Imperial Oil Limited: What You Need to Know From the Latest Quarterly Results

Imperial Oil Limited (TSX:IMO)(NYSE:IMO) just reported results for the fourth quarter of 2015. They weren’t good.

| More on:
The Motley Fool

On Tuesday morning Imperial Oil Limited (TSX:IMO)(NYSE:IMO) reported results for the fourth quarter of 2015. Below we take a look at the numbers, what they mean for Imperial, and what they mean for the oil sector.

The numbers

Expectations were not high for Imperial in this oil-price environment. Analysts on average were expecting fourth-quarter earnings per share of $0.25, down from $0.79 one year earlier. But Imperial wasn’t even able to make this number, posting EPS of $0.12 for the quarter.

Granted, there were also some bright spots. Imperial was able to reduced costs by 25% (compared with 2014) in the second half of the year. The Kearl expansion project continues to perform well, and the downstream business has helped to stabilize earnings.

Despite the earnings miss, Imperial is doing very well. The company not only made a profit in the fourth quarter, but its balance sheet remains in great shape too with net debt equal to less than 25% of the company’s market value.

The implications for Imperial

The past 12 months have certainly not been pleasant for Imperial, but the company performed very well operationally and has emerged as one of the strongest players in Canada’s energy patch. Critically, the company did not make any big acquisitions, despite the lure of seemingly cheap assets (such as Canadian Oil Sands Ltd.).

Consequently, the company is poised to not only survive the oil slump, but also to take out some of its weaker competitors. So you should expect at least some small transactions this year from Imperial.

The implications for the sector

Although Imperial reported positive earnings per share, the company did lose $289 million from its upstream division in the fourth quarter. And over the whole year, Imperial’s upstream operations lost a total of $704 million. In a way, this could be viewed as a positive for the energy sector, since it hints that today’s oil price is unsustainable.

That said, Imperial also tallied fourth-quarter production of 400,000 barrels of oil equivalent per day, an increase of 27% year over year. Of course, the main reason for this was the aforementioned Kearl expansion. And this offers yet another reminder that even though oil prices remain severely depressed, producers aren’t turning off the taps. This is something to think about before you invest in any energy stocks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Investing

Canadian flag

1 Magnificent Canadian Stock Down 4 Percent to Buy and Hold Forever

Here's one magnificent Canadian stock long-term investors may want to add, despite the company being near its all-time high.

Read more »

four people hold happy emoji masks

Why Canadian Investors Should Consider Investing in U.S. Stocks

U.S. lender Oaktree Specialty Lending (NASDAQ:OCSL) has an even higher yield than Toronto-Dominion Bank (TSX:TD).

Read more »

consider the options
Dividend Stocks

Is TD Bank the Best Dividend Stock for You?

Toronto-Dominion Bank (TSX:TD) has a high dividend yield but is embroiled in a serious money-laundering scandal.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

How to Use Your TFSA to Earn $6,000 Per Year in Passive Income

Hint: You'll need this Hamilton covered call ETF, which yields over 10%.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, June 21

Overnight weakness in metals prices could pressure TSX mining stocks at the open today.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.

TFSA: 2 Canadian Stocks to Buy and Hold for Tax-Free Gains

Here are two TFSA stocks that have excellent capital gains potential as they are leaders in their respective industries.

Read more »

Growth from coins
Dividend Stocks

2 Dividend-Growth Stocks With TSX-Beating Potential That Deserve More Respect

Here are two of the best TSX dividend-growth stocks you can buy today and hold for the next decade.

Read more »

A stock price graph showing declines
Bank Stocks

TD Stock Has Fallen to a Low of $73: Is it Done Dropping?

TD (TSX:TD) is often viewed as a great long-term investment. But given its volatility in recent months, has TD stock…

Read more »