Oil sands producer Cenovus Energy Inc.fourth-quarter earnings and revenue improved despite a $197-million hedging loss, which was more than offset by an income tax recovery, the Calgary-based oil company said Friday.

Earnings grew to $73-million, or 10 cents per share, from $42-million, or 6 cents, in the same period a year ago, driven by higher oil production and strong crude prices.

Revenue was $3.17-billion in the three months ended Dec. 31, up from $3-billion in the year-earlier period.

The company booked a $197-million mark-to-market hedging charge during the quarter, compared with $92-million a year ago.

But the fourth-quarter results also included a $19-million income tax recovery, compared to a $153-million expense a year ago.

Cenovus is a relatively new name in the oil patch. The company was spun off from natural gas producer Encana Corp. in late 2009.

“We have made huge strides in Cenovus's first year as an independent company and laid the groundwork for substantial growth from our oil assets,” said Brian Ferguson, Cenovus president and chief executive officer.

It expects that cash flow from operations will be stronger in the first quarter, ranging from $25-million to $75-million in the first quarter of 2011, due to lower costs of heavy oil, which has improved margins.

However, it is maintaining its full-year estimate for refining operating cash flow at zero to $100-million.

It projects that inflation will drive costs three to five per cent higher, mainly due to rising labour costs.

In December, Cenovus said it would spend up to $2.3-billion this year, the majority of which is for projects that will bear fruit in 2012 and beyond.

Cenovus has said it aims to produce 300,000 barrels of bitumen per day by 2019 – five times its current output.

In 2010, combined production at its Foster Creek and Christina Lake projects was 59,045 barrels per day, a 33 per cent increase over 2009.

Its Foster Creek and Christina Lake oil sands projects are part of a 50-50 joint venture with Houston-based energy giant ConocoPhillips, which ties Cenovus production to two of the U.S. firm's refineries.

All Cenovus oil sands developments use steam to liquefy the sticky bitumen deep underground so it can be more easily drawn to the surface. The company also has conventional crude oil, natural gas and natural-gas liquids holdings in western Canada and two refineries in the United States.

Source: The Globe And Mail

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