IMO stock: Imperial Oil (IMO) Rallies 5.8% Since Q2 Earnings Release

 Here is the article. 

My study notes:

1. July 31 - August 13 - IMO went up 5.8%
2. Investors are optimistic about the company’s full-year cost-minimizing efforts.
3. Quarterly results - loss of 52 cents a share  - lower than 69 cents a share
4. 2020 2nd quarter - $2.68 billion, 2019 - $6.92, Zacks concensus estimate of $3.09 billion

Shares of Imperial Oil IMO have improved 5.8% since second-quarter 2020 earnings announcement on Jul 31. While the bottom line came ahead of the Zacks Consensus Estimate, investors are optimistic about the company’s full-year cost-minimizing efforts.

Imperial Oil’s quarterly results reported an adjusted loss of 52 cents a share, narrower than the Zacks Consensus Estimate of a loss of 69 cents. This better-than-expected result was driven by higher year-over-year natural gas production. However, the Canadian integrated oil and gas player delivered earnings of 66 cents in the year-ago quarter. The year-over-year decline was due to lower price realizations.

In the second quarter, revenues of $2.68 billion fell shy of the Zacks Consensus Estimate of $3.09 billion. Moreover, the top line fell from the year-ago quarter’s sales of $6.92 billion.

My study notes:

1. 2020 - operating actitivities C$816 million in the reported quarter. 2019 - $1026 million
2. 2020 2nd quarter  -C$162 million to its shareholder through dividend, 0.22/ share compared with 0.19/share in 2019
3. $233 million in cash and cash equivalents
4. total debt amounted to C$5,193 million, a total debt to total capital of 18.5%

Financial Performance

Imperial Oil’s cash flow used in operating activities was C$816 million in the reported quarter. However, in the year-ago period, cash flow from operating activities came in at C$1,026 million.

Importantly, the company returned C$162 million to its shareholders through dividends in the reported quarter. It paid out 22 Canadian cents as dividend per share compared with 19 Canadian cents a year ago.

As of Jun 30, the company held C$233 million in cash and cash equivalents. Its total debt amounted to C$5,193 million, representing a total debt to total capital of 18.5%.

Outlook

Responding to the coronavirus-induced sudden oil price slump, Imperial Oil is taking steps to rationalize its planned activities and capital spending for the current year.

Amid the growing crisis,the company announced sizeable cuts in 2020 capital and operating spending plans. Capital and exploration expenditures for the ongoing year are projected to be in the $1.1-$1.2 billion band, indicating a fall from the previous guided range of $1.6-$1.7 billion. Also, the company classified certain prospects to reduce 2020 operating expenses by $500 million from the year-ago levels.

Imperial Oil expedited the process of its Kearl project's planned turnaround by stopping work in mid-July with the expected completion in late August. This strategic action will further allow the company to manage its projected ramped-down production level in the near term. This, in turn, is likely to shrink Kearl’s total gross production to nearly 220,000 barrels per day in 2020 from the prior guidance of 240,000 barrels.  Moreover, production from Cold Lake is estimated to decline to 135,000-140,000 barrels per day in the period.

By the end of the second quarter, refinery utilization rates and petroleum product sales dropped due to moderate demand for petroleum products in Canada. However, both metrics are anticipated to improve in the third quarter.