Imperial Oil: AAA Balance Sheet And Lower Political Risk Than Integrated Competitors
- The company offers an Exxon-like balance sheet, but with production growth and long life reserves of 40 years.
- IMO, a AAA company, has been ignored by energy bulls with appetites for less diverse drillers operating in costly environments in North Dakota, Australia and the Caspian region.
- IMO is held back by short-term worries about Keystone XL pipeline completion, issues surrounding transportation of crude via rail, and environmental opposition to oil sands.
- The company has excellent dividend coverage. An inflection point has been reached where operating cash flow (Q1 2014) is roughly 8x or 10x the dividend.
- Given a clear path for expanding Kearl from 70K barrels (in Q1 2014) to 345K barrels in 2020, dividends should expand commensurately.