Cenovus Energy Inc. (CVE), the Canadian crude producer planning to more than triple output in the next decade, said quarterly profit slumped 43 percent on a risk- management loss as it spent more to expand oil-sands operations.
Net income fell to C$289 million ($292 million), or 38 cents a share, from C$510 million, or 67 cents, a year earlier, the Calgary-based company said in a statement distributed by Business Wire today. Excluding one-time items, per-share profit was 57 cents, matching the average of 17 analysts’ estimates compiled by Bloomberg.
Earnings fell due to an unrealized after-tax risk- management loss of C$218 million, compared with a gain of C$283 million a year earlier. Capital investment at its producing oil sands properties rose 52 percent to C$346 million.
Cenovus is expanding bitumen extraction at its Foster Creek and Christina Lake operations, while drilling test wells at the Telephone Lake and Grand Rapids sites. Cenovus said in an October investor presentation it’s planning to reach production of about 500,000 barrels a day by 2021, more than three times current output. Total oil production rose 28 percent to 171,350 barrels a day in the latest quarter.
Cenovus owns stakes in two refineries with Phillips 66 in the U.S. and benefits from expanding profit margins for refined products such as diesel and jet fuel. The company recently revamped its Wood River refinery in Illinois to be able to process more heavy oil.
By pairing production with refining, Cenovus is able to hedge itself against some of the risk of crude-price fluctuations, Chief Executive Officer Brian Ferguson has said.
Oil futures averaged $92.20 a barrel in the quarter, up 3 percent from a year earlier in trading on the New York Mercantile Exchange.
Cenovus gained 0.5 percent to C$34 yesterday in Toronto. The stock has 15 buy and nine hold ratings from analysts.
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