Cenovus profits more than triple

Planned maintenance work cut into production from Cenovus Energy's Foster Creek plant in northeast Alberta in the second quarter. (Canadian Press/Cenovus )

Oilsands operator Cenovus Energy Inc. reported its second-quarter profits more than tripled Tuesday, thanks to robust oil prices and strength in its refining operations.
But wet weather and wildfires throughout Western Canada this spring took a toll on the Calgary-based company's production during the quarter.
"Through these adverse conditions, our teams demonstrated resilience. We have continued to deliver on our oil growth plans," chief executive Brian Ferguson told a conference call with analysts.
Before markets opened, Cenovus said its net profits soared to $655 million, or 85 cents per share in the three months ended June 30.
That compared with $183 million, or 24 cents a year earlier. That beat the average analyst estimate of 44 cents per share, according to a survey by Thomson Reuters.
Revenues in the quarter jumped to $4 billion from $3.1 billion a year earlier. Cash flow jumped to $939 million from $537 million.
Production at the company's Foster Creek and Christina Lake oilsands projects in northern Alberta was more than 58,000 barrels per day, net to the company. That was slightly less than the same period a year earlier due to planned maintenance work.
"Our manufacturing approach to developing these oilsands assets has been instrumental in bringing on expansions at industry-leading capital efficiencies while controlling quality, cost and safety," Ferguson said.
"We expect that this formula will allow us to advance our development plans through the next decade."
He added Cenovus is well on its way to meeting its goal of producing 400,000 barrels per day from the oilsands by the end of 2021.
Cenovus 3-month chart
Cenovus is a relatively new name in the oilpatch, having split off from natural gas producer Encana Corp. in late 2009.
Shares in the company dropped 2.4 per cent, or 90 cents, to $37.02 in mid-day trading on the Toronto Stock Exchange.
In response to out-of-control forest fires in northern Alberta in May, Cenovus was forced to cut production from its Pelican Lake oil pool in northern Alberta. Production was curtailed for about two weeks, including one week with no output at all.
That site itself was never in peril, but a pipeline that carries crude from the region was out of commission as the fires knocked out its power supply.
Pelican Lake production is now back to its normal level of between 20,000 and 22,000 barrels of oil per day.
Flooding in Saskatchewan has also caused problems for Cenovus and its peers. At its Weyburn oilfield, production declined by 1,750 barrels per day. In the Lower Shaunavon and Bakken regions of the province, production was down about 3,100 barrels per day.
The company expects production will recover during the third quarter.
"We fully expect to meet our overall production guidance and exit- rate volume expectations for each of our operating areas," chief operating officer John Brannan told the conference call.
In June, the Calgary-based company announced it aims to produce about 500,000 barrels of oil per day by the end of the decade. The steep increase from its current daily output of around 135,000 barrels will be largely driven by a six-fold jump in oilsands production by the end of 2021

Ford, Chrysler take 2Q hit to position for growth

DEARBORN, Mich. (AP) — Ford's ambitious plans to grow in Asia took a toll on its second-quarter profit, with higher costs to design and sell cars offsetting rising sales.
The company's net income fell 8 percent to $2.4 billion for the April-June period. Ford blamed higher prices for steel and other commodities, but also said that after years of restructuring, the company is strong enough to spend heavily on future growth. Ford spent $400 million more on engineering and advertising new vehicles than it did a year earlier.
"That's the new thing for Ford, that we are investing in the future," Ford Chief Financial Officer Lewis Booth said.
Rival Chrysler Group also took a hit, reporting a loss of $370 million in the quarter. Like Ford, Chrysler said the loss was a sign of a healthier balance sheet. Without a $551 million accounting charge for refinancing bailout debts to the U.S. and Canadian governments, Chrysler would have earned $181 million.
Ford's worldwide sales were up 7 percent. Revenue rose 13 percent to $35.5 billion. But the company warned last month that its profit could slip, citing investments in future products.
Investment in Asia is the next step in President and CEO Alan Mulally's plan to move beyond the company's near collapse in 2006, when it took out $23 billion in loans to restructure. Since then, it has cut costs and sunk billions into improving Ford cars, resulting in nine straight quarterly profits. Now, the company aims to expand its business in Asia, where it's dwarfed by General Motors Co.
Ford plans to roll out 15 cars in India and China over the next four years, and as a result, it's spending hundreds of millions more on product development than it did a year ago. In Asia, Ford reported a pretax profit of just $1 million, down $112 million from the same time last year. The company also took a hit because some of its hottest cars are smaller and less profitable than its older models, like the $8,000 Figo in India. It hopes to make up for that by selling more cars.
An investment now could mean a windfall for Ford later. GM sells three times more cars in China than Ford does in all of Asia, and GM booked a $600 million profit in its international operations — which includes Asia — in the first quarter. Ford currently controls less than 3 percent of the market in both India and China, but wants to increase its sales by 50 percent by mid-decade.
Ford also said it is spending more on production to meet post-recession demand in the U.S., where people are expected to buy nearly 2 million more cars this year than they did last year. Ford projects that annual U.S. sales will be in the lower end of its 13 million to 13.5 million forecast. The company lowered its forecast for European sales, which were weakened by the debt crisis in the latest quarter. Ford now expects sales no higher than 15.3 million vehicles, down from 15.5 million.
One reason sales softened in the U.S. was a lack of discounts. Both Ford and Chrysler were able to command higher prices for their cars and trucks last quarter, partly because of tight supplies of Japanese cars following an earthquake in that nation.
Chrysler's average selling price rose nearly 5 percent from a year earlier to $29,964 while Ford's rose 1 percent to $31,179, according to Edmunds.com automotive website. Both spent less on rebates and other deals.
While Chrysler was focused on paying off its government loans, Ford paid $2.6 billion of its own debt during the quarter. The company now has $14 billion in debt, a legacy of its 2006 restructuring. Ford hopes its steady reduction in debt will convince ratings agencies to return the company to investment-grade status, which would make it cheaper to borrow money.
Ford may not have to wait long. Standard and Poor's Ratings Service said the company's "financial performance is tracking levels consistent with a higher rating," although it said it is waiting to act until Ford completes contract talks with the United Auto Workers union. Ford and the UAW are expected to kick off negotiations on a new four-year contract this Friday.
GM is scheduled to release its second-quarter earnings Aug. 4.
Ford shares fell 30 cents, or 2 percent, to $12.89 in afternoon trading.

RIM TO CUT 2000 JOBS WORLDWIDE

Research In Motion will slash about 2,000 jobs from its operations worldwide in an effort to cut costs, but the impact on employees at its Bedford office will be "relatively small," the company said Monday.

The BlackBerry maker announced the "cost optimization program" in a news release Monday, calling the layoffs a "prudent and necessary step for the long-term success of the company."

A spokesman said Monday in an email to The Chronicle Herald that "although RIM is looking to achieve efficiencies across its global operations, the impact of the workforce reduction announced today is relatively small in Halifax."

If employees at RIM’s customer support centre in Bedford had any inkling of impending job losses at their office, they were keeping mum Monday.

"Actually, I don’t know anything about it," one man said outside the Innovation Drive office.

A woman declined comment, saying, "It’s not worth the risk."

RIM said it would notify affected employees at its North American operations this week. The company, based in Waterloo, Ont., has about 19,000 employees worldwide.

Bedford councillor Tim Outhit said he isn’t privy to any of the company’s plans for layoffs in his community, but he expressed concern for the workers.

"Obviously, I’m hoping for the best for them. I like to see good-paying, knowledge economy jobs in Nova Scotia, and I was very pleased when RIM came here. They’re good-paying jobs, and we’d like to see them be here."

RIM’s arrival in Nova Scotia was announced with fanfare in November 2005. With the expected gain of hundreds of jobs in the area, the province pulled out all the stops to woo the company.

The former Office of Economic Development gave $5 million to RIM in 2005 to cover training and recruitment, and the provincial business development agency, Nova Scotia Business Inc., contributed an additional $5.3 million in payroll rebates. Under the rebate program, companies receive money each year after they meet predetermined hiring targets.

Neither RIM nor the business development agency would specify how many people the company now employs in Bedford, but Percy Paris, the minister of economic and rural development and tourism, said the number is about 540.

That is far below the estimated job growth touted in Nova Scotia Business Inc.’s 2005-06 annual report.

"The company already has more than 100 employees in place in Halifax and will continue to create one job every business day for the next five years," the report said.

Despite falling short of job estimates, the company has been a boon to the province, said Stephen Lund, the agency’s president and chief executive officer.

Name recognition alone has allowed Nova Scotia’s business jet-setters to market the province to potential clients overseas.

"This is a critical part of the IT sector," Lund said. "Having RIM has allowed us to leverage that name around the world. When we’re talking to companies in London, New York, China, it’s a great selling tool for us."

The province’s financial investment of $10.3 million has paid off, he said.

"This is a strong positive return on investment for us. If you take just the tax revenue alone that those employees would generate, it far exceeds what we paid out."

The dip in the company’s workforce comes as RIM squares off against fierce competition in the smartphone market, including Apple’s iPhone and phones with Google’s Android operating system. RIM’s BlackBerry PlayBook tablet has also received lukewarm reviews compared with Apple’s popular iPad.

Lund said RIM’s challenges are no reason to lose faith in the company.

"They’re still showing strong numbers; they’re just not meeting the numbers analysts have expected. Halifax has been a great operation. We have great confidence in the company."