Tight oil writedowns spark Cenovus Energy earnings 17 cents per share below expected, Cenovus shares fall 5%; Encana earnings 15 cents per share above expected, shares fall 2%

Tight oil writedowns spark Cenovus Energy miss, Shares fall five per cent on second-quarter results disappointment by Dan Healing, July 24, 2013, Calgary Herald
The stock market was quick to react, knocking $1.76 or 5.5 per cent off its shares to close at $30.49. The company known for its industry-leading thermal oilsands operations in northern Alberta missed analyst expectations and left many of them scratching their heads over one-time balance sheet hits. On a conference call, president and chief executive Brian Ferguson refused to explain a $63-million “pre-exploration expense” related to a “conventional oil opportunity,” nor would he describe the circumstances, location or parties involved, citing a confidentiality agreement. “We have fully written off in the quarter the entire obligation,” he said. “It is related to a farm-in in our conventional oil operations.”

The writedown, combined with a $46-million exploration expense related to an unnamed tight oil play in Saskatchewan and a $57-million impairment from its $240-million Saskatchewan Shaunavon tight oil asset sale to Calgary junior Surge Energy Inc. last month, led to Cenovus posting operating earnings of 34 cents per share, well below analyst consensus of 51 cents. Chief operating officer John Brannan said the company is diverting $35 million in extra spending in the second half of the year to a southern Alberta tight oil play based on results to date, without giving details. [Emphasis added]

Encana’s Q2 operating earnings beat estimates, CEO charting new strategy by Lauren Krugel, The Canadian Press, July 24, 2013, Calgary Herald
Doug Suttles, the former BP executive who took the top job in June, said he has tasked an “internal strategy team” to take a hard look at the company’s key strengths and weaknesses. The work is slated to wrap up by year-end, with 2014 expected to be the first year with the new strategy in place. External help has also been enlisted in the process, Suttles said. … On the call, Suttles was asked how wide the range of options could potentially be — whether it could encompass bold moves like a major acquisition or an all-out corporate sale. “We haven’t actually eliminated any course of action as part of the strategy, other than we’re not going to get out of the oil and gas business — I can confirm that,” said Suttles. “But we are going to look at a very wide range of alternatives and look at what we think is the best one, the best choice to make sure that we can sustainably grow value. And so right now at this point, we haven’t eliminated any potential options.”

Encana’s board looked at more than 100 candidates, from both inside and outside the company, before picking Suttles for the top job. At BP, Suttles led the cleanup of the massive oil spill in the Gulf of Mexico, triggered by the blowout of the Macondo well in April 2010. Some 757 million litres of oil spewed into the waters off the Louisiana coast. Earlier in the day, Encana posted operating earnings of $247 million, or 34 cents per share — widely beating the average analyst estimate of 19 cents per share, according to Thomson Reuters. A year earlier, operating earnings — which strip out one-time items — were $198 million, or 27 cents per share Net earnings were $730 million, or 99 cents per share, reversing a year-earlier loss of $1.48 billion. … Encana shares fell about two per cent to $17.78 in late afternoon trading on the Toronto Stock Exchange. [Emphasis added]

Cenovus Energy Our History
Cenovus began independent operations on December 1, 2009 when Encana Corporation split into two distinct companies: one an oil company (Cenovus), the other a natural gas company (Encana). Cenovus has retained assets from both PanCanadian Energy Corp. and Alberta Energy Company, the two Canadian oil and natural gas companies that merged to form Encana in 2002. It’s through those two companies that Cenovus can trace its roots.

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BP Oil Spill Criminal Investigation May Ensnare Executives In Cover-Up by John Rudolf, May 3, 2012, Huffingtonpost.com
On April 25, 2010, three days after the Deepwater Horizon rig sank in the Gulf of Mexico, Doug Suttles, a senior BP executive, told reporters the company’s deep-sea well was leaking about 1,000 barrels of oil a day, a fraction of its maximum output. “This is a long way away from something more significant,” Suttles said. [Emphasis added]

A BP Cover-up? by Niamh Marnell, May 24th, 2010, DC Bureau
Last Thursday BP lost any credibility after they were forced to admit that their initial oil spill estimate was wrong. When independent experts came up with figures 10 times the BP estimate, several lawmakers accused BP Friday of purposefully covering up the extent of the spill. BP’s chief operating officer, Doug Suttles…. [Emphasis added]

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