Imperial Oil Limited (IMO) Bundle
Understanding Imperial Oil Limited (IMO) Revenue Streams
Understanding Imperial Oil Limited’s Revenue Streams
The financial performance of Imperial Oil Limited is significantly influenced by its diverse revenue streams. This section delves into the breakdown of these primary sources, year-over-year growth rates, and the contributions of different business segments to overall revenue.
Breakdown of Primary Revenue Sources
The company generates revenue through various segments, primarily including upstream (exploration and production), downstream (refining and marketing), and chemicals. The following table summarizes the revenues from these segments for the nine months ending September 30, 2024, compared to the same period in 2023:
| Segment | 2024 Revenue (millions CAD) | 2023 Revenue (millions CAD) | Year-over-Year Growth (%) |
|---|---|---|---|
| Upstream | 30,915 | 33,713 | -8.4 |
| Downstream | 37,862 | 36,534 | 3.6 |
| Chemicals | 855 | 980 | -12.8 |
| Total Revenue | 38,812 | 37,694 | 2.9 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects the overall performance of the company. For the first nine months of 2024, total revenue increased by 2.9% compared to the same period in 2023. This growth is primarily attributed to the resilience in the downstream segment despite a decline in upstream revenues.
Contribution of Different Business Segments to Overall Revenue
Each business segment contributes differently to the overall revenue. The following table illustrates the contribution of each segment for the nine months ending September 30, 2024:
| Segment | Revenue Contribution (%) |
|---|---|
| Upstream | 79.8 |
| Downstream | 97.6 |
| Chemicals | 2.2 |
Analysis of Significant Changes in Revenue Streams
In 2024, the upstream segment experienced a decrease in revenue primarily due to lower crude oil prices and production challenges. The average price of West Texas Intermediate (WTI) oil for the nine months was 77.59 CAD per barrel, slightly up from 77.29 CAD in 2023. Meanwhile, the downstream segment benefited from improved refining margins, which contributed to its revenue growth despite lower throughput due to maintenance activities.
Overall, while upstream revenues faced challenges, the downstream segment's performance helped mitigate the overall impact, allowing the company to achieve a modest revenue increase year-over-year.
A Deep Dive into Imperial Oil Limited (IMO) Profitability
Profitability Metrics
Gross Profit Margin: For the third quarter of 2024, the gross profit margin was 6.67% compared to 7.03% in the same quarter of 2023. Over the nine months ending September 30, 2024, the gross profit margin averaged 9.18%, slightly up from 9.09% in the previous year.
Operating Profit Margin: The operating profit margin for Q3 2024 was reported at 12.14%, down from 13.03% in Q3 2023. For the nine-month period, the operating profit margin stood at 11.99%, compared to 11.51% in 2023.
Net Profit Margin: The net profit margin for Q3 2024 was 9.35%, a decrease from 11.53% in Q3 2023. For the nine months ending September 30, 2024, the net profit margin was 9.18%, slightly up from 9.08% in the prior year.
Trends in Profitability Over Time
Over the past three years, the profitability metrics have shown fluctuations. The following table summarizes the gross, operating, and net profit margins for the last three years:
| Year | Gross Profit Margin (%) | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|---|
| 2022 | 9.05 | 11.45 | 10.05 |
| 2023 | 9.09 | 11.51 | 9.08 |
| 2024 (YTD) | 9.18 | 11.99 | 9.18 |
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, the following table illustrates how the company's profitability ratios stack up against the sector:
| Metric | Company (%) | Industry Average (%) |
|---|---|---|
| Gross Profit Margin | 9.18 | 10.50 |
| Operating Profit Margin | 11.99 | 12.80 |
| Net Profit Margin | 9.18 | 9.50 |
Analysis of Operational Efficiency
The operational efficiency has been impacted by various factors, including cost management strategies and market conditions. In the third quarter of 2024, operational costs decreased by approximately $80 million due to lower energy prices. The trend in gross margins has shown a slight increase, indicating better cost management practices.
Additionally, the average cost of production per barrel has decreased to $30.00 in 2024 from $32.00 in 2023, reflecting improved operational efficiencies.
The company's focus on optimizing turnaround times at refineries has led to a capacity utilization rate of 90% in Q3 2024, down from 96% in Q3 2023.
Debt vs. Equity: How Imperial Oil Limited (IMO) Finances Its Growth
Debt vs. Equity: How Imperial Oil Limited Finances Its Growth
As of September 30, 2024, Imperial Oil Limited reported total long-term debt of CAD 3,997 million, which includes finance leases amounting to CAD 550 million . The company's short-term debt stands at approximately CAD 118 million .
The debt-to-equity ratio for Imperial Oil is currently 0.17, indicating a conservative approach to leveraging compared to the industry average of approximately 0.50 . This suggests that the company relies more on equity financing relative to debt compared to its peers in the oil and gas sector.
In recent activities, Imperial Oil extended the maturity date of its existing long-term, variable-rate Canadian dollar loan from ExxonMobil to June 30, 2035. The company also engaged in share repurchases, having bought back 12.4 million shares at a total cost of CAD 1,206 million during the nine months ended September 30, 2024 .
Imperial Oil's credit rating has remained stable, with a current rating of A from Standard & Poor's, reflecting its strong financial health and ability to meet its debt obligations .
The following table summarizes the debt and equity structure of Imperial Oil Limited:
| Financial Metric | Amount (CAD millions) |
|---|---|
| Long-term Debt | 3,997 |
| Short-term Debt | 118 |
| Total Debt | 4,115 |
| Total Shareholders' Equity | 23,639 |
| Debt-to-Equity Ratio | 0.17 |
| Industry Average Debt-to-Equity Ratio | 0.50 |
| Shares Repurchased (millions) | 12.4 |
| Cost of Share Repurchase (CAD millions) | 1,206 |
| Credit Rating | A |
In balancing its financing strategy, Imperial Oil emphasizes maintaining a low debt level while strategically utilizing equity funding. This approach allows the company to minimize financial risk while still pursuing growth initiatives through capital investments and share buybacks.
Assessing Imperial Oil Limited (IMO) Liquidity
Assessing Liquidity and Solvency
The liquidity and solvency of the company are critical components of its financial health. In this section, we will analyze the current and quick ratios, working capital trends, cash flow statements, and any potential liquidity concerns or strengths.
Current and Quick Ratios
The current ratio, which measures the company's ability to cover short-term liabilities with short-term assets, is calculated as follows:
| Year | Current Assets (millions CAD) | Current Liabilities (millions CAD) | Current Ratio |
|---|---|---|---|
| 2024 | 9,407 | 6,516 | 1.44 |
| 2023 | 8,298 | 6,603 | 1.25 |
The quick ratio, which excludes inventories from current assets, provides a stricter measure of liquidity:
| Year | Quick Assets (millions CAD) | Current Liabilities (millions CAD) | Quick Ratio |
|---|---|---|---|
| 2024 | 7,992 | 6,516 | 1.23 |
| 2023 | 6,354 | 6,603 | 0.96 |
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, reflects the short-term financial health of the company.
| Year | Working Capital (millions CAD) |
|---|---|
| 2024 | 2,891 |
| 2023 | 1,695 |
The increase in working capital from CAD 1,695 million in 2023 to CAD 2,891 million in 2024 indicates improved liquidity and financial stability.
Cash Flow Statements Overview
The cash flow statement provides insights into cash flows from operating, investing, and financing activities:
| Cash Flow Type | Q3 2024 (millions CAD) | Q3 2023 (millions CAD) | Nine Months 2024 (millions CAD) | Nine Months 2023 (millions CAD) |
|---|---|---|---|---|
| Operating Activities | 1,487 | 2,359 | 4,192 | 2,423 |
| Investing Activities | (484) | (380) | (1,421) | (1,283) |
| Financing Activities | (1,533) | (1,639) | (2,145) | (2,173) |
In the third quarter of 2024, cash flows from operating activities decreased compared to 2023, primarily due to unfavorable working capital impacts. However, the cash flows from operating activities for the nine months show a significant increase from CAD 2,423 million in 2023 to CAD 4,192 million in 2024.
Potential Liquidity Concerns or Strengths
Despite the decrease in cash flows from operating activities in Q3 2024, the overall liquidity position remains robust with a current ratio of 1.44 and a quick ratio of 1.23. The company’s ability to maintain positive working capital trends further solidifies its liquidity strength. However, the increase in financing activities outflows due to dividends and share repurchases may pose future liquidity considerations.
The cash and cash equivalents at the end of Q3 2024 were CAD 1,490 million, down from CAD 2,716 million in Q3 2023, indicating a decrease in available cash which should be monitored closely.
Is Imperial Oil Limited (IMO) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio: As of September 30, 2024, the P/E ratio stands at 9.81, calculated using the net income of 3,565 million CAD and the diluted earnings per share of 6.66 CAD.
Price-to-Book (P/B) Ratio: The P/B ratio is calculated at 1.85, based on total shareholders' equity of 23,639 million CAD and total shares outstanding of 523 million.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio is reported at 5.64, using an enterprise value of 22,525 million CAD and EBITDA of 3,996 million CAD.
Stock Price Trends
Over the last 12 months, the stock price has experienced the following trends:
- Beginning of 2023: 40.00 CAD
- Mid-2023 Peak: 56.00 CAD
- End of 2023: 45.00 CAD
- Current Price (September 2024): 65.00 CAD
Dividend Yield and Payout Ratios
The current dividend yield is 2.77%, with dividends declared per share of 1.80 CAD. The payout ratio stands at 27%, calculated based on the net income of 3,565 million CAD and total dividends paid of 960 million CAD.
Analyst Consensus
Analysts have provided the following consensus ratings for the stock:
- Buy: 10 analysts
- Hold: 5 analysts
- Sell: 2 analysts
| Metric | Value |
|---|---|
| P/E Ratio | 9.81 |
| P/B Ratio | 1.85 |
| EV/EBITDA Ratio | 5.64 |
| Current Stock Price | 65.00 CAD |
| Dividend Yield | 2.77% |
| Payout Ratio | 27% |
| Analyst Buy Ratings | 10 |
| Analyst Hold Ratings | 5 |
| Analyst Sell Ratings | 2 |
Key Risks Facing Imperial Oil Limited (IMO)
Key Risks Facing Imperial Oil Limited
Understanding the risk landscape is crucial for evaluating the financial health of any company. For Imperial Oil Limited, several internal and external risks could impact its operations and financial performance.
Industry Competition
The oil and gas sector is highly competitive, with numerous players vying for market share. In the third quarter of 2024, Imperial's net income was 1,237 million Canadian dollars, down from 1,601 million Canadian dollars in the same quarter of 2023. This decline can be attributed to increased competition in both upstream and downstream operations, affecting pricing and margins.
Regulatory Changes
Regulatory pressures are a constant concern in the energy sector. Changes in environmental regulations can lead to increased operational costs. The company has incurred federal excise taxes totaling 1,908 million Canadian dollars in the first nine months of 2024, compared to 1,781 million Canadian dollars in the same period of 2023. Such increases can squeeze profit margins further and require ongoing compliance investments.
Market Conditions
Fluctuations in global oil prices significantly impact financial results. In Q3 2024, the average price for West Texas Intermediate (WTI) was 75.27 USD per barrel, down from 82.32 USD per barrel in Q3 2023. This decrease reflects ongoing uncertainties regarding demand, particularly from major markets like China, which can affect revenue stability.
Operational Risks
Operational disruptions, including maintenance activities, can affect production levels. Refinery throughput decreased to 389 thousand barrels per day in Q3 2024, down from 416 thousand barrels per day in Q3 2023. Such reductions can lead to lower sales volumes and impact profitability.
Financial Risks
Financial stability is also at risk due to high levels of debt and interest expenses. As of September 30, 2024, total long-term debt stood at 3,997 million Canadian dollars. This debt burden necessitates careful cash flow management to meet interest obligations, which were 11 million Canadian dollars for Q3 2024.
Strategic Risks
Strategic decisions, such as capital allocation and investment in new projects, carry inherent risks. In the first nine months of 2024, capital and exploration expenditures totaled 1,421 million Canadian dollars, up from 1,283 million Canadian dollars in the same period of 2023. Poor investment choices could lead to wasted resources and diminished shareholder value.
Mitigation Strategies
To address these risks, Imperial Oil Limited has implemented several strategies:
- Enhancing operational efficiency to mitigate the impact of regulatory changes and competition.
- Investing in technology to improve production reliability and reduce costs.
- Maintaining a diversified portfolio to cushion against market volatility.
| Risk Type | Current Impact (2024) | Previous Impact (2023) |
|---|---|---|
| Net Income | 1,237 million CAD | 1,601 million CAD |
| Federal Excise Tax | 1,908 million CAD | 1,781 million CAD |
| Long-Term Debt | 3,997 million CAD | 4,011 million CAD |
| Refinery Throughput | 389 thousand bpd | 416 thousand bpd |
| Capital Expenditures | 1,421 million CAD | 1,283 million CAD |
Future Growth Prospects for Imperial Oil Limited (IMO)
Future Growth Prospects for Imperial Oil Limited
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Product Innovations: The company is focused on enhancing its product offerings and operational efficiencies, particularly in its upstream and downstream segments.
- Market Expansions: Expansion into international markets is a strategic priority, aiming to leverage global demand for energy products.
- Acquisitions: The company is actively seeking acquisition opportunities to bolster its market position and operational capabilities.
Future Revenue Growth Projections and Earnings Estimates
For the year 2024, the company projects total revenues of CAD 38,812 million, compared to CAD 37,694 million in 2023. This represents an increase driven by higher production volumes and improved market conditions.
Earnings estimates for 2024 suggest a net income of CAD 3,565 million, slightly up from CAD 3,524 million in 2023, translating to a net income per share of CAD 6.66 versus CAD 6.04 in the previous year.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has announced a new normal course issuer bid program, allowing for the purchase of up to 26,791,840 common shares from June 29, 2024, to June 28, 2025. This initiative is expected to enhance shareholder value and optimize capital structure.
Competitive Advantages That Position the Company for Growth
Imperial Oil Limited benefits from several competitive advantages:
- Robust Infrastructure: The company has a well-established network of refineries and production facilities, enhancing operational efficiency.
- Strong Financial Position: With total assets of CAD 42,529 million as of September 30, 2024, the company maintains a strong balance sheet.
- Market Leadership: The company holds a significant market share in Canada's oil and gas sector, providing a competitive edge over smaller players.
Financial Overview
The following table summarizes key financial metrics for Imperial Oil Limited as of September 30, 2024:
| Metric | 2024 (CAD millions) | 2023 (CAD millions) |
|---|---|---|
| Total Revenues | 38,812 | 37,694 |
| Net Income | 3,565 | 3,524 |
| Net Income per Share | 6.66 | 6.04 |
| Total Assets | 42,529 | 41,199 |
| Total Liabilities | 18,890 | 18,977 |
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Updated on 16 Nov 2024
Resources:
- Imperial Oil Limited (IMO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Imperial Oil Limited (IMO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Imperial Oil Limited (IMO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.