By Judy McKinnon 

Husky Energy Inc.'s second-quarter profit plunged 81% and cash flow fell 22% as slumping crude oil and natural-gas prices continued to weigh on results.

The Calgary, Alberta-based energy company said a corporate tax increase in its home province and a weaker Canadian dollar also hurt profits.

Husky said earnings fell to 120 million Canadian dollars ($92 million), or 10 Canadian cents a share, from C$628 million, or 63 Canadian cents a year earlier. Results in the latest period included a C$157 million charge related to an increase in Alberta's corporate tax rate to 12% from 10%.

Cash flow fell to C$1.18 billion from C$1.50 billion.

Husky's results are reflective of a sector hit hard by a steep decline in crude oil prices over the past year and a prolonged period of low natural gas prices. Last week, Canadian oil and gas producer Encana Corp. r eported a steep quarterly loss, and earlier Tuesday U.K. oil giant BP PLC swung to a massive second-quarter loss. Both were hit by charges, but were also hurt by lower oil prices.

Husky said its daily production edged up nearly 1% to 337,000 barrels of oil equivalent a day, which it said reflects steady results from its suite of heavy oil thermal projects and a strong performance at its Liwan gas project offshore China.

Still, it said its average realized price for crude oil, natural-gas liquids and bitumen in the quarter fell 37%, and its average natural-gas prices was down 5% from a year earlier.

The company said it is on track to meet its target of C$400 million to C$600 million in cost savings this year, with about C$575 million accounted for to date.

"This, combined with the transition to low sustaining capital projects and business efficiency initiatives, is expected to lead to greater resiliency," the company said.

Husky is targeting about 85,000 barrels a day of new production by the end of 2016, with more than 40% expected to come from low-sustaining capital projects. It reiterated Tuesday that the Sunrise oil-sands project in northern Alberta, a key part of its plan to add new production, is expected to reach full capacity around the end of 2016. Husky is partners in the project with BP PLC.

Write to Judy McKinnon at judy.mckinnon@wsj.com

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