Cenovus profit beats estimates as refinery margins improve

Wed Apr 24, 2013 2:30pm EDT
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(Reuters) - Cenovus Energy (CVE.TO: Quote), Canada's No. 2 independent oil producer, posted a quarterly operating profit that beat analysts' estimates as the cost of raw materials for its two U.S. refineries declined.

Cenovus said margins improved in the first quarter as the discount on the Canadian heavy crude processed by its refineries in Illinois and Texas increased 49 percent from a year earlier.

During the quarter, Canadian heavy crude was trading at an average discount of $31.96 per barrel to the North American benchmark, West Texas Intermediate (WTI), the company said in a statement.

Cenovus said its oil production rose 15 percent in the quarter to 180,225 barrels a day. The company operates the Foster Creek and Christina Lake oil sands developments in northern Alberta in a joint venture with ConocoPhillips (COP.N: Quote).

Its average realized oil price fell to $56.72 per barrel from $72.61 in the same period of last year.

But operating cash flow from refining almost doubled to C$524 million, the company said. Cenovus shares ownership with Phillips 66 (PSX.N: Quote) of refineries in Wood River, Illinois, and Borger, Texas. Overall cash flow, a glimpse into its ability to fund its projects, rose 7 percent to C$971 million.

"When our cash flow from heavy oil production is affected by low commodity prices, our refineries give us a financial advantage by turning that discounted crude into higher-value refined products," Cenovus Chief Executive Brian Ferguson said.

Cenovus reported first-quarter operating income, which excludes most one-time items, of C$391 million ($381 million), or 52 Canadian cents per share. This was ahead of the 48 Canadian cents that analysts had estimated, according to Thomson Reuters I/B/E/S.

A year earlier, operating income was C$340 million, or 45 Canadian cents per share.   Continued...

A construction worker walks past the steam generating facility at the Cenovus Foster Creek SAGD oil sands operations near Cold Lake, Alberta, July 9, 2012. REUTERS/Todd Korol