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Imperial Oil (IMO) Q4 Earnings Beat Estimates, Sales Miss

Zacks Equity Research

Imperial Oil Limited IMO reported fourth-quarter 2018 earnings per share of 82 cents, beating the Zacks Consensus Estimate of 71 cents, supported by catapulted profit levels from the downstream segment. The bottom line depicts a significant rise from the year-ago figure of 41 cents.

During the quarter under review, the company generated $5,971 million in revenues, missing the Zacks Estimate of $8,271 million. The top line also plunged from the year-ago figure of $6,360 million. The decline stemmed from lower realized commodity prices.

Imperial Oil Limited Price, Consensus and EPS Surprise

Imperial Oil Limited Price, Consensus and EPS Surprise | Imperial Oil Limited Quote

Segmental Information

Upstream: Production volumes during the quarter under review averaged 431,000 barrels of oil equivalent per day (Boe/d) compared with 399,000 Boe/d in the year-ago period. Notably, the company recorded the highest liquid output of 407,000 barrels per day (BPD) in the quarter. Imperial Oil achieved gross output from Kearl of 206,000 BPD, of which its net share is 146,000 BPD.

The company received average realized price of C$47.63 per barrel of synthetic oil compared with the year-ago quarter’s C$74.12. For conventional crude oil, it received C$22.95 per barrel compared with the year-ago figure of C$60.05.

Revenues from the segment came in at C$2,290 million, down from fourth-quarter 2017’s C$2,905. As such, segmental loss in the quarter was recorded at C$310 million, narrower than the year-ago period’s $481 million, due to higher volumes and favorable foreign exchange effects.

Downstream: Refinery throughput in the fourth quarter of 2018 averaged 408,000 BPD, depicting an increase from the prior-year level of 391,000 BPD. Capacity utilization came in at 96% versus 92% in the corresponding quarter of the last year.

Petroleum product sales amounted to 510,000 BPD compared with the prior-year level of 496,000 BPD. Full-year 2018 sales were recorded at 504,000 BPD, the highest in the last three decades.

Revenues from the downstream segment totaled C$6,295 million, up from $6,011 million in the fourth quarter of 2017. Consequently, the segmental net income skyrocketed to C$1,142 million from $290 million in the year-ago period, due to strong operating performance and margins.

Chemical: The segment generated revenues of C$331 million versus C$357 million in the fourth quarter of 2017. Net income from the segment was recorded at C$55 million compared with the year-ago figure of C$74 million. The decline came on the back of lower industry margins.

Cost and Expenses

Total expenses in the quarter came in at C$6,804 million, lower than the year-ago level of C$8,286 million.

Capital Expenditure

In the quarter under review, the company’s total capital and exploration expenditures came in at C$493 million, higher than the year-ago level of C$216 million. Of the total expenditure in fourth-quarter 2018, 70% was allotted to the Upstream segment.

Financial Performance

Importantly, in the quarter under review, it paid back C$151 million to its shareholders through dividends. The company paid 19 Canadian cents as dividend per share in the reported quarter compared with 16 Canadian cents in the year-ago period. The company bought back around 10.1 million shares in the quarter for C$410 million, including those bought from Exxon Mobil Corporation (XOM).

As of Dec 31, Imperial Oil held C$988 million in cash and cash equivalents. Its long-term debt amounted to C$5,180 million, representing a debt-to-capital ratio of around 17.5%.

Cash Flow

Imperial Oil generated cash flow from operating activities of C$871 million in the quarter under review. The figure was down from year-ago level of C$1,080 million.

Guidance

For full-year 2019, the company’s total capital expenditure is expected in the range of C$2.3-C$2.4 billion, including C$800 million related to the company’s Aspen in-situ project.

Zacks Rank and Stocks to Consider

Currently, Imperial Oil has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks as given below.

Houston, TX-based Shell Midstream Partners, L.P. SHLX is a midstream energy company. For 2019, its bottom line, which has witnessed three upside revisions over the past 60 days, is expected to grow 27.7% year over year. The company currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Houston, TX-based Phillips 66 Partners LP PSXP is an oil and gas midstream company. Its bottom line for 2018 is expected to increase more than 56% year over year. It delivered average positive earnings surprise of more than 6% in the trailing four quarters. The stock currently has a Zacks Rank #2.

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