Refining bonanza pumps up Canada energy results

Thu Nov 1, 2012 4:15pm EDT
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Canada's large integrated oil companies pocketed hefty returns at their refineries in the third quarter, lifting profit well beyond expectations and prompting investors to bid their shares sharply higher on Thursday.

Suncor Energy Inc (SU.TO: Quote), Imperial Oil Ltd (IMO.TO: Quote) and Husky Energy Inc (HSE.TO: Quote) all took advantage of a wide gulf between the discounted price of oil in the glutted North American interior and expensive imported barrels, a benefit that showed up in an important measure known as the refining margin.

That spread has been building for the past year as booming production in both Canada and the United States has flooded the market in the U.S. Midwest and Midcontinent regions.

Meanwhile, U.S. petroleum product inventories were low through the summer and into autumn following the closure of refineries on the East Coast in recent years, said Lanny Pendill, analyst at Edward Jones.

"Refiners with that advantage have really been making out like bandits and reaping record profits in refining, whereas the less advantaged ones haven't done that well and have actually closed plants or are looking to divest plants, and we've seen a lot of that occur in the last 12 to 18 months," Pendill said.

Discounted Canadian crude prices are squeezing returns in the oil-producing parts of the business. Suncor on Thursday delayed a multibillion-dollar oil sands processing plant in Alberta due to the surge in light crude output in regions like the North Dakota Bakken, permitting refineries to be fed with cheaper feedstock.

Following the round of Street-beating profit, shares of the Canadian refiners all jumped about 3 percent on the Toronto Stock Exchange. Suncor rose C$1.16 to C$34.68, Imperial gained C$1.34 to C$45.53, and Husky climbed 90 Canadian cents to C$27.95.

Pendill pointed out that the effects were not just showing up among the Canadian integrateds, but also in results of the global majors, including Exxon Mobil Corp (XOM.N: Quote), BP Plc (BP.L: Quote) and Royal Dutch Shell (RDSa.L: Quote).   Continued...