October 27, 2011 / 5:00 PM / in 6 years

Oil sands, prices bolster Canadian energy results

CALGARY, Alberta (Reuters) - Strong prices for oil sands-derived crude bolstered quarterly earnings at Imperial Oil Ltd (IMO.TO), Cenovus Energy Inc (CVE.TO) and other Canadian energy producers, although snags elsewhere in their operations marred some of the results.

Imperial and Cenovus rose on Thursday after they reported third-quarter profits, with at least some of the stocks’ gains attributed to a sharp jump in oil prices following an EU deal on Greek debt with private lenders.

Canadian Oil Sands Ltd COS.TO, reported its quarterly results after market, but its shares also rose as oil prices jumped 4 percent to $93.96 a barrel, the highest closing price since early August.

Nonetheless, prices for synthetic crude processed from the Alberta tar sands were up by a quarter versus a year earlier, due partly to shutdowns earlier in the year at several facilities. Prices for raw bitumen, which is also sold to refineries, were also higher, though not by as much.

“Still, in the overall scheme of things, bitumen producers were relatively happy with price realizations relative to the past. It is still quite healthy,” FirstEnergy Capital Corp analyst Michael Dunn said. “Plus we’ve seen a recovery here, so third-quarter prices were good and current prices are good.”

Canada’s oil sands, the world’s third-largest crude source, are the subject of intense environmental debate in the United States as Washington decides whether to allow the massive Keystone XL pipeline to Texas from Alberta to proceed.

The resource is Canada’s most lucrative export, and already makes up a major part of U.S. oil supply as it competes with domestic oil and crude from the Middle East and elsewhere.

In the quarter, synthetic crude sold for a premium to U.S. benchmark West Texas Intermediate, while heavy oil was discounted, albeit by a smaller margin than last year.

For its results, Imperial -- Canada’s affiliate of Exxon Mobil Corp (XOM.N) -- sold synthetic crude for an average C$97.89 a barrel in the quarter, up 25 percent. Bitumen fetched C$58.23, up 2 percent.

The company earned C$859 million ($847 million), or C$1.01 a share, more than double its year-earlier profit of C$418 million, or 49 Canadian cents a share.

Imperial said production at its Cold Lake, Alberta, bitumen project climbed 2,000 barrels a day to a record average 162,000 bpd. At Syncrude Canada Ltd, in which Imperial owns 25 percent, net synthetic oil output averaged 75,000 bpd, up 14 percent.

Conventional crude production was held back by the shutdown of an Enbridge (ENB.TO) pipeline that moves the supply from Imperial’s Norman Wells fields in the Northwest Territories.

Wide margins between crude and gasoline prices helped to quadruple refining and marketing profit to C$272 million.

NEXEN PROFIT FALLS

Nexen’s profit fell 66 percent to C$200 million, or 38 Canadian cents a share, from C$581 million, or 95 Canadian cents a share.

Production lagged expectations, as output was slow to ramp up at the company’s Buzzard oil field in the North Sea following the installation of a platform, although it has climbed back closer to the 220,000 bpd capacity this month, executives said.

Nexen cut its annual production target to 200,000-215,000 bpd from 210,000-230,000. Also factored into that is the possibility that its contract in Yemen will expire in December, if a new deal is not reached. Unrest in the country has raised the chances that the operations will cease.

“Our discussions there were going quite well up until about the spring time. We had essentially a strong framework with mutual understanding in place,” Chief Executive Marvin Romanow told analysts. “But with the changes and the challenges that have occurred in the country, it’s a little bit less clear. But our contract is clear. It terminates on December 17 without a renewal.”

At Nexen’s Long Lake oil sands project, production gains remain much slower than first planned, averaging 29,500 bpd in the quarter. That is up 6 percent but still less than half the design capacity.

CENOVUS PROFIT JUMPS

Cenovus, which is known for its Foster Creek and Christina Lake, Alberta, oil sands developments and U.S. refining joint venture with ConocoPhillips (COP.N), earned C$510 million, or 67 Canadian cents a share, up 73 percent from C$295 million, or 39 Canadian cents a share.

The company attributed the gain to 14 percent higher output at the two projects. Overall production averaged 133,496 bpd, up 4 percent.

“We experienced substantial oil sands growth and a rebound of conventional oil production following a particularly wet spring,” CEO Brian Ferguson, said. “We also continued to experience robust market conditions for our refining operations.”

Ferguson said Cenovus is now meeting with potential partners for oil sands holdings that are not jointly owned by ConocoPhillips, including the proposed Telephone Lake project.

However, he did not say when he expects a deal.

CANADIAN OIL SANDS

Third-quarter profit at Canadian Oil Sands, the biggest partner in the Syncrude Canada Ltd joint venture, rose 25 percent on higher oil prices and increased production, the company said on Thursday.

The company, which as a 37 percent stake in Syncrude, one of Canada’s largest oil sands producers, earned C$242 million ($244 million), or 50 Canadian cents per share, up from its year-earlier C$193 million, or 40 Canadian cents.

Canadian Oil Sands said its results were helped by a 26 percent rise, to C$97.89 per barrel, in the price of the light synthetic crude produced at the Syncrude site in northern Alberta.

During the quarter, production rose 13 percent to 109,260 barrels a day net to the company.

Canadian Oil Sands shares closed up 87 Canadian cents at C$24.28 on the Toronto Stock Exchange on Wednesday,

Cenovus shares rose 2 Canadian cents at C$36.23 on the Toronto Stock Exchange. Imperial climbed 93 Canadian cents to C$42.86 and Nexen fell 12 Canadian cents to C$16.677.

($1=$0.99 Canadian)

Additional reporting by Scott Haggett. Editing by Rob Wilson

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