Imperial Oil reports doubled 3Q profits; dividends remain unchanged

Imperial Oil

Imperial Oil, Canada’s major, reported this Friday its 3Q results, posting a quarterly profit more than doubled from the prior quarter. The rally in oil prices, in addition to higher output due to increased demand, were the main factors for the increase.

Firstly, Imperial’s net income rose to C$908 million ($735.34 million), or C$1.29 per share, in 3Q, in contrast with C$366 million, or 50 Canadian cents per share, in the second quarter of the year.

Moreover, the strong demand and high commodity prices generated for the company cash flow from operating activities of $1,947 million and free cash flow1 of $1,688 million; per share basis, this was cash flow of C$2.14. According to Reuters, this came under the analysts’ expectations of C$2.24 per share.

Moreover, the company reported its highest third-quarter production in over 30 years, driven by continued strong production at Kearl. Overall, Imperial Oil reported quarterly production of 435,000 barrels of oil equivalent per day; up about 8% from the second quarter.

In addition, downstream capacity reached a high record of 94%, the highest since the fourth quarter of 2018. Total throughput averaged 404,000 barrels per day at its refineries, compared with 332,000 bpd in the second quarter.

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Imperil Oil looking for ways to give more to shareholders, incluiding special dividend

On the other hand, despite the strong performance, the company kept its dividend unchanged, at 27 cents per share. As we reported earlier, rival Suncor doubled its dividend. The move that aligned with the trend of returning more cash to shareholders rather than investing in new production.

Upon breaking news, Imperial Oil’s shares were down 6% on the Toronto Stock Exchange. Analysts quoted by Reuters point out the dividend strategy as the main reason for the decrease. “Imperial announced no changes to the dividend or share repurchases, which we believe the market wants to see in light of Suncor’s move,” Eight Capital Research analyst Phil Skolnick said in a note.

On the other hand, Imperial Oil’s Chief Financial Officer Daniel Lyons said that the company is “actively evaluating options to return more cash to shareholders, including paying a special dividend.”

Finally, the company lowered its 2021 capital budget to C$1.1 billion, down from a previous forecast of C$1.2 billion.

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