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Imperial Oil (IMO) Tops Earnings and Sales Estimates in Q2

Zacks Equity Research

Imperial Oil IMO recently released second-quarter 2018 results, wherein it delivered a comprehensive beat. The company reported second-quarter 2019 earnings per share of 66 cents, surpassing the Zacks Consensus Estimate of 60 cents. The outperformance can be attributed to stronger contribution from its upstream and downstream segments. The Canadian integrated oil and gas player’s bottom line also surged from the year-ago figure of 19 cents.

Meanwhile, Canadian integrated peers like Cenovus Energy CVE and Suncor Energy SU lagged earnings estimates in the latest quarterly release.

Imperial Oil generated second-quarter revenues of $6,924 million, surpassing the Zacks Estimate of $6,660 million. However, the top line plunged from the year-ago figure of $7,396 million.

Imperial Oil Limited Price, Consensus and EPS Surprise

Imperial Oil Limited Price, Consensus and EPS Surprise

Imperial Oil Limited price-consensus-eps-surprise-chart | Imperial Oil Limited Quote

Segmental Information

Upstream: Revenues from the segment came in at C$3,707 million, increasing from second-quarter 2018’s C$2,971 on higher output levels. As such, the segment swung to a profit of C$985 million against C$6 million loss in the year-ago period. Favorable tax impacts to the extent of C$689 million aided the results.

Net production volumes during the quarter under review averaged 354,000 barrels of oil equivalent per day (Boe/d) compared with 296,000 Boe/d in the year-ago period. Total oil and NGL output amounted to 331,000 barrels per day (BPD) versus 276,000 BPD in second-quarter 2018. Net oil and NGL output from Kearl and Cold Lake totaled 140,000 bpd and 1108,000 bpd, respectively. Syncrude output averaged 69,000 BPD, rising 50% from the year-ago quarter on stronger asset reliability. Net natural gas production came in at 139 million cubic feet per day (Mcf/d), higher than 122 Mcf/d in the prior-year quarter.

Bitumen (accounting for 75% of output) price realizations totaled 57.19 a barrel, up from $48.90 in the year-ago quarter. The company received average realized price of C$79.96 per barrel of synthetic oil compared with the year-ago quarter’s C$86.31. For conventional crude oil, it received C$58.20 per barrel compared with the year-ago figure of C$74.55. Prices of NGL and gas declined on a y/y basis to C$16.78 a barrel and C$1.94 per thousand cubic feet, respectively.

Downstream: Revenues from the downstream segment totaled C$6,881 million, declining from $7,221 million in second-quarter 2018. The segmental net income totaled C$258 million, increasing from C$201 million owing to lower net turnaround impacts.

Refinery throughput in second-quarter 2019 averaged 344,000 BPD, depicting a decline from the prior-year level of 363,000 BPD. Capacity utilization came in at 81% versus 86% in the corresponding quarter of the last year. Petroleum product sales were 477,000 BPD compared with the prior-year level of 510,000 BPD.

Chemical: The segment generated revenues of C$314 million versus C$402 million in second-quarter 2018. Net income from the segment was recorded at C$38 million compared with the year-ago figure of C$78 million. The decline came on the back of lower industry margins.

Total Costs & Capex

Total expenses during the quarter were C$8,532 million, lower than the year-ago level of C$9,279 million.

In the quarter under review, the company’s total capital and exploration expenditures were C$429 million, higher than the year-ago level of C$284 million. Of the total expenditure in second-quarter 2019, 70% was allotted to the upstream segment.

Financial Performance

Imperial Oil generated cash flow from operating activities of C$1,029 million in the quarter under review. The figure improved from the year-ago level of C$859 million.

Importantly, in the quarter under review, it paid back C$515 million to its shareholders through dividends and share buybacks. The company paid 19 Canadian cents as dividend per share in the reported quarter compared with 16 Canadian cents in the year-ago period. Imperial Oil bought back around 9.8 million shares in the quarter for C$368 million, including those bought from Exxon Mobil Corporation XOM.

As of Jun 30, the company held C$1,087 million in cash and cash equivalents. Its long-term debt amounted to C$5,168 million, representing a debt-to-capital ratio of around 17.1%.

For full-year 2019, the Zacks Rank #3 (Hold) company’s total capital expenditure is now expected in the range of C$1.8-C$1.9. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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