(Adds analyst's comment, CEO quote, details on oil sands
By Nia Williams
July 30 Cenovus Energy Inc, 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
, 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. 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 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
Operating profit rose 85 percent to C$473 million, or 62
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
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)