Cenovus Quarterly Profit Meets Estimates; Cash Flow Rises

Cenovus Energy Inc., the Canadian crude producer planning to more than triple output in the next decade, reported third-quarter results that met analysts’ estimates as added production boosted cash flow.

Excluding a loss from hedging contracts and other one-time items, per-share profit was 57 Canadian cents, matching the average of 17 estimates compiled by Bloomberg. Net income fell 43 percent 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 today.

Cash flow rose 41 percent to C$1.12 billion from C$793 million in the third quarter of 2011, driven by gains at its oil-sands projects and its stake in two U.S. refineries. Bitumen production at Foster Creek and Christina Lake increased 44 percent to average 95,000 barrels a day. At the refineries, co-owned by Phillips 66, output climbed 8.7 percent.

“Stronger-than-expected refining margins and lower transportation costs” helped boost cash flow and operating earnings, Randy Ollenberger, an analyst at BMO Capital Markets in Calgary, said in a note to clients today.

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. Capital investment at its producing oil-sands properties rose 52 percent to C$346 million.

‘Integrated Strategy’

Operating cash flow from refining more than doubled to C$530 million, helped by higher volumes after an expansion and lower input costs, the company said. The refineries, which use Canadian crude, produced about 463,000 barrels a day of gross refined products in the quarter. Cenovus boosted its 2012 guidance for operating cash from refining by 38 percent.

“Our integrated strategy is paying off,” Chief Executive Officer Brian Ferguson said in the statement. By pairing production with refining, Cenovus is able to hedge itself against some of the risk of crude-price fluctuations.

Cenovus rose 1.2 percent to C$34.40 at the close in Toronto. The stock has 15 buy and nine hold ratings from analysts.

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