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Why Is Imperial Oil (IMO) Down 0.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Imperial Oil (IMO). Shares have lost about 0.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Imperial Oil due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Imperial Oil Q3 Earnings Beat, Revenues Lag Estimates

Imperial Oil reported third-quarter 2022 adjusted earnings per share of $2.22, which beat the Zacks Consensus Estimate of $2.09. The outperformance was largely due to an overall positive macro environment and high commodity prices, driven in large part by supply challenges. Moreover, the bottom line improved significantly from the year-ago quarter’s profit of $1.02 per share due to a year-over-year increase in sales.

However, the Canadian integrated oil and gas player’s quarterly revenues of $11.67 billion underperformed the Zacks Consensus Estimate of $14.33 billion though it rose from the year-ago quarter’s sales of $8.13 billion.

Segmental Information

Upstream: Revenues of C$4,949 million increased from the prior-year level of C$4,152 million. The segment reported a net income of C$986 million, higher than the net income of C$524 million in the year-ago quarter. This upside was driven by improved realizations and higher volumes in the reported quarter.

During the quarter under review, net production volumes averaged 361,000 barrels of oil equivalent per day (Boe/d), down from 389,000 Boe/d in the year-ago quarter. The total oil and NGL output amounted to 346,000 barrels per day (bpd) compared with 370,000 bpd in the third quarter of 2021.

Net oil and NGL output from Kearl and Cold Lake totaled 175,000 bpd and 111,000 bpd, respectively. Syncrude output averaged 51,000 bpd, down from the year-earlier level of 66,000 bpd. Net natural gas production came in at 87 million cubic feet per day (Mcf/d), lower than 111 Mcf/d in the last year’s comparable quarter.

Bitumen price realizations totaled C$81.58 a barrel, up from C$60.44 in the year-ago quarter. IMO received an average realized price of C$124.80 per barrel of synthetic oil compared with the year-ago quarter’s C$85.94.

Imperial Oil received C$94.87 per barrel for conventional crude oil, compared with the year-ago quarter’s C$59.54. The price of NGL increased to C$61.61 a barrel, while the same for gas rose to C$5.10 per thousand cubic feet.

Downstream: Revenues of C$16,236 million skyrocketed from C$9,197 million in the third quarter of 2021. Moreover, the segment earned a net income of C$1,012 million compared with C$293 million in the year-ago quarter, attributable to the high realization in Downstream and an attractive refining margin environment.

The refinery throughput in the third quarter averaged 426,000 bpd, higher than the prior-year level of 404,000 bpd. The capacity utilization of 100% compared favorably with the year-earlier level of 94%. This outperformance was due to increased reliability and optimization.

Chemical: Revenues of C$520 million rose from C$477 million in the third quarter of 2021. The net income for this segment was recorded at C$54 million, down from C$121 million in the year-ago quarter.

Total Costs & Capex

Total expenses of C$12,719 million increased from the year-ago quarter’s C$9,044 million.

In the quarter under consideration, Imperial Oil’s capital and exploration expenditures totaled C$392 million, higher than the year-ago quarter’s C$277 million.

Financial Performance

Imperial Oil’s cash flow from operating activities was C$3.09 billion in the reported quarter. In the year-ago period, cash flow from operating activities had come in at C$1.95 billion. Meanwhile, IMO’s free cash flow in the third quarter of 2022 totaled C$3.45 billion.

The company returned C$227 million to its shareholders through dividends in the reported quarter.

As of Sep 30, Imperial Oil held C$3.58 billion in cash and cash equivalents. Its total debt amounted to C$4.16 billion.

Outlook

Imperial Oil announced its intention to initiate another substantial issuer bid to return an additional $1.5 billion to its shareholders in the fourth quarter. Consistent with this sustained production performance, Imperial Oil updated its 2022 production guidance at Cold Lake to range between 140,000 and 145,000 bpd. The capital expenditure guidance for the full year has been maintained at around C$1.4 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

The consensus estimate has shifted -10.38% due to these changes.

VGM Scores

Currently, Imperial Oil has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Imperial Oil has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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