The extended slump in oil and gas prices has lowered the shares of energy stocks of all kinds. Typically, integrated oil companies can withstand the downturn most effectively because of their diversified operations. Imperial Oil reduces its exposure to lower oil prices thanks to its three refineries, whose profit margins benefit from lower energy prices. Imperial has two major oil sands projects in Alberta which promise to generate growing revenue for decades. And in the past quarter, the company raised production to its highest level in more than a decade. Imperial continues to maintain its quarterly dividend, which yields 1.3%.

IMPERIAL OIL (Toronto symbol IMO; www.imperialoil.ca) is a major integrated oil company with oil sands projects in Alberta and conventional oil and gas operations across Western Canada. It also operates three refineries and 1,700 Esso gas stations. Imperial recently finished the second phase of its 71%-owned Kearl oil sands project in northern Alberta.

In the three months ended September 30, 2015, Imperial’s share of Kearl’s output was 128,000 barrels a day. That helped push its overall production up 25.7%, to 386,000 barrels of oil equivalent a day from 307,000 a year earlier. That was the company’s highest production output in more than a decade.

However, lower oil prices cut its revenue by 25.9%, to $7.2 billion from $9.7 billion. Cash flow per share fell 32.9%, to $1.10 from $1.64.

During the third quarter, Imperial also completed the Woodland pipeline, a joint venture with Enbridge (Toronto symbol ENB). This 530-kilometre pipeline transports Kearl blended bitumen to Edmonton. 

Energy stocks: Higher output should boost cash flow, even if oil price stays low

Imperial earmarked $4.0 billion for capital projects in 2015, down 29.8% from $5.7 billion in 2014. Most of that was aimed at expanding its Kearl and Cold Lake properties.

These projects will prosper when oil prices recover, and they should last for decades. Meanwhile, the company’s refineries cut its exposure to falling oil prices, as cheaper crude cuts the refineries’ input costs and increases their profit margins.

Meanwhile, the stock trades at 12.9 times Imperial’s projected 2015 cash flow of $3.45 a share. However, the higher output could increase that to $4.66 in 2016—even if oil stays low. The shares trade at just 9.6 times that forecast. Its quarterly $0.14 dividend yields 1.3%. Earlier this year, Imperial raised its dividend for the 20th consecutive year.

Imperial Oil is still a safety-conscious buy.

Recommendation in Canadian Wealth Advisor: BUY

For a recent report on how Canada’s top driller is preparing for higher oil and gas prices, read High-quality rigs give Precision Drilling first crack at an energy rebound.