Oilpatch companies with refineries are expected to provide the high points while upstream oil and gas producers supply the lows as third-quarter reporting season kicks off this week.

Calgary analysts expect generally strong results from oil and gas companies over the next few weeks despite generally weak expectations from investors, who chopped the S&P/TSX energy index by 22 per cent of its value during the three months ended Sept. 30.

First out of the gate on Thursday is a company for which expectations are particularly modest, Calgary-based Encana Corp.

Canada’s biggest natural gas producer has come under fire following the collapse of its $5.4-billion joint venture with PetroChina this year and for its focus on producing gas, a product whose depressed price fell even further in the three months ended Sept. 30.

Next week will feature reports by oilsands producers including Nexen Inc., Cenovus Energy Inc., Canadian Oil Sands Ltd., Imperial Oil Ltd. and MEG Energy Corp. and the following week it’s Husky Energy Inc., Suncor Energy Inc., Canadian Natural Resources Ltd. and Talisman Energy Inc.

“Q3 results should be a story of extreme bifurcation, with E&Ps (explorers and producers) seeing significantly lower numbers sequentially due to generally lower price realizations while integrateds reap the benefits of record crack spreads,” said CIBC World Markets energy analyst Andrew Potter in a report.

Potter added he expects earnings per share to be up 11 per cent over the previous quarter for the integrated companies (which both produce and refine oil) and a substantial 122 per cent compared with the same quarter in 2010.

Cash flow per share for large capitalization producers is expected to fall two per cent from the second quarter but advance four per cent over the same period of 2010.

“Canadian and U.S. mid-continent refiners continued to benefit from the strong refined product export market and lower purchase feedstock costs, driven by the crude oil supply glut at Cushing (Okla.), which should translate into strong downstream results for Q3,” says a note from Calgary investment bank Peters&Co. Ltd.

West Texas Intermediate crude averaged $89.54 US per barrel in the quarter, down 13 per cent from the previous three months, and Europe-traded Brent was $112.09, off four per cent. Near month natural gas prices in New York averaged $4.05 US per thousand cubic feet, down seven per cent from the second quarter.

In an interview, BMO Capital Markets analyst Randy Ollenberger said the persistent WTI-Brent price differential is helping refiners’s bottom line.

“The refining companies are largely capturing that spread between WTI and Brent,” he said. “It’s not as much a function of strong downstream markets as a function of just discounted feedstock costs.”

Oilsands miners that upgrade to synthetic crude, such as Suncor and Imperial (through Syncrude), are getting a good premium for their products while producers of bitumen that buy synthetic to blend so it will flow in a pipeline are seeing higher costs, Ollenberger added.

In July, Encana said it expects to announce by year-end a joint venture deal on its Cutbank Ridge, B.C., play that will partly replace the failed PetroChina joint venture, adding it would sell midstream assets as well.

It is not expected to announce the joint venture deal on Thursday, Ollenberger said.

CIBC reckons Encana will report cash flow per share of $1.46, down one per cent from the second quarter and five per cent from the same period of 2010, as production comes in at 3.5 billion cubic feet equivalent per day, up two per cent from Q2 and six per cent year over year.

Suncor, which reports Nov. 3, is picked by both Peters&Co. and CIBC to have an outstanding quarter compared to previous periods as it benefits from all three market positives — synthetic crude premiums, strong refining margins and Brent pricing for its European output.

Also getting a Brent boost will be Nexen, Talisman and Husky, CIBC added.

dhealing@calgaryherald.com