Canadian oil producers to see higher profits

Sun Jan 30, 2011 10:30am EST
 
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By Scott Haggett

CALGARY, Alberta (Reuters) - Higher oil prices and improved refining profits are likely to strengthen fourth-quarter earnings at Canada's biggest oil companies, though weak returns from natural gas and pipeline woes may dampen gains.

The fourth quarter was marked by renewed investor confidence in Canada's oil and gas sector as an improving global economy buoyed oil prices and raised demand.

Though problems with Enbridge Inc's pipeline system dampened Canadian heavy oil prices, the benchmark price of the commodity surged in fourth quarter.

It averaged $85.24 a barrel on the New York Mercantile Exchange. This was up 12 percent from the fourth quarter of 2009, boosting the profit picture for the country's oil companies, most of which report in the coming weeks.

"The oil price is quite healthy so it's going to be a reasonably (good) quarter," said Michael Dunn, an analyst at FirstEnergy Capital.

The impact of higher oil prices could be seen in the fourth-quarter results of Canadian Oil Sands Ltd, the biggest shareholder in the Syncrude Canada Ltd oil sands project.

The company said on Thursday that its profit more than tripled to C$311 million ($311 million), or 64 Canadian cents a share, well above the 35 Canadian cent a share profit expected by the market. The higher oil price and lower royalty payments lifted results.

Along with higher oil, refining profits improved for the first time in more than a year, adding to the bottom lines of the integrated production and refining companies such as Suncor Energy Ltd, Imperial Oil Ltd and Husky Energy Inc.   Continued...