Imperial Oil Ltd.’s recent Q3 report shows a tough quarter behind them as they move ahead with good performance on the upstream side in 2019.
“Imperial achieved its highest third-quarter production in 30 years. This performance demonstrates the results of the company’s focus on upstream reliability,”says Rich Kruger, outgoing chairman and CEO. Overall, upstream gross oil-equivalent production averaged 407,000 barrels per day (BPD), up from 393,000 barrels per day in the third quarter of 2018.
Cash flow generated from operating activities was $1.376 billion in the third quarter, up from $1.207 billion in the corresponding period in 2018, primarily reflecting favourable working capital effects, partially offset by lower earnings.
However, Imperial was not so fortunate with other aspects of the quarter. Crude-by-rail shipments were off by 8%, refinery through-put decreased 25,000BPD, product sales declined 28,000BPD and net income for the quarter was down more than $300 million compared to the same period last year. Even chemical income declined, with numbers revealing sales declines of about half compared to last year’s Q3 totals.
The company reports that margin pressures and turnaround activities cost some $300 million in lost revenue in Q3. As a result, net income for downstream activity was written as $221 million in the third quarter, compared to $502 million in the third quarter of 2018.
Big picture remains bright
While some numbers in Q3 were less than optimum, 2019 looks like a good exit point for Kruger, who will retire this year and will be replaced by Brad Corson, who will take on the CEO mantle January 1, 2020. Corson was appointed president and director in September.
“Imperial’s people and assets provide a solid foundation for continued growth and leadership within the Canadian energy industry,” says Corson, adding he looks forward to building on Imperial’s strengths to deliver long-term shareholder value.
As Kruger hands over the reins, Imperial’s strengths look good moving forward despite challenges in the downstream side where income was $736 million for the first nine months of 2019, compared to $1.224 billion for the same period in 2018. Earnings were negatively impacted by lower margins of close to $430 million, reliability events of about $140 million, including the fractionation tower incident at Sarnia, and lower sales volumes of about $100 million.
Challenges aside, Imperial’s management was able to increase net income in the first nine months of 2019. During this period income was $1.929 billion, or $2.51 per share on a diluted basis, up from net income of $1.461 billion or $1.79 per share in the first nine months of 2018. Behind this gain is a 4% decrease in Alberta’s corporate income tax rate.
Cash flow generated from operating activities is also up. The company reports earnings of $3,405 million in the first nine months of 2019, up from $3,051 million in the same period of 2018, primarily re