Rising crude prices, record retail sales and strong performance at its refineries propelled Imperial Oil Ltd. to sterling fourth-quarter earnings, as it roundly beat market expectations.
The past year was a difficult one for Canada's oil patch, with low gas prices, a surging loonie and operational difficulties - including fires and unplanned maintenance that hurt major players such as Suncor Energy Inc. and Syncrude Canada Ltd. - taking a substantial bite out of the windfall produced by higher oil prices.
But Imperial credited its ability to steer free of problems at its own operations for its $799-million in profit for the last three months of 2010, a tally 50 per cent higher than the same quarter in 2009. The company's operating earnings, at 92 cents a share, exceeded analyst predictions by 42 per cent and sent its shares up 4.6 per cent Monday.
"From Imperial's perspective, I think it reflects a sustained focus on looking after the fundamentals of our business," spokesman Pius Rolheiser said.
The company's full-year results, with $2.2-billion in earnings, beat 2009 by 40 per cent. Earnings in 2010 were hit by an $80-million loss thanks to disruptions on the Enbridge Inc. pipeline network, $320-million from the stronger Canadian dollar and $255-million in extra royalties. But those royalties were propelled by higher crude prices, which added $880-million.
The company's profits were also boosted by high gasoline and jet fuel demand, stoked largely by the economic recovery.
"Our total retail fuel sales volume in 2010 was the highest in the history of the business. We saw strong growth in both our company-owned store sales as well as through our branded wholesale network," Mr. Rolheiser said. "Our aviation business also achieved a sales record in 2010."
More important were its refineries, where margins increased alongside performance. The company's facilities ran at 88 per cent of their capacity in 2010, up from 82 per cent in 2009.
"Lower maintenance activities and improved reliability in refining allowed for higher utilization and stronger financial results," Mr. Rolheiser said.
Though the 2010 profits still substantially lag the company's performance several years ago - 2008 earnings came in at an all-time high of $3.9-billion, while 2007 was $3.2-billion - the company is also spending heavily to build its Kearl oil sands project.
Capital outlay in 2010 hit $4-billion, and the company is planning to spend another $4-to $4.5-billion in 2011. Over the next decade, Imperial plans to spend $35-to $40-billion to grow, largely by increasing its footprint in Canada's oil sands. A major component will be Kearl, whose first phase, at 110,000 barrels a day, is now 50-per-cent complete.
However, the company has yet to take delivery of 34 construction modules that have been delivered to Lewiston, Idaho, an inland port. Those modules were delivered from Asia but have been prevented from travelling to the Fort McMurray area by local residents, who have raised concern that the massive pieces of equipment will pose a safety hazard as they travel across a mountain highway.
Though Imperial still plans to meet its scheduled start of Kearl operations in late 2012, the uncertainty over the module delivery has raised concern over its ability to make that date.
Mr. Rolheiser, however, said it's too early to tell.
"At this point, it's premature to talk about potential delay until we have a better sense of the outcome of the regulatory process [in the U.S.]" he said.
Apart from the oil sands, Imperial is also working to boost its natural gas fortunes. The company's gas output fell by 7 per cent in 2010, but it also added 10,000 hectares of land to its holdings in northeastern British Columbia, where the Horn River and Montney play have proven to be some of North America's most attractive new places for gas development.