Moving the heavy, tar-like bitumen by rail requires specialized cars that are heated and insulated, and CEO Brian Ferguson says the company has some of those on order.
"We haven't actually yet moved bitumen, but we are absolutely looking at that and doing some tests on moving that," he said in an interview.
"I do think that it's going to prove to be very viable to do, so I think we'll likely be in a position to start that in 2014."
Cenovus is currently moving about 6,000 barrels of oil per day by rail, but those are light and medium crudes from areas such as the Bakken formation in Saskatchewan. That number is expected to increase to 10,000 barrels per day by year-end.
With existing pipelines full and the fate of pipeline expansion projects anything but certain, Cenovus (TSX:CVE) and many other Canadian oil companies are looking at a variety of ways to get their products to the best-paying markets.
Rail is a costlier option than pipelines, but it's seen as a good way to tide producers over until a more permanent infrastructure is built.
"Rail provides a nice supplement to moving volumes," said Don Swystun, executive vice-president of refining, marketing, transportation and development.
"If we can move it on the pipeline, we do, because it's lower cost and more value to us."
In the first three months of the year, the price gap between Canadian heavy oil and U.S. light oil was at US$31.96 a barrel — 49 per cent wider than at the beginning of 2012.
A price difference between light and heavy oil is not unusual, given that the latter is more difficult to process. But a dearth of pipeline infrastructure to get that crude to the most lucrative markets worsened the differential late last year and in early 2013.
More recently, the differential has narrowed to a more normal level at around $14, but Ferguson said he does not see that lasting long.
Some oilsands facilities are undergoing maintenance in the second quarter, temporarily lowering supplies. And Imperial Oil Ltd.'s (TSX:IMO) massive Kearl oilsands mine is expected to start up shortly, alone adding 110,000 barrels a day to the market.
Although a wider price gap means Cenovus makes less money on the crude it produces from its oilsands, it's a boon to its refinery business because it means a cheaper raw product.
During the first quarter, Cenovus said cash flow from its refining division — which includes interests in refineries in Texas and Illinois, in partnership with Phillips 66 — nearly doubled to $524 million.
Its profits for the first three months of the year, excluding hedging and foreign exchange impacts, were $391 million, or 52 cents per share, up from 340 million, or 45 cents per share, in the same 2012 period.
That beat the average analyst estimate of 48 cents per share, according to Thomson Reuters.
Accounting for unrealized hedging and foreign exchange losses, first-quarter net earnings were $171 million, or 23 cents per share, down from $426 million, or 56 cents per share, a year earlier.
Revenue was $4.32 billion, down from $4.69 billion.
Cenovus also said Wednesday that it has been trying to sell its non-core light oil assets in the Bakken and Lower Shaunavon regions of Saskatchewan, but that it's having a tough time getting a deal done.
"Market conditions appear to be working against us and we may not close the transaction this year," said chief financial officer Ivor Ruste.
Ferguson added that although many potential buyers have been looking at those assets, they're having trouble accessing capital to make an offer.
"As soon as markets improve I would expect that we will be able to announce that we have a transaction we can close."
All of Cenovus' oilsands developments use steam to liquefy the sticky bitumen deep underground so it can be more easily drawn to the surface.
Its Christina Lake and Foster Creek developments are part of a 50-50 joint venture with Houston energy giant ConocoPhillips.
Oilsands production increased to 100,347 barrels per day for the quarter, up from 81,947 bpd, while conventional oil production increased to 79,878 bpd, up from 74,903 bpd.
Cenovus was created in 2009 when Encana Corp. (TSX:ECA) spun off its oil and refinery assets from its natural gas business.
Cenovus shares rose 1.8 per cent to $29.28 in afternoon trading Wednesday on the Toronto Stock Exchange.
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