Canadian energy companies hit by weak prices

Wed Apr 25, 2012 3:52pm EDT
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By Jeffrey Jones and Scott Haggett

CALGARY, Alberta (Reuters) - Three large Canadian oil companies pumped out first-quarter earnings on Wednesday that mostly missed expectations, but investors were cheered by promises of higher output and steps to deal with depressed natural gas markets and prices for heavy oil that lag far behind those for international crude.

Encana Corp (ECA.TO: Quote), Canada's largest natural gas producer, benefited from its hedging program as gas prices slumped to 10-year lows, but still had to fend off questions about whether it was time to put the company up for sale.

Profit at Nexen Inc NXY.TO, which is working to iron out operational bugs after a disappointing 2011, was lower than expected. But production is meeting forecasts as major projects such as the Long Lake oil sands venture in Alberta and Buzzard oil field in the North Sea run more reliably.

Cenovus Energy Inc (CVE.TO: Quote), the oil sands producer and refiner, reported higher earnings due to a jump in output and rich refining margins.

"Those exposed to North American gas are going to face challenges this quarter, those that have refining operations should continue to do well within that segment, given where margins have been, and those that have more exposure to a Brent oil-price environment will get the higher netbacks, and we've certainly seen that in Nexen's results today," said Lanny Pendill, analyst with Edward Jones.

Shares in Encana, worth more than C$40 each in 2008, have tumbled to near C$18 on the Toronto Stock Exchange because of weak gas prices. To shore up its balance sheet, it has been selling stakes in some shale-gas fields to other companies, primarily from Asia.

Chief Executive Randy Eresman said Encana is looking for a buyer interested in taking a 10 percent stake in its Cutbank Ridge gas field in northeastern British Columbia.

However, asked on a conference call if an outright sale would be preferable to adding joint-venture partners, Eresman said Encana's shares were too low to consider such a move.   Continued...