CALGARY - Suncor Energy Inc. (TSX:SU) said Wednesday its net income during the second quarter dropped by more than two thirds as it took some $1.2 billion in charges related to its holdings in the oilsands and in Libya.
The Calgary-based energy giant also hiked its quarterly dividend by 22 per cent to 28 cents per share.
"We continue to focus squarely on profitable growth. This means we're disciplined with our capital and invest wisely in high-return projects," said CEO Steve Williams.
"This prudent approach and our cash generating ability have enabled us to increase our quarterly dividend to shareholders."
Net income was $211 million, or 14 cents per share, compared to $680 million, or 45 cents per share, a year earlier.
But operating earnings, which strip out the effects of unusual items, were stronger at $1.14 billion, compared to $934 million during the second quarter of 2013.
On a per-share basis, operating earnings were 77 cents per share, missing the average analyst estimate of 97 cents per share, according to Thomson Reuters.
Cash flow from operations was $2.4 billion, or $1.64 per share, compared to $2.25 billion, or $1.49 per share.
The company took a $718-million charge related to a decision to shelve the Joslyn oilsands mine, which would have been operated by the Canadian unit of France's Total SA. The partners decided the project would not be economically feasible in today's environment.
Suncor also took a $297-million charge in Libya, which has been rocked by political unrest, and a $223-million charge on oilsands assets that no longer fit with Suncor's strategy.
Production in the oilsands averaged 378,000 barrels per day during the quarter, up form 276,000 barrels a year earlier.
Company-wide output averaged 518,400 barrels per day, compared to 500,100 during the same 2013 quarter.
Cash operating costs in the oilsands were down about 27 per cent.
And the firm has also lowered its capital spending target for this year to $6.8 billion from $7.8 billion.
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Some of the most active companies traded Wednesday on the Toronto Stock Exchange:
Toronto Stock Exchange (15,524.82, up 78.27 points):
Penn West Petroleum Ltd. (TSX:PWT). Oil and gas. Down $1.37, or 13.78 per cent, to $8.57 on 11.7 million shares. Shares in the company fell sharply Wednesday after it announced it's reviewing its accounting practices going back several years and will have to restate some of its past financial reports.
Athabasca Oil Corp. (TSX:ATH). Oil and gas. Up 26 cents, or 4.37 per cent, to $6.21 on 7.9 million shares
Yamana Gold Inc. (TSX:YRI). Miner. Down six cents, or 0.66 per cent, to $9.08 on 7 million shares.
Bombardier Inc. (TSX:BBD.B). Aerospace. Up seven cents, or 1.94 per cent, to $3.67 on 5.4 million shares
Nuinsco Resources Ltd. (TSX:NWI). Miner. Unchanged at two cents on 5.1 million shares.
Trevali Mining Corp. (TSX:TV). Miner. Up two cents, or 1.52 per cent, to $1.34 on 5 million shares.
Companies reporting major news:
Amaya Gaming Group Inc. (TSX:AYA). Gaming. Down 12 cents, or 0.41 per cent, to $29.49 on 2.2 million shares. The company says its shareholders have approved a financing that's key to its proposed acquisition of the world's largest online poker company, operator of PokerStars and Full Tilt Poker.Amaya said Wednesday it has now obtained all the required shareholder and regulatory approvals and will move to close the deal.
Cenovus Energy Inc. (TSX:CVE). Up 80 cents, or 2.44 per cent, to $33.61 on 3 million shares. The Calgary-based company has appointed a vice president of rail to its leadership team, as the major oilsands producer moves more of its crude by train. The company made its announcement as it posted a more than threefold increase in second-quarter profits and a 33 per cent jump in oilsands production.
CGI Group Inc. (TSX:GIB.A). Information technology. Up 37 cents, or 0.96 per cent, to $38.82 on 1.8 million shares. The company saw its third-quarter net profit jump 26 per cent to $225.1 million, or 71 cents per share diluted. That compares with $178.2 million, or 56 cents per share diluted, in the same quarter of 2013.
Sherritt International Inc. (TSX:S). Miner. Up 25 cents, or 5.73 per cent, to $4.61 on 2.3 million shares. The company reported a loss of $30.1 million in its latest quarter, mainly due to its Ambatovy joint venture nickel and cobalt mine in Madagascar. The loss amounted to 10 cents per share in the quarter. That compared with a loss of $10.7 million, or four cents per share, in the same quarter of 2013.
Torstar Corp. (TSX:TS.B). Publishing. Down 45 cents, or 5.45 per cent, to $7.81 on 264,118 shares. The publisher of the country's largest newspaper, the Toronto Star, reported a slightly higher profit in its latest quarter as it continued to feel pressure from falling print advertising revenues. The media company said Wednesday it had a profit of $19.7 million, up from $18.1 million a year ago, but revenue was lower due to a drop in print ads.
TORONTO - Yamana Gold Inc. (TSX:YRI) had US$43.3 million of adjusted earnings in the second quarter, which was down from a year earlier amid lower revenue and realized gold prices.
The Toronto-based company's adjusted earnings amounted to five cents per Yamana share â€” a penny above the general estimate of four cents per share, but down from US$50.2 million or seven cents per share a year earlier.
Under standard accounting that includes costs associated with an acquisition during the quarter, Yamana's net income was $5.1 million or one cent per share, which compared with a year-earlier net loss of $7.9 million or one cent per share.
During the quarter, Yamana partnered with Agnico Eagle Mines (TSX:AEM) to buy Montreal-based Osisko, which owns the Canadian Malartic mine in northern Quebec and a development project near Kirkland Lake in Ontario.
Yamana's revenue for the three months ended June 30 was US$450.8 million, up from $430.5 million but nearly $20 million less than analyst estimates of about $470 million.
Yamana's production totalled the equivalent of 331,765 ounces of gold, up from 295,545 a year earlier. But the average price that Yamana received declined to US$1,292 per ounce from $1,385 per ounce.
TORONTO - Agnico Eagle Mines Ltd (TSX:AEM) had US$37.7 million of net income in the second quarter and the profit would have been higher without costs associated with its acquisition of a 50 per cent stake in Osisko Mining, in partnership with Yamana Gold (TSX:YRI).
Agnico Eagle's profit for the three months ended June 30 amounted to 20 cents per share, which compares with a net loss of $24.4 million or 14 cents per share a year earlier.
Excluding a US$6.1-million item related to Osisko, foreign exchange, stock options and a non-recurring gain, Agnico would have had US$52.8 million of net income or 28 cents per share in the second quarter.
Its revenue was US$437.8 million, up from $336.4 million in the second quarter of 2013, due to significantly higher gold production volumes.
Agnico Eagle said its production benefitted from higher grades of ore at its Meadowbank mine in Nunavut and contributions from production at Goldex and La India.
"With the closing of the Osisko transaction in the second quarter, we are now working closely with our partner Yamana to optimize the Canadian Malartic mine and maximize the potential of the Kirkland Lake portfolio," Sean Boyd, Agnico's president and chief executive officer, said in a statement issued Wednesday after markets closed..
Agnico Eagle also said Wednesday that it's increasing its 2014 production guidance to about 1.35 million ounces, which is above the 2014 guidance range of 1.175 million to 1.205 million ounces.
TORONTO - Kinross Gold Corp. (TSX:K) had US$32.9 million of adjusted earnings in the second quarter, down 72 per cent from the same time last year and below analyst estimates.
The Toronto-based company attributed the reduced adjusted earnings to lower gold prices during the quarter. The average price that Kinross received was US$1,285 per ounce sold, down from US$1,394 an ounce in the second quarter of 2013.
Its revenue was US$911.9 million, down from US$968 million a year before.
The adjusted earnings amounted to three cents per Kinross share, which was two cents below analyst estimates of five cents per share and down from US$119.5 million or 10 cents per share reported by the company a year earlier.
Last year's second-quarter included a massive $2.433-billion writedown of Kinross's assets but there were no impairments recorded in this year's comparable period.
Kinross had $46 million of net income before adjustments, or four cents per share, in the three months ended June 30, compared with a 2013 second-quarter net loss of $2.17 per share or $2.48 billion.
TORONTO - Barrick Gold Corp. (TSX:ABX) had a US$269-million net loss and $159-million of adjusted earnings in the second quarter, missing analyst estimates on both counts.
The adjusted profit amounted to 14 cents US per share, down from 66 cents a year earlier and two cents a share below analyst estimates.
Net loss per share was 23 cents per share, far less than the net loss of $8.56 billion or $8.55 cents a year before. But analysts had been looking for a net profit of 19 cents per share, according to data compiled by Thomson Reuters.
The net loss before adjustments included a $514-million writedown of the Jabal Sayid copper project in Saudi Arabia, partially offset by other items.
Barrick attributed its reduced adjusted profit to lower gold and copper prices as well as lower sales volumes compared with the second quarter of 2013.
The Toronto-based mining company's revenue for the three months ended June 30 was US$2.43 billion, which was down from $3.2 billion a year earlier but in line with estimates.
Analysts had estimated Barrick's revenue would be about $2.44 billion and its adjusted earnings per share would be 16 cents.
As analysts anticipated, the company also said Wednesday that it's working to bring down its costs.
The company is reducing its capital spending budget by $200 million to a range of between $2.2 billion and $2.5 billion.
It also said the average cost of producing an ounce of gold in 2014 will be lower than previously estimated.
WATERLOO, Ont. - Open Text Corp. (TSX:OTC) reported Wednesday that its fourth-quarter profit doubled compared with a year ago, as revenue improved by more than 40 per cent.
The corporate software company, which keeps its books in U.S. dollars, said it earned US$88.1 million, or 72 cents per diluted share, up from $42.2 million, or 36 cents per diluted share, a year ago.
Revenue improved to $494 million, up from $347.3 million.
Open Text noted that licence revenue was up 27 per cent compared with a year ago, while its cloud services revenue was up 255 per cent. Customer support revenue was up 12 per cent.
For its full year, Open Text reported a profit of $218.1 million or $1.81 per diluted share on $1.62 billion in revenue. That compared with a profit of $148.5 million, or $1.26 per diluted share, on $1.36 billion in revenue the previous year.
The company also announced the appointment of John Doolittle as chief financial officer, effective Sept. 8.
Doolittle will replace Paul McFeeters who is retiring.
CALGARY - Shares in Penn West Petroleum Ltd. (TSX:PWT) fell sharply Wednesday after the company announced it's reviewing its accounting practices going back several years and will have to restate some of its past financial reports.
Its shares plunged 13.78 per cent or $1.37 to close at $8.57. They had traded as slow as $8.18 earlier in the day on the Toronto Stock Exchange.
Late Tuesday, the Calgary-based oil and gas producer said chief financial officer David Dyck, who started in the role on May 1, found inadequate documentation to support how some of its expenses were classified in the past.
The review will result in a restatement of previous financial reports for at least 2012 and 2013, as well as for the first quarter of 2014, and may delay completion of its full second-quarter report.
The review covers 2014 so far and the four previous fiscal years.
"We have acted quickly and effectively to review our accounting practices. We will take the steps necessary to correct our historical financial statements and we will take appropriate steps to ensure that we avoid a similar situation in the future," board chairman Rick George, the former CEO of Suncor Energy Inc. (TSX:SU), said in a statement.
Among other things, the board's audit committee and its independent advisers have identified $111 million of operating expenses that were classified without adequate support as capital expenditures in property, plant and equipment in 2012 and a further $70 million in 2013.
They also found about $100 million in operating expenses that were incorrectly reclassified as royalty expenses.
Penn West said the review may require it to reduce its 2014 capital spending and royalty expense assumptions, as well as increase operating cost assumptions. That would result in lower funds flow this year than anticipated.
However, its cash and debt balances, production guidance and operations are unaffected.
Separately, Penn said its 2014 production guidance remains between the equivalent of 101,000 and 106,000 barrels per day of crude, gas and liquids.
In the quarter ended June 30, Penn West says it produced the equivalent of about 108,130 barrels per day.
"If you read that release, you will find that our asset quality and execution capability remain strong, our long-term plan for the company remains intact, and importantly today, we are on target to deliver on our promises to our stakeholders," said CEO Dave Roberts.
"As a result of the improvements we have made to the business in the past year, we are a more resilient organization today."
Desjardins analyst Kristopher Zack said the production figures were positive, but the accounting review is just "another distraction" for a company that has been trying to turn itself around.
"Although the company has continued to make solid progress by improving operating efficiencies in its key focus areas, we believe the accounting review will provide another overhang on the stock," he said in a note to clients.
Analysts at Dundee Capital Markets said the financial restatements shouldn't have a material impact. They said the Penn West ship is "heading in the right direction," but it's "not at full steam (yet)."
Penn West has had a tumultuous ride over the past year or so, replacing its CEO, slashing its dividend, cutting its workforce and selling assets.
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MONTREAL - Uni-Select said Wednesday it will focus on boosting sales for the rest of the year after the automotive parts distributor swung to a US$15.5-million profit in the second quarter.
The Quebec-based company, which reports in U.S. dollars, said the profit amounted to 73 cents per share compared with a loss of $9.3 million or 43 cents per share a year ago when it was hit by a $35.2-million restructuring charge.
Excluding one-time adjustments, Uni-Select (TSX:UNS) earned $16.5 million or 77 cents per share for the period ended June 30, up from $15.6 million, or 72 cents per share a year earlier.
Revenue from Uni-Select's operations in Canada and the United States increased to $478.7 million from $476.2 million last year.
Uni-Select was expected to record 73 cents per share in adjusted profits on $464.6 million in revenues, according to analysts polled by Thomson Reuters.
"While the sales growth recorded in the second quarter was softer than expected, we are pleased with our overall performance and more particularly with our continued ability to lower costs and improve profitability, which are key drivers of our long-term growth plans," stated president and CEO Richard Roy.
He said its cost-cutting plan has made the company more competitive.
Uni-Select said the action plan remains on schedule to save $5.6 million in costs and reduce inventories by $7.6 million in the second-half of the year.
Roy said Uni-Select's main focus in the rest of the year is to accelerate sales while focusing on initiatives that will strengthen its relationship with independent wholesalers.
Organic growth during the quarter increased by 6.8 per cent in Canada and 1.3 per cent in the United States.
Benoit Poirier of Desjardins Capital Markets said the consolidated organic growth of 2.9 per cent was less than the 3.5 per cent increase he forecast.
However, he described the results as "encouraging," saying they demonstrate that its action plan is bearing fruit.
The company also announced Wednesday the creation of a chief operating officer position, but did not say who would fill the job that will report to Roy.
On the Toronto Stock Exchange, Uni-Select's shares lost 60 cents or 2.3 per cent at C$25.50 in Wednesday afternoon trading.
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TORONTO - The Toronto stock market advanced Wednesday, powered by solid earnings and an indication from the U.S. Federal Reserve that it is in no rush to raise interest rates.
The S&P/TSX composite index closed up 78.27 points to 15,524.82.
The Canadian dollar was off 0.36 of a cent to 91.73 cents US.
U.S. markets were mixed after the Fed ended its policy meeting with word that it is continuing to pare its monthly bond purchases. They have been intended to keep long-term borrowing rates low and are set to end in October.
The Fed reiterated that it will keep short-term rates low "for a considerable time" after those bond purchases end. Most economists think a rate increase is about a year away.
The Dow Jones industrials dipped 31.75 points to 16,880.36, while the Nasdaq gained 20.2 points to 4,462.9 and the S&P 500 index edged up 0.12 of a point to 1,970.07.
Strong economic growth data had raised concerns the Fed could act sooner to raise rates.
Gross domestic product grew by a better-than-expected annual pace of four per cent in the second quarter. The contraction of the economy in the January-March period because of severe winter weather was also revised to 2.1 per cent from 2.9 per cent.
"It really answers how constructive the Fedâ€™s quantitative easing has been, whether this huge intervention had a positive effect on the economy and the answer is yes," said Monika Skiba, senior portfolio manager at Manulife Asset Management.
Two days before the release of the American government's employment report for July, payroll firm ADP reported that 218,000 jobs were created in the private sector during the month, short of the 235,000 print that was expected. Analysts looked for the U.S. government report to show that about 230,000 jobs were created during July.
Meanwhile, Cenovus Energy Inc. (TSX:CVE) shares gained 80 cents to $33.61 as the company more than tripled its second-quarter net earnings to $615 million or 81 cents per share as it benefited from increased oil production and higher commodity prices.
"Since the price of the commodity has been strong, the earnings of the companies are reflecting that, theyâ€™re better than expected," added Skiba.
"But beyond this, weâ€™re probably at the stage where higher prices would be negative for economic growth."
Meanwhile, Sherritt International Inc. (TSX:S) reported a quarterly loss of $30.1 million or 10 cents a share, mainly due to startup costs at its Ambatovy joint venture nickel and cobalt mine in Madagascar. But its shares were ahead 17 cents to $4.61. The loss came as prices for nickel and cobalt continued to improve as many anticipate nickel shortages due to an Indonesian mineral export ban on raw ore exports.
In the U.S., shares in Twitter surged 20 per cent after the social network's earnings blew past expectations.
September copper was ahead two cents at US$3.24 a pound and the base metals sector rose 0.77 per cent.
The TSX energy sector was ahead 0.47 per cent as September crude declined 70 cents to US$100.27. A major decliner was Penn West Petroleum (TSX:PWT). Its shares plunged 13.78 per cent to $8.57 after the company announced it's reviewing its accounting practices going back several years and will have to restate some of its past financial reports.
September bullion was off $3.60 to US$1,296.90 an ounce.
The gold sector fell about 0.65 per cent ahead of earnings later in the day from major miners including Barrick Gold (TSX:ABX).
BRUSSELS - The European Union targeted Russian President Vladimir Putin's inner circle for the first time Wednesday for the Kremlin's actions in Ukraine, subjecting three of his long-time associates to EU-wide asset freezes and travel bans.
A total of eight people were added to the EU's sanctions list for allegedly undermining Ukraine's sovereignty or profiting from Moscow's takeover of Crimea, the EU's Official Journal showed. Three companies were also blacklisted.
Among the individuals was Arkady Rotenberg, Putin's former judo partner and a major shareholder of the civil engineering company Giprotransmost. The company has received a public contract to conduct a study on building a bridge from Russia to Crimea, the EU said.
Also targeted was Yuri Kovalchuk, a longtime Putin acquaintance identified by the EU as co-founder of the Ozero Dacha, a co-operative society bringing together influential individuals around Russia's president. Kovalchuk is also the chairman and largest shareholder of Bank Rossiya, which has opened branches in Crimea since its unilateral annexation by Russia.
The third Putin ally on the sanctions list was Nikolai Shamalov, another Ozero Dacha co-founder and the second largest shareholder in Bank Rossiya.
Rotenberg and Kovalchuk have been subject to similar U.S. sanctions since March.
The other five people targeted by the EU measures, which go into effect immediately, include the first deputy chief of staff of the Russian presidential administration and three pro-Moscow officials in Crimea and eastern Ukraine.
The companies subjected to EU restrictions were the Russian National Commercial Bank, which was taken over by pro-Russian authorities in Crimea, the subsidiary of the Russian state-owned Aeroflot airline that now operates between Moscow and Crimea, and Almaz-Antei, which the EU said makes anti-aircraft missiles that separatists in Ukraine have used to shoot down aircraft.
The new measures mean a total of 95 people and 23 entities are now subject to the EU's Ukraine-related sanctions.
TORONTO - The Canadian dollar closed lower Wednesday as the American greenback gained strength against major currencies after data showed that the U.S. economy rebounded strongly in the second quarter.
The loonie was down 0.36 of a cent to 91.73 cents US as gross domestic product in the U.S. grew a much better than expected four per cent after contracting in the January-March period because of severe winter weather. That contraction was revised lower to 2.1 per cent from 2.9 per cent.
The data was released a day before Statistics Canada reports gross domestic product data for May. Economists looked for a 0.3 per cent advance in the month but some say that Canadian GDP could come in higher.
Traders also took in some positive employment news two days before the release of the American government's employment report for July. Payroll firm ADP reported that 218,000 jobs were created in the private sector during the month. Analysts looked for the U.S. government report to show that about 230,000 jobs were created during July.
Canadian jobs data for July comes out on August 8.
Meanwhile, the U.S. Federal Reserve ended its two-day policy meeting with word that it is continuing to pare its monthly bond purchases. They have been intended to keep long-term borrowing rates low and are set to end in October.
The Fed reiterated that it will keep short-term rates low "for a considerable time" after those bond purchases end. Most economists think a rate increase is about a year away.
On the commodity markets, oil prices lost early momentum from the economic growth data and September crude slipped 70 cents to US$100.27.
September copper was two cents higher at US$3.24 a pound while December bullion was off $3.60 to US$1,296.90 an ounce.
WASHINGTON - Republican senators blocked an election-year bill Wednesday to limit tax breaks for U.S. companies that move operations overseas.
The bill would have prohibited companies from deducting expenses related to moving their operations to a foreign country. It also would have offered tax credits to companies that move operations to the U.S. from a foreign country.
The Senate voted 54-42 to end debate on the bill, six short of the 60 votes needed to advance it. The White House says President Barack Obama supports the legislation.
"Today in the United States, any time an American company closes a factory or plant in America and moves operations to another country, the American taxpayers pick up part of that moving bill," said Senate Majority Leader Harry Reid, D-Nev. "Frankly, a vote against this bill is a vote against American jobs."
Republicans called the bill an election-year stunt. They noted that Democrats tried to pass a similar bill two years ago, right before the last congressional elections.
Senate Republican Leader Mitch McConnell of Kentucky said the bill is "designed for campaign rhetoric and failure, not to create jobs here in the U.S."
Republicans also complained that Reid wouldn't allow any amendments. The legislation now joins a growing number of bills that have stalled in the Senate this year because Democrats and Republicans couldn't agree on amendments.
The bill would have cost U.S. companies that move overseas $143 million in additional taxes over the next decade, according to the Joint Committee on Taxation, which analyzes tax legislation for Congress. Companies moving into the U.S. would have seen their tax bills drop by $357 million over the same period.
The difference â€” $214 million â€” would have been added to the budget deficit.
The White House and some Democrats in Congress have been making the case that a growing number of U.S. corporations are using international tax loopholes to avoid paying U.S. taxes.
On Wednesday, Obama criticized U.S. companies that reincorporate overseas as a way to lower their U.S. tax bills. Many of these companies keep most of their operations in the U.S., including their headquarters.
The process, called an inversion, allows firms to shield more of their foreign earnings from being taxed in the U.S.
"You know, they are renouncing their citizenship even though they're keeping most of their business here," Obama said in a speech in Kanas City, Missouri.
"They shouldn't turn their back on the country that made their success possible," Obama added.
Some Democrats in Congress have been pushing legislation to make it harder for U.S. firms to reincorporate overseas mainly to avoid U.S. taxes.
Republicans say that instead of punishing corporations for leaving the U.S., Congress should make America's tax laws more inviting so more firms will want to come here.
At 35 per cent, the U.S. has the highest corporate income tax rate in the industrialized world. Many corporations, however, pay lower tax rates because the law is filled with many credits, deductions and exemptions.
Associated Press writer Jim Kuhnhenn contributed to this report.
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CALGARY - The CEO of Cenovus Energy Inc. says he's carefully considering whether to spin out 4.5 million acres of royalty land into a new entity, or if shareholders would be better off with the status quo.
Cenovus chief executive Brian Ferguson said Wednesday he's been asked numerous times by existing and prospective shareholders whether the Calgary-based company would consider a spinoff transaction similar to the creation of PrairieSky Royalty Ltd. (TSX:PSK) earlier this year by Encana Corp.'s (TSX:ECA)..
"I want to make sure that anything that Cenovus considers and contemplates is something that has got sustainable value for Cenovus shareholders," Ferguson said in an interview following the release of Cenovus' second-quarter results.
"I don't want to do something that in one or two years, for whatever reason, we may regret. So I'm being very thoughtful about this."
A spinout could be a good way to "crystallize" value from land that traces its roots back to Canadian Pacific's erstwhile energy business, providing a high-quality, low cost stream of cash flow. But as things stand today, investors are benefiting from the properties, which have helped Cenovus sustain its dividend and internally fund oilsands growth.
The spinout of PrairieSky in May raised $1.67 billion for Encana and marked one of the biggest initial public offerings in Canadian history. Encana retains a 54 per cent stake in that outfit, which enjoys minimal overhead costs and makes money by allowing other energy firms to develop oil and gas on its 5.2 million acres in southern and central Alberta.
Cenovus was itself spun off as a separate company from Encana in 2009. The royalty lands were divided between the two companies along geographic lines, with Cenovus getting the lands in eastern Alberta and Saskatchewan.
Also Wednesday, Cenovus announced it had created a new leadership position within the company dedicated to crude-by-rail, signalling it expects that transportation mode is here to stay. Kent Avery will be filling that role.
As part of a broader effort to get more value out of the oil and gas it produces, Cenovus has also appointed Bob Pease as executive vice-president of markets, products and transportation.
Most oil producers say they'd prefer to ship their oil to market by pipeline, as it's more efficient. But with environmental opposition clouding the outlook for pipelines, firms have been increasingly turning to rail as an alternative â€” a controversial proposition, especially after last year's deadly crash by a runaway oil train in Lac Megantic, Que.
But Ferguson sees rail as more than a stop-gap measure, because it offers more flexibility to producers. Specialized railcars can carry bitumen that has been diluted to varying degrees, unlike pipelines, where a lot of dilution is needed for the crude to flow. As well, rail enables crude to be shipped to markets that aren't served by pipelines.
"I can see us moving a very meaningful of our component total production by rail for a long time," said Ferguson.
The company completed eight unit train deliveries during the first half of the year. Unit trains consist of 100 or so rail cars carrying a single product. Cenovus says it's on track to reach 30,000 barrels of rail loading capacity by the end of this year. Ferguson said it's likely to move more than that next year, although Cenovus has not yet worked through its 2015 budget.
Earlier Wednesday, Cenovus posted stronger results for the second quarter.
The company brought in $615 million in net earnings during period, or 81 cents per share. That's up from $179 million, or 24 cents per share diluted, in the same quarter last year.
Operating earnings, which strip out the effects of one-time items, were $473 million, or 62 cents per share â€” up 85 per cent from a year earlier and handily beating the average analyst estimate of 49 cents per share, according to Thomson Reuters.
Cash flow was almost $1.2 billion versus $871 million year-over-year, up 37 per cent, as Cenovus said it benefited from increased oil production and higher commodity prices.
Cenovus is known for its steam-driven oilsands operations in northeastern Alberta.
The company's oil sands production averaged almost 125,000 barrels per day net in the second quarter, up 33 per cent from a year earlier, primarily driven by its Christina Lake project in northern Alberta.
At its Foster Creek oilsands project, the company has been working to circulate steam more effectively through the maturing reservoir. Ferguson said he's happy with how the project has been performing so far this year.
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