* Higher prices likely to lift profits
* Natural gas remains weak
* Crude, refining strong (In U.S. dollars unless noted.)
By Scott Haggett
CALGARY, Alberta, April 19 (Reuters) - Canadian oil producers are expected to post higher first-quarter profits due to rising prices and refiners should get a lift from strong gasoline demand, but weak returns from natural gas production will temper the gains.
Turmoil in the Middle East and North Africa and strong demand from resurgent economies pushed the benchmark price of oil on the New York Mercantile Exchange 20 percent above the year-earlier to average $94.60 a barrel in the quarter. International prices, measured by the Brent benchmark, were stronger yet, rising 37 percent to an average $105.52 per barrel.
The oil production side of the industry, which is the biggest supplier of crude to the United States, will have performed well in the quarter. And integrated companies, including Suncor Energy Inc (SU.TO), Imperial Oil Ltd (IMO.TO), Husky Energy Inc (HSE.TO) and Cenovus Energy Inc (CVE.TO), which have refining exposure, may have done best of all.
"Refining will be strong again this quarter," said George Toriola, an analyst at UBS Canada. "So oil is good, refining is good but the green light is not there yet for gas."
Burgeoning supplies from shale gas discoveries in Canada and the United States have continued to outstrip North American demand for natural gas, pushing prices lower. Benchmark prices for the fuel on the New York Mercantile Exchange fell 16 percent to $4.20 per million British thermal units during the quarter, while the price at the AECO hub in southeastern Alberta sagged 23 percent to C$3.58 a gigajoule.
Dropping prices may cut into profits at Encana Corp (ECA.TO). Canada's largest natural gas producer will be the first of the senior gas companies to disclose its first-quarter results, reporting on Tuesday morning.
The company is expected to report an operating profit of 15 cents a share, down from 50 cents in the first quarter of 2010, according to analyst estimates compiled by Thomson Reuters I/B/E/S.
With little good news on profits expected, analysts will likely be looking for an update from Encana on the $5.4 billion joint-venture agreement it signed with PetroChina (601857.SS) earlier this year to explore for gas on Encana's lands in northeastern British Columbia. The deal, however, still awaits government approval.
Encana, which concentrates on natural gas production, may also update investors on whether it will focus on discoveries that also offer more valuable oil and natural gas liquids as well as gas.
"A lot of investors are interested in whether they announce anything on liquids-rich plays, but I'm not expecting anything material," said Phil Skolnick, an analyst at Canaccord Genuity. "It's still early days for them."
Some companies will see gains checked by operating woes. Canadian Natural Resources Ltd (CNQ.TO), for instance, had a fire in January at its Horizon oil sands project, and Nexen Inc NXY.TO has struggled to bring its Long Lake oil sands plant up to full production.
However both Nexen and Canadian Natural produce oil from the North Sea and will benefit from high Brent prices, along with Suncor and Talisman Energy Inc TLM.TO.
COMPANY RELEASE DATE EXPECTED EPS*
Encana Corp Apr 20 $0.15
Cenovus Energy Apr 27 C$0.34
Nexen Inc Apr 27 C$0.53
Husky Energy Inc Apr 27 C$0.50
Imperial Oil Ltd Apr 28 C$0.92
Suncor Energy May 3 C$0.76
Talisman Energy May 4 n.a.
Canadian Natural Resources May 5 C$0.33 *Estimates compiled by Thomson Reuters I/B/E/S ($1=$0.96 Canadian) (Editing by Peter Galloway)