Latest quarterly results released on May 1 validate estimated Net Present Value [NPV] of US$37 a share for buy-recommended Imperial Oil (NYSEMKT:IMO) and a $2 billion oil deal on nearby leases unmasks value not included in NPV.
First quarter 2007 cash flow benefited from higher than normal Canadian oil prices relative to the global benchmark and NPV is concentrated 76% on oil production. Meanwhile, Norwegian
company Statoil (NYSE:STO)’s purchase announced April 27 of non-producing oil sands leases appears to value recoverable resources in the ground for a dollar a barrel.
Chief Executive Tim Hearn believes Imperial has 12 billion barrels of non-proven resources under its lands. Such opportunity helps explain why Imperial’s stock may have additional appeal at the same time it has a McDep Ratio near 1.0 on the present value we recognize. Moreover, long-term global oil price has resumed an uptrend with the current quote of $69 a barrel above the 40-week average.
IMO has a half weighting in our illustrative energy portfolio concentrated on real assets that promise a high return providing clean fuel for global growth.
Originally published on May 2, 2007.
IMO 1-yr chart: