Imperial Oil Ltd Reports Operating Results (10-Q)

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Nov 05, 2009
Imperial Oil Ltd (IMO, Financial) filed Quarterly Report for the period ended 2009-09-30.

Imperial Oil is Canada's largest integrated petroleum company. Its operations conducted under the ``Esso`` banner are concentrated in the exploration and production of oil and natural gas refining and marketing petroleum products and in the manufacture and sale of petrochemicals. The company has approximately 7500 employees in two operating divisions. Imperial Oil Ltd has a market cap of $32.08 billion; its shares were traded at around $37.85 with a P/E ratio of 9 and P/S ratio of 1.1. The dividend yield of Imperial Oil Ltd stocks is 1%. Imperial Oil Ltd had an annual average earning growth of 34.8% over the past 10 years. GuruFocus rated Imperial Oil Ltd the business predictability rank of 2.5-star.

Highlight of Business Operations:

The companys net income for the third quarter of 2009 was $547 million or $0.64 a share on a diluted basis, compared with $1,389 million or $1.57 a share for the same period last year. Net income for the first nine months of 2009 was $1,045 million or $1.22 a share on a diluted basis, versus $3,218 million or $3.60 a share for the first nine months of 2008.

Net income in the third quarter was $439 million versus $999 million in the same period of 2008. Earnings decreased primarily due to lower crude oil and natural gas commodity prices of about $950 million as a result of the global economic downturn. Lower realizations were partially offset by lower royalty costs due to lower commodity prices of about $200 million, the impact of a lower Canadian dollar of about $115 million and lower energy costs of about $95 million.

Net income for the first nine months was $833 million versus $2,587 million during the same period last year. Crude oil and natural gas commodity prices were lower by about $3,000 million compared to the first nine months of 2008. Earnings were also negatively impacted by lower cyclical Cold Lake heavy oil production of about $50 million, lower Syncrude volumes of about $30 million and lower conventional volumes from expected reservoir decline of about $30 million. These factors were partially offset by lower royalty costs due to lower commodity prices of about $750 million and the impact of a lower Canadian dollar of about $590 million.

Nine-month net income was $226 million, compared with $539 million in 2008. Earnings in the first nine months of 2008 included a gain of $187 million from the sale of Rainbow pipeline. Also impacting earnings in 2009 were lower overall downstream margins of about $90 million and lower sales volumes of about $60 million due to the slowdown in the economy. Higher planned maintenance activities at the refineries also negatively impacted earnings by $30 million. These factors were partially offset by the favourable impact of a weaker Canadian dollar of about $65 million.

Investing activities used net cash of $545 million in the third quarter and $1,431 million in the first nine months of 2009, an increase of $238 million and $850 million from corresponding periods in 2008. Additions to property, plant and equipment were $554 million in the third quarter, compared with $326 million during the same quarter of 2008, and $1,478 million in the first three quarters of 2009, compared with $839 million in the same period last year. Expenditures were primarily for advancing the Kearl oil sands project. Other upstream investments included development drilling at Cold Lake, facilities improvements at Syncrude, exploration drilling at Horn River and development drilling at conventional fields in Western Canada. For the Downstream segment, capital expenditures were focused mainly on refinery projects to increase sulphur recovery and reduce sulphur dioxide emissions, upgrade water management systems as well as enhance feedstock flexibility and energy efficiency. Proceeds from asset sales were $8 million in the third quarter and $45 million in the first nine months of 2009, compared with $19 million and $260 million in the corresponding periods of 2008. The 2008 results included proceeds from the sale of Rainbow pipeline.

Cash dividends of $257 million were paid in the first nine months of 2009, compared with dividends of $242 million in the same period of 2008. Per-share dividends declared in the first three quarters of 2009 totaled $0.30, up from $0.28 in the same period of 2008.

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