imperial oil

IMPERIAL OIL $40.61 (Toronto symbol IMO; Shares outstanding: 854.2 million; Market cap: $34.6 billion; TSINetwork Rating: Average; Dividend yield: 1.1%; www.imperialoil.ca) is the largest investor in the Mackenzie pipeline project, which aims to pump natural gas from the Arctic to Alberta. The company owns 34.4% of this project. Recently, Royal Dutch Shell (New York symbol RDS.A) said it will sell its 11.4% stake in the proposed pipeline. That’s mainly because regulatory delays have doubled the project’s estimated costs, to around $16.2 billion. To put that in perspective, Imperial’s market cap is $37.6 billion. As well, new discoveries of shale gas in Canada and the U.S. have increased gas supply and depressed prices. Royal Dutch Shell aims to complete this sale by June 2012. That gives it plenty of time to find a buyer. Imperial and its remaining partners will make a final decision on the Mackenzie project in December 2013. If they decide to proceed, the new pipeline could begin operating in 2018....

ENCANA CORP., $28.92, Toronto symbol ECA, reported sharply higher earnings this week. In the three months ended June 30, 2011, Encana earned $166 million, or $0.22 a share (all amounts except share price in U.S. dollars). That’s up 151.5% from $66 million, or $0.09 a share a year earlier. These figures exclude several unusual items, particularly losses related to hedging and foreign exchange. On this basis, the latest earnings easily beat the consensus estimate of $0.14 a share. Even so, cash flow per share fell 10.9%, to $1.47 from $1.65. That’s mainly because the company’s average selling price for gas fell 7.5% to $5.09 per thousand cubic feet from $5.50 a year earlier (gas accounts for 96% of Encana’s overall production). Average daily gas production rose 3.3%. Encana sold its oil for at an average price per barrel of $92.66, up 38.2% from $67.05....

You may think oil is set to rise sharply, due to fast growth in India and China. Or you may think prices could be set to fall, because high oil prices could prompt users to switch to cheaper natural gas. The truth is, no one knows the future direction of oil prices. That’s why, instead of trying to predict the future direction of oil prices, we continue to recommend that you stick with well-established oil stocks with high-quality reserves and rising production. In addition, you should limit your investments in oil stocks to a portion of your portfolio’s Resource holdings. ...

IMPERIAL OIL $45.38 (Toronto symbol IMO; Shares outstanding: 854.2 million; Market cap: $38.7 billion; TSINetwork Rating: Average; Dividend yield: 1.0%; www.imperialoil.ca) is a major integrated-oil company that gets most of its production from its oil-sands projects in Alberta. Imperial also has conventional oil and natural-gas operations in western Canada, and holds interests in offshore projects in Atlantic Canada. The company’s other operations include four refineries and roughly 1,900 Esso gas stations In the three months ended March 31, 2011, Imperial’s cash flow rose 33.1%, to $873 million, or $1.03 a share. A year earlier, cash flow was $656 million, or $0.77 a share. The rise came mainly from higher production, higher oil prices and improved profits at Imperial’s refineries. Revenue rose 11.4%, to $6.9 billion from $6.2 billion. The company’s production is set to rise in the long term, thanks to its new oil-sands projects, including the $10.9-billion Kearl project, which is more than 50% complete. Imperial owns 71% of Kearl. ExxonMobil Corp. (New York symbol XOM) owns the remaining 29%. Exxon also holds a 69.6% interest in Imperial....

Imperial Oil’s large oil and gas reserves will let it grow for decades. To tap into those reserves, Imperial will spend $3.5 billion to $4 billion a year over the next 10 years (for a total of $35 billion to $40 billion). Its cash flow is forecast to be over $3.8 billion this year, so it can meet its spending targets without taking on debt or issuing shares. IMPERIAL OIL $45.38 (Toronto symbol IMO; Shares outstanding: 854.2 million; Market cap: $38.7 billion; TSINetwork Rating: Average; Dividend yield: 1.0%; www.imperialoil.ca) is a major integrated-oil company that gets most of its production from its oil-sands projects in Alberta. Imperial also has conventional oil and natural-gas operations in western Canada, and holds interests in offshore projects in Atlantic Canada. The company’s other operations include four refineries and roughly 1,900 Esso gas stations In the three months ended March 31, 2011, Imperial’s cash flow rose 33.1%, to $873 million, or $1.03 a share. A year earlier, cash flow was $656 million, or $0.77 a share. The rise came mainly from higher production, higher oil prices and improved profits at Imperial’s refineries. Revenue rose 11.4%, to $6.9 billion from $6.2 billion....

Exxon Mobil, $80.34, symbol XOM on New York (Shares outstanding: 4.9 billion; Market cap: $389.3 billion; www.exxonmobil.com), was formed in 1999, following the merger of Exxon and Mobil. It is the world’s largest publicly traded oil company. Exxon Mobil owns 70% of Imperial Oil, symbol IMO on Toronto. In the three months ended March 31, 2011, Exxon Mobil’s earnings jumped to $2.14 a share from $1.33 a year earlier. That beat the consensus estimate of $1.75. The improved performance came from higher oil and natural gas prices, increased refining margins, and record performance from the chemicals division. The company continues to buy back large amounts of its stock. In the latest quarter, it bought back 69 million shares for $5.7 billion....

These three leading industrial companies all face rising costs for labour and raw materials. However, all three continue to win new contracts that will help them offset these expenses. Moreover, all three continue to trade at attractive multiples to earnings. SNC-LAVALIN GROUP INC. $55 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 150.8 million; Market cap: $8.3 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.snclavalin.com) continues to win new contracts, thanks in part to its strong reputation. SNC is a leading Canadian engineering and construction company. It designs and builds large-scale public-works projects, such as roads, bridges, transit systems and water-treatment plants. It also builds mines, chemical plants and electrical-power systems....

IMPERIAL OIL LTD. $46 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $39.0 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.0%; TSINetwork Rating: Average; www.imperialoil.ca) now estimates that its Kearl oil-sands project will cost $10.9 billion. That’s 36% higher than its earlier estimate of $8 billion. The company owns 71% of Kearl, and Exxon-Mobil Corp. (New York symbol XOM) owns the remaining 29%. ExxonMobil also owns 69.9% of Imperial’s shares. Imperial has changed the original design of this project to make it easier to expand in the future, and to respond to new environmental regulations. These changes were the main reason for the higher costs....

iShares S&P/TSX Capped Energy Index Fund, $21.11, symbol XEG on Toronto (Shares outstanding: 50.5 million; Market cap: $1.1 billion; ca.ishares.com) aims to mirror the performance of the S&P/TSX Capped Energy Index, which is made up of the largest-capitalization energy stocks on the Toronto exchange. The weight of any one company is capped at 25% of the index’s market capitalization. The fund’s MER is 0.55%. It yields 1.4%. iShares S&P/TSX Capped Energy Index Fund’s top 10 holdings are Suncor Energy, 18.5%; Canadian Natural Resources, 13.5%; Cenovus Energy, 7.5%; Encana Corp., 6.8%; Talisman Energy, 6.4%; Canadian Oil Sands Trust, 4.4%; Nexen, 3.7%; Imperial Oil, 3.5%; Crescent Point Energy, 3.4%; and Penn West Energy Trust, 3.3%. We continue to think most investors are better off investing in individual companies as part of a well-balanced and diversified portfolio, rather than in funds that focus on narrow market sectors. As well, indexes that cap their holdings at a certain level – 25% in the case of the iShares S&P/TSX Capped Energy Index Fund – can cut your return by reducing the contribution from top performers if they soar to make up more that the capped limit....

Husky Energy Inc., $28.22, symbol HSE on Toronto (Shares outstanding: 897.2 million; Market cap: $25.3 billion; www.huskyenergy.com), is an integrated oil and gas company. Hong Kong-based billionaire Li Ka-Shing owns 70.5% of Husky’s shares. Husky produces conventional oil and gas across western Canada, as well as heavy oil (a heavy, black viscous oil) at Lloydminster, Saskatchewan, and from the oil sands at Tucker, Alberta. Husky also has major holdings in eastern Canada, including interests in Newfoundland’s Terra Nova and White Rose offshore oil fields. Apart from its exploration and production activities, Husky owns a number of refineries, including a light-oil refinery at Prince George, B.C., and an asphalt refinery at Lloydminster, where it also has a heavy-oil upgrader. (Heavy-oil upgraders take heavy oil and process it into high-quality conventional crude oil.)...