Cenovus Energy Inc. chief executive Brian Ferguson said Wednesday he's carefully considering whether to spin out 4.5 million acres of royalty land into a new entity, as Encana did with PrairieSky Royalty Ltd

Ferguson says he's been asked numerous times by existing and prospective shareholders whether the Calgary-based company would consider a spinoff.

"I want to make sure that anything that Cenovus considers and contemplates is something that has got sustainable value for Cenovus shareholders," Ferguson said in an interview following the release of Cenovus' second-quarter results.

"I don't want to do something that in one or two years, for whatever reason, we may regret. So I'm being very thoughtful about this."

Royalty play

A spinout could be a good way to "crystallize" value from land that traces its roots back to Canadian Pacific's erstwhile energy business, providing a high-quality, low cost stream of cash flow. But as things stand today, investors are benefiting from the properties, which have helped Cenovus sustain its dividend and internally fund oilsands growth.

Cenovus also said it has appointed a vice president of rail to its leadership team, as the major oilsands producer moves more of its crude by train.

The Calgary-based company made its announcement as it posted a more than threefold increase in second-quarter profits and a 33 per cent jump in oilsands production.

Most oil producers say they'd prefer to ship their oil to market by pipeline, as it's more efficient. But with environmental opposition clouding the outlook for pipelines, Cenovus and many of its peers have been increasingly turning to rail as an alternative — a controversial proposition, especially after last year's deadly crash in Lac-Mégantic, Que.

Kent Avery has been tasked with overseeing Cenovus' rail transport. As part of a broader effort to get more value out of the oil and gas it produces, Cenovus has also appointed Bob Pease as executive vice-president of markets, products and transportation.

Delivery by rail on increase

The company completed eight unit train deliveries during the first half of the year. Unit trains consist of 100 or so rail cars carrying a single product. Cenovus says it's on track to reach 30,000 barrels of rail loading capacity by the end of this year.

Cenovus brought in $615 million in net earnings during the quarter, or 81 cents per share. That's up from $179 million, or 24 cents per share diluted, in the same quarter last year.

Operating earnings, which strip out the effects of one-time items, were $473 million, or 62 cents per share — up 85 per cent from a year earlier and handily beating the average analyst estimate of 49 cents per share, according to Thomson Reuters.

Cash flow was almost $1.2 billion versus $871 million year-over-year, up 37 per cent, as Cenovus said it benefited from increased oil production and higher commodity prices.

Oilsands production up 33%

Cenovus is known for its steam-driven oilsands operations in northeastern Alberta.

The company's oilsands production averaged almost 125,000 barrels per day net in the second quarter, up 33 per cent from a year earlier, primarily driven by its Christina Lake project in northern Alberta. At its Foster Creek oilsands project, the company has been working to circulate steam more effectively through the maturing reservoir.

Shares in the company were up nearly three per cent at $33.75 in late-morning trading on the Toronto Stock Exchange