This paper reports on the results of a numerical simulation study of a SAGD well pair at Husky's Pikes Peak thermal project, in the Lloydminster area. The pressure difference between the injector and producer wells gradually increased over a period of a year followed by a sudden and significant decline in the fluid production rate. Initial numerical simulation identified the problem as being due to damage near the production well, because only this damage pattern matched observations of field production and pressure. A detailed history match of the field data was then conducted. By adjusting the value of skin factor, excellent matches on the production rate and injection and production pressure were obtained. It was shown that by the time the skin factor had increased by a factor of 8 as a result of damage, and the pressure difference was about 900 kPa, the production rate started to drop significantly. Thereafter, the skin factor increased rapidly, and reached 30 times its original value. An acid treatment was :performed on the production well. After the treatment, the skin factor returned to its original value, and the well pair returned to normal production. This case study is an example of how numerical simulation can be used as a tool to diagnose, identify and analyze SAGD operational problems.