UPDATE 2-Refining margins shrink at oil producers Cenovus, Husky

Thu Oct 24, 2013 11:04am EDT
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* Cenovus third-quarter operating profit down 28 pct

* Husky third-quarter net profit down 3 pct

* Cenovus shares up 0.52 percent; Husky shares gain 0.2 pct

Oct 24 (Reuters) - The narrowing price difference between crude oil and the petroleum products extracted from it hit refining margins at Canadian oil producers Cenovus Energy Inc and Husky Energy Inc, which both reported earnings on Thursday.

Cenovus, Canada's No. 2 independent oil producer, said operating cash flow from refining slumped 75 percent to C$133 million ($128 million) in the third quarter, as higher heavy crude feedstock costs at its refineries weighed on results.

Margins fell as pipeline capacity increased in the southern United States, easing bottlenecks, and the price gap between the world's two most actively traded crude oil contracts leveled out in July.

The price gap between U.S. benchmark West Texas Intermediate (WTI) and European benchmark Brent crude collapsed in July for the first time since 2010 and stayed between $2 and $6 per barrel for the next couple of months.

The slump in refining cash flow pushed Cenovus' overall cash flow down 17 percent to C$932 million, or C$1.23 per share, from C$1.1 billion, or C$1,47 per share in the year-ago period.

Oil sand production rose in the quarter, driven by a 63 percent increase in volumes at the Christina Lake project in northern Alberta, which offset a 22 percent fall in quarterly production at Foster Creek, also in northern Alberta.   Continued...