January 31, 2012 / 3:03 PM / in 6 years

Imperial Oil profit surges 26 percent on crude prices

CALGARY, Alberta (Reuters) - Imperial Oil Ltd (IMO.TO) reported a sharply higher quarterly profit on Tuesday, thanks to stronger crude prices and an improved performance at its refining operations, and boosted its dividend by more than 9 percent.

Canada’s No. 2 oil producer and refiner, majority owned by U.S. major Exxon Mobil Corp (XOM.N), said fourth-quarter net income rose 26 percent to C$1.01 billion ($1.01 billion) or C$1.18 a share, from C$799 million, or 94 Canadian cents, a year earlier.

That topped the average analyst estimate of 89 Canadian cents a share as compiled by Thomson Reuters I/B/E/S.

The company’s revenue rose 17 percent to C$8.12 billion.

Imperial is the first of Canada’s big energy companies to report earnings in a quarter marked by robust oil prices. While the company’s oil and gas operations did very well, its refining operations were more profitable than expected.

”The surprise was the downstream (refining and marketing operations), said Andrew Potter, an analyst with CIBC World Markets. “They had really strong earnings despite reliability that was only so-so.”

Imperial’s four Canadian refineries are capable of processing more than 500,000 bpd of crude but handled just 433,000 bpd in the quarter due to maintenance shutdowns at some of its facilities.

Despite the reduced output, earnings from refining operations rose as the margin, the profit made on refining a barrel of crude and selling it to retail customers, strengthened. Overall, Imperial’s refining and market contributed C$272 million the company’s profit, 2.3 percent more than the year-prior quarter.

“Lower than expected downstream utilization of 85 percent was more than offset by higher than expected margins of C$33.76 (per barrel),” George Toriola, an analyst at UBS Securities, wrote in a research note.

However the bulk of the profit boost came from Imperial’s Cold Lake oil sands project as output surged. Production from the thermal facility, where steam is pumped into the ground to liquefy tarry bitumen deposits, jumped 10 percent to 162,000 barrels per day as the company drilled new wells to boost output above the project’s original capacity of 150,000 bpd.

“Cold Lake continues to produce at great, great levels,” Potter, said.

The company sold bitumen for an average price of C$72.83 a barrel in the quarter, 24 percent higher than a year ago.

Imperial is expected to soon announce if it will go ahead with a planned expansion of its Cold Lake operations. The Nabiye project will add 30,000 bpd of production for an undisclosed cost.

Along with Cold Lake, Imperial is also developing the C$28 billion Kearl oil sands project. It said the project’s first C$10.9 billion, 110,000 bpd phase is expected to start up on schedule later this year.

Imperial’s net crude oil and natural gas liquids production fell 4.3 percent to 202,000 bpd, despite record output from Cold Lake. Output from its 25 percent stake in Syncrude Canada Ltd fell 20 percent to 63,000 bpd as malfunctioning equipment had to be repaired at the oil sands project.

Natural gas output fell 10 percent to 226 million cubic feet per day.

Cash flow, a key indicator of a company’s ability to pay for new projects and drilling, rose 21 percent to C$1.22 billion. It did not provide per-share results for the measure.

Also on Wednesday, Imperial said it is increasing its quarterly dividend by a penny to 12 Canadian cents per share, the first increase to the payout since April, 2010.

Imperial’s shares were up 54 Canadian cents at C$47.40 by midday Tuesday on the Toronto Stock Exchange, even as the exchange’s energy index dropped by 1.1 percent.

($1=$1.00 Canadian)

Additional reporting by Shounak Dasgupta in Bangalore; editing by Peter Galloway and Rob Wilson

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