plans", "intends",
"believes", "projects", "indicates", "could", "vision", "goal", "objective" and
similar expressions. Our business is subject to risks and uncertainties, some of
which are similar to other energy companies and some of which are unique to us.
Our actual results may differ materially from those expressed or implied by our
forward-looking statements as a result of known and unknown risks, uncertainties
and other factors.
You are cautioned not to place undue reliance on our forward-looking
statements. By their nature, forward-looking statements involve numerous
assumptions, inherent risks and uncertainties, both general and specific, that
contribute to the possibility that the predicted outcomes will not occur. The
risks, uncertainties and other factors, many of which are beyond our control,
that could influence our actual results include, but are not limited to:
o changes in general economic, market and business conditions;
o fluctuations in supply and demand for our products;
o fluctuations in commodity prices;
o fluctuations in the cost of borrowing;
o our use of derivative financial instruments to hedge exposure
to changes in commodity prices and
fluctuations in interest rates and currency exchange rates;
o political and economic developments, expropriation, royalty
and tax increases, retroactive tax claims and changes to
import and export regulations and other foreign laws and
policies in the countries in which we operate;
o our ability to receive timely regulatory approvals;
o the integrity and reliability of our capital assets;
o the cumulative impact of other resource development projects;
o the accuracy of our reserve estimates, production estimates
and production levels and our success at exploration and
development drilling and related activities;
o the maintenance of satisfactory relationships with unions,
employee associations, joint venturers and partners;
o competitive actions of other companies, including increased
competition from other oil and gas companies or from companies
that provide alternative sources of energy;
o the uncertainties resulting from potential delays or changes
in plans with respect to exploration or development projects
or capital expenditures;
o actions by governmental authorities, including changes in
environmental and other regulations;
o the ability and willingness of parties with whom we have
material relationships to fulfill their obligations to us; and
o the occurrence of unexpected events such as fires, blowouts,
freeze-ups, equipment failures and other similar events
affecting us or other parties whose operations or assets
directly or indirectly affect us.
We caution that the foregoing list of important factors is not
exhaustive. Events or circumstances could cause our actual results to differ
materially from those estimated or projected and expressed in, or implied by,
these forward-looking statements. You should also carefully consider the matters
discussed under "Risk Factors" included and incorporated by reference in the
prospectus. We undertake no obligation to update publicly or otherwise revise
any forward-looking information, whether as a result of new information, future
events or otherwise, or the foregoing list of factors affecting this
information.
HUSKY ENERGY INC.
OVERVIEW
We are a Canadian based integrated energy and energy related company
headquartered in Calgary, Alberta. Our registered and principal office is
located at 707 - 8th Avenue S.W., Calgary, Alberta, T2P 3G7. Our common shares
are listed for trading on the Toronto Stock Exchange under the trading symbol
"HSE."
Our operating activities are divided into three segments. The upstream
segment includes the exploration for, and the development and production of,
crude oil and natural gas in western Canada, offshore the east coast of Canada
and in certain international areas. The midstream segment includes heavy crude
oil upgrading operations, commodity marketing, and infrastructure operations,
which include pipeline, processing, storage and cogeneration. The refined
products segment includes the refining of crude oil and marketing of refined
petroleum products.
UPSTREAM
Our portfolio of assets includes properties that produce light, medium
and heavy gravity crude oil, natural gas liquids ("NGL"), natural gas and
sulphur. We have a high degree of operational control in the upstream operating
properties, which accounted for approximately 90% of our total working interest
production as of December 31, 2001. Our upstream operations are primarily in
western Canada and offshore the east coast of Canada (Jeanne d'Arc Basin). We
also have some international upstream operations in China, Indonesia and Libya.
WESTERN CANADA
Our core areas of operations in western Canada are separated into five
regional business units which include: British Columbia and Foothills, Northwest
Alberta Plains, East Central Alberta, Lloydminster Heavy Oil and Gas and
Southern Alberta and Saskatchewan.
o The British Columbia and Alberta foothills region has become
an area of exploration focus for us. This region is
characterized by underdeveloped deep, liquids-rich natural gas
reserves and production.
o The northwest Alberta plains region produces both conventional
light oil and natural gas. Activity in this region is focused
on increasing natural gas reserves and production from shallow
gas assets.
o The east central Alberta region produces both natural gas and
medium gravity crude oil. We have a well developed
infrastructure and high working interests in this region and
are focused on optimizing reservoir recovery and production.
o The Lloydminster area is primarily a heavy oil producing
region with good primary oil thermal development
opportunities. We have a long operating history in this region
which has been supported by our upgrader facility, the asphalt
refinery and extensive pipeline infrastructure.
o The Southern Alberta and Saskatchewan area is a mature
producing region, characterized primarily by medium gravity
crude oil and natural gas. We have high working interests and
a well developed infrastructure to expand areas and improve
recovery in order to moderate production declines.
We are also developing a significant presence in the oil sands region
located in northeast Alberta. This region holds tremendous long-term growth
potential from bitumen extraction and production.
Western Canada upstream activity in 2001 involved participation in
1,129 wells with an average working interest of 91% and with an overall drilling
success rate of approximately 91%, making us the third most active drilling
operator in western Canada. Growth in production over the next ten years from
western Canada is planned to come from northwestern Alberta plains shallow gas,
British Columbia and Alberta foothills deep gas exploration, primary/thermal
heavy oil
production development in the Lloydminster area and from holdings in the Cold
Lake and Athabasca oil sand deposits.
EAST COAST OF CANADA
Our current offshore east coast Canada exploration and development
program is focused primarily in the Jeanne d'Arc Basin on the Grand Banks,
offshore the coast of Newfoundland and Labrador, which contains the Hibernia,
Terra Nova and White Rose oil fields. We have ownership interests in the Terra
Nova and White Rose fields as well as in a number of smaller fields in the
central part of the basin. We presently hold approximately a 39% net working
interest in the Significant Discovery License areas in the Jeanne d'Arc Basin
and a net 42% working interest in the exploration licenses granted to date. We
believe that our geotechnical expertise, drilling experience and extensive
database in this area provides us with a strong foundation for future
development. We also believe that there is further exploration potential in the
area, and that our position offshore the east coast of Canada will provide us
with growth opportunities for light crude oil production in the medium to
long-term.
o We hold a 12.51% interest in the Terra Nova field which
commenced production in January 2002. The Terra Nova field is
the second largest discovery on the Grand Banks, after the
Hibernia field. Peak production is expected to be
approximately 128,000 barrels per day of oil (16,000 barrels
per day of oil net to Husky). The Terra Nova development
project is the first Grand Banks field to be developed using a
floating production storage and offloading system.
o We are the operator and hold a 72.5% interest in the White
Rose field. In March 2002, we announced the decision to
proceed with the development of White Rose. Current plans
provide for a total of 19 to 21 wells to be drilled to recover
between 200 and 250 million barrels of oil over a 10 to 15
year period. Peak production is expected to be approximately
92,000 barrels of oil per day (approximately 66,700 barrels
per day of oil net to Husky). The field is expected to begin
production by the end of 2005.
INTERNATIONAL
Our international exploration and development program is focused at
Wenchang, China and Madura, Indonesia.
o On October 13, 2000, we signed a petroleum contract with the
China National Offshore Oil Corporation to develop two
offshore oil fields in the South China Sea. We hold a 40%
interest in the fields, which are expected to achieve peak
production of approximately 50,000 barrels of oil per day
(20,000 barrels of oil per day net to Husky). The project is
90% complete and is expected to begin production in June 2002.
We are also the operator of a 2,200 square mile exploration
block surrounding the development project at Wenchang.
o We are a party to a production sharing contract, which
provides for various cost and production sharing arrangements,
relating to a 690,400 acre block in the Madura Strait,
offshore Java, Indonesia. Ten exploration and appraisal wells
have been drilled in the block resulting in discoveries of two
natural gas fields. However, the construction of the power
plant and development of the natural gas field has been
postponed pending resolution of energy market and finance
issues arising from the current economic conditions in
Indonesia.
MIDSTREAM
Midstream operations include the upgrading of heavy crude oil feedstock
into synthetic crude oil, pipeline transportation and processing of heavy crude
oil, storage of crude oil, diluent and natural gas, cogeneration of electrical
and thermal energy, and the marketing of our and third party producer's crude
oil, natural gas, NGL, sulphur and petroleum coke.
We own and operate the Husky Lloydminster Upgrader (the "Upgrader"),
which processes heavy oil from the Lloydminster and Cold Lake areas of Alberta
and Saskatchewan into synthetic crude oil, a premium light gravity oil. The
Upgrader's throughput averaged 71,700 barrels per day in 2001 of which 59,500
barrels per day was synthetic crude oil. We
are assessing a possible expansion of the Upgrader to 150,000 barrels per day.
Front-end engineering and design work for such an expansion will be undertaken
in 2002 and a decision on this major growth program will be made following the
completion of the work.
We have been operating a 15 billion cubic feet natural gas storage
facility at Hussar, Alberta since April 2000, and we are continuing to evaluate
additional gas storage opportunities within western Canada. Our crude oil
pipeline systems include approximately 1,900 kilometers of pipeline and are
capable of transporting in excess of 528,000 barrels per day of blended heavy
crude oil, diluent and synthetic crude oil.
REFINED PRODUCTS
Refined products operations include refining of heavy and light crude
oil, marketing of refined petroleum products, including asphalt and alternate
fuels, and processing of grain, primarily for ethanol production. We sell and
distribute transportation fuels, including ethanol blended fuels, through 578
independently operated Husky and Mohawk branded petroleum outlets, including
service stations, truck stops and bulk distribution facilities located from the
west coast of Canada to the eastern border of Ontario.
We own and operate a refinery at Prince George, British Columbia, which
is designed to refine 10,000 barrels per day of light crude oil into a full
range of refined petroleum products. The refinery typically operates at maximum
capacity to meet market fuel demands. In addition to the refined petroleum
product supplied by the Prince George refinery, we have established processing
arrangements with other refiners pursuant to which those refiners process crude
oil supplied by us into refined products which are then marketed by us. We are
pursuing acquisitions and joint venture opportunities to further enhance our
existing refining capacity.
We have been in the paving and specialty asphalt business for over 50
years. We supply asphalt across western Canada and the northwestern and
midwestern United States. We have a significant market share of the western
Canadian paving asphalt, emulsified asphalt and asphalt products business. We
are studying the feasibility of expanding our producing capacity, and all of our
asphalt requirements are currently supplied by our Lloydminster, Alberta asphalt
refinery.
We own and operate a 10 million litre per year ethanol production
facility in Minnadosa, Manitoba. The plant supplies ethanol to mainly Husky and
Mohawk gasolines sold within Manitoba.
RECENT DEVELOPMENTS
FIRST QUARTER RESULTS
On May 1, 2002, we reported net earnings of $126 million ($0.29 per
share) in the first quarter of 2002, compared with $192 million ($0.42 per
share) in the same quarter of 2001. Cash flow from operations was $373 million
($0.87 per share), as compared with $620 million ($1.46 per share) in the first
quarter of 2001.
Net earnings in the first quarter of 2002 were down from the same
period last year, reflecting lower natural gas prices in the quarter. Earnings
were positively impacted by the narrowing of heavy/light crude differentials and
a lower income tax provision.
Upstream production during the first quarter of 2002 averaged 288,700
barrels of oil equivalent per day, an increase of 3% from the fourth quarter of
2001 (an increase of seven percent from the first quarter of 2001). Lower
commodity prices early in the quarter resulted in some shut-in production. New
well tie-ins substantially offset natural declines. During the quarter we
received our first production from the Terra Nova field.
During the first quarter of 2002, 103 exploratory wells were drilled
with a 91% success rate. Exploration drilling in western Canada continued to
focus on natural gas targets in the predominately winter-only accessible areas
of the foothills, deep basin and Alberta northern plain districts.
First quarter 2002 sales of synthetic crude oil from the Lloydminster
Upgrader averaged 71,200 barrels per day, up from 49,700 barrels per day in the
fourth quarter of 2001 (up from 56,200 barrels per day in the first quarter of
2001). Production in the fourth quarter of 2001 had been affected by two plant
outages. The plant operated at maximum capacity during the first quarter of
2002.
Sales volume of asphalt products averaged 17,700 barrels per day in the
first quarter of 2002, up from the 15,000 barrels per day in the first quarter
of 2001 due to a strong winter sales program. This has occurred in spite of
reduced demand for asphalt products.
WHITE ROSE OILFIELD DEVELOPMENT
In March 2002, we and our co-venturer announced our decision to proceed
with the development of the White Rose oilfield located offshore the east coast
of Newfoundland and Labrador, Canada. The White Rose development plan utilizes a
floating production storage and offloading vessel with a peak production
capacity of approximately 100,000 barrels of oil per day. Current plans provide
for a total of 19 to 21 wells to recover between 200 and 250 million barrels of
oil over a 10 to 15 year period. Peak production is expected to be approximately
92,000 barrels per day and production is anticipated to begin by the end of
2005. We own 72.5% of the White Rose oil field.
Development costs for the White Rose project are expected to be
approximately $2.35 billion with approximately $2 billion incurred by the time
production begins. Full field operating costs are expected to be approximately
$2 billion over the 15-year life of the field. Operating costs during peak
production are expected to average approximately $3.30 per barrel.
SELECTED FINANCIAL AND OPERATING INFORMATION
The following table sets forth our selected consolidated financial and
operating information for the years ended December 31, 1999, 2000 and 2001
derived from our audited consolidated financial statements which have been
audited by KPMG LLP and our unaudited consolidated financial statements for the
three months ended March 31, 2001 and 2002. Our consolidated financial
statements are prepared in accordance with Canadian GAAP, which differs in
certain respects from U.S. GAAP. For a discussion of the principal differences
between our financial results as calculated under Canadian GAAP and under U.S.
GAAP, you should refer to Note 17 of our consolidated financial statements for
the year ended December 31, 2001, incorporated by reference into the prospectus.
You should read this selected consolidated financial information in conjunction
with our audited consolidated financial statements and the related notes, our
unaudited consolidated interim financial statements, and other information
included in the documents incorporated by reference in the prospectus.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
------------------ ------------------------
MARCH 31,
---------
(MILLIONS OF DOLLARS, EXCEPT RATIOS) 2002 2001(6) 2001 2000 1999
- ------------------------------------ ---- ------- ---- ---- ----
(UNAUDITED)
INCOME STATEMENT ITEMS:
Sales and operating revenues, net of royalties..................... $1,359 $1,780 $6,627 $5,090 $2,794
Net earnings....................................................... 126 192 701 464 43
CASH FLOW STATEMENT ITEMS:
Cash flow from operations.......................................... $373 $620 $1,946 $1,399 $517
Capital expenditures............................................... 426 351 1,473 803 706
BALANCE SHEET ITEMS (AT PERIOD END):
Total assets....................................................... $9,730 $8,991 $9,503 $8,902 $4,815
Total debt......................................................... 2,302 2,170 2,192 2,378 1,382
Shareholders' equity (1)........................................... 4,564 4,133 4,583 4,039 1,995
OTHER FINANCIAL DATA AND RATIOS:
EBIT (2)........................................................... $210 $390 $1,235 $1,018 $273
EBITDA (3)......................................................... 431 582 2,042 1,499 566
Interest expense (4)............................................... 33 40 152 144 94
Total debt to EBITDA (3)(5)........................................ 1.3x 1.2x 1.1x 1.6x 2.4x
EBITDA to interest expense (3)(4).................................. 13.1x 14.6x 13.4x 10.4x 6.0x
Total debt to total capitalization (1)............................. 34% 34% 32% 37% 41%
- ------------------------
(1) 1999 shareholders' equity and total capitalization include loans to
shareholders of $1,743 million.
(2) EBIT represents earnings from operations before interest, income taxes,
ownership charges and other non-recurring items.
(3) EBITDA represents earnings from operations before interest, income
taxes, depletion, depreciation and amortization, ownership charges and
other non-recurring items. EBITDA is presented because it is frequently
used to evaluate a company's ability to service debt. We believe that
EBITDA, while providing useful information, should not be considered in
isolation or as a substitute for net earnings, as an indicator of
operating performance or as an alternative to cash flow as a measure of
liquidity.
(4) Interest expense includes both expensed and capitalized interest
payments as well as interest income.
(5) Trailing twelve-month period.
(6) Restated to reflect the adoption, effective January 1, 2002, of the
recommendations of the Canadian Institute of Chartered Accountants on
foreign currency translation.
SELECTED SEGMENTED FINANCIAL INFORMATION
The following table sets forth certain segmented financial information
for us and our business units for the periods indicated.
THREE MONTHS YEARS ENDED DECEMBER 31,
------------ ------------------------
ENDED MARCH 31,
---------------
(MILLIONS OF DOLLARS) 2002 2001 2001 2000 1999
- --------------------- ---- ---- ---- ---- ----
UPSTREAM
Gross revenue................................................................. $586 $855 $2,667 $2,055 $765
Royalties..................................................................... 75 184 471 327 94
Hedging....................................................................... -- -- -- 155 69
Net revenue................................................................... 511 671 2,196 1,573 602
Costs and expenses............................................................ 152 129 648 370 204
EBITDA........................................................................ 359 542 1,548 1,203 398
Operating profit (EBIT)....................................................... 159 368 820 796 175
MIDSTREAM
Upgrading Operations
Gross margin................................................................ $75 $133 $428 $321 $172
Operating costs............................................................. 36 69 192 158 114
EBITDA...................................................................... 40 59 249 165 65
Operating profit (EBIT)..................................................... 35 56 232 149 49
Infrastructure and Marketing
Gross margin................................................................ $58 $55 $197 $117 $95
EBITDA...................................................................... 56 54 189 111 90
Operating profit (EBIT)..................................................... 52 50 172 96 77
REFINED PRODUCTS
Light Oil Products
Gross margin................................................................ $18 $20 $96 $81 $95
Operating expenses.......................................................... 7 7 30 27 25
EBITDA...................................................................... 12 10 50 41 55
Operating profit (EBIT)..................................................... 6 4 25 19 35
Asphalt Products
Gross margin................................................................ $7 $9 $106 $38 $22
EBITDA...................................................................... 6 8 105 36 20
Operating profit (EBIT)..................................................... 4 6 99 30 14
SELECTED OPERATING INFORMATION
The following table sets forth certain historical operating information
for us and our business units for the periods indicated. In this table, "bbls",
"mbbls" and "mmbbls" means barrels, thousand barrels, and million barrels,
respectively, "mmcf" and "bcf" means million cubic feet and billion cubic feet,
respectively, and "mboe" and "mmboe" means thousand barrels of oil equivalent
and million barrels of oil equivalent, respectively, with natural gas converted
to oil on the basis of six thousand cubic feet of natural gas equals one barrel
of oil.
THREE MONTHS YEARS ENDED DECEMBER 31,
------------ ------------------------
ENDED MARCH 31,
---------------
2002 2001 2001 2000 1999
---- ---- ---- ---- ----
UPSTREAM
DAILY PRODUCTION (before royalties)
Light/medium crude oil and NGL (mbbls/day).............................. 117.5 115.5 112.0 63.6 26.5
Heavy crude oil (mbbls/day)............................................. 76.9 56.9 65.4 53.5 42.1
Natural gas (mmcf/day).................................................. 566.0 584.0 572.6 358.0 250.5
----- ----- ----- ----- -----
Total barrels of oil equivalent (mboe/day).............................. 288.7 269.7 272.8 176.8 110.4
===== ===== ===== ===== =====
PROVED RESERVES (after royalties)
Light/medium crude oil and NGL (mmbbls)
Canada................................................................................ 339 336 117
International......................................................................... 37 35 6
Total................................................................................. 376 371 123
Heavy crude oil (mmbbls)
Western Canada........................................................................ 164 110 96
Natural gas (bcf)
Canada................................................................................ 1,559 1,435 772
International......................................................................... 115 110 110
Total................................................................................. 1,674 1,545 882
Total barrels of oil equivalent (mmboe)................................................... 819 739 366
UNDEVELOPED LAND HOLDINGS (thousands of net acres)
Alberta............................................................................... 5,373 5,616 692
Saskatchewan.......................................................................... 1,921 2,639 586
British Columbia...................................................................... 141 173 66
Manitoba.............................................................................. 75 162 --
Total Western Canada...................................................................... 7,510 8,590 1,344
Northwest Territories and Arctic...................................................... 409 409 417
Eastern Canada........................................................................ 1,471 1,489 258
Total Canada.............................................................................. 9,390 10,488 2,019
International......................................................................... 697 221 389
Total..................................................................................... 10,087 10,709 2,408
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
------------------ ------------------------
MARCH 31,
---------
2002 2001 2001 2000 1999
---- ---- ---- ---- ----
MIDSTREAM
UPGRADING OPERATIONS
Volume throughput (mbbls/day)....................................... 76.6 75.1 71.7 70.0 71.8
Synthetic crude oil sales (mbbls/day)............................... 71.2 56.2 59.5 60.6 61.9
Upgrading differential ($/bbl)...................................... $9.85 $21.61 $17.91 $13.77 $6.49
Unit operating costs ($/bbl)........................................ 5.15 10.11 7.35 6.17 4.35
INFRASTRUCTURE AND MARKETING
Aggregate pipeline throughput (mbbls/day)........................... 469 550 537 528 394
REFINED PRODUCTS
LIGHT OIL PRODUCTS
Number of fuel outlets.............................................. 578 579 580 579 597
Fuel sales volume (million litres/day).............................. 7.2 7.4 7.6 7.4 7.6
Refinery throughput (mbbls/day)..................................... 10.9 10.9 10.2 9.2 10.2
ASPHALT PRODUCTS
Sales volume (mbbls/day)............................................ 17.7 15.0 21.4 20.2 17.1
Refinery throughput (mbbls/day)..................................... 25.2 22.2 23.7 23.4 17.9
USE OF PROCEEDS
The net proceeds to us from this offering will be approximately
US$394.6 million ($604.6 million, based on the noon buying rate on June 7,
2002), after deducting underwriting discount and estimated expenses payable by
us of approximately US$3.6 million. The net proceeds received by us from the
sale of the notes will be used, in part, to repay bank indebtedness. The balance
will be used to fund expenditures relating to our primary areas of operation in
western Canada, offshore the east coast of Canada, the Wenchang oil fields in
the South China Sea and in the Madura Strait area offshore Indonesia. The net
proceeds that are not utilized immediately will be invested in short-term
marketable securities.
CONSOLIDATED CAPITALIZATION
The following table summarizes our consolidated capitalization at March
31, 2002, as adjusted to give effect to the issuance of the notes offered by
this prospectus supplement and the application of the net proceeds as described
under "Use of Proceeds". You should read the selected unaudited financial
information included elsewhere in this prospectus supplement. All U.S. dollar
amounts have been converted to Canadian dollars using the exchange rate of
US$0.6266 equals $1.00 at March 31, 2002.
MARCH 31, 2002
--------------
(MILLIONS OF DOLLARS) ACTUAL AS ADJUSTED
- --------------------- ------ -----------
(UNAUDITED)
Short-term debt................................................................. $120 $--
---- ---
Long-term debt, including portions due within one year:
Revolving syndicated credit facility.......................................... 385 --
Senior notes and debentures................................................... 929 929
Medium term notes............................................................. 600 600
Senior secured bonds.......................................................... 268 268
Notes offered hereby.......................................................... -- 638
-- ---
Total long-term debt............................................................ 2,182 2,435
----- -----
Shareholders' equity:
8.90% Capital Securities (1).................................................. 359 359
Common shares................................................................. 3,400 3,400
Retained earnings............................................................. 805 805
--- ---
Total shareholders' equity...................................................... 4,564 4,564
----- -----
Total capitalization............................................................ $6,866 $6,999
====== ======
- ------------------------
(1) Under U.S. GAAP, the Capital Securities would be included in long-term
debt.
PRO FORMA INTEREST COVERAGE
The following pro forma interest coverage ratios, which have been
prepared in accordance with Canadian securities requirements, are included in
this prospectus supplement in accordance with Canadian disclosure requirements.
The following consolidated financial ratios are calculated for the
twelve month periods ended December 31, 2001 and March 31, 2002 based on
audited, in the case of December 31, 2001, and unaudited, in the case of March
31, 2002, financial information. The pro forma financial ratios give effect to
the issuance of the notes offered by this prospectus supplement and the
application of the net proceeds to repay indebtedness as discussed under "Use of
Proceeds". The actual financial ratios do not give effect to the issuance of the
notes offered by this prospectus supplement. The pro forma interest coverage
ratios set forth below do not purport to be indicative of the actual interest
coverage ratios that would have occurred on the foregoing dates. The interest
coverage ratios set forth below are not indicative of interest coverage ratios
for any future periods. The ratios have been calculated based on Canadian GAAP.
PRO FORMA ACTUAL MARCH 31, 2002 (1)(2) PRO FORMA
---------- ---------------------------- ---------
DECEMBER 31, 2001 MARCH 31, 2002 (1)
----------------- ------------------
Interest coverage ratios on long-term debt:
Earnings................................ 6.9 times 6.9 times 5.8 times
Cash flow............................... 11.6 times 12.7 times 10.7 times
- ------------------------
(1) Based on 2001 financial information that has been restated to reflect
the adoption, effective January 1, 2002, of the recommendations of the
Canadian Institute of Chartered Accountants on foreign currency
translation.
(2) The actual March 31, 2002 interest coverage ratios modify and supersede
the March 31, 2002 interest coverage ratios in our prospectus dated
June 6, 2002.
Interest coverage on long-term debt on an earnings basis is equal to
earnings before interest on long-term debt and income taxes divided by interest
expense and capitalized interest. Interest coverage on long-term debt on a cash
flow basis is equal to cash flow from operations before interest expense and
cash income taxes divided by interest expense and capitalized interest. For
purposes of calculating the pro forma interest coverage ratios set forth in this
prospectus supplement, long-term debt includes the current portion of long-term
debt.
Our interest expense, after giving effect to the issuance of the notes
offered by this prospectus supplement and the application of the net proceeds to
repay indebtedness as discussed under "Use of Proceeds," would amount to $128
million for the 12 month period ended December 31, 2001. Our earnings before
interest expense and income tax for the twelve month period ended December 31,
2001 was $1,235 million which is 6.9 times our interest expense for this period.
Additionally, the above interest coverage ratios have been calculated
without including the annual carrying charges relating to our issue of the 8.90%
Capital Securities. If our Capital Securities were classified as long-term debt
(as they would be under U.S. GAAP), and the annual carrying charges were
included in interest expense, our interest coverage ratios would have been as
follows:
PRO FORMA ACTUAL MARCH 31, 2002 (1)(2) PRO FORMA
---------- ---------------------------- ---------
DECEMBER 31, 2001 MARCH 31, 2002 (1)
----------------- ------------------
Interest coverage ratios on long-term debt:
Earnings................................ 5.9 times 5.6 times 4.9 times
Cash flow............................... 9.8 times 10.4 times 9.0 times
- ------------------------
(1) Based on 2001 financial information that has been restated to reflect
the adoption, effective January 1, 2002, of the recommendations of the
Canadian Institute of Chartered Accountants on foreign currency
translation.
(2) The actual March 31, 2002 interest coverage ratios modify and supersede
the March 31, 2002 interest coverage ratios in our prospectus dated
June 6, 2002.
CREDIT RATINGS
The notes have received ratings of "Baa2" by Moody's Investors Service,
Inc. ("Moody's") and "BBB" by Standard & Poor's Corporation ("S&P"). Credit
ratings are intended to provide investors with an independent measure of credit
quality of any issue of securities.
Moody's credit ratings are on a long-term debt rating scale that ranges
from Aaa to C, which represents the range from highest to lowest quality of such
securities rated. According to the Moody's rating system, debt securities rated
Baa are considered as medium-grade obligations, they are neither highly
protected nor poorly secured. Interest payments and principal security appear
adequate for the present but certain proactive elements may be lacking or may be
characteristically unreliable over any great length of time. Such securities
lack outstanding involvement characteristics and in fact have speculative
characteristics as well. The addition of a 1, 2 or 3 modifier after a rating
indicates the relative standing within a particular rating category. The
modifier 1 indicates that the issue ranks in the higher end of its generic
rating category, the modifier 2 indicates a mid-range ranking and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
S&P's credit ratings are on a long-term debt rating scale that ranges
from AAA to D, which represents the range from highest to lowest quality of such
securities rated. According to the S&P rating system, debt securities rated BBB
exhibit adequate protection parameters. However, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet the financial commitments on the notes. The addition of a plus
(+) or minus (-) designation after a rating indicates the relative standing
within a particular rating category.
The credit ratings accorded to the notes by the rating agencies are not
recommendations to purchase, hold or sell the notes inasmuch as such ratings do
not comment as to market price or suitability for a particular investor. Any
rating may not remain in effect for any given period of time or may be revised
or withdrawn entirely by a rating agency in the future if in its judgment
circumstances so warrant, and if any such rating is so revised or withdrawn, we
are under no obligation to update this prospectus supplement.
DESCRIPTION OF THE NOTES
The following description of the terms of the notes (referred to in the
prospectus as the "debt securities") supplements, and to the extent inconsistent
therewith replaces the description set forth under "Description of Debt
Securities" in the prospectus and should be read in conjunction with such
description. Capitalized terms used but not defined in this prospectus
supplement have the meanings ascribed to them in the prospectus. In this section
only, "we", "us", "our", or "Husky" refers only to Husky Energy Inc. and not any
of its subsidiaries, partnership interests or joint venture investments.
GENERAL
The notes initially will be issued in an aggregate principal amount of
US$400,000,000. The notes will mature on June 15, 2012. The notes will bear
interest at the rate of 6.25% per annum. Interest will be payable semi-annually
on June 15 and December 15 of each year, commencing December 15, 2002, to the
persons in whose names the notes are registered at the close of business on the
preceding June 1 or December 1, respectively.
The notes will be our direct unsecured obligations and will rank at
least equally and ratably with all of our other unsubordinated and unsecured
indebtedness. Upon closing of this offering, we will advance the proceeds of
this offering to our subsidiary, Husky Oil Operations Limited ("HOOL"), and HOOL
will issue us a note (the "HOOL note") in the amount of such proceeds. The
principal amount of the HOOL note, plus accrued and unpaid interest equal to
accrued and unpaid interest on the notes, will become due and payable upon any
event of default with respect to the notes, and will be fully and
unconditionally guaranteed by Husky Oil Limited Partnership ("HOLP"). The HOOL
note and the HOLP guarantee will be pledged in favor of the Trustee for the
benefit of the holders of the notes. A breach under the collateral documents
relating to this pledge will be an event of default under the Indenture. As a
result, for so long as this intercompany arrangement and pledge are in place,
the Trustee on behalf of the holders of notes will have a claim against HOOL and
HOLP in an amount equal to the amount due under the notes and, therefore, the
notes will in effect rank pari passu with any unsecured and unsubordinated debt
issued or guaranteed by HOOL or HOLP.
The provisions of the Indenture relating to the payment of Additional
Amounts in respect of withholding taxes in certain circumstances (described
under the caption "Description of Debt Securities -- Additional Amounts" in the
accompanying prospectus) and the provisions of the Indenture relating to the
redemption of notes in the event of specified changes in withholding tax law on
or after the date of this prospectus supplement (described under the caption
"Description of Debt Securities -- Tax Redemption" in the prospectus) will apply
to the notes.
We may from time to time without notice to, or the consent of, the
holders of the notes, create and issue additional notes under the Indenture,
equal in rank to the notes, in all respects (except for the payment of interest
accruing prior to the issue date of the new notes, and except for the first
payment of interest following the issue date of the new notes) so that the new
notes may be consolidated and form a single series with the notes, and have the
same terms as to status, redemption and otherwise as the notes.
The notes will not be entitled to the benefit of any sinking fund. We
may issue debt securities and incur additional indebtedness other than through
the offering of notes pursuant to this prospectus supplement.
PLEDGE TERMINATION
Under the circumstances set forth below, we may terminate the pledge of
the HOOL note and the HOLP guarantee.
We shall notify S&P and Moody's and the Trustee of our intention to
exercise our option to terminate the pledge of the HOOL note and the HOLP
guarantee at least 45 days prior to the proposed date of such termination (the
"Release Date"). In order to effect the termination of the pledge of the HOOL
note and the HOLP guarantee, on the proposed Release Date we will deliver to the
Trustee an officer's certificate stating that we have satisfied each of the
conditions specified below and that we have not been notified by either of S&P
or Moody's that the rating assigned to the notes will be downgraded, or receive
a negative change in outlook, as a result of the termination of the pledge of
the HOOL note and the HOLP guarantee, or
notice thereof.
After delivery of such officer's certificate, we may, at our option and
without the consent of the holders of the notes, permanently terminate the
pledge of the HOOL note and the HOLP guarantee, PROVIDED THAT at the time of
such termination:
o neither HOOL nor HOLP shall be the primary obligor or
guarantor with respect to any Indebtedness, other than
Indebtedness which in the aggregate does not exceed an amount
equal to 10% of Consolidated Net Tangible Assets;
o the rating assigned to the notes by each of S&P and Moody's is
equal to or higher than BBB- (or equivalent) by S&P or Baa3
(or equivalent) by Moody's; and
o no event which is, or after notice or passage of time or both
would be, an event of default or an event of default has
occurred and is continuing under the Indenture.
GOVERNING LAW
The Indenture provides that it and the notes will be governed by, and
construed in accordance with, the laws of the State of New York. In addition,
the pledge agreement, the HOOL note and the HOLP guarantee will be governed by,
and construed in accordance with the laws of Alberta, Canada, in each case,
without giving effect to applicable principles of conflicts of law to the extent
that the application of the law of another jurisdiction would be required
thereby.
OPTIONAL REDEMPTION
The notes will be redeemable, in whole or in part, at our option at any
time at a redemption price equal to the greater of:
o 100% of the principal amount of the notes to be redeemed, and
o as determined by the Quotation Agent (as defined below), the
sum of the present values of the remaining scheduled payments
of principal and interest on the notes to be redeemed (not
including any portion of the payments of interest accrued as
of the date of redemption), discounted to the redemption date
on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate (as
defined below) plus 20 basis points,
in either case, plus accrued interest thereon to the date of redemption.
Notice of any redemption will be delivered by first-class mail at least
30 days, but not more than 60 days, before the redemption date to each holder of
the notes to be redeemed.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the notes or portions of the
notes called for redemption.
"ADJUSTED TREASURY RATE" means, with respect to any redemption date,
the rate per annum equal to the semi-annual equivalent yield to maturity or
interpolated (on a day count basis) of the Comparable Treasury Issue, assuming a
price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for the redemption
date.
"COMPARABLE TREASURY ISSUE" means the United States Treasury security
or securities selected by the Quotation Agent as having an actual or
interpolated maturity comparable to the remaining term of the notes to be
redeemed that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the notes.
"COMPARABLE TREASURY PRICE" means, with respect to any redemption date,
(i) the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (ii) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.
"QUOTATION AGENT" means one of the Reference Treasury Dealers, which is
appointed by us.
"REFERENCE TREASURY DEALER" means (i) Salomon Smith Barney Inc. or its
affiliates which are primary U.S. Government securities dealers and their
respective successors, PROVIDED, HOWEVER, that if it or its affiliates shall
cease to be a primary U.S. Government securities dealer in The City of New York
(a "Primary Treasury Dealer"), we shall substitute another Primary Treasury
Dealer; and (ii) any other Primary Treasury Dealer selected by us.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Quotation Agent, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Quotation Agent by such Reference Treasury Dealer at 3:30 p.m.
(New York time) on the third business day preceding such redemption date.
BOOK-ENTRY SYSTEM
The Depository Trust Company (hereinafter referred to as the
"Depositary") will act as securities depository for the notes. The notes will be
issued as fully registered notes registered in the name of Cede & Co. (the
Depositary's nominee) or such other name as may be requested by an authorized
representative of the Depositary. One or more fully registered global notes
(hereinafter referred to as the "global notes") will be issued for each of the
notes, in the aggregate principal amount of the issue, and will be deposited
with the Depositary. The provisions set forth under "Description of Debt
Securities -- Global Securities" in the prospectus will be applicable to the
notes.
The following is based on information furnished by the Depositary:
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
clearing agency registered pursuant to the provisions of Section 17A of the U.S.
Securities Exchange Act of 1934. The Depositary also facilitates the settlement
among participants of notes transactions, such as transfers and pledges, in
deposited notes through electronic computerized book-entry charges in
participants' accounts, thereby eliminating the need for physical movement of
notes certificates. Direct participants (hereinafter referred to as "direct
participants") include:
o securities brokers and dealers;
o banks;
o trust companies;
o depositories for Euroclear and Clearstream;
o clearing corporations; and
o certain other organizations.
The Depositary is owned by a number of its direct participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, LLC, and the
National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others such as brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly, in the case of "indirect
participants". The rules applicable to the Depositary and its direct and
indirect participants are on file with the SEC.
Purchases of notes under the Depositary's system must be made by or
through direct participants, which will receive a credit for the notes on the
Depositary's records. The ownership interest of each "beneficial owner" is in
turn to be recorded on the direct and indirect participant's records. Beneficial
owners will not receive written confirmation from the Depositary of their
purchases but beneficial owners are expected to receive written confirmation
providing details of the transaction, as well as periodic statements of their
holdings, from the direct or indirect participants through which the beneficial
owners entered into the transaction. Transfers of ownership interests in the
global notes are to be accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners of the global notes
representing notes will not receive notes in definitive form representing their
ownership interests, except in the event that use of the book-entry system for
the notes is discontinued or upon the occurrence of certain other events
described in this prospectus supplement.
To facilitate subsequent transfers, the global notes which are
deposited with the Depositary are registered in the name of the Depositary's
nominee, Cede & Co., or such other name as may be requested by an authorized
representative of the Depositary. The deposit of the global notes with the
Depositary and its registration in the name of Cede & Co. or such other nominee
effect no change in beneficial ownership. The Depositary has no knowledge of the
actual beneficial owners of the global notes representing the notes. The
Depositary's records reflect only the identity of the direct participants to
whose accounts the notes are credited, which may or may not be the beneficial
owners. The participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
direct participants, by direct participants to indirect participants and by
direct participants and indirect participants to beneficial owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. (nor any other Depositary
nominee) will consent or vote with respect to the global notes representing the
notes. Under its usual procedures, the Depositary mails an "omnibus proxy" to us
as soon as possible after the applicable record date. The omnibus proxy assigns
Cede & Co.'s consenting or voting rights to those direct participants whose
accounts the notes are credited on the applicable record date (identified in a
listing attached to the omnibus proxy).
Principal, premium, if any, and interest payments on the global notes
representing the notes will be made to the Depositary. The Depositary's practice
is to credit direct participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the Depositary's records
unless the Depositary has reason to believe that it will not receive payment on
that date. Payments by direct and indirect participants to beneficial owners
will be governed by standing instructions and customary practices, as is the
case with notes held for the account of customers in bearer form or registered
in "street name", and will be the responsibility of the direct or indirect
participant and not of the Depositary, the Trustee or us, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal, premium, if any, and interest to the Depositary is our
responsibility or the responsibility of the Trustee, disbursement of these
payments to direct participants shall be the responsibility of the Depositary,
and disbursement of these payments to the beneficial owners shall be the
responsibility of direct and indirect participants. Neither we nor the Trustee
will have any responsibility or liability for disbursements of payments in
respect of ownership interest in the notes by the Depositary or the direct or
indirect participants or for maintaining or reviewing any records of the
Depositary or the direct or indirect participants relating to ownership
interests in the notes or the disbursement of payments in respect of the notes.
The Depositary may discontinue providing its services as securities
depository with respect to the notes at any time by giving reasonable notice to
us or the Trustee. Under these circumstances, and in the event that a successor
depository is not obtained, notes in definitive form are required to be printed
and delivered. We may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor depository). In that event,
notes in definitive form will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that we believe to be
reliable, but is subject to any changes to the arrangements between us and the
Depositary and any changes to these procedures that may be instituted
unilaterally by the Depositary.
CERTAIN INCOME TAX CONSEQUENCES
THE FOLLOWING SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED
TO BE, AND SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE
INVESTOR AND NO REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY
PARTICULAR INVESTOR IS MADE. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS FOR ADVICE WITH RESPECT TO THE INCOME TAX
CONSEQUENCES TO THEM HAVING REGARD TO THEIR OWN PARTICULAR CIRCUMSTANCES,
INCLUDING ANY CONSEQUENCES OF AN INVESTMENT IN THE NOTES ARISING UNDER STATE,
PROVINCIAL OR LOCAL TAX LAWS IN THE UNITED STATES OR CANADA OR TAX LAWS OF
JURISDICTIONS OUTSIDE THE UNITED STATES OR CANADA.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Borden Ladner Gervais LLP, Calgary, Alberta, Canada,
our Canadian counsel, the following summary addresses the material Canadian
federal income tax considerations of purchasing, owning and disposing of the
notes to an initial purchaser of notes under this offering (a "Holder") who, for
the purposes of the INCOME TAX ACT (the "ITA"), deals at arm's length with Husky
Energy Inc. at all relevant times, is a non-resident of Canada, holds the notes
as capital property, and does not use or hold, and is not deemed to use or hold,
the notes in connection with a business carried on in Canada. For the purposes
of the ITA, related persons (as defined therein) are deemed not to deal at arm's
length and it is a question of fact whether persons not related to each other
deal at arm's length.
This summary is based on the current provisions of the ITA and the
regulations thereunder, the understanding of Borden Ladner Gervais LLP of the
current assessing and administrative practices of the Canada Customs and Revenue
Agency (the "CCRA") and all specific proposals to amend the ITA and the
regulations thereunder publicly announced by the Minister of Finance (Canada)
before the date of this prospectus supplement. This summary does not otherwise
take into account or anticipate changes in the law or in the assessment and
administrative practices of the CCRA, whether by judicial, governmental or
legislative decision or action nor does it take into account tax legislation or
considerations of any province or territory of Canada or any jurisdiction other
than Canada. This summary is of a general nature only and is not intended to be,
and should not be interpreted as, legal or tax advice to any particular Holder
of notes.
The payment of interest, premium, if any, and principal in respect of
the notes by Husky Energy Inc. to a Holder will not be subject to non-resident
withholding tax under the ITA. No other tax on income (including capital gains)
will be payable by a Holder under the ITA in respect of the holding, repayment,
redemption or disposition of the notes, or the receipt of interest, premium, if
any, or principal thereon, except that in certain circumstances, a Holder who is
a non-resident insurer carrying on business in Canada, and elsewhere, may be
subject to taxes under the ITA.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain material U.S. federal income
tax consequences that may be relevant to the purchase, ownership and disposition
of notes by United States persons (as defined below) who purchase notes in this
offering at the issue price set forth on the cover of this prospectus supplement
and who hold the notes as capital assets ("U.S. Holders") within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This
discussion does not purport to deal with all aspects of U.S. federal income
taxation that may be relevant to particular holders in light of their particular
circumstances nor does it deal with persons that are subject to special tax
rules, such as dealers in securities or currencies, financial institutions,
insurance companies, tax-exempt organizations, persons holding the notes as a
part of a straddle, hedge, or conversion transaction or a synthetic security or
other integrated transaction, U.S. Holders whose "functional currency" is not
the U.S. dollar, and holders who are not U.S. Holders. In addition, this summary
does not address the tax consequences applicable to subsequent purchasers of the
notes. Furthermore, the discussion below is based upon the provisions of the
Code and United States Treasury regulations, rulings and judicial decisions
under the Code as of the date of this prospectus supplement, and those
authorities may be repealed, revoked or modified (possibly with retroactive
effect) so as to result in U.S. federal income tax consequences that may be
materially different from those discussed below. There can be no assurance that
the Internal Revenue Service ("IRS") will take a similar view as to any of the
tax consequences described in this summary.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR
SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE OR OF
ANY LOCAL OR FOREIGN TAXING JURISDICTION.
As used in this section, the term "United States person" means a
beneficial owner of a note that is (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision of the
United States, (iii) an estate, the income of which is subject to U.S. federal
income taxation regardless of its source or (iv) a trust, if (A) a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust, or (B) the trust
has validly made an election to be treated as a U.S. person under applicable
United States Treasury regulations.
PAYMENTS OF INTEREST
Interest on a note will generally be includible by a U.S. Holder as
ordinary income at the time the interest is paid or accrued, depending on the
U.S. Holder's method of accounting for U.S. federal income tax purposes. In
addition to interest on the notes, if any additional amounts are paid on account
of Canadian withholding taxes, a U.S. Holder would be required to include such
additional amounts in income.
A U.S. Holder may be entitled to deduct or credit foreign withheld tax,
subject to applicable limitations in the Code. For U.S. foreign tax credit
purposes, interest income on a note generally will constitute foreign source
income and be considered "passive income" or "financial services income". If the
applicable rate of Canadian withholding tax is 5% or more, however, interest on
the notes will be treated as "high withholding tax interest" for foreign tax
credit purposes. The rules governing the foreign tax credit are complex and
investors are urged to consult their tax advisors regarding the availability of
the credit under their particular circumstances.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a note, a U.S. Holder
generally will recognize a taxable gain or loss equal to the difference between
the amount realized (reduced by any amounts attributable to accrued but unpaid
interest, which will be taxable as ordinary income) and the U.S. Holder's
adjusted tax basis in the note. Such gain or loss generally will constitute a
long-term capital gain or loss if the note was held by such U.S. Holder for more
than one year and otherwise will be short-term capital gain or loss. Under
current law, net capital gains of certain non-corporate taxpayers (including
individuals) are, under some circumstances, taxed at lower rates than items of
ordinary income. Somewhat lower capital gains tax rates may apply to the sale by
certain non-corporate taxpayers (including individuals) of notes held for more
than five years. The deductibility of capital losses is subject to limitations.
In the case of a U.S. Holder who is a United States resident (as defined in
Section 865 of the Code), any such gain or loss will generally be treated as
U.S. source, unless it is attributable to an office or other fixed place of
business outside the United States and certain other conditions are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments
of interest on, and the proceeds of disposition of, a note to U.S. Holders other
than certain exempt recipients (such as corporations). In general, backup
withholding, at the then applicable rate, will be applicable to a U.S. Holder
that is not an exempt recipient if such U.S. Holder:
o fails to furnish its correct taxpayer identification number
which, for an individual, would be his or her Social Security
Number;
o is notified by the IRS that it has failed to properly report
payments of interest or dividends; or
o in some circumstances, fails to certify, under penalties of
perjury, that the holder has furnished a correct taxpayer
identification number and has not been notified by the IRS
that it is subject to backup withholding for failure to report
interest and dividend payments.
Any amount withheld from payment to a holder under the backup
withholding rules will be allowed as a credit against the holder's federal
income tax liability and may entitle the holder to a refund, provided the
required information is furnished to the IRS. A U.S. Holder that does not
provide a correct taxpayer identification number may be subject to penalties
imposed by the IRS. Holders of notes should consult their tax advisors regarding
the application of backup withholding in their particular situation, the
availability of an exemption from backup withholding and the procedure for
obtaining such an exemption, if available.
UNDERWRITING
Salomon Smith Barney Inc. is acting as sole bookrunning manager of the
offering and is acting as representative of the underwriters named below.
Subject to the terms and conditions stated in the underwriting
agreement dated the date of this prospectus supplement, each underwriter named
below has agreed to purchase, and we have agreed to sell to that underwriter,
the principal amount of notes set forth opposite the underwriter's name.
UNDERWRITER PRINCIPAL AMOUNT OF
- ----------- -------------------
NOTES
-----
Salomon Smith Barney Inc........................... US$180,000,000
CIBC World Markets Corp............................ 36,000,000
Credit Suisse First Boston Corporation............. 36,000,000
HSBC Securities (USA) Inc.......................... 36,000,000
TD Securities (USA) Inc............................ 36,000,000
BMO Nesbitt Burns Corp............................. 22,000,000
RBC Dominion Securities Corporation................ 22,000,000
Scotia Capital (USA) Inc........................... 22,000,000
Tokyo-Mitsubishi International plc................. 10,000,000
----------
Total............................................ US$400,000,000
==============
The underwriting agreement provides that the obligations of the
underwriters to purchase the notes included in this offering are subject to
approval of legal matters by counsel and to other conditions. The underwriters
are obligated to purchase all the notes if they purchase any of the notes.
The underwriters propose to offer some of the notes directly to the
public at the public offering price set forth on the cover page of this
prospectus supplement and some of the notes to dealers at the public offering
price less a concession not to exceed 0.40% of the principal amount of the
notes. The underwriters may allow, and other such dealers may reallow a
commission not in excess of 0.25% of the principal amount of the notes. After
the initial offering of the notes to the public, the representatives may change
the public offering price and concessions.
The following table shows the underwriting discounts and commissions
that we are to pay to the underwriters in connection with this offering
(expressed as a percentage of the principal amount of the notes).
PAID BY
-------
HUSKY ENERGY
------------
Per note........................................... 0.65%
In connection with this offering, Salomon Smith Barney Inc., on behalf
of the underwriters, may purchase and sell notes in the open market. These
transactions may include over-allotment, syndicate covering transactions and
stabilizing transactions. Over-allotment involves syndicate sales of the notes
in excess of the principal amount of the notes to be purchased by the
underwriters in this offering, which creates a syndicate short position.
Syndicate covering transactions may involve purchases of the notes in the open
market after the distribution has been completed in order to cover syndicate
short positions. Stabilizing transactions consist of certain bids or purchases
of the notes made for the purpose of preventing or retarding a decline in the
market price of the notes while the offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession
from a syndicate member when Salomon Smith Barney Inc., in covering syndicate
short positions or making stabilizing purchases, repurchases notes originally
sold by that syndicate member.
Any of these activities may have the effect of preventing or retarding
a decline in the market price of the notes. They may also cause the price of the
notes to be higher than the price that otherwise would exist in the open market
in the absence of these transactions. The underwriters may conduct these
transactions in the over-the-counter market or otherwise. If the underwriters
commence any of these transactions, they may discontinue them at any time.
The notes are a new issue of securities with no established trading
market. The notes will not be listed on any securities exchange or on any
automated dealer quotation system. The underwriters may make a market in the
notes after completion of the offering, but will not be obligated to do so and
may discontinue any market-making activities at any time without notice. No
assurance can be given as to the liquidity of the trading market for the notes
or that an active public market for the notes will develop. If an active public
trading market for the notes does not develop, the market price and liquidity of
the notes may be adversely affected.
We estimate that our total expenses for this offering will be US$1.0
million.
The underwriters have performed investment banking and advisory
services for us from time to time for which they have received customary fees
and expenses. The underwriters may, from time to time, engage in transactions
with and perform services for us in the ordinary course of their business.
Certain of the underwriters are affiliated with entities that are agents for and
members of syndicates of lenders which made available revolving and term
facilities to us. We are in compliance in all material respects with the terms
of the agreements governing such facilities.
Because more than 10% of the proceeds of this offering, not including
underwriting compensation, will be received by entities who are affiliated with
National Association of Securities Dealers, Inc. members who are participating
in this offering, this offering is being conducted in compliance with the NASD
Conduct Rule 2710(c)(8). Pursuant to that rule, the appointment of a qualified
independent underwriter is not necessary in connection with this offering, as
the offering is of a class of securities rated Baa or better by Moody's rating
service or BBB or better by S&P's rating service.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters may be required to make because of any
of those liabilities.
LEGAL MATTERS
Certain legal matters in connection with the offering will be passed
upon for us by Borden Ladner Gervais LLP, Calgary, Alberta, Canada (concerning
matters of Canadian law), and by Paul, Weiss, Rifkind, Wharton & Garrison, New
York, New York (concerning matters of U.S. law). Certain legal matters in
connection with the offering will be passed upon for the underwriters by Blake,
Cassels & Graydon LLP, Calgary, Alberta, Canada (concerning matters of Canadian
law), and by Shearman & Sterling, Toronto, Ontario, Canada and New York, New
York (concerning matters of U.S. law).
The partners and associates of Borden Ladner Gervais LLP and Paul,
Weiss, Rifkind, Wharton & Garrison as a group beneficially own, directly or
indirectly, less than 1% of our securities of any class.
================================================================================
US$400,000,000
HUSKY ENERGY INC.
6.25% NOTES DUE 2012
[GRAPHIC]
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PROSPECTUS SUPPLEMENT
JUNE 7, 2002
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SALOMON SMITH BARNEY
-----
CIBC WORLD MARKETS
CREDIT SUISSE FIRST BOSTON
HSBC
TD SECURITIES
BMO NESBITT BURNS
RBC CAPITAL MARKETS
SCOTIA CAPITAL
TOKYO-MITSUBISHI INTERNATIONAL PLC
-----
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