IMPERIAL OIL LTD. $41(Toronto symbol IMO; Conservative Growth and Income Portfolios, Shares outstanding: 847.6 million; Market cap: $34.8 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.4%; TSINetwork Rating: Average; www.imperialoil.ca) gets about 90% of its crude oil from its Alberta oil sands operations, including its 25% stake in the Syncrude project.
In addition, it has conventional oil and natural gas operations, also in Western Canada, and owns stakes in projects off the coast of Atlantic Canada.
Imperial also owns three refineries, petrochemical plants and 1,700 gas stations, which operate under the Esso banner.
In 2015, Imperial produced an average of 366,000 barrels of oil equivalent (94% oil, 6% natural gas), up 18.1% from 310,000 in 2014. That’s because Imperial recently started up the second phase of its Kearl oil sands project in Alberta. The company owns 71% of Kearl; Exxon- Mobil (New York symbol XOM) holds the remaining 29%. Exxon also owns 69.9% of Imperial.
However, lower oil and gas prices cut Imperial’s revenue in 2015 by 27.3%, to $26.9 billion from $37.0 billion. Earnings declined 70.4%, to $1.1 billion, or $1.32 share. That’s partly due to a $320-million charge related to Alberta’s higher corporate tax rates. In 2014, it earned $3.8 billion, or $4.45, which included a $478-million gain on the sale of assets. Cash flow per share fell 45.4%, to $3.41 from $6.24.
Now that Imperial has completed the Kearl project, its capital spending will fall to $1.8 billion in 2016 from $4.0 billion in 2015. That should support its $0.56-a-share dividend, which yields 1.4%.
The stock now trades at 12.6 times Imperial’s projected 2016 cash flow of $3.25 a share. That’s still a reasonable multiple in light of the company’s profitable refining operations and large reserves.
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