Imperial, like much of the energy sector, had a marked bounce-back in demand for its products over the past 12 months.TODD KOROL/Reuters
Imperial Oil Ltd. increased its quarterly dividend by more than 25 per cent Tuesday, reflecting a broader trend in Canada’s oil patch even as the company keeps a close eye on how inflation could hit its bottom line.
Imperial IMO-A announced Tuesday that its first-quarter dividend would rise to 34 cents a share from last quarter’s 27 cents, bolstered by rising oil prices and its highest level of crude production in more than 30 years.
Imperial, like much of the energy sector, also had a marked bounce-back in demand for its products over the past 12 months, with gasoline and diesel hovering around 90 per cent to 95 per cent of prepandemic levels.
“We continue to see industry demand trends pretty consistent with what we saw through 2021,” Imperial president and chief executive officer Brad Corson said on an investor call Tuesday.
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Jet fuel has been slower to recover. Although demand is sitting at 70 per cent to 75 per cent of historical levels, Mr. Corson said the waves of COVID-19 infections mean it continues to be a somewhat volatile commodity.
And while Mr. Corson said Imperial has been fortunate to avoid significant effects from inflationary pressures, that’s not guaranteed.
He said the largest consequence thus far has been on Imperial’s own energy bills, because of the rising cost of the natural gas it buys to operate its facilities. “Where I could see more significant impacts would be things like steel,” he added.
Still, he expects that knocks to Imperial’s bottom line will be minimal on that front, given the company has already purchased most of the materials for two large construction projects in 2022, the Sarnia Products Pipeline in Ontario and a tailings pond project at its Kearl Lake oil sands site in Alberta.
“It’s something we’re going to keep a very close eye on going forward, but so far we’ve been able to manage it quite well,” Mr. Corson said.
On production, Imperial averaged 445,000 barrels of oil a day in the quarter ending Dec. 31. That was slightly lower than the same quarter in 2020, because of the Arctic temperatures that landed Alberta in a deep freeze in late December of last year.
Mr. Corson said Imperial’s chemicals business was a standout in 2021, hitting its highest full-year earnings in more than 30 years.
In all, the company earned net income of $813-million in the fourth quarter of 2021.
Mr. Corson also said there has been a lot of interest in XTO Energy Canada, which is owned 50-50 by Imperial and ExxonMobil Canada. The two parent companies announced in January they were entertaining plans to sell off XTO, a 650,000-acre shale oil and gas operation with assets in the Montney and Duvernay areas of central Alberta.
XTO produces about 9,000 barrels of liquids and 140 million cubic feet of natural gas a day, but Mr. Corson said Imperial has other mining assets that create better value for shareholders.
Mr. Corson said Imperial and Exxon received several unsolicited offers for XTO before they even put it on the market – which didn’t surprise him, given the amount of consolidation in Montney and Duvernay.
And while Mr. Corson emphasized there’s no final decision on whether XTO will definitely go under the hammer – the companies are weighing offers – he said the size of the play means Imperial and Exxon are open to selling it off in pieces.
“The key is going to be what delivers the most value and how does that compare to our view of value, if we were to continue to retain the asset and develop it further ourselves,” he said.
Mr. Corson said while Imperial is keeping an open mind on mergers and acquisitions more broadly, it’s not top of mind for the company. “Our top priority centres around our existing asset base and maximizing value from those assets,” he said.
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Emma Graney