Imperial Oil (NYSE: IMO) reported Q1 EPS of $0.38, $0.02 worse than the analyst estimate of $0.40. Revenue for the quarter came in at $7.98 billion versus the consensus estimate of $9.24 billion.

First quarter highlights

• Net income of $293 million or $0.38 per share on a diluted basis, compared to a net income of $516 million or $0.62 per share in the first quarter of 2018.
• Cash generated from operating activities was $1,003 million, up from $985 million in the first quarter of 2018.
• Capital and exploration expenditures totalled $529 million, compared with $274 million in the first quarter of 2018. During the quarter the company announced a slowdown in the development of the Aspen project given market uncertainty stemming from the Government of Alberta’s intervention in crude markets and other industry competitiveness challenges. As a result, capital expenditures for 2019 are now expected to be in the range of $1.8 billion to $1.9 billion, down from the previous guidance of $2.3 billion to $2.4 billion.
• Dividends paid and share purchases totalled $510 million in the first quarter of 2019, including the purchase of about 10 million shares for $361 million.
• Production averaged 388,000 gross oil-equivalent barrels per day, up from 370,000 barrels per day in the same period of 2018.
• Gross production of Kearl bitumen averaged 180,000 barrels per day (127,000 barrels Imperial’s share), compared to 182,000 barrels per day (129,000 barrels Imperial’s share) in the first quarter of 2018. First quarter results were affected by an extended period of extremely cold weather and related impacts on shovel performance. Imperial continues to expect annual average gross production at Kearl of 200,000 barrels per day in 2019.
• Gross production of Cold Lake bitumen averaged 145,000 barrels per day, compared to 153,000 barrels per day in the same period of 2018. Extremely cold weather negatively impacted first quarter production.
• The company’s share of gross production from Syncrude averaged 78,000 barrels per day, up from 65,000 barrels per day in the same period of 2018. The increase in production was primarily due to stronger asset reliability, partially offset by the impact of the Government of Alberta’s curtailment order.
• Crude-by-rail shipments averaged 36,000 barrels per day in the first quarter, down from 146,000 barrels per day in the fourth quarter of 2018. During the first quarter, the company ramped down activity from 89,000 barrels per day in January to essentially zero in February, before resuming limited shipments in late March.
• Refinery throughput averaged 383,000 barrels per day, compared to 408,000 barrels per day in the first quarter of 2018. Capacity utilization was 91 percent, compared to 96 percent in the first quarter of 2018. Performance was affected by several individually small reliability events, which reduced throughput by approximately 20,000 barrels per day in the quarter.
• Petroleum product sales were 477,000 barrels per day, compared to 478,000 barrels per day in the first quarter of 2018.
• Kearl’s autonomous haul truck program received regulatory approval from Alberta Occupational Health and Safety, granting Imperial the ability to automate its entire fleet. Plans include expanding the scope of the ongoing pilot to about 20 trucks through 2020, before making a final decision on full automation. The project is expected to drive a significant improvement in safety performance and operating cost.
• Imperial invests in new SAIT water management program, reflecting its commitment to environmental sustainability. The company’s $1 million donation launched a new two-year diploma program at the Southern Alberta Institute of Technology (SAIT), the first of its kind in Canada. Graduates will develop skills for working global water-related issues in a wide range of industries.
• Imperial releases comprehensive Energy and carbon summary. The report highlights the company’s efforts to responsibly develop energy for a lower-carbon future. Imperial has reduced greenhouse gas emissions intensity in its operated oil sands facilities by 20 percent between 2013 and 2017, and is developing technologies that could reduce greenhouse gas emissions intensity for future in-situ oil sands production by approximately 25 percent to 90 percent.

“First quarter operational performance was impacted by challenges in both the upstream and downstream early in the quarter, in part due to extreme cold weather across the country. Furthermore, the Government of Alberta’s production curtailment order significantly affected financial performance, as improved upstream realizations were more than offset by reduced downstream margins,” said Rich Kruger, chairman, president and chief executive officer.

“Alberta’s mandated curtailment continues to impact crude-by-rail economics. After increasing crude-by-rail shipments to record levels in late 2018, the company discontinued shipments in February. Late in the quarter, the company resumed limited rail shipments, and will continue to evaluate future movements as economically justified,” said Kruger.

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