The narrowing price difference between crude oil and the petroleum products extracted from it hit refining margins at Canadian oil producers Cenovus Energy Inc and Husky Energy Inc, which both reported earnings on Thursday.
Cenovus, Canada's No. 2 independent oil producer, said operating cash flow from refining slumped 75 percent to C$133 million ($128 million) in the third quarter, as higher heavy crude feedstock costs at its refineries weighed on results.
Margins fell as pipeline capacity increased in the southern United States, easing bottlenecks, and the price gap between the world's two most actively traded crude oil contracts leveled out in July.
The price gap between U.S. benchmark West Texas Intermediate (WTI) and European benchmark Brent crude collapsed in July for the first time since 2010 and stayed between $2 and $6 per barrel for the next couple of months.
The slump in refining cash flow pushed Cenovus' overall cash flow down 17 percent to C$932 million, or C$1.23 per share, from C$1.1 billion, or C$1,47 per share in the year-ago period.
Oil sand production rose in the quarter, driven by a 63 percent increase in volumes at the Christina Lake project in northern Alberta, which offset a 22 percent fall in quarterly production at Foster Creek, also in northern Alberta.
Combined oil sand production rose 6 percent to 101,824 barrels per day, boosting third-quarter net profit 28 percent to C$370 million, or 49 Canadian cents a share. But operating profit fell nearly 28 percent to C$313 million, or 41 Canadian cents per share.
Cenovus, which operates oil sand, conventional oil and natural gas projects in Canada, and holds a 50 percent stake in two refineries in the United States, also said it is on track to boost net oil output to 500,000 barrels per day by 2023.
Shares of the energy giant were up 0.52 percent at C$30.85 on Thursday morning on the Toronto Stock Exchange.
HUSKY MEETS ESTIMATES
Rival Husky Energy, Canada's No.3 integrated oil producer, reported a 3 percent fall in quarterly profit. Adjusted to remove most one-time items, profit rose 6 percent to C$544 million, or 55 Canadian cents per share, in line with analysts average forecast, according to Thomson Reuters I/B/E/S.
Husky's shares were up 0.21 percent at C$29.26 on Thursday morning on the Toronto Stock Exchange.
The company, controlled by Hong Kong billionaire Li Ka-shing, said net income fell to C$512 million, or 52 Canadian cents per share, in the third quarter ended Sept. 30 from C$526 million, or 53 Canadian cents per share, a year earlier.