At a time of economic uncertainty and lower oil prices, investors choosing energy stocks typically find more security with big integrated producers.
This Canadian giant has strong refining and marketing operations in addition to its oil and gas exploration and production. It is increasing its output in Alberta’s oil sands, and developing another oil sands project due to begin production in 2022. The company’s focus on Canada adds risk, largely due to a lack of new pipeline capacity. At the same time, this stock continues to reward shareholders with share buybacks and a dividend raised for the 23rd consecutive year.
The Real Deal in Canadian Blue Chips
Which stocks are tomorrow's blue chips?
Strong performance and smart management separate
the best from the rest for durable growth and income.
IMPERIAL OIL LTD. (Toronto symbol IMO; www.imperialoil.ca)is Canada’s third-largest publicly traded oil company, after Suncor (No. 1) and Canadian Natural Resources. U.S.-based ExxonMobil (New York symbol XOM) owns 69.6% of Imperial.
About 60% of the company’s production comes from its Alberta oil sands operations; they include its 25% stake in the Syncrude project. Suncor now owns 58.74% of Syncrude, but Imperial continues to manage the operation. The two companies are looking at various ways to further cut Syncrude’s costs and improve efficiency.
Another oil sands property is the Kearl project in Northern Alberta. Imperial owns 71% of Kearl, while ExxonMobil holds the remaining 29%. Kearl was one of two projects to receive the bulk of Imperial’s increased spending on exploration and upgrades this year (see below).
Imperial also has conventional oil and natural gas operations in the West and holds stakes in projects off the coast of Atlantic Canada.
At the end of 2017, the company’s reserves totalled 1.57 billion barrels (60% bitumen, 30% synthetic oil, 7% natural gas, and 3% crude oil and other liquids). Based on current production, those reserves would last roughly 14.5 years.
Imperial’s other operations include three refineries (one in Alberta, and two in Ontario), and a petrochemical plant in Sarnia, Ontario. The company also supplies gasoline to over 1,800 Esso and Mobil stations in Canada.
Due to lower oil prices, Imperial Oil’s revenue fell 26.2% from $36.2 billion in 2014 to $26.8 billion in 2015, and fell a further 6.4% to $25.05 billion in 2016. Oil prices moved higher in 2017, which is why Imperial’s revenue gained 16.3% to $29.1 billion.
In 2015, the company’s earnings dropped 70.3%, from $4.45 a share (or $3.8 billion) in 2014 to $1.32 a share (or $1.1 billion). However, they jumped 93.2% to $2.55 a share (or $2.2 billion) in 2016. That’s because Imperial sold its 500 company-owned gas stations to independent operators for a $1.7 billion gain. In 2017, writedowns of two projects cut earnings by 77.3%, to $0.58 a share (or $490 million).
Cash flow per share fell from $6.32 in 2014 to $3.50 in 2015, and to $2.04 in 2016. But it rebounded to $3.48 in 2017.
Energy stocks: Company achieves big production upgrade at oil sands project
In the third quarter of 2018, the company produced an average of 393,000 barrels a day. That’s up slightly from 390,000 a year earlier. Thanks to higher oil prices, revenue jumped 36.0%, to $9.7 billion from $7.2 billion a year earlier.
Imperial earned $749 million in the third quarter, 101.9% higher than a year earlier. Due to fewer shares outstanding, it earned $0.94 a share in the quarter—113.6% higher than a year earlier. In addition to better crude prices, higher profits from the company’s refineries contributed to the earnings gain. Imperial’s cash flow in the latest quarter also jumped 52.5%, to $1.51 a share from $0.99.
For all of 2018, Imperial planned to spend $1.5 billion on exploration and upgrades to its existing operations. That’s up 123.7% over its total 2017 spending of $671 million.
Most of this year’s increase was for two projects. Those include the Kearl oil sands project.
Upgrades to Kearl’s bitumen-processing operations let the company increase that project’s production from 180,000 barrels a day (127,800 barrels to Imperial) in the second quarter of 2018 to 244,000 (173,000 to Imperial) in the third quarter. That offset declines at the Cold Lake and Syncrude operations.
Imperial is also building a natural-gas-fired cogeneration electrical power plant at its refinery near Edmonton. When the company completes this project in early 2020, the new plant will supply about 75% of the refinery’s power needs.
Those two projects, together with new oil extraction technologies that require much less steam, will help Imperial with its plan to cut its greenhouse gas emissions per barrel by 10% over the next five years.
Imperial now plans to develop the Aspen oil sands project 45 kilometres northeast of Fort McMurray, Alberta.
The project will cost $2.6 billion. That’s equal to 8% of Imperial’s $32.4 billion market cap.
The company plans to begin construction later this year. Aspen should begin operating in 2022. It will initially produce 75,000 barrels a day. To put that in context, Imperial’s overall production in the third quarter of 2018 averaged 393,000 barrels a day. Future expansion could increase Aspen’s daily output to 150,000 barrels a day.
The company’s strong balance sheet will help support those new projects. As of September 30, 2018, Imperial’s long-term debt was $4.9 billion, or a moderate 18% of its market cap. The company also held cash of $1.1 billion.
Despite the higher capital spending, Imperial still plans to buy back up to 40.4 million of its shares (5% of the total outstanding) by June 26, 2019. In the first half of 2018, the company spent $1.1 billion on buybacks.
Starting with the July 2018 payment, Imperial increased its quarterly dividend by 18.8%, to $0.19 a share from $0.16. The new annual rate of $0.76 yields 2.1%. The company has now increased the annual dividend rate each year for the past 23 years.
The stock trades at a reasonable 14.1 times the projected 2018 earnings of $2.42 a share. It’s also attractive at just 5.7 times Imperial’s likely full-year cash flow of $5.92 a share.
Learn everything you need to know in
'The Power and Profits of Energy Stocks'
FREE Special Report from The Successful Investor.
Canadian Natural Resources Stock Guide: What to look for in Canadian Energy Stocks and more
Get Your FREE Report Now:
The Power and Profits of Energy Stocks
X No, I don’t want to make income in future.
Privacy Policy and Terms of Use
The Successful Investor Inc. and its affiliate Successful Investor Wealth Management (referred to hereafter as TSI Network) know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly. This notice describes our privacy policy. By visiting websites owned by or associated with TSI Network, you are accepting the practices described in this Privacy Policy.
This privacy policy is applicable to all TSI Network Visitors, Clients, Employees, Suppliers, Web sites, Management, and all other interested parties. Any links to or from our site are not covered by this policy. We encourage you to read the privacy policies of every site that you visit.
The privacy of the site/store visitor is very important to TSI Network, and is respected at all times. The information we receive from customers helps us to personalize and continually improve your online experience at TSI Network.
We do not collect or disclose personal information, except when it is provided to us voluntarily by the site/store visitor with their consent.
We store subscriber and password files containing personal information securely. These files are stored in secure areas that are not accessible to the general public. We are always working to ensure the security of your personal information.
We are continuously in the process of improving our sites and services. If any new features or policies require a change to this current policy, we will post a clear notice of this change on pages of our site where the privacy policy appears. The principle behind this privacy policy is to collect information with your knowledge and consent.
What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
Information You Give Us: We receive and store any information you enter on our website or give us in any other way through sign-up forms or ordering forms for publications and services. You can choose not to provide certain information, but then you might not be able to take advantage of many of our services and features. We use the information that you provide for such purposes as responding to your requests, customizing your web browsing experience for you, improving our website, and communicating with you.
Automatic Information: We receive and store certain types of information whenever you interact with us. For example, like many websites, we use "cookies," and we obtain certain types of information when your web browser accesses TSI Network.
Information from Other Sources: For reasons such as improving personalization of our service (for example, providing better product recommendations or special offers that we think will interest you), we might receive information about you from other sources and add it to our account information. We also sometimes receive updated delivery and address information from our shippers or other sources so that we can correct our records and deliver your next purchase or communication more easily.
We do reserve the right, however, to collect and perform statistical analyses of the internet traffic to our website for our internal use. However, information collected does not allow us to identify any individual, and will not collect any personal information of the visitor. Furthermore, we do not sell, rent or loan to any outside parties the information collected and analyzed.
Although you may be able to access some of our websites without being required to register or provide personal information, certain websites and sections of our websites may require registration. In addition, if you choose to contact us to ask a question, we will collect your personal information so that we can respond to your question.
To make the visitor’s experience on our website easier, we may use per-session “cookies” (session identifiers) to track the state of the visitor session. This “cookie” is destroyed when your session with our website is over.
Cookies are alphanumeric identifiers that we transfer to your computer's hard drive through your web browser to enable our systems to recognize your browser and to provide features like "Remember Me" for our paying subscribers. Cookies are also used during the ordering process to help ensure your order is handled correctly. We do not extract any information about individual users or their computers as a part of this process.
The "Help" portion of the toolbar on most browsers will tell you how to prevent your browser from accepting new cookies, how to have the browser notify you when you receive a new cookie, or how to disable cookies altogether. However, cookies allow you to take full advantage of some of TSI Network's most useful features, and may be required to access certain areas of our website.
Internet Protocol (or IP) addresses are collected for all visitors to this site. This information is used for the purposes of traffic analysis.
Does TSI Network Use the Information It Receives?
"Contact Us" and Comment Features: TSI Network encourages visitors to its websites to contact us with questions and comments. Email addresses and other information of persons using these features may be collected in order to facilitate our responses to those inquiries.
Purchases of Merchandise: TSI Network websites may offer individuals the opportunity to purchase branded or other merchandise online. In connection with those purchases, customers may be asked to submit personal information, such as shipping addresses and credit card information, which is required to complete the transaction. TSI Network may also offer a Membership program, through which purchasers of its products may receive discounts on their online purchases. Membership registration may involve the submission of personal information to TSI Network and assignment of a user ID and password.
Agents: We employ other companies and individuals to perform functions on our behalf. Examples include fulfilling orders, delivering packages, sending postal mail and email, removing repetitive information from customer lists, analyzing data, providing marketing assistance, processing credit card payments and providing customer service. They have access to personal information needed to perform their functions, but may not use it for other purposes.
Promotional Offers: We may make our postal mailing list available to organizations offering products or services that might interest you. If you prefer NOT to receive these offers, please send an email with your name and address to service@tsinetwork.ca with "Do Not Rent Name" in the subject line. We do NOT make our email list available outside our organization.
Protection of TSI Network and Others: We release account and other personal information when we believe release is appropriate to comply with law; enforce the terms of the Legal notices that accompany this policy; or protect the rights, property or safety of TSI Network, our users or others. This includes exchanging information with other companies and organizations for fraud protection and credit risk reduction.
In addition to these limited disclosures of personal information, TSI Network may provide its affiliates or unaffiliated third parties with aggregate information about visitors to our sites. For example, we might disclose the median ages of visitors to our websites, or the numbers of visitors to our websites that come from different geographic areas. Such aggregate information will not include information of any individual visitors to our websites.
TSI Network may provide personal and other information to a purchaser or successor entity in connection with the sale of TSI Network, a subsidiary or line of business associated with TSI Network, or substantially all of the assets of TSI Network or one of its subsidiaries, affiliates or lines of business.
With Your Consent: Other than as set out above, you will receive notice when information about you might go to third parties, and you will have an opportunity to choose not to share the information.
Except as provided herein, TSI Network will not sell or rent personal information about you to unaffiliated third parties.
We may disclose personal information you have provided through our websites, for the above purposes, to persons or companies that we retain to carry out and other activities for which you have registered or in which you have otherwise asked to participate. In particular, we may for these purposes transfer information to any country (including the USA and other countries which may not offer the same level of data protection as Canada). We also will disclose personal information if required by law, including compliance with warrants, subpoenas or other legal processes.
TSI Network requires persons and companies to which it discloses personal information to restrict their use of such information to the purposes for which it has been provided by TSI Network, to adequately protect the information, and not to disclose that information to others. TSI Network cannot be responsible, however, for any damages caused by the failure of unaffiliated third parties to honour their privacy obligations to TSI Network. Similarly, TSI Network is not responsible for the privacy policies and practices of other websites that are linked to our websites.
COMMENTS: TERMS OF USE
We’re always happy to receive feedback, comments and ideas from TSI Network visitors, and we encourage you to add your perspective to any issue by leaving your comments on the site.
To make sure users get the most out of the site’s comments function, we’ve provided a few guidelines:
Do not post threatening, harassing, defamatory, or libelous material.
Do not intentionally make false or misleading statements.
Do not offer to sell or buy any product or service.
Do not post material that infringes copyright.
Do not post information that you know to be confidential or sensitive or otherwise in breach of the law.
TSI Network will not accept responsibility for information posted in the comments.
Please note that we reserve the right to delete or edit all comments. As well, we may close posts to further comments at our discretion. If a user repeatedly abuses our comment policy, we may also revoke that user’s access to our comments section.
By commenting on TSI Network, you agree that you retain all ownership rights in what you post on the site, and that you will relieve us from any and all liability that may result from those postings.
Special Note for Parents
TSI Network does not sell products for purchase by children. If you are under 18, you may use TSI Network's site only with involvement of a parent or guardian
How do we protect your personal information?
TSI Network does everything possible to prevent unauthorized intrusion to its websites and the alteration, acquisition or misuse of personal information by unauthorized persons. Notably passwords submitted by users of our websites are encrypted using encryption mechanisms. However, TSI Network cautions visitors to its websites that no network, including the Internet, is entirely secure. Accordingly, we cannot be responsible for loss, corruption or unauthorized acquisition of personal information provided to our websites, or for any damages resulting from such loss, corruption or unauthorized acquisition.
How do we maintain the integrity of your personal information?
TSI Network has procedures in place to keep your personal information accurate, complete and current for the purposes for which it is collected and used. You may review the information that you have provided to us and where appropriate you may request that it be corrected. If you wish to review your personal information please send a request to: service@tsinetwork.ca.
How do I withdraw my consent to use Personal Information? Access, Correction, Inquiries and Complaints
If you wish to request access to, or correction of, your personal information in our custody or control, or find out how we've used or disclosed that information, please make your request in writing to us. We may need to verify your identity before searching for or providing you with personal information. In some circumstances, we may not be able to provide access to your personal information, for example if it contains the personal information of other persons, if it constitutes confidential commercial information, or if it is protected by solicitor-client privilege. If we deny your request for access to, or refuse a request to correct, your personal information, we will advise you of the reasons for this refusal.
If you do not want to receive promotional offers, please notify TSI Network by sending an email to service@tsinetwork.ca.
How can you ask questions about our Privacy Policy and access your personal information?
The provision of information by you is entirely voluntary and you have the right not to provide information. Subject to applicable law, you may have the right to receive certain information as to whether or not personal information relating to you is held by TSI Network and to obtain a copy of such information that is sought. You may also have the right to require information, where appropriate, to be erased, blocked or made anonymous or to have data updated or corrected. If you do not wish TSI Network to hold information about you or if you wish to have access to information, modify information, or object to any processing of information or if you have questions please contact us.
What Choices Do I Have?
As discussed, you can always choose not to provide information even though it might be needed to make a purchase or to take advantage of TSI Network features.
You can add or update certain information as explained in the section "How Can I Change My Information?"
If you do not want to receive email or other mail from us, please notify TSI Network by sending an email to service@tsinetwork.ca.
The "Help" portion of the toolbar on most browsers will tell you how to prevent your browser from accepting new cookies, how to have the browser notify you when you receive a new cookie, or how to disable cookies altogether. However, you will not be able to use important features of TSI Network sites if you do not use cookies.
Changes to this Policy
This Policy is the sole authorized statement of TSI Network's practices with respect to the collection of personal information through TSI Network's websites and the subsequent use and disclosure of such information. Any summaries of this Policy generated by third party software or otherwise (for example, in connection with the "Platform for Privacy Preferences" or "P3P") shall have no legal effect, are in no way binding upon TSI Network, shall not be relied upon in substitute for this Policy, and neither supersede nor modify this Policy.
TSI Network may revise this Policy from time to time.
Legal Notices and Disclaimers
The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
Information presented on this web site or contained in our publications is not an offer, nor a solicitation, to buy or sell any securities referred to on the web site or in the publications. The material is general information intended for recipients who understand the risks associated with an investment in any securities referred to in the publications or on this web site. The Successful Investor has made no determination regarding whether an investment, course of action, or associated risks are suitable for the recipient.
