April 24 (Bloomberg) -- Cenovus Energy Inc., the fourth-largest Canadian oil producer, reported first-quarter results that exceeded analysts’ estimates because of higher-than-expected refining returns.
Profit excluding provisions for hedging and currency losses and other one-time items beat the 46-cent average of 19 analysts’ estimates compiled by Bloomberg. The refining division reported operating cash flow almost doubled because of higher margins and lower oil-supply costs, Calgary-based Cenovus said today in a statement.
The company exceeded expectations because of its refining earnings as high margins offset lower-than-forecast volumes, Randy Ollenberger, a Calgary-based analyst at BMO Capital Markets, said in a note today, predicting similar refining results from the company’s peers.
Cenovus co-owns a refinery in Borger, Texas, and one in Roxana, Illinois, with Phillips 66. The facilities together can process more than 400,000 barrels of oil a day, according to Cenovus’s website. The two refineries have access to Western Canada Select and other “discounted oil feedstock,” the company said today.
Per-barrel refinery margins, known as crack spreads, in the U.S. Midwest were higher in the first quarter, rising to $27.93 a barrel, from $21.50 last year, Cenovus said.
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.
Through a combination of pipeline, barge and rail to reach coastal markets, Cenovus is receiving higher international prices for 40,000 barrels a day of its production, the company said.
Cenovus’s average oil production rose 15 percent to 180,225 barrels a day in the quarter from a year earlier.
Net income dropped 60 percent to C$171 million ($166 million), or 23 cents a share, from C$426 million, or 56 cents, a year earlier. Profit fell because of foreign-exchange and hedging losses and a higher depreciation, depletion and amortization expense. Sales declined 5.4 percent to C$4.32 billion from C$4.56 billion last year.
The company’s shares, which have 19 buy and six hold ratings from analysts, rose 2.1 percent to C$29.36 at the close in Toronto.
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.
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