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Cenovus Energy's strong production boosts shares as profit narrowly misses

Cenovus Energy's West White Rose extension project in Newfoundland

By Seher Dareen and Nia Williams

(Reuters) -Cenovus Energy narrowly missed analysts' estimates for quarterly profit, but higher production and refinery throughput volumes pushed shares in the Canadian oil and gas producer as much as 7% 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.

But U.S. refining margins were hit by a C$430 million non-cash write-down of refined product and crude oil inventory, as well as unplanned outages at Cenovus' Lima, Ohio, refinery and the Borger, Texas, plant operated by Phillips 66.

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Cenovus's U.S. refineries have been a drag on earnings in recent years, following a deadly fire at its 160,000 bpd Toledo, Ohio, plant in 2022 and an explosion at its 49,000 bpd Superior, Wisconsin, refinery in 2018. Both refineries restarted last year.

Superior is running at 65-70% utilization rates, with plans to increase throughput in the second quarter of 2024, Cenovus said. The company's other U.S. refineries are running at utilization rates north of 90% in the first quarter.

Cenovus CEO Jon McKenzie said while there was nothing technically wrong with Superior, there were difficulties in getting the plant to process crude at higher rates after it had been offline for five years.

"There's no doubt Superior has been a bit of a fistfight for us," McKenzie told an earnings call. "Anytime you take a refinery that hasn't run for that length of time through its first winter you do find some deficiencies."

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

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.

"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 and Nia Williams in British Columbia, additional reporting by Laura Sanicola in Washington; Editing by Sriraj Kalluvila and Jane Merriman)