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

Speculators seen leading commodities crash

By Sarah Turner and Michael Kitchen, MarketWatch

SYDNEY (MarketWatch) — Analysts offered a wide variety of reasons for Thursday’s plunge in commodities, but some agreed the main force behind the drop might simply be a matter of stampeding speculators.

“It all began with silver, which started falling sharply late last week when CME Group increased margin requirements on trades,” said BMO Financial Group Chief Economist Sherry Cooper, in a note Thursday.

Indeed, the CME’s repeated hikes to the silver-margin requirements sent the metal, which as of April 29 had risen nearly 60% for the year, tumbling, with benchmark silver futures losing more than 25% since then.
But a variety of other news, including a Wall Street Journal report that billionaire financier George Soros was selling off his holdings, helped the losses snowball, and on Thursday, silver fell 8% on the Comex division of the New York Mercantile Exchange, its largest one-day percentage drop since Dec. 1, 2008.

This touched off massive selling across the commodities complex.

“Silver really just burnt off in a big way and that fed through to other commodities,” said Michael Turner, strategist at RBC Capital Markets.

Oil (NEW:CLM11) was especially hard hit by Thursday’s follow-on crash, dropping as low as $99.35 during the North American session, its heaviest drop in percentage terms since April 2009. Crude futures continued to decline on Friday and were recently off over 4%. Read more on oil’s Friday drop.

Turner says that the dollar’s rise after the European Central Bank failed to signal further near-term interest-rate hikes early Thursday helped turn silver’s drop into a stampede out of almost all commodities. Read more about the European Central Bank


Independent oil trader and author Dan Dicker agreed, saying crude’s reaction to the drop was “great proof of just how much speculative money there was in the oil market.”

Noting that much of the drop included a large volume of margin selling, he added that the fall also showed “just how much stupid money there is in the oil game.”

But despite the speculative nature of the drop, analysts at Lloyds Bank said Friday that some economic fundamentals actually point to even lower prices for some commodities.

“Many of them have looked frothy for a while and have perhaps accelerated beyond the pace justified by the global recovery,” they said in a research note.

But they also added that “some perspective is required,” citing the fact that the Thomson Reuters/Jefferies CRB Index, which tracks global commodities prices, is “actually marginally below the levels of five years ago, so it’s hard to argue that commodity prices are headed for a massive decline given that global [gross

TSX ends 2-day slide as energy and banks gain

Toronto's main stock index eked out a modest gain on Wednesday, following losses, as energy and financial issues advanced, but continued uncertainty over commodity prices investors cautious.
Financial shares, up 0.6 percent, led the pack, boosted by better-than-expected results from U.S. Among the top gainers, Royal Bank of Canada climbed 1 percent to C$60.42.
The index's energy group pushed up 0.1 percent as U.S. crude oil prices ended a two-session slide, data showing U.S. gasoline stockpiles plunged last week and by continued worries about the Libyan Suncor Energy was up 0.1 percent at C$42.09, Canadian Oil Sands Trust rose 0.3 percent to C$31.12, 0.4 percent higher at C$31.73.
Base-metals miners fell 1.1 percent, tracking weaker copper prices after data showed U.S. auto sales China would make further efforts to quell inflation.
Diversified miner Teck Resources was down 1.9 percent at C$50.90, while First Quantum Minerals
C$121.30.
"The very fact that the miners are down says something about what's going on in terms of
The Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE> ended up 32.24 p
Eight of its 10 main sectors were higher. The gold-mining sub-sector was off 0.4 percent
of bullion.
Earlier in the day, the index rose more than 1 percent as oil prices gained.
"The fact that we opened strongly and gave back some, and (then) coming back, to me it
Nakamoto said. "If everyone was on the same page we probably would have regained yesterday's Market watchers said bargain-hunting was in play after the index lost more than 400 points on Monday "Today, bargain hunters are trying to nibble in the markets, but (without) conviction just yet," said broker at MF Global Canada, in Montreal.
Shaw Communications dropped 3.4 percent to C$19.80 after investors reacted to delays in its
service and troubles in keeping cable subscribers as it eases off promotions.
Gildan Activewear rallied 3 percent to C$33.80, after Scotia Capital became the latest brokerage to target on the T-shirt maker. The company built on gains made after announcing earlier this week based sock maker Gold Toe Moretz Holdings.
($1=$0.96 Canadian)