* Asset sale delayed as buyers lack financing
* Q1 output up 15 pct, operating profit C$0.52 vs est.
* Cheaper Canadian crude helps margins at U.S. refineries
* Sees Q2 operating cash flow of C$250 mln-C$350 mln from
* Shares rise 1.6 pct
By Scott Haggett and Krithika Krishnamurthy
CALGARY, Alberta, April 24 Cenovus Energy
, Canada's No. 2 independent oil producer, said on
Wednesday that the sale of some of its Saskatchewan oil
properties put on the block earlier this year has been delayed
by a "down draft" in the country's capital markets.
Cenovus, whose first-quarter operating profit topped
expectation with a 15 percent rise, said the smaller companies
that are the likely buyers for its Saskatchewan Bakken and Lower
Shaunavon assets are finding it difficult to find money to
finance the purchase.
"We've certainly seen a very significant down draft in the
Canadian energy market in the last three or four week period,"
Brian Ferguson, Cenovus' chief executive said on a conference
call. "Companies (that are interested in the fields) are telling
us that right now they're having a challenge accessing capital
markets here in Canada because they are smaller Canadian
Benchmark oil prices have fallen more than 8 percent since
the start of the month, closing at $89.18 per barrel on Tuesday,
while Canadian prices have weakened further. Western Canada
Select heavy crude last traded at a $17.75 per barrel discount
to the U.S. benchmark, compared with a $14.90 per barrel
discount at the beginning of April.
With the weak pricing, the Toronto Stock Exchange's energy
index has dropped nearly 7 percent since April 1,
compared with 4.8 percent fall in the exchange's benchmark
"There's not a lot of money that's being raised or going
into (energy) equities right now," said John Stephenson, a
portfolio manager at First Asset Investment Management, which
holds Cenovus shares. "I think it's generally an apathy with the
resource sector ... Things seem to be grinding slower and
Cenovus said it expects to eventually sell the properties,
which produce up to 7,000 barrels per day of light crude oil.
However, it is no longer counting on completing the sale this
Cenovus said margins improved in the first quarter as the
discount on the Canadian heavy crude processed by its refineries
in Illinois and Texas increased 49 percent from a year earlier.
Cenovus said its oil production rose 15 percent in the
quarter to 180,225 bpd. The company operates the Foster Creek
and Christina Lake oil sands developments in northern Alberta in
a joint venture with ConocoPhillips.
Its average realized oil price fell to $56.72 per barrel
from $72.61 in the same period of last year.
But operating cash flow from refining almost doubled to
C$524 million ($510.10 million), the company said. Cenovus
shares ownership with Phillips 66 of refineries in Wood
River, Illinois, and Borger, Texas.
Overall cash flow, a glimpse into its ability to fund its
projects, rose 7 percent to C$971 million.
Cenovus reported first-quarter operating income, which
excludes most one-time items, of C$391 million ($381 million),
or 52 Canadian cents per share. This was ahead of the 48
Canadian cents that analysts had estimated, according to Thomson
A year earlier, operating income was C$340 million, or 45
Canadian cents per share.
Net profit fell 60 percent to C$171 million, or 23 Canadian
cents per share, due mainly to foreign exchange losses.
Cenovus forecast operating cash flow of C$250 million to
C$350 million from its refining business in the second quarter,
compared with C$344 million a year earlier.
Shares of the company were up 45 Canadian cents to C$29.20
by midafternoon on the Toronto Stock Exchange.