Imperial Oil (IMO) Misses Q2 EPS by $1.12, Revenues Miss

Imperial Oil (NYSE: IMO) reported Q2 EPS of ($0.72), $1.12 worse than the analyst estimate of $0.40. Revenue for the quarter came in at $3.71 billion versus the consensus estimate of $9.24 billion.

Second quarter highlights

• Net loss of $526 million or $0.72 per share on a diluted basis, compared to net income of $1,212 million or $1.57 per share in the second quarter of 2019, primarily driven by lower realizations in the Upstream, with bitumen realizations falling by nearly 80 percent compared to the second quarter of 2019, and lower margins in the Downstream. Second quarter 2020 results include a reversal of the non-cash inventory revaluation charge of $281 million recorded in the first quarter of 2020. Second quarter 2019 results included a favourable impact, largely non-cash, of $662 million associated with the Alberta corporate income tax rate decrease.
• Cash flow used in operating activities was $816 million, compared to cash flow generated from operating activities of $1,026 million in the corresponding period of 2019, primarily reflecting lower realizations in the Upstream and lower margins in the Downstream.
• Capital and exploration expenditures totalled $207 million, compared with $429 million in the second quarter of 2019. Imperial remains committed to the previously announced plan to reduce capital spending by $500 million in 2020 versus its initial guidance with a focus on low capital, high-value initiatives. Total capital expenditures for the year continue to be anticipated at between $1.1 billion and $1.2 billion.
• Dividends paid totalled $162 million or $0.22 per share, up from $147 million or $0.19 per share in the second quarter of 2019. In light of the current industry environment, the company did not purchase shares consistent with the suspension of its share purchase program effective April 1.
• Production averaged 347,000 gross oil-equivalent barrels per day, compared to 400,000 barrels per day in the same period of 2019. Reduced production was driven mainly by the advancement and extension of planned turnaround activities in response to the current business environment.
• Total gross bitumen production at Kearl averaged 190,000 barrels per day (135,000 barrels Imperial’s share), compared to 207,000 barrels per day (147,000 barrels Imperial’s share) in the second quarter of 2019. Lower production was mainly due to the balancing of near-term production with demand through the advancement and extension of planned turnaround activities at one of Kearl’s two plants, partially offset by the addition of supplemental crushing facilities in 2020. A turnaround at Kearl’s second plant was advanced to a mid-July start, and is expected to run until late August. With the extended duration of these turnarounds, Imperial now expects total gross production at Kearl to average approximately 220,000 barrels per day for full-year 2020.
• Gross bitumen production at Cold Lake averaged 123,000 barrels per day, compared to 135,000 barrels per day in the same period of 2019. Lower production was mainly due to production timing associated with steam management and maintenance. Imperial expects full-year gross production at Cold Lake to average approximately 135,000 barrels per day.
• The company’s share of gross production from Syncrude averaged 50,000 barrels per day, compared to 80,000 barrels per day in the same period of 2019. Lower production was mainly due to the balancing of near-term production with demand and a revised turnaround schedule.
• Refinery throughput averaged 278,000 barrels per day, compared to 344,000 barrels per day in the second quarter of 2019. Capacity utilization was 66 percent, compared to 81 percent in the second quarter of 2019. Lower throughput was primarily due to reduced demand from the COVID-19 pandemic, partially offset by improved reliability mainly from the absence of the Sarnia fractionation tower incident which occurred in April 2019.
• Petroleum product sales were 357,000 barrels per day, compared to 477,000 barrels per day in the second quarter of 2019. Lower petroleum product sales were mainly due to reduced demand from the COVID-19 pandemic.
• Imperial named Western Canada recipient of the Canadian Centre for Diversity and Inclusion (CCDI)'s "Employer Initiative of the Year" award. The award recognizes Imperial's approach to business development with Indigenous communities in Alberta’s Athabasca region.

“We have focused our spending on efficient high-value opportunities, and taken swift action to respond to market conditions, advancing and adjusting downtime to align with the weak margin environment,” said Brad Corson, chairman, president and chief executive officer. “Given the significant capital and expense reductions achieved in the quarter and the strength of our balance sheet, we are highly confident in our ability to meet our targets, improve cash flow and continue to deliver value to our shareholders.”

“The difficult market conditions in the quarter demonstrated the benefits of Imperial’s integrated business model and strong balance sheet as the company progressed key projects and maintained its dividend without increasing its debt,” said Corson. The company’s financial performance steadily improved as the second quarter progressed, with the company focusing on execution of its revised operational and financial management activities, strategically advancing key maintenance projects to minimize costs and margin loss. “Imperial’s assets are well-positioned for strong performance and ready to respond to an improving business environment going forward,” Corson added.

For earnings history and earnings-related data on Imperial Oil (IMO) click here.

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