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Imperial Oil (IMO) to Face $0.9-$1.2B Impairment Charges in Q4

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Imperial Oil Limited (IMO - Free Report) recently expressed that it has no more intention to develop a substantial chunk of its unconventional portfolio in Alberta after re-evaluating the long-term development plans of the same.

With the removal of these non-producing, undeveloped assets from its development plans, the company expects to witness non-cash, after-tax impairment charge of $0.9-$1.2 billion in the December quarter. However, its impairment does not comprise the high-value, liquids-rich segment of its unconventional asset portfolio, which it aims to develop.

Notably, the company’s write-down decision is in sync with its strategy to concentrate more on lucrative portions of its unconventional portfolio and major oil sands assets. Also, the charges will not impact Imperial Oil's earlier-provided production guidance.

Exxon Mobil Corporation (XOM - Free Report) , which holds 69.6% ownership stake in Imperial Oil, also plans the removal of certain underperforming natural gas assets from its development plans and expects to bear a non-cash, after-tax impairment charge of $17-$20 billion in the final quarter of 2020. This marks the company’s largest-ever impairment.

Last week, Imperial Oil announced that it will economize workforce by nearly 200 of its 6,000 total employees across Canada. Also, the company slashed the headcount of contractors that it recruits by about 450 since the commencement of this year. All these initiatives are integral to the company’s cost-controlling measures on account of softness in crude prices.

The currently Zacks Rank #3 (Hold) Imperial Oil enters the bracket of other Canadian energy companies, namely Cenovus Energy (CVE - Free Report) ,  Suncor Energy (SU - Free Report) and Husky Energy in strategically cutting jobs. These industry players aim to overcome the tough times while maintaining financial flexibility and operational excellence. Markedly, bolstering the companies’ capital positions at a time when oil prices seldom reap any profits for most producers, is touted to be a wise move. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brief on Imperial Oil

Founded in 1880, Calgary-based Imperial Oil is one of the largest integrated oil companies of Canada, mainly engaged in oil and gas production, petroleum products refining, and marketing and chemical business.

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