April 24, 2013 / 10:19 AM / 5 years ago

Cenovus profit beats estimates as refinery margins improve

(Reuters) - Cenovus Energy (CVE.TO), 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.

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

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).

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) 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.

Net profit fell 60 percent to C$171 million, or 23 Canadian cents per share, due mainly to foreign exchange losses.

Cenovus forecast operating cash flow of C$250 million to C$350 million from its refining business in the second quarter, compared with C$344 million a year earlier.

Shares of the company, which has a market value of C$21.73 billion, closed at C$28.75 on the Toronto Stock Exchange on Tuesday.

($1 = 1.0260 Canadian dollars)

Reporting by Krithika Krishnamurthy in Bangalore; Editing by Sreejiraj Eluvangal

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