(Reuters) - Cenovus Energy Inc (CVE.TO), Canada’s No. 2 independent oil producer, said on Wednesday its second-quarter profit more than tripled, helped by a surge in production at its oil sands projects in northern Alberta.
The company operates two oil sands projects, Foster Creek and Christina Lake, as joint ventures with ConocoPhillips (COP.N), and is developing a third project called Narrows Lake.
Christina Lake’s production jumped 77 percent from the second quarter of 2013 to average nearly 68,000 barrels per day (bpd) as Cenovus ramped up phase E of the project and completed a partial turnaround with minimal impact.
Foster Creek output rose 3 percent from a year earlier to average almost 57,000 bpd.
FirstEnergy Capital analyst Mike Dunn said Foster Creek was the more significant increase because the project has fallen short of expectations in the past.
“This is probably the first quarter in a couple of years that Foster Creek has outperformed. It may be a bit of an inflection point in terms of no longer disappointing the street,” Dunn said.
Cenovus’s total oil sands output rose by a third to average almost 125,000 bpd, while oil production overall rose 18 percent to 201,688 bpd. Natural gas production fell 5 percent.
Cenovus also holds a half interest in two U.S. refineries owned by Phillips 66 (PSX.N). Operating cash flow from refining was $219 million in the quarter, a 32 percent year-on-year decline, due to lower refining margins and higher heavy crude oil feedstock costs.
Cenovus has started moving more crude by rail to avoid congestion on export pipelines that can leave crude stranded in Alberta, forcing producers to accept discounted prices.
The company loaded its first unit train at the Hardisty rail terminal operated by U.S. Development Group and Gibson Energy Inc (GEI.TO) during the second quarter, and completed eight unit trains deliveries in the first half of the year.
Chief Executive Officer Brian Ferguson said the company was on track to reach 30,000 bpd of loading capacity by the end of 2014 and that rail netbacks were competitive with pipeline netbacks, although he declined to give figures.
“By moving our delivery point to the U.S. Gulf Coast and Midwest we have been able to exceed the net price we would have achieved by just selling it here in Alberta,” he said.
The company’s net income rose to C$615 million ($566 million), or 81 Canadian cents a share, in the quarter ended June 30, from C$179 million, or 24 Canadian cents, a year earlier.
Operating profit rose 85 percent to C$473 million, or 62 Canadian cents. Cenovus’s cash flow, a key indicator of its ability to fund new projects, rose 37 percent to C$1.19 billion, or C$1.57 a share.
Cenovus shares were last up 1.6 percent on the Toronto Stock Exchange at C$33.50.
Additional reporting by Ashutosh Pandey in Bangalore; Editing by Savio D'Souza; and Peter Galloway