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Imperial Oil delivers near-record fourth quarter earnings and stays the course despite falling oil prices

Imperial Oil delivers near-record fourth quarter earnings and stays the course despite falling oil prices

Imperial Oil reported net earnings of $671 million (or $0.79 per share) in the fourth quarter of 2014, down 36% from the same period in the previous year. Earnings reached a near-record high of $3.8 billion, split almost evenly between their upstream oil production and downstream refining business units.  Cash flow from operations dropped to $1.09 billion due to lower oil prices in the fourth quarter. Despite the fourth quarter decline, 2014 was a strong year for Imperial, reporting full-year net income of $3.8 billion, 34% higher than 2013.

OIL PRODUCTION

  • Imperial produced 315,000 barrels of oil equivalent per day (boepd) in the fourth quarter of 2014, down 14,000 boepd largely due to the sale of several conventional oil assets in Western Canada (sold to Whitecap Resources for $855 million in May of 2014). 
  • Factoring out the Whitecap assets, Imperial managed to grow production by 4,000 boepd in the fourth quarter, which brings total 2014 production to 310,000 boepd, up 12% from 2013.
  • Refinery throughput dropped to 373,000 barrels per day (bpd). Excluding planned maintenance turnarounds at Sarnia and Nanticoke, the company reported a record 94% refinery capacity utilization rates.

REALIZATION FROM CRUDE OIL AND BITUMEN SALES

  • Imperial’s synthetic crude oil netted $82 per barrel in the fourth quarter, down from $91.65 in the third quarter.
  • Selling price for non-upgraded bitumen declined slightly to $52.37 per barrel, down $0.94 from the previous quarter.
  • The lower realization prices were blamed on the lower West Texas Intermediate price, however a weaker Canadian dollar and narrowing heavy oil discount did help offset the declines. The company did not provide guidance on where it expects oil prices to be in 2015.

KEARL OIL SANDS MINE UPDATE

  • Kearl’s fourth quarter production averaged 66,000 bpd, bring the 2014 average to 72,000 bpd, still significantly lower than the facility’s nameplate capacity of near 100,000 bpd.
  • The company blamed the miss on a malfunctioning crusher which resulted in a 4-week long shutdown in November. Kearl also underwent a planned maintenance turnaround in September which took the facility offline for 2 weeks. 
  • The company continues construction of a new cogeneration (cogen) facility, which is expected to start-up by the end of the year. The new cogen plant will help reduce power draw from the Alberta energy grid.
  • Operating costs for the mining facility were not directly disclosed.
  • The Kearl Expansion Project was reported essentially complete and ahead of schedule. This first expansion phase will add another 110,000 bpd capacity to the plant and is slated to start-up by the third quarter of this year.

COLD LAKE FACILITY UPDATE

  • The latest phase of Cold Lake expansion, Nabiye, started initial steam injection in January and is expected to commence oil production in the first quarter of 2015. Cold Lake averaged 152,000 bpd in the fourth quarter, down slightly from 155,000 bpd from the previous year.
  • Once fully operational, Nabiye will add another 40,000 bpd to the company’s heavy oil portfolio, bringing total production capacity at Cold Lake to near 200,000 bpd for Imperial Oil.
  • The Cold Lake facility uses Cyclic Steam Stimulation (CSS) technology, where steam is injected into a single well, heating up the surrounding bitumen. Once sufficiently warmed up, the steam is shut-off and the bitumen is pumped out.

CAPITAL EXPENDITURES

  • The company spent $5.65 billion in capital expenditures for 2014, 30% lower than the previous year. Much of Imperial’s capex spending was dedicated to the expansion of Nabiye and Kearl.
  • The company provided little guidance on 2015 capital expenditures, except to suggest expenditures likely peaked in 2013 and will be trending lower over the near term. During their investor's presentation in January, the company emphasized strong continued growth in their in-situ assets.
  • Imperial also announced a few weeks ago its intention to sell 1200 “On the Run” convenience stores connected to their Esso branded gas stations. So far, no buyer has been announced. Imperial Oil has a strong balance sheet, low debt-load and is the only Canadian industrial company with a AAA rating from Standard & Poor.
OVERVIEW OF IMPERIAL OIL'S CANADIAN OPERATIONS AND CAPACITY (PHOTO COURTESY IMPERIAL OIL'S Q3-2014 UPDATE)

OVERVIEW OF IMPERIAL OIL'S CANADIAN OPERATIONS AND CAPACITY
(PHOTO COURTESY IMPERIAL OIL'S Q3-2014 UPDATE)

Imperial Oil is 69.6% owned by ExxonMobil, which also reported Q4 earnings today. Imperial/ExxonMobil also operate the Syncrude facility, of which it owns a 25% stake. The company declared a dividend of $0.52 per share, up $0.03 from 2013 payouts. The full fourth quarter pressure release can be found on the Imperial website [click here for link]. All dollar figures reported are in Canadian funds.

Suncor posts 80% drop in fourth quarter earnings due to falling oil prices

Suncor posts 80% drop in fourth quarter earnings due to falling oil prices

Canadian energy stocks prices to perfection

Canadian energy stocks prices to perfection

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