Cenovus Energy Considering Refinery Acquisitions

Reuters, October 31, 2016

Canadian oil and gas producer Cenovus Energy Inc. said on Thursday it would consider refinery acquisitions in areas including the U.S. Gulf Coast region provided the opportunity offered good value and was easily accessible for Canadian crude. Chief Executive Brian Ferguson, speaking on a third-quarter earnings call, said integrating Cenovus's oil production in western Canada with its downstream business was core.

"It's very consistent with strategy and really revolves around how do we improve the margin on every barrel that we can produce," he said. "There would be a whole laundry list of items that would have to be accomplished starting with very good value."

The company has a 50 percent share in two U.S. refineries operated by Phillips 66 with a combined gross capacity of 460,000 barrels per day, and recently completed a de-bottlenecking project at the Wood River, Illinois plant that added 18,000 barrels per day of capacity. Cenovus is also updating cost estimates for Phase G of its Christina Lake thermal plant in northern Alberta, which was deferred after crude prices slumped in 2014. It was one of nearly 20 oil sands projects put on hold by producers.

"We have been clear about our capital priorities within the oil sands, and that Christina Lake phase G will be the first project in the oil sands to resume construction," Ferguson said, adding that the company would give more details in December. Ferguson said the 2017 capital budget was likely to be focused on capital discipline. Cenovus trimmed its 2016 capital spending budget to C$1.0 billion - C$1.1 billion, from the C$1.1 billion - C$1.2 billion previously forecast, and said it cut operating costs per barrel by 14 percent versus the year-ago period. The company also narrowed its full-year oil and gas production forecast to 266-272,000 barrels of oil equivalent per day.

Cenovus reported a third-quarter loss due to asset impairment charges resulting from declining heavy oil and natural gas prices. The Calgary-based company recorded a net loss of C$251 million ($187.6 million), or 30 Canadian cents per share, for the third quarter, compared with a profit of C$1.8 billion a year earlier, which included a C$1.9 billion after-tax gain. Operating losses, which exclude most onetime items, were 28 Canadian cents per share in the latest quarter. Cenovus shares were up 4 percent in midday trading on the Toronto Stock Exchange at C$20.98.


(Written by Nia Williams; Additional reporting by John Benny in Bengaluru; editing by Jonathan Oatis and Andrew Hay)

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