May 1, 2008 / 4:58 PM / in 10 years

Imperial Oil profit falls on weak refining results

CALGARY, Alberta (Reuters) - Imperial Oil Ltd’s IMO.TO profit fell 12 percent in the first quarter as weak refining results and plant outages overshadowed the impact of record high crude prices, Canada’s No. 2 oil producer and refiner by stock market value said on Thursday.

<p>Bruce March, president and chief executive of Imperial Oil, addresses to shareholders at the company's annual general meeting in Calgary May 1, 2008. REUTERS/Todd Korol</p>

Imperial, known for extensive heavy-oil and oil-sands operations as well as its national chain of Esso gas stations, earned C$681 million ($668 million), or 75 Canadian cents a share, down from year-earlier C$774 million, or 81 Canadian cents a share.

The result, which did not have the gains from asset sales that fattened earnings in 2007, fell well short of the 96 Canadian cent per share profit forecast among analysts surveyed by Reuters Estimates.

The earnings were marked by an 85 percent drop, to C$30 million, in profits from Imperial’s downstream division. But profits from petroleum production were also hampered by a 43 percent fall in natural gas output as one big field ran dry.

“The thing that surprised us the most was how much the gas production was down,” said William Lacey, an analyst at FirstEnergy Capital. “But everyone knew that the downstream (result) was going to be poor.”

Shares of Imperial, which is majority-owned by U.S. oil major Exxon Mobil Corp XOM.N, fell C$1.63, or nearly 3 percent, to C$57.79 on the Toronto Stock Exchange. Before Thursday, the stock was up 9 percent since the start of the year.

Imperial and its rivals enjoyed oil prices that averaged a record $97.82 a barrel in the quarter, up more than two-thirds from the year before. Crude has recently climbed even higher to near $120 a barrel.

Imperial’s oil and gas production operations earned a net C$650 million in the quarter, up 15 percent.

But Imperial said its results were hindered by a month-long unplanned outage at its Strathcona refinery near Edmonton, Alberta, which contributed to tight gasoline supplies in the region, as well as weak industry-wide refining margins.

In addition, oil production slipped due to lower output at the Syncrude Canada oil sands venture, which was also hit with unscheduled shutdowns of units during the quarter. Imperial has a 25 percent stake in the venture.

“Like any quarter we had some bright spots but Syncrude had some challenges in the quarter,” Bruce March, an Exxon Mobil refining executive who took over as Imperial’s chief executive on April 1, told reporters after the company’s annual meeting. “We had a pretty significant gas resource that’s been in natural decline...and refining margins were significantly lower than in prior years.”

Still, March added, “it was a good quarter.”

The company produced a net average 216,000 barrels of oil a day, down 3 percent from the first quarter of 2007. Natural gas production averaged 259 million cubic feet a day, down from 456 million cubic feet.

Imperial’s oil and gas production operations earned a net C$650 million in the quarter, up 15 percent.

Imperial’s revenue rose 25 percent to C$7.23 billion from $5.77 billion.

($1=$1.02 Canadian)

Reporting by Jeffrey Jones and Scott Haggett; Editing by Peter Galloway

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