- Imperial Oil (TSX:IMO) has revised its capital outlook by $500 million
- The company has also announced that it is suspending share buybacks
- Imperial Oil has cut spending by $1 billion
- The company has lost 50 per cent of its share value in the last 30 days
- Imperial Oil (TSX:IMO) is trading at $14.86 per share before market open, with a $10 billion market cap
Imperial Oil (TSX:IMO) has reduced its outlook for the year by $500 million, as COVID-19 closures decimate energy sector businesses.
To compensate for the revenue dip, the company has cut enough fat to save $1 billion this year.
A combination of less spending on exploration and development, and cost-cutting measures such as pacing production, is behind the reduction.
Scope reductions have been found for the planned turnaround at the company’s Sarnia facility. A planned Coker turnaround at Syncrude has also been deferred until the third quarter.
The company believes its upstream production, downstream refinery utilisation, and product sales will face COVID-19’s impacts in the near future.
Imperial Oil’s CEO, President, and Chairman, Brad Corson, said the current business environment poses many challenges for the energy industry.
“The current combination of falling oil demand and increasing supply may be uniquely challenging. However, Imperial has a long history of weathering market volatility,” he said.
The markets are certainly volatile lately, especially for the energy companies.
An OPEC stoush over production volumes became an all-out price war when Saudi Arabia and Russia opened the floodgates and uncapped production. This flooded the market and torpedoed oil prices.
This went hand-in-hand with an oil consumption slowdown in China, then the world, as COVID-19 spread, causing governments to shut down businesses.
All of this has contributed to Imperial Oil’s share price halving in the last thirty days.
“As we continue to face these challenging conditions, I am extremely proud of the dedication and hard work by Imperial’s workforce across the country, to maintain safe and reliable operations as they also look after the well-being of themselves and their co-workers, their families, communities, and our customers.
“We have flexibility in our plans to respond to market conditions as they unfold, and remain focused on maximising long-term shareholder value in whatever business environment we operate,” Brad added.
Imperial Oil has also announced that it will suspend its share purchase scheme.
The company is not without reason to be hopeful. Imperial Oil has the best debt-to-capital ratio of the large Canadian oil companies, and $1.7 billion in cash or cash equivalents.
The company requires very little sustaining capital when compared to other energy companies, and is in a comparatively strong position.
Imperial Oil (TSX:IMO) is trading at $14.86 per share before market open.
