Cenovus profit triples as oil sands production jumps

Wed Jul 30, 2014 1:40pm EDT
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(Reuters) - Cenovus Energy Inc (CVE.TO: Quote), Canada's No. 2 independent oil producer, said on Wednesday its second-quarter profit more than tripled, helped by a surge in production at its oil sands projects in northern Alberta.

The company operates two oil sands projects, Foster Creek and Christina Lake, as joint ventures with ConocoPhillips (COP.N: Quote), and is developing a third project called Narrows Lake.

Christina Lake's production jumped 77 percent from the second quarter of 2013 to average nearly 68,000 barrels per day (bpd) as Cenovus ramped up phase E of the project and completed a partial turnaround with minimal impact.

Foster Creek output rose 3 percent from a year earlier to average almost 57,000 bpd.

FirstEnergy Capital analyst Mike Dunn said Foster Creek was the more significant increase because the project has fallen short of expectations in the past.

"This is probably the first quarter in a couple of years that Foster Creek has outperformed. It may be a bit of an inflection point in terms of no longer disappointing the street," Dunn said.

Cenovus's total oil sands output rose by a third to average almost 125,000 bpd, while oil production overall rose 18 percent to 201,688 bpd. Natural gas production fell 5 percent.

Cenovus also holds a half interest in two U.S. refineries owned by Phillips 66 (PSX.N: Quote). Operating cash flow from refining was $219 million in the quarter, a 32 percent year-on-year decline, due to lower refining margins and higher heavy crude oil feedstock costs.

Cenovus has started moving more crude by rail to avoid congestion on export pipelines that can leave crude stranded in Alberta, forcing producers to accept discounted prices.   Continued...