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1. Company Snapshot

1.a. Company Description

Imperial Oil Limited engages in exploration, production, and sale of crude oil and natural gas in Canada.The company operates through three segments: Upstream, Downstream and Chemical segments.The Upstream segment explores for, and produces crude oil, natural gas, synthetic oil, and bitumen.


As of December 31, 2021, this segment had 386 million oil-equivalent barrels of proved undeveloped reserves.The Downstream segment is involved in the transportation and refining of crude oil, blending of refined products and the distribution, and marketing of refined products.It also transports crude oil to refineries by contracted pipelines, common carrier pipelines, and rail; maintains a distribution system to move petroleum products to market by pipeline, tanker, rail, and road transport; and owns and operates fuel terminals, natural gas liquids, and products pipelines in Alberta, Manitoba, and Ontario.


In addition, this segment markets and supplies petroleum products to motoring public through approximately 2,400 Esso and Mobil-branded sites.Further, it sells petroleum products, including fuel, asphalt, and lubricants for industrial and transportation customers, independent marketers, and resellers, as well as other refiners serving the agriculture, residential heating, and commercial markets through branded fuel and lubricant resellers.The Chemical segment manufactures and markets various petrochemicals, benzene, aromatic and aliphatic solvents, plasticizer intermediates, and polyethylene resin.


Imperial Oil Limited has a strategic agreement with E3 Metals Corp.to advance a lithium-extraction pilot in Alberta.The company was incorporated in 1880 and is headquartered in Calgary, Canada.


Imperial Oil Limited is a subsidiary of Exxon Mobil Corporation.

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1.b. Last Insights on IMO

Imperial Oil's Q4 earnings beat estimates with 19.01% and 19.54% surprises in earnings and revenue, respectively. The company also reported a 20% dividend lift. According to Tudor, Pickering, Holt, the company's shares were maintained at a hold rating with a price target at C$115.00. Imperial Oil's strong production and dividend growth are promising, but risks from declining income and refining pressures exist.

1.c. Company Highlights

2. Imperial Oil's Q3 2025 Earnings: Strong Cash Flow and Record Crude Production

Imperial Oil reported a net income of $539 million, excluding identified items, and cash flows from operating activities of $1.798 billion. The company's EPS came in at $2.18, beating analyst estimates of $1.97. Revenue growth is expected to be 3.9% next year, indicating a positive outlook. The company's financial performance was driven by higher volumes, including record crude production and high refinery utilization. With a P/E Ratio of 13.67 and an EV/EBITDA of 8.1, the stock appears to be reasonably valued.

Publication Date: Nov -04

📋 Highlights
  • Strong Q3 Cash Flow and Shareholder Returns: Generated $1.8B cash flow from operations and $1.9B cash on hand, returning $1.8B to shareholders via dividends and buybacks.
  • Restructuring Cost Savings: Aim for $150M annual expense reduction by 2028 through centralized operations and efficiency gains.
  • Record Production and Efficiency: Upstream production hit 462,000 oil-equivalent barrels/day; Kearl achieved 316,000 barrels/day with unit cash costs at $15.13/barrel.
  • Future Capacity and Cost Targets: Target 300,000 barrels/day at Kearl by 2027 ($18/barrel unit cost) and 40% of Cold Lake production via advantaged technologies by 2030.

Operational Highlights

The company's upstream production averaged 462,000 oil equivalent barrels per day, with Kearl setting a quarterly production record, averaging 316,000 barrels per day. The downstream utilization was 98%, with refinery throughput averaging 425,000 barrels per day. According to John Whelan, "Kearl's unit cost and reliability improvements are key to our success." The Strathcona renewable diesel facility was successfully started up, and the turnaround at Sarnia was completed ahead of schedule and below budget.

Restructuring Efforts

Imperial Oil announced a restructuring effort to further strengthen its position and foundation for future growth, expecting to achieve a reduction in annual expenses of $150 million by 2028. The restructuring will centralize corporate and technical activities, realizing efficiency and effectiveness benefits from scale, integration, and technology. As John Whelan explained, the company is undergoing a 2-year transition period for workforce transformation and outsourcing work to global capability centers.

Future Growth Prospects

The company is confident in its guidance and ability to deliver industry-leading shareholder returns over a range of market conditions. With a strong financial position, operating results, and strategic initiatives to further strengthen efficiency and effectiveness, Imperial Oil is well-positioned for future growth. The company's ROE of 19.47% and ROIC of 16.48% indicate a strong ability to generate returns for shareholders. The dividend yield of 2.19% also provides a relatively stable source of return.

Valuation and Returns

With a P/B Ratio of 2.57 and a P/S Ratio of 1.3, Imperial Oil's valuation appears reasonable compared to its peers. The company's Free Cash Flow Yield of 6.99% is also attractive, indicating a strong ability to generate cash for shareholders. Overall, Imperial Oil's strong financial performance, operational highlights, and restructuring efforts position the company for future growth and returns for shareholders.

3. NewsRoom

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What Recent Developments Are Shaping the Investment Story for Imperial Oil

Nov -26

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RBC Lifts Imperial Oil (IMO) Price Target to C$118, Maintains Sector Perform

Nov -26

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Suncor's Steady Momentum: Why Holding the Stock Still Makes Sense

Nov -25

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RBC Names Suncor Energy, Canadian Natural Resources as Top Picks in Integrated Oil, Exploration and Production Cos

Nov -24

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Here's Why Hold Strategy Is Apt for Imperial Oil Stock Now

Nov -24

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Helmerich & Payne Q4 Earnings Miss Estimates, Revenues Beat

Nov -18

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Imperial Oil (TSX:IMO): Exploring Valuation After Recent Share Price Surge

Nov -14

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Equinor Q3 Earnings Miss Estimates, Revenues Increase Y/Y

Nov -13

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.02%)

6. Segments

Downstream

Expected Growth: 2.5%

Increasing demand for refined petroleum products in Canada, driven by growth in transportation and industrial sectors, will fuel Imperial Oil Limited's refining and marketing segment growth.

Upstream

Expected Growth: 3.6%

Imperial Oil's upstream segment is expected to grow due to increasing global demand for crude oil and natural gas, driven by population growth and urbanization, as well as the company's strategic investments in exploration and production capabilities.

Chemical

Expected Growth: 4.5%

Imperial Oil's petrochemical segment growth is driven by increasing demand from packaging, construction, and automotive industries, as well as growing adoption of recycled plastics, leading to a forecast CAGR of 4.5%.

Corporate and Other

Expected Growth: 4.3%

Imperial Oil's corporate offices and other non-operational activities are expected to grow steadily, driven by increasing investments in digitalization and process optimization, as well as the company's efforts to reduce operating costs and improve efficiency.

Eliminations

Expected Growth: 4.4%

Imperial Oil’s elimination segment growth is driven by increased demand for petroleum products, refining capacity expansion, and a focus on operational efficiency, which will lead to higher profitability.

7. Detailed Products

Esso Gasoline

High-quality gasoline for vehicles, designed to improve fuel efficiency and engine performance

Mobil 1 Lubes

Premium lubricants for vehicles, providing superior engine protection and performance

Asphalt and Sulfur Products

High-quality asphalt and sulfur products for construction, road building, and industrial applications

Chemical Products

Specialty chemicals for various industries, including plastics, adhesives, and coatings

Heavy Oil and Bitumen

Heavy oil and bitumen products for industrial and commercial use

Jet Fuel and Aviation Products

High-quality jet fuel and aviation products for the aviation industry

8. Imperial Oil Limited's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Imperial Oil Limited is moderate due to the availability of alternative energy sources such as solar and wind power, as well as increasing adoption of electric vehicles.

Bargaining Power Of Customers

The bargaining power of customers is low due to the lack of negotiating power of individual consumers, and the company's ability to maintain prices despite fluctuations in demand.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate due to the presence of a few large suppliers of crude oil, but the company's ability to negotiate prices and maintain relationships with multiple suppliers.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the oil and gas industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several large players in the oil and gas industry, leading to intense competition for market share and pricing power.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 16.31%
Debt Cost 3.95%
Equity Weight 83.69%
Equity Cost 13.12%
WACC 11.63%
Leverage 19.49%

11. Quality Control: Imperial Oil Limited passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Suncor Energy

A-Score: 7.1/10

Value: 7.1

Growth: 6.8

Quality: 6.2

Yield: 8.0

Momentum: 6.0

Volatility: 8.7

1-Year Total Return ->

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Imperial Oil

A-Score: 6.7/10

Value: 5.6

Growth: 7.7

Quality: 6.7

Yield: 5.0

Momentum: 7.0

Volatility: 8.3

1-Year Total Return ->

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Chevron

A-Score: 6.3/10

Value: 4.8

Growth: 5.0

Quality: 5.0

Yield: 8.0

Momentum: 5.0

Volatility: 9.7

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Diamondback Energy

A-Score: 6.2/10

Value: 7.4

Growth: 7.8

Quality: 6.3

Yield: 7.0

Momentum: 2.0

Volatility: 6.7

1-Year Total Return ->

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ExxonMobil

A-Score: 6.0/10

Value: 5.7

Growth: 5.0

Quality: 6.2

Yield: 7.0

Momentum: 2.5

Volatility: 9.7

1-Year Total Return ->

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Cenovus Energy

A-Score: 5.7/10

Value: 6.8

Growth: 5.8

Quality: 5.0

Yield: 6.0

Momentum: 4.0

Volatility: 6.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

127.84$

Current Price

127.84$

Potential

-0.00%

Expected Cash-Flows