* Imperial Oil Q1 EPS C$1.19 vs C$0.91
* Wide margins generate record downstream profit
* Husky EPS C$0.70 vs C$0.60
* Shares in both companies rise
By Jeffrey Jones
CALGARY, Alberta, April 26 (Reuters) - Imperial Oil Ltd's refining profit hit a record high in the first quarter as the company took advantage of a ballooning gap between weak Canadian crude oil prices and prices for the gasoline and other fuels it produces.
Husky Energy Inc also reaped rewards from the drop in prices for Canadian crude barrels compared with the price for international oil, the result of burgeoning supplies in the U.S. Midwest and Midcontinent region, the major market for Canadian crude.
Pure producers of Canadian oil, especially heavier grades such as Western Canada Select, struggled as the price slumped at times to around 60 percent of Brent, the international benchmark. It has since recovered to more normal spreads.
Producers with refining and retailing operations, called downstream assets, fared much better, however.
"If you've got downstream joint-venture operations, or you're an integrated company with downstream operations, what you're not making at the wellhead you're going to make back to some degree on the cheaper input cost at your refinery," said Martin King, analyst at FirstEnergy Capital Corp.
"Presumably you'll capture some of the upside on the refined products side as well."
During the quarter, Brent crude climbed above $120 a barrel, but Canadian oil is priced against U.S. Benchmark West Texas Intermediate, which mostly hovered just above $100, due partly to a glut of supplies in the Midwest as well as the massive Cushing storage hub in Oklahoma.
In March, Western Canada Select sold for around $35 a barrel under the WTI at times, which meant bargains for refineries, such as Imperial's that do not have to rely on the more expensive imported barrels.
"Our integration provided strong shareholder value as our downstream segment posted record quarterly earnings, mostly on the performance of three of our four refineries that can capture the value from processing discounted Western Canadian crudes," Imperial Chief Executive Bruce March said in a statement.
In the first quarter, Imperial, the Canadian affiliate of Exxon Mobil Corp, earned C$1.02 billion ($1.04 billion), or C$1.19 per share, up 30 percent from a year-earlier C$781 million, or 91 Canadian cents a share.
Profit from the downstream segment rose by C$179 million to C$455 million.
Imperial produces oil from the Cold Lake oil sands project as well as from its 25 percent share of the Syncrude Canada Ltd oil sands mining development.
The company's C$10.9 billion, 110,000 barrel per day Kearl oil sands project is slated to open by year-end.
Imperial's gross production fell 7 percent to 289,000 barrels of oil equivalent a day due to divestment of natural gas assets.
For Husky, refineries that process Canadian heavy crude, such as its 50-percent-owned Toledo, Ohio, plant, did well due to the spread. Its Lima, Ohio, refinery, which runs mostly light oil, was hit by tighter margins, the company said.
Husky's 82,000 barrel a day Lloydminster upgrading plant in Western Canada, which turns heavy crude into refinery-ready light synthetic oil, also has its highest returns when the spread between the two grades is widest, Chief Executive Asim Ghosh said.
He told reporters after Husky's annual meeting that he expects volatility in North American crude markets to last for another few years, meaning more give and take between production and refining.
"We are substantially mitigated, and that's what we're prepared to say," Ghosh said. "The actual results vary literally month by month."
Husky's first-quarter profit was C$591 million, or 60 Canadian cents a share, down 6 percent from C$626 million, or 70 Canadian cents a share, in the year-before quarter.
Husky, controlled by Hong Kong billionaire Li Ka-shing, chairman of Hutchison Whampoa Ltd and Cheng Kong (Holdings) Ltd, also produces oil and gas in Canada and Southeast Asia.
Total production before royalties averaged 320,000 barrels of oil equivalent per day, compared with 310,000 a year earlier.
Husky shares rose 47 Canadian cents, or 2 percent, to C$24.77 on the Toronto Stock Exchange on Thursday. Imperial rose 8 Canadian cents to C$45.34.