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Imperial Oil (IMO) Q1 Earnings Beat Estimates, Sales Miss

Imperial Oil IMO reported first-quarter 2023 adjusted earnings per share of $1.58, which beat the Zacks Consensus Estimate of $1.45. This was largely due to higher contributions from the company's Downstream segment, driven by higher volumes and improved margins. The bottom line also improved significantly from the year-ago quarter’s figure of $1.38.

Revenues of $8.9 billion missed the Zacks Consensus Estimate of $11.3 billion. The top line also declined from the year-ago quarter’s level of $10 billion. This was primarily due to weaker performance of the Upstream segment.

Imperial Oil declared a quarterly dividend of 50 cents per share (up 14% from 44 cents) payable on Jul 1, 2023, to shareholders of record at the close of business on Jun 2, 2023.

Imperial Oil Limited Price, Consensus and EPS Surprise

Imperial Oil Limited Price, Consensus and EPS Surprise
Imperial Oil Limited Price, Consensus and EPS Surprise

Imperial Oil Limited price-consensus-eps-surprise-chart | Imperial Oil Limited Quote

Segmental Information

Upstream: Revenues of C$3,700 million decreased from the prior-year level of C$4,534 million. The segment reported a net income of C$330 million compared with C$782 million in the year-ago quarter. This downside can be attributed to lower price realizations.

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Net production volume came in at 370,000 barrels of oil equivalent per day (Boe/d) compared with 319,000 Boe/d in the year-ago quarter. Total oil and NGL output amounted to 406,000 barrels per day (bpd) compared with 362,000 bpd in the first quarter of 2022.

Net oil and NGL output from Kearl and Cold Lake totaled 171,000 bpd and 118,000 bpd, respectively. Syncrude output averaged 70,000 bpd, which increased from the year-ago quarter’s level of 59,000 bpd. Net natural gas production came in at 37 million cubic feet per day (Mcf/d), lower than 107 Mcf/d in the comparable quarter of 2022.

Bitumen price realizations totaled C$50.33 a barrel compared with C$89.36 in the year-ago period. IMO received an average realized price of C$102.45 per barrel for synthetic oil compared with the prior-year quarter’s C$117.24.

For conventional crude oil, it received C$65.02 per barrel compared with C$98.38 in the corresponding period of 2022. The price of NGL decreased from C$5.08 to C$3.05 per thousand cubic feet year over year.

Downstream: Revenues of C$13,482 million were down from C$14,045 million in the first quarter of 2022. Net income totaled C$870 million compared with C$389 million in the year-ago period, attributable to higher margins primarily reflecting improved market conditions.

The refinery throughput in the first quarter averaged 417,000 bpd, higher than the prior-year quarter’s level of 399,000 bpd. The capacity utilization of 96% compared favorably with the year-ago level of 93%.

Chemical: Revenues of C$433 million declined from C$471 million in the first quarter of 2022. Net income for this segment was recorded at C$53 million, down from the year-ago quarter’s level of C$56 million.

Total Costs & Capex

Total expenses of C$10,476 million decreased from the prior-year quarter’s C$11,152 million. Capital and exploration expenditures amounted to C$429 million from C$296 million in the corresponding period of 2022.

Financial Performance

Cash flow from operating activities came in at C$821 million compared with C$1.9 billion in the year-ago quarter. Capital expenditure for full-year 2023 is anticipated to be around C$1.7 billion.

Negative free cash flow during the first quarter totaled C$1.2 billion.

The company returned C$266 million to its shareholders through dividends in the reported quarter.

As of Mar 31, Imperial Oil had cash and cash equivalents of C$2.24 billion. Total debt amounted to C$4.5 billion, with a debt-to-capitalization of 15%.

Zacks Rank and Key Picks

Currently, Imperial Oil carries a Zacks Rank #3 (Hold).  Some better-ranked stocks for investors interested in the energy sector are CVR Energy CVI, sporting a Zacks Rank #1 (Strong Buy), and Marathon Petroleum MPC and Ranger Energy Services RNGR, each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

CVR Energy: CVI is worth approximately $2.63 billion. CVI currently pays investors $2.00 per share, or 7.63%, on an annual basis.

The company currently has a forward P/E ratio of 6.59. In comparison, its industry has an average forward P/E of 8.60, which means CVI is trading at a discount to the group.

Marathon Petroleum: MPC is valued at around $58.02 billion. It delivered an average earnings surprise of 20.91% for the last four quarters and its current dividend yield is 2.30%.

The company currently has a forward P/E ratio of 6.36. In comparison, its industry has an average forward P/E of 9.10, which means MPC is trading at a discount to the group.

Ranger Energy Services: RNGR is valued at around $242.99 million. In the past year, its shares have gained 16.8%.

Ranger Energy Services currently has a forward P/E ratio of 5.30. In comparison, its industry has an average forward P/E of 11.60, which means RNGR is trading at a discount to the group.

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