CALGARY, Alberta (Reuters) - Canadian oil sands producer Cenovus Energy Inc (CVE.TO), which on Wednesday reported a higher-than-expected first-quarter profit, said it has acquired mothballed processing facilities from a Total-owned oil sands site, and will use the equipment at its planned Grand Rapids project.
Cenovus, which currently has two oil sands projects, said the newly acquired facilities will be moved to the Grand Rapids site from Total’s (TOTF.PA) Josyln oil sands development and will be used to process the first 10,000 barrel per day phase of what will eventually be a 180,000 bpd development.
“They have been well maintained,” John Brannon, chief operating officer for Cenovus, said on a conference call.
“The exact price of the transaction is confidential, so we have not disclosed that. But we think it is a huge opportunity for us to start this project at Grand Rapids with those facilities. It will help us keep our initial costs down and we think we can deliver a very good project.”
The acquisition of the central processing facility, which produces steam and processes oil and water, means the first phase will be smaller than Cenovus’ initial plan for a 30,000 bpd development. The company said it will tweak future expansions to come up to the project’s final capacity.
Total ended thermal oil sands production at its Joslyn site after an over-pressurized well blew up, creating a crater at the northern Alberta site. A mining project is still planned at Joslyn by Total, part of a joint venture between the company and Suncor Energy Inc (SU.TO).
Cenovus said it expects the first phase of Grand Rapids, a thermal development where steam and solvents will be pumped into the ground to liquefy tarry bitumen deposits, to begin producing oil in 2017.
The company’s profit jumped to C$247 million ($225.25 million), or 33 Canadian cents per share, in the quarter ended March 31, from C$171 million, or 23 Canadian cents per share, a year earlier.
Operating profit, which excludes most one-time items, fell to C$378 million, or 50 Canadian cents per share, from C$391 million, or 52 Canadian cents per share, a year earlier.
This beat the average analyst estimate of 48 Canadian cents per share, according to Thomson Reuters I/B/E/S.
The increase was helped by a 48 percent jump in production at its Christina Lake oil sands project in northern Alberta.
The Calgary-based energy company, which owns Christina Lake with ConocoPhillips (COP.N) and operates it, said production at the project rose to an average of 65,738 net barrels per day.
Cenovus also co-owns Foster Creek with Conoco, where production dropped 2 percent.
The company said its cash flow, a key indicator of its ability to fund new projects, fell 4 percent to about C$1.2 billion, hurt by “significantly lower” refining margins.
It holds 50 percent stakes in two U.S. refineries owned by Phillips 66 (PSX.N) and Cenovus’ refining margins have taken a hit in the past few quarters, hurt by the narrowing price difference between crude oil and the petroleum products extracted from it.
Total oil sands production rose 20 percent to an average of 120,444 bpd.
Cenovus were down 51 Canadian cents to C$32.53 by midafternoon Toronto Stock Exchange. The shares have risen 10 percent over the past 12 months.
Reporting by Sayantani Ghosh in Bangalore and Scott Haggett in Calgary; Editing by Don Sebastian and Gunna Dickson