Company News

WRAPUP 3-Canadian oil sands profits jump amid green battle

* Suncor EPS C$0.31 vs yr earlier C$0.06/shr loss

* Cenovus EPS C$0.23 vs C$0.21

* Imperial EPS C$0.60 vs C$0.64

* Cdn Oil Sands Trust C$0.49 vs C$0.10

* Michigan oil spill emboldens oil sands critics

* Suncor shares up 2 pct, Cenovus down 4.7 pct (Adds Canadian Oil Sands Trust results, comments)

By Jeffrey Jones and Scott Haggett

CALGARY, Alberta, July 29 (Reuters) - Four of Canada’s biggest oil sands companies posted higher profits on Thursday, on stronger oil prices, as controversy builds over the environmental costs of tapping North America’s biggest crude reserves.

Suncor Energy Inc SU.TO, the country's biggest oil producer and refiner, No. 2 competitor Imperial Oil Ltd IMO.TO and Cenovus Energy Inc CVE.TO, the third largest independent oil producer, raised their output in the second quarter and moved forward on major expansion plans.

Canadian Oil Sands Trust COS_u.TO, the largest owner in the Syncrude Canada Ltd joint venture, said its profit rose five-fold.

However operating problems with an upgrader at the Syncrude project, which hadn’t been previously disclosed, forced it to reduce its annual production target by 5 million barrels to 110 million barrels.

Despite the climbing profits, more questions are being raised about the impact of oil sands production after an Enbridge Inc ENB.TO pipeline break spilled 19,500 barrels of Canadian oil into a Michigan river this week and the U.S. Environmental Protection Agency balked at speedy approval of a C$7 billion ($6.7 billion) pipeline carrying oil sands crude to Gulf of Mexico refiners.


At Suncor, net income was C$480 million, or 31 Canadian cents per share, up from a year-earlier loss of C$51 million, or 6 Canadian cents.

Operating earnings, which exclude most one-time items, rose 20-fold to C$781 million, or 50 Canadian cents a share, from C$38 million, or 4 Canadian cents, exceeding the the average analyst forecast of 36 Canadian cents per share, excluding items, according to Thomson Reuters I/B/E/S.

Oil sands output averaged 295,000 barrels a day, excluding the company’s share of Syncrude production, down 2 percent.

Suncor Chief Executive Rick George said he was pleased with the performance despite major maintenance in the quarter.

He touted Suncor’s progress in honing its focus since taking over Petro-Canada in a C$22.7 billion deal nearly a year ago. Since then, Suncor has sold C$2.4 billion of assets and is on track to make deals for as much as C$1 billion more by the end of the year, he said.

Imperial, which is majority owned by U.S. oil major Exxon Mobil Corp XOM.N, earned C$517 million ($497 million), or 60 Canadian cents a share, up from year-earlier C$209 million, or 25 Canadian cents a share.

Analysts on averaged had expected earnings of 64 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Imperial, known for its dominant position in oil sands and heavy crude, and its national chain of Esso gas stations, said its results were helped by higher oil prices, increased production at its Cold Lake, Alberta, and Syncrude oil sands projects and stronger refining margins.

The company is currently developing its C$8 billion Kearl oil sands project.

Cenovus, which was spun off from Encana last year, earned a net C$172 million, or 23 Canadian cents a share, up 8 percent from C$160 million, or 21 Canadian cents.

Operating earnings fell to C$142 million, or 19 Canadian cents per share, from C$512 million, 68 Canadian cents per share, missing the average analyst forecast for a 39 Canadian cents per share operating profit.

Cenovus said its U.S. refining operations, part of a joint venture with ConocoPhillips COP.N, weighed on results.

Its shares fell C$1.43, or 5 percent, to C$28.54 on the Toronto Stock Exchange. Suncor rose 95 Canadian cents, or 3 percent, to C$33.99. Imperial slipped 14 Canadian cents to C$40.52.

Canadian Oil Sands Trust, which reported after markets closed, earned C$237 million, or 49 Canadian cents a unit, up more than five-fold from C$46 million, or 10 Canadian cents, in the second quarter of 2009.

It was expected to post a profit of 38 Canadian cents a unit, according the average analyst forecast compiled by Thomson Reuters I/B/E/S.

The trust, which has a 37 percent stake in Syncrude, said its share of production averaged 118,569 barrels per day in the quarter, up 55 percent on less major maintenance than in 2009.

Its units fell C$1.02, or 4 percent, to C$27.56 on the Toronto Stock Exchange.


Environmental opposition to the oil sands is growing as the industry tries to secure new markets in the southern United States and Asia.

In the past month, several U.S. lawmakers voiced opposition to TransCanada Corp's TRP.TO Keystone XL pipeline to the Gulf of Mexico, and the EPA said the proposal's environmental impact study was inadequate. The Michigan pipeline break has served to further embolden oil sands critics

Lanny Pendill, an analyst with Edward Jones, said he believed the Enbridge pipeline break was getting more attention than it normally would because of the BP Plc BP.L disaster in the Gulf of Mexico. Canada's oil sands may actually be deemed a safer option than deep water drilling, he said.

“But clearly they are under environmental scrutiny for other reasons -- disturbance to the land surface, the emissions and all that kind of stuff. I think that’s going to continue. It’s not going to let up,” Pendill said.

George said Suncor and the rest of the industry are working to counter environmentalists’ message that companies are ignoring their impact on air, land and water. Suncor is currently pioneering new technology to reduce the spread of toxic tailings ponds at its oil sands mine.

“All the work that we’ve done indicates that, certainly for Canadian citizens but increasingly for Americans as well, they see the oil sands as a very important part of the long-term strategy around energy security in North America,” he said.

He said Suncor and the rest of the industry also needs to keep improving performance and technology.

Cenovus is doing that by advancing the technology it uses to pump steam into the earth to allow the crude to flow to the surface in wells, Chief Executive Brian Ferguson told Reuters.

“I absolutely believe that Cenovus will both grow and continue to lessen our impact,” he said.