IMO Financial Analysis

Analysis Date: 2/3/2025

Business Model

Imperial Oil Limited operates across three main segments: Upstream (exploration, production, and sale of crude oil and natural gas), Downstream (refining, marketing, and distribution of petroleum products), and Chemical (manufacturing and marketing of petrochemicals). Revenue is generated from the sale of crude oil, synthetic oil, bitumen, natural gas, refined petroleum products, and chemicals.

Revenue Sources

• Upstream: Sales of crude oil, bitumen, synthetic oil, and natural gas.
• Downstream: Sales of refined petroleum products including gasolines, heating, diesel and jet fuels, lube oils, heavy fuel oils, and other products.
• Chemical: Sales of petrochemical products.

Income Statement Analysis

• Total revenues and other income decreased by 3.83% compared to Q4 2023, from $13,109 million to $12,607 million, primarily due to lower realizations.
• Total expenses decreased by 2.96% compared to Q4 2023, from $11,369 million to $11,032 million.
• Net income decreased by 10.26% compared to Q4 2023, from $1,365 million to $1,225 million, driven by lower revenues partially offset by lower expenses.

Balance Sheet Analysis

• Total assets increased by 4.22% year-over-year, from $41,199 million to $42,938 million.
• Total debt decreased by 2.93% year-over-year, from $4,132 million to $4,011 million.
• Shareholders' equity increased by 5.63% year-over-year, from $22,222 million to $23,473 million.

Capital Allocation

Imperial Oil is committed to returning surplus cash to shareholders through dividends and share repurchases. In Q4 2024, the company returned nearly $1.8 billion to shareholders, including $317 million in dividends and $1,475 million in share repurchases. The quarterly dividend was increased by 20% to $0.72 per share. Capital expenditures for Q4 2024 were $423 million, focused on sustaining and growing production in the Upstream and progressing the renewable diesel project in the Downstream. For full year 2024, $3.9 billion was returned to shareholders.

Management Commentary

Quarterly net income of $1,225 million and cash flows from operating activities of $1,789 million.

Kearl quarterly production of 299,000 total gross oil-equivalent barrels per day and highest-ever full year total gross production.

Quarterly dividend increased by 20 percent from 60 cents to 72 cents per share.

Net income (loss) (U.S. GAAP) decreased from $1,365 million in Q4 2023 to $1,225 million in Q4 2024.

Overall Sentiment: Positive. Management highlights strong operational performance and record production, particularly in the Upstream segment. They emphasize commitment to shareholder returns through increased dividends and share buybacks. While net income decreased slightly year-over-year, the overall tone is optimistic about operational momentum and future prospects.

Recommendation

Rating: Hold

Reason for Rating: Considering the slight decrease in net income despite strong operational performance and increased shareholder returns, a Hold recommendation is appropriate. The company is generating strong cash flow and rewarding shareholders, but revenue and income growth are not robust year-over-year.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/3/2025, 7:37:19 AM