* Boosts 2009 spending to C$2.2 billion * Advancing Kearl oil sands project * Profit falls to C$660 million from C$886 million * Fourth-quarter EPS C$0.76 vs C$0.96 (Recasts with analyst, company comments)
By Jeffrey Jones
CALGARY, Alberta, Jan 29 (Reuters) - Imperial Oil Ltd (IMO.TO) boosted capital spending by 60 percent on Thursday, partly to advance a multibillion-dollar oil sands project, rarities in an industry hammered by shaky energy and financial markets.
Imperial, Canada’s biggest oil producer and refiner, reported a 26 percent drop in fourth-quarter profit, citing falling crude prices. But it also said it plans to spend C$2.2 billion ($1.8 billion) in 2009, up from C$1.4 billion in 2008.
The company is nearing a go-ahead decision on its C$8 billion Kearl oil sands venture in northern Alberta against a backdrop of project deferrals by numerous rivals whose fortunes have dwindled in recent months.
“They’re certainly bucking the trend there, there’s no question about it,” Edward Jones analyst Lanny Pendill said. “But I think it’s important to point out that Imperial Oil’s in a very different position than its peers are.”
Despite the downturn, Imperial had a cash warchest of nearly C$2 billion at the end of 2008, a 67 percent increase from 2007, and virtually no debt.
“They actually have a strategic advantage here because they are able to continue to pursue long-term projects, while most of the industry is having to sit on the sidelines waiting for better credit conditions,” he said.
Petro-Canada PCA.TO, operator of the Fort Hills oil sands project, said on Thursday it was in no rush move forward with that C$21 billion project, which it put on hold late last year.
It is waiting until energy and financial markets improve and it can find ways to chop construction costs.
Canada’s oil sands are the largest crude deposits outside the Middle East, but production is far more complex and expensive. With oil prices around $40 a barrel, down from a July peak above $147, at least C$90 billion of oil sands developments have been put on hold.
But Imperial, the Canadian affiliate of U.S. oil major Exxon Mobil Corp (XOM.N), has said it believes its project economics will improve as rivals drop out, freeing up labor and materials. It is expected to make a decision on going ahead by the end of the first quarter.
“Our view of Kearl is it’s a high-quality project and work continues to advance it, irrespective of the current economic climate,” Imperial spokesman Gordon Wong said.
Imperial, known for its national chain of Esso gas stations, extensive oil sands holdings and other big ticket projects like the C$16.2 billion Mackenzie Gas Project, said net income fell to C$660 million, or 76 Canadian cents a share, in the quarter, down from year-earlier C$886 million, or 96 Canadian cents a share.
Revenue fell 23 percent to C$5.9 billion.
Imperial said its oil output averaged 224,000 barrels a day in the quarter, down 4 percent. Natural gas production fell 31 percent to 239 million cubic feet a day.
Earnings at its energy production division dropped 55 percent to C$336 million. Refining and marketing profit rose 18 percent to C$257 million, on stronger margins and the weaker Canadian dollar, it said.
Imperial shares fell 63 Canadian cents to C$39.16 on the Toronto Stock Exchange. They are down 20 percent in the past year.
$1=$1.22 Canadian Reporting by Jeffrey Jones; editing by Rob Wilson