QUOTE AND NEWS
SeekingAlpha  Apr 28  Comment 
Forbes  Nov 28  Comment 
On 11/30/16, Imperial Oil Ltd (Toronto: IMO) will trade ex-dividend, for its quarterly dividend of $0.15, payable on 1/1/17. As a percentage of IMO's recent stock price of $45.01, this dividend works out to approximately 0.33%. Click here to find...
The Hindu Business Line  Nov 22  Comment 
India’s first female Merchant Navy captain has become the first woman to be awarded by the IMO for exceptional bravery in the dramatic rescue of seven fishermen from a sinking fishing boat in tumultu...




 

Imperial Oil AMEX:IMO, TSX:IMO is a Canadian oil, gas and petrochemical producer that also engages in exploration and development activities. As a petroleum company, it refines over 400,000 barrels of oil per day at 2 refineries in Ontario, 1 in Dartmouth, Nova Scotia (which is the smallest but has experienced more steady output over the last 5 years, throughput has not declined as much as the other three over that period) and its largest in Strathcona, Alberta.

Presently numerous factors are contributing to increased pressure on oil prices to rise; they include emerging economies like India and fewer conventional oil supplies (heavier oil like bitumen which makes up a significant part of Imperial Oil's resources, is in higher demand; higher oil prices also make it more viable to produce from unconventional sources which require greater expense to develop and process).

Imperial Oil is also a producer of Ethanol blended gasoline and markets biodiesel; biofuels are in growing demand in the West where governments are under increasing pressure to curb specific elements of pollution including greenhouse gases; though the comany estimates that oil and gas will still supply about 60% of the world's energy needs over the next twenty years.[1][2]

In 2009 the company experienced large declines in revenue (31.84%) and net income (net income per share down 57.63%) on account of lower fuel prices, lower refinery throughput (down 7.4%, largest decline in five years) and lower sales of petroleum products (down 6.6% in 2009 to the lowest level in 5 years, gasolines which are the largest segment showed strong results however heating, diesel and jet fuels as well as lube oil and other products were down (by 10.78%).

Kearl Oil Sands project initial development is about 50% complete (January 2011) and is estimated to begin operating in in Q1 2013 when it will be capable of producing 110,000 barrels a day (much of the billion dollar capital expenditure spent by Imperial Oil in the last quarter of 2010 went to development of the Kearl Oil Sands project).

Company overview

Not counted in 2P reserves (which amounted to 2.153 billion barrels of oil equivalent at the beginning of 2010) is most of its bitumen resource base (which can be easily exploited when oil prices are high and with the right oil extraction technology (like Petrobank's THAI technology which could be 17% more efficient than existing steam assisted gravity drainage)); the company's total resource base in early 2010 was about 15 billion barrels of oil equivalent.[3] Proved reserves which represent only about 14.3% of total resources are still large enough to last the company over 25 years at current production rates.[2]

Key production regions include Cold Lake, Alberta (avg net production in 2009 was 120,000 bbls per day, for the first nine months of 2010 gross production averaged 143,000 bbls per day down 1000 bbl per day compared to the previous year because of the cyclic nature of production there; most production at Cold Lake is refined in the US except for a Bitumen upgrading facility in Lloydminster, Saskatchewan), Athabasca oil sands deposit near Fort McMurray, Alberta which is part of Syncrude (in 2009 65,000 bbls per day of the operation's 259,000 bbls per day net production was Irving Oil's share (has a 25% interest in Syncrude); for the first nine months of 2010 production from Syncrude was 71,000 barrels per day up 7.58%, Norman Wells, NWT (contributed 56% of Irving Oil's conventional oil production in 2009, 11,000 barrels per day net production). For the first nine months of 2010 gross natural gas production was 282 million cubic feet per day down 4.08% due to maintenance and a smaller reservoir. Gross conventional oil production in the first nine months of 2010 was 22,000 barrels per day down 8% because of maintenance at Norman Wells and a diminishing reservoir.[4]

Key development and exploration regions and asserts are the Horn River shale gas project in Western Canada, 50% interest in a Beaufort Sea exploration license., an interest in 3 natural gas fields in the Mackenzie Delta (with 3 other companies) including a 100% interest in the biggest gas field there, oil sands leases in Athabasca and Peace River, Northern Alberta, a 70.96% interest in the Kearl project (shared with another subsidiary of Exxon Mobil the company's largest shareholder), 40 miles from Fort McMurray, Alberta

In 2009 $300 million in capital expenditure went to Cold Lake, adding 30,000 barrels a day in gross production.

The company operates in 3 segments;

  • Upstream - Is the company's exploration and production arm. Activity takes place mostly in Western Canada and offshore Atlantic Canada. Products include natural gas, crude oil and heavy bitumen as well as petrochemical products and synthetic oil.
  • Downstream - Transports, distributes and refines crude oil and petrochemical products. Marketing is done under the Esso brand name which oversees nearly 2000 gas stations and associated retail operations.
  • Chemical - Makes and markets various products including ethylene, benzene and plasticizer intermediates (which participate in polymerization reactions the result of which is various polymers, resins).

A bright spot for the company in 2009 was its gross land holdings of developed land up 1% by the end of the year (increase came entirely from liquids and gas). In terms of drilling wells, the total was up to 937 (627 net) for oil and gas which is an increase of 2.3% (4.3% net) over 2008. There were 215 fewer bitumen drilled wells compared to 2008 (down 5.07%).

2010 production (gas, synthetic oil)

Synthetic oil production at syncrude (its share) rose 7.3% to 73,000 bbl/d in 2010 due to operational reliability improvements while conventional production (liquids/crude) was 8% lower to 23,000 bbl/d because of maintenance at Norman Wells and reservoir depletions. Natural gas production was lower by 5.1% (or 150 million ft3/d) to 46,700 boe/d due to maintenance activity and reservoir decline. Cold Lake production (bitumen) increased 2.13% (or 3,000 bbl/d) to 144,000 bbl/d; according to Imperial Oil, the positive results were largely due to the cyclic nature of production there.[5]

4th Quarter 2010 - gross production was 302,000 boe/d (8,000 boe/d more than the whole year) mostly due to increases in the quarter at Cold Lake. 79,000 bbl/d came (in the quarter) came from Syncrude, conventional oil was 24,000 bbl/d.

Shareholders

For much of its history Imperial Oil has been controlled by a large American oil company, more recently Exxon Mobil which owns 69.9% of shares. For the last couple years it has used an existing share repurchase program to buy back shares owned by minority owners and those owned by Exxon Mobil. The new program started in June 2010 uses shares traded on the Toronto Stock Exchange.[6]

Business and financials

net income
Cdn mil[7]
upstream downstream chemical corporate
2010qtr4[5] 526(1764year) 266 25 (18)
2009 1324 278 46 (69)
2008 2923 796 100 59
2007 2369 921 97 (199)
2006 2376 624 143 (99)
2005 2008 694 121 (223)
In the fourth quarter of 2009 current assets made up 20.06% of total assets ($3.505 billion) down from 27.26% ($4.643 billion) the year before. In 2009 total assets were up 2.57% despite the fall in current assets, mostly due to a strong showing in Property, plant and equipment, less accumulated depreciation and depletion (up 14.26% to $12.852 billion).[7]

In 2007 oil prices significantly impacted financial results, especially the price relating to Brent Crude which rose more rapidly than Canadian heavy oil (from the company's Bow River operation).[8]

2010 4th qtr - capex during the quarter was 1065 million 28% higher than the same period in 2009 a result of increased financing of operations around Kearl Oil sands. During the quarter net income amounted to Cdn$799 million.

2010 - Cdn$880 million of the company's 1764 million 2010 (entire year) upstream net income was a result of higher crude oil and natural gas prices, $90 million attributable to higher volumes out of Cold Lake. The stronger Canadian dollar cost the company $320 million during the year, higher royalty costs $255 million. Brent crude averaged $79.90 in 2010 29% higher than 2009.[5]

Cdn million[7] 2005 2006 2007 2008 2009 9M09[4] 9M10[4] Cdn million[7] 2005 2006[9] 2007[8] 2008 2009 9M09[4] 9M10[4]
operating revenue27,79724,50525,06931,24021,29215,53418,053 net income2600304431883878157910451411
cash flow345135873626426315916642203 total assets15,58216,14116,28717,03517,47316,82219,398
earnings per share2.543.123.434.391.861.231.66 ebit3918410045955200227914551901
shareholders equity66337406792390659439941010,746 total expenses24,29620,68821,06426,30319,19814,07916,255
dividends paid317315319330341257263 change in cash382497(950)766(1461)(1516)(462)

Production and Refining

refining
thousand bbls/day
[7]
2005 2006 2007 2008 2009 9M09[4] 9M10[4] production
thousand boe/day
[7]
2005 2006[9] 2007[8] 2008 2009 9M09[4] 9M10[4] 2010
Strathcona174160170155145 gross liquids/conv3831453733252323
Sarnia106111103108100 gross bitumen139152154147141144143144
Nanticoke1089410010794 gross synthetic oil5365767270667173
Dartmouth7977697674 gross production
incl gas
358365351308293284284294
total466442442446413 net production317310295255257

Competition

In terms of refiners Imperial Oil, Shell and PetroCanada (now part of Suncor) represent 36% of gas stations in Canada and the most popular gas station brand in every province of the country except Atlantic Canada (where local company Irving Oil does most of its business).[10] Since the merger of Suncor and Petro Canada Imperial Oil was close to losing the distinction of being the leading refiner in Canada. In 2009 it refined about 413,000 bpd which was about 30,000 bpd lower than the year before, its refining capacity remained steady at 502,000 bpd compared to Suncor's 443,000 bpd.[11]

Trends and Forces

New race on for patents featuring Canadian petroleum producers

Because of the decreasing amount of conventional oil available to be found in Canada and abroad and because of a greater reliance by Canadian producers on heavy bitumen (synthetic oil) many of them have been shifting their focus over to the technological aspect of the industry. 10% (170 billion barrels) of Canada's oil sands crude is considered recoverable, that means 1.6 trillion barrels of oil could be added to the reserve base of companies that can develop improved extraction technologies, the patents also give the more innovative companies licensing value. So far Petrobank Energy and Resources has led the charge for that kind of technology but others such as Imperial Oil (steel wire rope lubricants), Suncor (conveyor belts and hand railings) and Schlumberger Canada have begun patenting industrial components.[12]

Unusually high gas prices prompt Tony Clement to call parliamentary hearings

On May 12, 2011 Tony Clement, Canada's industry leader stated his intention of bringing together key executives in the oil refining and retail sectors in Ottawa where they will be subjected to questions regarding gas prices and the method used to determine it. As Canada's leading refiner and a key operator of gas filling stations (ESSO brand) Imperial Oil will be one of the companies directly affected. One of the concerns raised by Tony Clement and other ministers of parliament (MP's) is that although the price of oil is 31% lower (May 2011) than it was the previous year gas prices haven't fallen (remain near or above the Cdn$1.3, $1.4/L level). Even though federal gas taxes are a key component of the price of gas the federal government wouldn't commit to a review of the tax.[13]

References

  1. Biodiesel Could Reduce Greenhouse Gas Emissions (2007-11-30).
  2. 2.0 2.1 Irving Oil 2009 Annual Report (2010).
  3. Petrobank's THAI Technology Expands Exploitable Bitumen In Place (2010-03-12).
  4. 4.0 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 Imperial Oil 2010 Third Quarter Report (2010-11-01).
  5. 5.0 5.1 5.2 Imperial Oil 2010 Fourth Quarter Earnings Release (2011-01-31).
  6. Imperial Oil Continues Existing Share Repurchase Program (2010-06-23).
  7. 7.0 7.1 7.2 7.3 7.4 7.5 Imperial Oil SEC 10-K Form 2009 Annual Report (2010-02-26).
  8. 8.0 8.1 8.2 Imperial Oil 2007 Annual Report/ (2008).
  9. 9.0 9.1 Imperial Oil 2006 Annual Report (2007).
  10. Petroleum Products Distribution Networks Natural Resources Canada. Retrieved on 2010-11-26.
  11. Suncor 2009 Annual Report (2010-03-05).
  12. Petroleum patent pending (2011-01-09).
  13. Ottawa to grill gas-industry executives over soaring pump prices (2011-05-12).
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