Cenovus Profit Falls on Canadian Crude Price Decline

Cenovus Energy Inc. (CVE), the fourth- largest Canadian oil producer, said first-quarter profit fell on lower crude prices, currency losses and provisions for hedging.

Net income dropped to C$171 million ($167 million), or 23 cents a share, from C$426 million, or 56 cents, a year earlier, the Calgary-based company said today in a statement on PR Newswire. Excluding one-time items, per-share profit beat the 46-cent average of 19 analysts’ estimates compiled by Bloomberg.

“Net earnings were negatively impacted by unrealized risk- management and foreign-exchange losses in the quarter,” Cenovus said. Operating profit was bolstered by the refining division, which reported a 97% jump in operating cash flow amid lower feedstock costs.

Cenovus co-owns a refinery in Borger, Texas, and one in Roxana, Illinois, with Phillips 66. (PSX) The facilities together can process the equivalent of more than 400,000 barrels of oil a day, according to Cenovus’s website.

Per-barrel refinery margins, known as crack spreads, in the U.S. Midwest were higher in the first quarter than Cenovus had predicted late last year, Phil Skolnick, a New York-based analyst at Canaccord Genuity Corp., said in an April 22 note.

The price of Canadian heavy crude fell 12 percent from a year earlier to average $66.99 a barrel in the quarter, according to data compiled by Bloomberg. The difference between Western Canada Select and U.S. benchmark oil prices increased as output from oil-sands projects in Alberta rose without sufficient transportation to bring the crude to markets.

Output Gains

Cenovus’s average oil production rose to 180,225 barrels a day in the quarter from 156,850 barrels a year earlier, it said. Operating earnings climbed to 52 cents a share from 45 cents.

The company’s stock declined 0.6 percent to C$28.75 yesterday in Toronto. The shares, which have dropped 14 percent this year, have 19 buy and six hold ratings from analysts.

Suncor Energy Inc., Imperial Oil Ltd. and Husky Energy Inc. are the three largest Canadian oil producers by sales, according to data compiled by Bloomberg.

To contact the reporters on this story: Rebecca Penty in Calgary at rpenty@bloomberg.net; 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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