UPDATE 1-Oil producers Cenovus, Husky say refining margins shrink

Thursday, 24 Oct 2013 | 8:36 AM ET

* Cenovus third-quarter operating profit down 28 pct

* Husky third-quarter net profit down 3 pct

Oct 24 (Reuters) - Canadian oil producers Cenovus Energy Inc and Husky Energy Inc said their refining margins were hurt as the price difference between crude oil and the petroleum products extracted from it narrowed sharply.

Cenovus, Canada's No. 2 independent oil producer, said operating cash flow from refining slumped 75 percent to C$133 million ($128 million) in the third quarter, also due to a rise in heavy crude feedstock costs at its refineries.

The company's margins fell as pipeline capacity increased in southern United States, easing inland bottlenecks, and the price gap between the world's two most actively traded crude oil contracts leveled out in July.

The price gap between U.S. benchmark West Texas Intermediate (WTI) and European benchmark Brent crude collapsed in July for the first time since 2010 and stayed between $2 and $6 per barrel for the next couple of months.

Cenovus is best known for its Foster Creek and Christina Lake oil sands projects in northern Alberta, where combined oil sands production increased 6 percent to 101,824 barrels per day, boosting third-quarter net profit 28 percent.

Operating profit, however, fell nearly 28 percent to C$313 million, or 41 Canadian cents per share.

Cenovus operates numerous oil sand, conventional oil and natural gas projects in Canada, and holds a 50 percent stake in two refineries in the United States.

Rival Husky Energy, Canada's No.3 integrated oil producer, reported a 3 percent fall in quarterly profit.

The company, controlled by Hong Kong billionaire Li Ka-shing, said net income fell to C$512 million, or 52 Canadian cents per share, in the third quarter ended Sept. 30 from C$526 million, or 53 Canadian cents per share, a year earlier.

Husky Energy, which operates in Canada and Asia, said cash flow rose 6 percent to C$1.35 billion in the quarter. Total upstream production increased 8 percent to 309,000 barrels of oil equivalent per day.

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