Imperial Oil: Oil Price Yes, Alberta Royalties No

While the price of buy-recommended Imperial Oil (IMO) is above estimated net present value [NPV] currently estimated at $42 a share, we keep our buy rating as long as six-year oil price is in an uptrend defined as current price above the 40-week average. Third quarter results reported today met expectations in Canadian dollars thereby exceeding expectations in U.S. dollars worth ten per cent less than just three months ago).

Along with dollar devaluation, tax increases in Alberta help drive up oil price enough to strengthen stock price for the companies who provide investment to develop costly new supply. Six-year oil price doubled from the end of 2004 to mid 2006, traded sideways for almost a year and now is rising again perhaps toward another double subject to short declines from time to time.

Chief Executive Tim Hearn remains a statesman as he focuses on converting Imperial’s rich resources into proven reserves and an attractive financial return.

Originally published on October 30, 2007.