02-08-2025
Imperial Oil Ltd (IMO) Q2 2025 Earnings Call Highlights: Record Production Amidst Declining Earnings
Net Income: $949 million, down $184 million from Q2 2024 and down $339 million from Q1 2025.
Cash Flow from Operations: Nearly $1.5 billion, with $2.4 billion of cash on hand at the end of the quarter.
Upstream Earnings: $664 million, down $67 million from Q1 2025.
Downstream Earnings: $322 million, down $262 million from Q1 2025.
Chemical Earnings: $21 million, down $10 million from Q1 2025.
Capital Expenditures: $473 million, $11 million higher than Q2 2024.
Dividends Paid: $367 million in Q2 2025.
Upstream Production: 427,000 oil equivalent barrels per day, up 9,000 barrels per day from Q1 2025 and up 23,000 barrels per day from Q2 2024.
Kearl Production: 275,000 barrels per day gross, up 19,000 barrels per day from Q1 2025.
Kearl Unit Cash Costs: USD18.86 per barrel, decreased by nearly USD2 per barrel from Q1 2025.
Cold Lake Production: 145,000 barrels per day, down 9,000 barrels per day from Q1 2025.
Syncrude Production: 77,000 barrels per day, up 4,000 barrels per day from Q1 2025.
Refinery Throughput: 376,000 barrels per day, reflecting a utilization of 87%.
Petroleum Product Sales: 480,000 barrels per day, up 25,000 barrels per day from Q1 2025.
Warning! GuruFocus has detected 7 Warning Signs with TAC.
Release Date: August 01, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Imperial Oil Ltd (IMO) generated cash flow from operations of nearly $1.5 billion and ended the quarter with approximately $2.4 billion of cash on hand.
Upstream production for the quarter averaged 427,000 oil equivalent barrels per day, marking the highest second quarter production in over 30 years.
The company completed significant project milestones, including the construction of a renewable diesel facility at Strathcona, which began production in July.
Kearl set a second quarter production record, averaging 275,000 barrels per day gross, and achieved a decrease in unit cash costs.
Imperial Oil Ltd (IMO) plans to accelerate share repurchases through its NCIB, aiming to complete the program by year-end, demonstrating a commitment to returning surplus cash to shareholders.
Negative Points
Net income for the second quarter was $949 million, down $184 million from the second quarter of 2024, primarily due to lower upstream realizations.
Downstream earnings of $322 million were down $262 million from the first quarter, reflecting lower margin capture.
Chemical business earnings were $21 million, down $10 million from the first quarter, driven by soft polyethylene margins.
Refinery throughput was lower due to higher unplanned downtime and impacts from planned turnarounds at Strathcona and Nanticoke.
The company experienced a decrease in net income sequentially, down $339 million from the first quarter of 2025, primarily driven by lower upstream realizations and downstream margin capture.
Q & A Highlights
Q: Can you explain the decision to accelerate the NCIB and your confidence in completing it without leveraging up? A: We are confident in accelerating the NCIB due to our strong cash flow, current cash on hand, and commodity prices. We plan to complete the program using free cash flow without leveraging our balance sheet. This aligns with our strategy of returning surplus cash to shareholders, having returned $20 billion since 2020, with $15 billion in share buybacks. - John Whelan, CEO
Q: What insights have you gained from deploying the autonomous haul system (AHS) at your sites? A: The AHS has been a success, reducing unit cash costs by about $1 per barrel. We are optimizing the fleet further and exploring additional automation opportunities, such as robotic fueling and inspection. This is part of our broader technology strategy, which is core to our operations. - John Whelan, CEO
Q: Could you elaborate on the renewable diesel production and its optimization? A: The renewable diesel facility at Strathcona is operational, and we are optimizing production based on feedstock and hydrogen supply. We have sufficient gray hydrogen for startup, and the ramp-up will depend on further hydrogen availability. The facility will operate year-round, leveraging proprietary technology for lower emissions. - John Whelan, CEO and Scott Maloney, VP Downstream
Q: What are the plans for the SAGD projects at Cold Lake, and how do they provide a competitive advantage? A: We are advancing solvent-assisted SAGD (SA-SAGD) projects, with Grand Rapids performing above expectations. The Mahkeses SA-SAGD project is set for 2029, aiming for 30,000 barrels per day. These projects lower costs and emissions, leveraging decades of experience at Cold Lake. - John Whelan, CEO and Cheryl Gomez-Smith, SVP Upstream
Q: How did Kearl's performance exceed expectations, and what does this imply for future production? A: Kearl's performance was boosted by better ore grade, increased material movement, and improved hydrotransport lines. The turnaround was shorter than expected, contributing to higher production. We remain on track with our guidance, expecting strong performance in the second half of the year. - John Whelan, CEO and Cheryl Gomez-Smith, SVP Upstream
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
