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An oil field worker walks through oil facilities at the Cenovus Foster Creek SAGD oil sands operations near Cold Lake, Alberta, July 9, 2012.


Cenovus said Wednesday that its profit dropped 40 per cent in the second quarter as it faced weaker oil and gas prices.

The Calgary-based company reported net earnings of $396-million for the second quarter, or 52 cents per diluted share, down from a profit of $655-million, or 86 cents per diluted share in the same period last year.

Operating earnings, which filter out one-time items, dropped to $283-million, or 37 cents per share, missing analyst expectations of 52 cents per share. A year earlier the company earned $395-million, or 52 cents per share.

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Revenue for the quarter came in at $4.21-billion, compared to $4.01-billion year over year.

Cenovus said exploration expenses of $68-million, decreased unrealized risk management gains, and an increase in depreciation, depletion and amortization costs as the reason for the sharp drop in net earnings for the quarter.

Cenovus is a relatively new name in the oil patch, having split off from natural gas producer Encana Corp. in late 2009.

The company is on the hunt for a joint venture partners to help it develop its Telephone Lake oil sands property. Firms enter into such deals as a means to speed up development and reduce risk.

A competitive process to find a partner is ongoing, and Cenovus isn't in any rush to land a deal. In the meantime, Cenovus is continuing to move that project forward solo.

Cenovus says total oil production in the second quarter averaged more than 155,000 barrels per day, a 28-per-cent increase compared with the same period a year earlier.

And oil sands production at Foster Creek and Christina Lake averaged more than 80,000 barrels per day, a 38 per cent increase compared with 2011.

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"Cenovus has a clearly defined 10-year growth plan, which is expected to deliver predictable, reliable performance," president and CEO Brian Ferguson said in a release.

"We're consistently growing oil production while maintaining our focus on low-cost operations and continuing to demonstrate the value of our integrated approach with strong refining margins."

At its investor day in December, Cenovus said it was aiming to grow production this year by 21 per cent as new phases of its Christina Lake oil sands project in northern Alberta come into service.

Christina Lake and the nearby Foster Creek development are part of a 50-50 joint venture with Houston energy giant ConocoPhillips. The partnership also includes interests in two U.S. refineries.

The refinery interests have helped cushion Cenovus against swings in oil prices. While lower prices eat into its profits in the upstream, or production side of the business, it means lower costs in the downstream, or refining end.

All Cenovus oil sands developments use steam to liquefy the sticky bitumen deep underground so it can be more easily drawn to the surface.

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