February 15, 2012 / 7:48 PM / 6 years ago

Cenovus profit soars as partner search extended

(Reuters) - Cenovus Energy Inc (CVE.TO), Canada’s No. 2 independent oil producer, said on Wednesday its quarterly profit tripled on production gains as it again extended its hunt for a joint-venture partner for a planned Alberta oil sands development.

The company, known for its oil sands production and U.S. refining joint ventures with ConocoPhillips (COP.N), is looking for a partner for its proposed 90,000 barrel per day Telephone Lake project.

The process, originally scheduled to be wrapped up by the end of 2011, has been extended again as Cenovus assesses some new international interest. But the company is shying away from being tied down on when a decision will be made.

“I don’t have an artificial deadline that I feel any kind of pressure (to meet)” Brian Ferguson, the company’s chief executive, said in an interview. “I’m prepared to take as long as it takes to get the ... transaction that, I believe, adds strategic value for us.”

Ferguson said Cenovus has yet to decide what sort of partnership it wants, or if it even wants a partner as its assesses the offers on the table.

“I’m being very open-minded about this,” he said. “It could be a joint venture where Cenovus is the operator with a partner, it could be a swap, it could be an outright divestiture and it could be a farm-out. We are looking at a variety of commercial arrangements.”

Oil sands and shale gas developers in Canada, including Encana Corp (ECA.TO), Talisman Energy Inc TLM.TO and Statoil STL.OL, have already lined up partners willing to contribute the cash needed to develop their vast reserves in northern Alberta and British Columbia.

International companies, particularly Asian concerns looking for a slice of Canada’s oil sands and shale gas resources, have been surging into the country in recent months.

Cenovus said its fourth-quarter oil and natural-gas liquids production rose about 11 percent from the year-before quarter to average 144,273 barrels per day. Just about half that output came from its Foster Creek and Christina Lake thermal oil sands projects in northern Alberta.

The company is expanding both projects, co-owned with ConocoPhillips, with Foster Creek’s output expected to reach up to 310,000 bpd by the end of the decade, while Christina Lake output will climb to 278,000 bpd by 2019.

The company is also planning the 180,000 bpd Grand Rapids project, expected to be complete in 2017, and the 130,000 bpd Narrows Lake project, where production is expected to begin in 2016.

Cenovus estimates its holdings in the tar sands of northern Alberta could contain as much as 8.2 billion barrels of bitumen. However, the company said its proved oil sands reserves were 1.5 billion barrels at yearend, up 26 percent from a year earlier.


The company’s fourth-quarter profit rose to C$266 million ($265.80 million), or 35 Canadian cents a share, from C$78 million, or 10 Canadian cents, a year earlier due to higher production, stronger oil prices and higher margins for its refining operations.

Cenovus “pumped out very strong results in the downstream despite crack spreads beginning to collapse near the tail end of the year,” Andrew Potter, an analyst at CIBC World Markets, wrote in a note to clients.

Excluding unusual items, the company earned 44 Canadian cents a share, less than the average analyst forecast for the measure of 54 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Cash flow, a glimpse into the company’s ability to fund operations, rose about 32 percent to C$851 million, or C$1.12 a share, from C$645 million, or 85 Canadian cents a share

The company stuck with its 2012 capital spending forecast of $3.1 billion to $3.4 billion, but said it may consider reducing investment in natural gas projects if prices for the fuel do not recover.

Cenovus also said it will increase its first-quarter dividend by 10 percent.

Cenovus shares, which have gained about 15 percent in value in the last three months, were down 18 Canadian cents at C$38.42 at midafternoon on the Toronto Stock Exchange.

($1=$1.00 Canadian)

Additional reporting by Shounak Dasgupta in Bangalore; Editing by Peter Galloway

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