Shares of the Canadian petroleum company Imperial Oil (IMO) dropped 2% on July 30 despite the company reporting strong second-quarter results.
Earnings came in at C$0.50 per share versus a reported loss of C$0.72 per share in the prior-year period. Revenues more than doubled to C$8.05 billion compared to C$3.7 billion reported a year ago. (See IMO stock charts on TipRanks)
Notably, the quarter marked the highest second-quarter production in more than 25 years. Production increased to 401,000 gross oil-equivalent barrels per day, compared to 347,000 barrels per day in the prior-year quarter.
Based on the record production, the company increased total gross production guidance for FY2021 by 10,000 barrels per day at Kearl and by 5,000 barrels per day at Cold Lake.
In June, Imperial renewed its share repurchase program, which allows the company to buy back up to 5% of its shares outstanding over the next twelve months until June 28, 2022. The company repurchased 4% of its outstanding shares during the quarter.
Imperial’s CEO Brad Corson commented, “The decisive actions Imperial took throughout the pandemic to accelerate structural business improvements have enabled the company to recover strongly and generate over $1.8 billion in cash flow from operating activities year-to-date, while also completing significant turnaround activity in the second quarter.”
He further added, “Imperial has significant momentum entering the second half of the year and is well positioned to continue delivering on its commitments.”
Raymond James analyst George Huang resumed coverage on Imperial with a Hold rating and a price target of C$34.46 (25.9% upside potential).
Huang believes that investor sentiment for Imperial is beginning to see a turnaround based on recent record levels of production and a positive rate of change within the upstream segment. However, he added that the stock’s current valuation premium versus its peers is not justified.
Overall, the stock has a Hold consensus rating based on 1 Buys and 11 Holds. The average Imperial Oil price target of $36 implies 31.5% upside potential from current levels. Shares of IMO have jumped 56% over the past year.
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