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Cenovus Swings to Fourth-Quarter Loss on Gas Asset Impairment

Cenovus Energy Inc., the Canadian oil producer planning to triple production within a decade, swung to a loss in the fourth quarter after taking a charge on its Suffield assets in southeast Alberta.

The net loss of C$118 million ($118 million), or 16 cents a share, compared with profit of C$266 million, or 35 cents, a year earlier, the Calgary-based company said in a statement today. Cenovus recorded a C$393 million impairment related to its Suffield assets, mainly due to estimated declines in future natural gas prices.

Cenovus has been able to offset declining prices for its Alberta bitumen by taking advantage of the discount at its refineries. The price of Canadian heavy crude, produced at oil- sands operations such as Cenovus’s Christina Lake site, fell 25 percent to an average of $61.32 a barrel in the fourth quarter from a year earlier, according to data compiled by Bloomberg.

Integrated oil companies like Cenovus “should be somewhat insulated from these issues as their downstream segments largely capture the crude price differentials,” Randy Ollenberger, an analyst at BMO Capital Markets in Calgary, said in a Jan. 24 note to clients. He has the equivalent of a buy rating on the stock.

Cenovus’s downstream segment includes a refinery in Borger, Texas, and another at Roxana, Illinois, it co-owns with Phillips 66. The facilities together can process the equivalent of almost 500,000 barrels of oil a day, according to its website.

Cenovus said in January it plans to boost shipments of oil by rail cars this year to 10,000 barrels a day to help offset a lack of pipeline capacity to carry crude to higher-priced markets such as the U.S. Gulf coast and Canada’s Pacific coast.

The company, which has 19 buy and six hold ratings from analysts, fell 0.7 percent to C$32.60 yesterday in Toronto.

Its board of directors approved a dividend increase of 10 percent for the first quarter of 2013.

To contact the reporter on this story: Jeremy van Loon in Calgary at jvanloon@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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