Cenovus Energy's strong production sends shares higher as profit narrowly misses

People work on the the fixed wellhead platform of Cenovus Energy’s West White Rose extension project, which had been suspended in March 2020 in Argentia, Placentia Bay, Newfoundland, Canada December 13, 2019. Picture taken December 13, 2019. REUTERS/Greg Locke/File Photo

(Reuters) -Cenovus Energy narrowly missed analysts’ estimates for quarterly profit, but higher production and throughput volumes pushed the Canadian oil and gas firm’s shares as much as 6% higher on Thursday.

Upstream production rose to 808,600 barrels of oil equivalent per day (boepd) in the fourth quarter from 806,900 boepd a year earlier, while downstream throughput increased to 579,100 barrels per day (bpd) from 473,500 bpd.

“The stronger-than-expected fourth-quarter performance ties to beats in upstream from offshore and conventional while oil sands was broadly in line,” said Jefferies analysts.

Global oil prices have eased from the highs hit following disruptions caused by Russia’s invasion of Ukraine in 2022, but still remain at a level when companies can drill profitably.

Net income of 39 Canadian cents per share for the fourth quarter, compared with 40 Canadian cents per share expected by analysts, per LSEG data.

The company’s total operating margins dropped about 21.4% year-on-year on a wider light-heavy differential, while margins in the U.S. were specifically hit by C$430 million in non-cash write-down of refined product and crude oil inventory.

Cenovus’ revenue fell to C$13.1 billion from C$14.1 billion, but came above estimates of C$12.8 billion.

“Adjusted funds flow beat expectations (as did cash conversion aided by a working capital) and supported in-line shareholder returns, with upstream offsetting downstream financial results,” TPH analysts said in a note.

Cenovus returned C$2.8 billion to shareholders in 2023, lower than C$3.4 billion a year earlier. The company also reduced long-term debt to C$7.1 billion from C$8.7 billion in the same period.

($1 = 1.3536 Canadian dollars)

(Reporting by Seher Dareen in Bengaluru; Editing by Sriraj Kalluvila)