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Why Is Imperial Oil (IMO) Up 14.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Imperial Oil (IMO - Free Report) . Shares have added about 14.5% in that time frame, outperforming the S&P 500.

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

Imperial Oil Misses on Q4 Earnings

Imperial Oil reported fourth-quarter 2020 adjusted earnings per share of 2 cents, missing the Zacks Consensus Estimate of 7 cents and the year-ago quarter’s profit of 27 cents. This underperformance was due to reduced revenue contribution from both the upstream and downstream segments along with a non-cash impairment charge of $1,171 million as the company ceased further development of a major portion of its unconventional portfolio.

Moreover, this Canadian integrated oil and gas player’s quarterly revenues of $4.63 billion missed the Zacks Consensus Estimate of $4.9 billion. Also, the top line fell from the year-ago quarter’s sales of $6.18 billion.

Segmental Information

Upstream: Revenues of C$2,940 million decreased from the prior-year level of C$3,259 million. The segment incurred a net loss of C$1,192 million against net income of C$96 million in the year-ago quarter. This downside was due to lower realizations of around $270 million and higher operating expenses of nearly $70 million along with a non-cash impairment charge of $1,171 million as the company stalled further advancement of a major portion of its unconventional portfolio.

Net production volumes during the quarter under review averaged 440,000 barrels of oil equivalent per day (Boe/d), up from 362,000 Boe/d in the year-ago quarter. Total oil and NGL output amounted to 417,000 barrels per day (BPD) compared with 335,000 BPD in fourth-quarter 2019. Net oil and NGL output from Kearl and Cold Lake totaled 199,000 bpd and 120,000 bpd, respectively. Syncrude output averaged 82,000 BPD, down 34.4% from the year-earlier quarter. Net natural gas production came in at 136 million cubic feet per day (Mcf/d), lower than 163 Mcf/d in the comparable quarter last year.

Bitumen price realizations totaled C$34.19 a barrel, down from C$42.80 in the year-ago quarter. The company received an average realized price of C$51.28 per barrel of synthetic oil compared with the year-ago quarter’s C$74.12. For conventional crude oil, it received C$27.21 per barrel compared with the year-ago quarter’s C$43.44. Prices of NGL decreased to C$19.03 a barrel while that of gas increased to C$2.25 per thousand cubic feet year over year, respectively.

Downstream: Revenues of C$4,213 million were down from $5,810 million in fourth-quarter 2019. Moreover, the segment incurred a net income of C$106 million compared with C$225 million in the year-ago quarter, attributable toweak margins of about $240 million and soft sales volumes of around $60 million.

Refinery throughput in the fourth quarter averaged 359,000 BPD, higher than the prior-year quarter’s level of 321,000 BPD. Capacity utilization of 85% compared favorably with the year-earlier level of 76%. This result was on account of the absence of prior-year planned turnaround activity at Nanticoke.

Chemical: Revenues of C$281 million rose from C$226 million in fourth-quarter 2019. Net income was recorded at C$23 million against the year-ago quarter’s reported net loss of C$2 million.

Total Costs & Capex

Total expenses of C$7,496 million declined from the year-ago quarter’s C$7,757 million.

In the quarter under consideration, the company’s capital and exploration expenditures summed C$195 million, down from the year-ago quarter’s C$414 million. Of the total expenditure, 54.9% was allotted to the upstream segment.

Financial Performance

Imperial Oil’s cash flow from operating activities was C$316 million in the reported quarter. However, in the year-ago period, cash flow from operating activities came in at C$1,024 million.

Importantly, the company returned C$161 million to its shareholders through dividends in the reported quarter. It paid out 22 Canadian cents per share of dividend, which matched the year-ago figure.

As of Dec 31, the company held C$771 million in cash and cash equivalents. Its total debt amounted to C$5,184 million, representing a total debt to total capital of 19.5%.

Outlook

Imperial Oil projects its 2021 guidance for output from Cold Lake at 130,000 BPD and from Kearl at 255,000 BPD. For the ongoing year, the company anticipates its capital expenditures to be $1.2 billion.


 

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months. The consensus estimate has shifted 10.26% due to these changes.

VGM Scores

At this time, Imperial Oil has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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