UPDATE 1-Lower output at Foster Lake weighs on Cenovus Energy profit

Feb 13 (Reuters) - Canadian oil and gas producer Cenovus Energy Inc's fourth-quarter operating profit fell short of analysts' estimates as production at its Foster Creek oil sands project in northern Alberta dropped 11 percent.

Production at the project fell to 52,419 barrels per day from a year earlier. The company said in December it would cut its 2014 investment in Foster Creek by 12 percent.

However, total oil sands production from Foster Creek and Christina Lake increased 13 percent to almost 114,000 bbls/d, boosted by a 47 percent increase at Christina Lake.

Cenovus owns the Foster Creek project, and the Christina Lake and Narrows Lake projects, jointly with ConocoPhillips . Cenovus operates all of them.

Cenovus said the costs to operate the Foster Creek project jumped 32 percent in 2013, hurt partly by lower production volumes, higher maintenance activities.

The company hired more people ahead of the start-up of phase F that is expected in the third quarter of 2014, which also increased costs at the project.

Calgary-based 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.

The company's margins have taken a hit in the past few quarters, hurt by the narrowing price difference between crude oil and the petroleum products extracted from it.

Operating cash flow from refining fell 11 percent in 2013 to C$1.1 billion ($1.00 billion), hurt by the lower market crack spreads and a five-fold increase in costs to buy ethanol credits.

Many refiners buy ethanol credits to comply with cleaner-fuel rules in the United States.

Those who do more of their own ethanol blending into refined fuels - rather than leaving it to pipeline companies or other third parties - have lower costs. Blenders generate a credit, while those who sell unblended fuels must buy these credits or the so-called Renewable Identification Numbers (RINs), to meet the mandate.

Cenovus said on Thursday that RIN costs have been trending lower since early in the fourth quarter after the U.S. Environmental Protection Agency proposed reducing the 2014 volume requirements for renewable blending.

The company's net loss narrowed to C$58 million, or 8 Canadian cents per share, in the fourth quarter ended Dec. 31 from C$117 million, or 15 Canadian cents per share, a year earlier.

Operating profit, which excludes most one-time items, was C$212 million, or 28 Canadian cents per share, compared with a loss of C$188 million, or 25 Canadian cents per share, a year earlier.

Analysts had expected an adjusted profit of 36 cents per share, according to Thomson Reuters I/B/E/S.