Hold-rated Imperial Oil (NYSEMKT:IMO) appears to be priced near estimated net present value [NPV] of $37 a share, where it would return 7% a year after inflation on our current estimates.
About 70% of the value of the stock is in oil production, including 33% for the company’s quarter ownership of oil miner/upgrader Syncrude. Some $6 a share of NPV is not indicated readily by near-term cash flow judging by correlation with about thirty producers.
Among sources of less obvious potential, the Kearl oil sands mine project, now in the planning stage after initial government approval, might be worth perhaps $3 a share now. Valuation could be enhanced should oil for delivery over the next six years, priced currently at $62 a barrel, resume an uptrend by crossing above the 40-week average later in 2007. Meanwhile fourth quarter 2006 results reported on February 1 came close to our estimates and provide the updated base for future projections.
Originally published on Feb. 2, 2007
IMO 1-yr chart