Canadian Oil and Gas Industry - PowerPoint PPT Presentation

Loading...

PPT – Canadian Oil and Gas Industry PowerPoint presentation | free to view - id: 72b610-N2M3O



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Canadian Oil and Gas Industry

Description:

Canadian Oil and Gas Industry Fundamental Analysis and Recommendations: Suncor, Imperial Oil, Talisman Presenters Karen Ford Industry Overview Aaron Cawker ... – PowerPoint PPT presentation

Number of Views:176
Avg rating:3.0/5.0
Slides: 146
Provided by: SimonF158
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Canadian Oil and Gas Industry


1
Canadian Oil and Gas Industry
  • Fundamental Analysis and
  • Recommendations
  • Suncor, Imperial Oil, Talisman

2
Presenters
  • Karen Ford Industry Overview
  • Aaron Cawker Suncor
  • Stephanie Cornell Talisman
  • Rahim Dhanji Imperial Oil

3
Industry Overview
  • Largest industry in the world
  • Oil gas trade surplus accounts 57 of Canadas
    merchandise trade balance in 2003
  • 3.5 per cent share of the world market, since
    1998
  • Employment near 500,000 in Canada
  • Invest close to 24 billion

4
Overviewcontinued
  • Payments to governments have averaged close to
    8.5 billion per year over the last 10 years
  • In 2003, the oil and gas industry contributed an
    estimated 16 billion to government revenues in
    the form of royalty payments, bonus payments and
    income taxes. 
  • We produce more than 20 of North Americas crude
    oil and natural gas but account for only 10 of
    its consumption
  • Capital Spending 2003 Conventional 23.8
    billion 

  • Oil Sands 5.0 billion 

  • Total 28.8 billion

5
Origins and History
  • Most crude oil and natural gas originate from
    plant and animal life millions of years ago
    swamps and oceans.
  • Heat and pressure transformed the soft parts of
    the plants and animals into solid, liquid or
    gaseous hydrocarbons known as fossil fuels -
    coal, crude oil or natural gas
  • Located in sand oils and oil fields
  • Found by drilling and creating wells

6
(No Transcript)
7
Sectors of the Industry
  • Petroleum Exploration and Production
  • Upstream
  • Refining
  • Midstream
  • Distribution and Retail Sales
  • Downstream
  •  

8
Types and Uses
  • Crude Oil and Natural Gas
  • Uses
  • Mobility, heat and cool our homes and provide
    electricity
  • Products
  • plastics, life-saving medications, clothing,
    cosmetics, and many other items you may use daily
  • Barrel  a unit of measure for oil and petroleum
    products that is equivalent to 42 U.S. gallons

9
Canadian Economy
  • Canada's GDP 2003 grew 1.7., 2002 it grew 2.2
  • Slowdown of Canadas economy
  • weak U.S. economic growth for most of the year
  • a strong appreciation of the Canadian dollar
  • the SARS outbreak in Toronto
  • restrictions on exports of softwood lumber and
    beef (due to mad cow disease).
  • Recovery of the U.S. economy, high oil and
    natural gas prices, and continued spending from
    the Canadian government are expected to boost
    Canadas economy in 2004.
  • The Canadian economy is forecast to grow 3.6 in
    2004

10
Situational Analysis
  • Demand is increasing
  • Oil and Natural Gas together provide the largest
    source of energy (64) in Canada
  • Natural gas 39 and Oil 25
  • Hydro 20
  • Coal 11
  • Nuclear 5
  • Prices have become volatile on the market
  • Energy shares make up 17 percent of the value of
    the SP/TSX, the second-largest group in the index

11
Crude Oil in Canada
  • Highlights
  • Ninth-largest producer of crude oil in the world
  • Prior to 2002, Canada did not even rank in the
    top 20 of countries with the most proven crude
    oil reserves. Alberta's oil sands, which stood at
    174.4 billion barrels as of January 2004
  • Saudi Arabia holds most crude oil reserves in the
    world
  •       

12
Crude Oilcontinued
  • Reserves 178.9 billion barrels (2nd)

World Reserves
13
Crude Oilcontinued
  • Production
  • 3.1 million barrels per day (bbl/d) for 2003, an
    increase of 7 over 2002
  • Oil sands production is expected to increase
    significantly and to offset the decline in
    conventional crude oil production, becoming
    Canada's major source of oil supply
  • Western Canada Sedimentary Basin (WCSB),
    underlying most Alberta and parts of British
    Columbia, Saskatchewan, Manitoba and the
    Northwest Territories main source of oil

14
(No Transcript)
15
Crude Oil Continued
  • Wells Drilled 4,845
  • Exports
  • US 1.4 million barrels per day
  • 3rd largest exporter of crude oil to
  • the US
  • Canada makes up 15 of total US oil imports
  • Canada supplies 9 of US oil consumption
  • Imports
  • 912,000 barrels per day

16
Crude Oil Prospects
17
Crude Oil Forecast
  • Significant potential for new crude oil
    production planned to come on stream over the
    next ten years
  • Canadas crude oil production growth is driven by
    the development of oil sands in Alberta and to a
    lesser degree by offshore projects in eastern
    Canada

18
Crude Oil Prospects
  • Maturing basin being extended by technology
  • Horizontal drilling
  • 3D Seismic
  • New drilling/recovery technology
  • Emerging basins
  • Oil Sands
  • Northern Canada
  • Offshore East Coast
  • Technology is key
  • Total Canadian production is projected to
    increase from the current 2.6 million barrels per
    day to reach 3.6 million barrels per day (b/d) by
    2015.

19
Crude Oil Resources (Billions of Barrels)
20
Crude Oil Supply Forecast
21
Natural Gas Highlights
  • Canada is the third-largest producer of natural
    gas
  • Production
  • 16.9 billion cubic feet per day
  • Reserves
  • 59.1 Tcf (Jan. 2004)
  • Wells Drilled in 2003 12,951
  • Exports
  • 2nd largest exporter in world
  • to US 3.8 trillion cubic feet per year
  • Largest exporter of natural gas to the US
  • Canada makes up 94 of total US gas imports
  • Canada supplies 17 of US gas consumption
  • No imports listed

22
Natural Gas Production and Consumption
23
Natural Gas Outlook
  • Short-term outlook, natural gas production is
    expected to decline 3, from 16.3 Bcf/d at the
    end of 2002, to 15.8 Bcf/d in 2005
  • new fields coming onstream are small and quickly
    depleted
  • If prices stay high, incentive to exploit the
    many small natural gas pools in the WCSB, as well
    as coalbead methane, of which the region holds
    considerable reserves

24
Natural Gas Outlook Productive Capacity
25
Prospects of Natural Gas
  • Natural gas demand keeps growing
  • Supply running hard to catch growing demand
  • New sources of supply coming on
  • Gas from tight sands is promising resource
  • Arctic gas from the Mackenzie Delta to be piped
    to Canadian and U.S. network of pipes
  • As demand for gas grows, Canadas resources will
    combine with Liquid Natural Gas (LNG) imports as
    important sources of this cleaner-burning fuel of
    choice in an increasingly environmentally
    conscious North America

26
Natural Gas Prospects
  • Significant untapped potential remaining
  • Sufficient pipeline capacity New supplies
  • Northern gas
  • East Coast offshore
  • Coal-bed methane

27
Potential of Natural Gas (TCF)
28
North America Natural Gas Demand
29
Strengths
  • Size and number oil sands in Alberta
  • Potential of Eastern and Northern Canada
  • high-tech exploration
  • cold-climate and offshore operations
  • construction and operations of pipelines
  • specialized controls and computer applications
  • environmental protection technology and safety
    training
  • innovative products and services that meet
    customer needs
  • refining processes that produce quality
    petroleum-based products while minimizing the
    impact on the environment.

30
Weaknesses
  • Limited natural gas reserves
  • Capacity for natural gas is forecasted to
    decrease
  • Canada is one of the high-cost places in the
    world to find and produce oil and gas
  • Deep gas, natural gas from coal and developments
    offshore, in the oil sands and the North are
    large, complex and expensive and have long lead
    times before they turn a profit
  • Challenges in meeting North Americas energy
    needs

31
Opportunities
  • Exporting to the US
  • Oils Sands
  • Exploration of Northern and Eastern Canada
  • World population is currently around 6 billion
    people, but is expected to grow to approximately
    7.6 billion by 2020.-- a huge increase in the
    demand for transportation fuels, electricity, and
    many other consumer products made from oil and
    natural gas.

32
Threats
  • Canada/US Foreign Exchange Rate

33
Threats
  • Price volatility
  • High Development costs
  • Environmental Issue
  • Especially Marine Life
  • Substitutes
  • Alternatives to oil and gas
  • Solar Power, Coal, Wind, Hydro, and Nuclear Power

34
Competitive Rivalry
  • Top Companies in Oil and Gas Producers (Selected
    by Assets)
  • EnCana Corp.
  • Canadian Natural Resources
  • Nexen
  • Penn West Petroleum
  • Western Oil Sands Inc
  • Paramount Resources
  • Compton Petroleum
  • Bonavista Energy Trust
  • PetroKazakhstan Inc.

35
Price History Crude Oil 1 Year
36
Crude Oil Prices since 1920
37
Crude Oil Price Forecast
38
Natural Gas Prices- 1 year
39
Natural Gas Prices-Since 1930
40
Natural Gas Price Forecast
41
(No Transcript)
42
Current Events
  • Despite high oil and gas prices, anticipated
    market volatility is preventing energy companies
    from increasing their rate of investment
  • Nov. 8 (Bloomberg)
  • Canadian Stocks Fall as Oil Prices Slip Suncor,
    Talisman Drop
  • -- Canadian stocks fell, led by oil and gas
    producers such as Suncor Energy Inc., after crude
    oil prices declined. A rise in the Canadian
    dollar to 84 U.S. cents for the first time in
    more than 12 years weighed on the benchmark
    index.
  • Oil and gas stocks in Canada are very
    sensitive to falling oil prices because of how
    high'' crude prices are
  • Tuesday, November 09, 2004
  • Crude oil futures tumbled below 48 (U.S.) a
    barrel Tuesday, closing at their lowest level in
    seven weeks, on rising expectations that the U.S.
    supply of transport and home-heating fuels will
    be adequate this winter.

43
(No Transcript)
44
Company Overview
  • Suncor Energy Inc. is an integrated energy
    company strategically focused on developing one
    of the worlds largest petroleum resource basins
    Canadas Athabasca oil sands.
  • Strong focus on technology
  • 37 years of oil sands experience

45
Company Overview
  • Became a publicly traded company in 1992
  • Total returns to shareholders have averaged more
    than 25 per year.

46
Corporate Committee
  • Richard George President CEO since 1991
  • Kenneth Alley Senior VP CFO since 2003, with
    Suncor since 1984
  • Mike Ashar Executive VP, Refining and Marketing
    since 2003, with Suncore since 1987
  • David Byler Executive VP, Natural Gas
    Renewable Energy since 2000, with Suncore since
    1979
  • Terrence Hopwood Senior VP General Council
    since 2002, with Suncore since 1988
  • Sue Lee Senior VP, HR Communications since
    1996
  • Kevin Nabholz Senior VP, Major projects since
    2002, with Suncore since 1986
  • Thomas Ryley Executive VP, Energy Marketing
    Refining, with Suncore since 1983
  • Steven Williams Executive VP Oil Sands since
    2003, with Suncore since 2002. 20 years of energy
    industry experience.

47
Pipeline network
48
Businesses
  • Oil Sands
  • Located near Fort McMurray, Alberta
  • The foundation of Suncors assets and is the
    center of their growth strategy.
  • Natural Gas and Renewable Energy
  • Based in Calgary, Alberta
  • Produce natural gas in Western Canada
  • Provides a price hedge against internal
    consumption at oil sands and refining operations.

49
Businesses
  • Refining, Marketing and Retail
  • Canada
  • Refinery feedstock and natural gas production are
    marketed to commercial and industrial consumers.
  • Products from the Sarnia refinery are sold to
    customers in Ontario, Quebec, and the
    Northeastern US, and to retail customers through
    approximately 500 Suncor-owned(Sunoco) and joint
    venture service stations in Ontario.

50
Businesses
  • United States
  • In August 2003, acquired a Denver, Colorado
    refinery along with 43 Phillips 66 retail
    stations.
  • Expansion into the rocky Mountain States allows
    easier movement of crude oil products to US
    markets.

51
Business Strategy - growth
  • Develop multiple sources of supply from the oil
    sands resource base
  • Upgrade technology to increase production
  • Use increase production to feed growing North
    American energy market
  • How to improve current model make it bigger.

52
(No Transcript)
53
Short term Goals
  • Increase crude oil production to more than 500000
    barrels per day by 2010-2012 from current level
    of 216600 bpd.
  • Reduce costs of production
  • Provide superior shareholder returns while
    providing social and economic benefits to
    stakeholders.
  • Reduce environmental impact of operations

54
Crude Oil Production
  • Planned expansion is designed to leverage
    economies of scale to keep costs per barrel among
    the lowest in the industry.

55
(No Transcript)
56
Natural gas
57
Main Resource Oil Sands
58
Oil Sands
  • Suncors future is built on Canadas oil sands
  • An estimated 175 billion barrels of crude oil
    reserves
  • First company to develop oil sands
  • Leases contain an estimated 12 billion barrels of
    bitumen reserves (heavy oil)

59
Oil Sands
  • With known resource base, Suncor doesnt have
    risk and cost associated with conventional
    exploration.
  • 12000 million barrels (12000/0.5)1/365 65
    years of resources.
  • In the process of acquiring further leases

60
Supply of Bitumen
  • Mining Surface mines supply majority of current
    production, plans to extend current mines with
    new operations planned to begin in 2010
  • In-situ Firebag development uses steam assisted
    gravity drainage (SAGD) to heat the underground
    reservoir, allowing the bitumen to be pumped to
    the surface. Expected to be at full production in
    2005.
  • Third Party Agreements plan on providing a
    fee-for-service agreement to process 27000
    barrels per day of 3rd party butimen (2008).

61
Production of Crude Oil vs. Revenue
62
Markets
  • Refining and marketing strategy builds on
    connections between the Oil sands production base
    and North American refiners and consumers.
  • This is the largest crude oil and refined product
    market in the world.

63
Markets - continued
  • Dont just supply the market, also participate in
    it through short and long-term marketing
    contracts as well as through retail distribution
    (Sunoco).

64
Markets - continued
  • Retail
  • operates nearly 300 Sunoco-branded retail
    stations in Ontario and supplies to over 200
    other stations through joint venture operations.
  • In 2003, purchased 43 Phillips 66 retail stations
    in Colorado and long-term supply contracts with
    nearly 150 more retailers.

65
Breakdown of Businesses
66
Investments
  • Currently producing hydrocarbon fuels to meet
    todays needs
  • Investing to supply new markets with renewable
    energy.
  • In 2003, they began the wind power project in
    southern Alberta, with partner EHN Wind Power
    Canada, Inc.

67
Stock Info.
  • Price as of Nov. 10, 2004 40.46
  • 52 week low 27.00
  • 52 week high 44.49
  • Average Daily Volume ? 1,500,000
  • Number of Shares Outstanding 453,421,000

68
1 Year weekly chart
1 Year weekly chart
69
1 Year weekly chart vs. SP Energy
70
5 Year Weekly Chart
71
5 Year weekly chart vs. SP 500
72
Company Analysis (Excel file)
2004 (9 months) 2003 2002 2001 2000
Share Price (End of period) 40.69 32.5 24.7 26.2 19.15
Revenue(millions) 6311 6306 5032 4294 3484
Net Earnings(millions) 767 1,084 761 388 377
EBIT (millions) 1186 1,804 1277 531 628
Total Assets(millions) 11362 10427 8683 8094 6833
Total Liabilities(millions) 6774 6002 5225 5317 4361
Total Debt(millions) 2347 2479 2686 3144 2256
Interest Expense(millions) 50 83 133 18 8
Equity(millions) 4588 4,588 3458 2777 2472
Shares Outstanding(EOP) 453,000,000 450,505,000 448,839,000 445,820,000 443,546,000
Beta 0.16 0.16 0.16 0.16 0.16
Operating Cash Flow(millions) 1562 2,081 1440 831 958
Capital Expenditures 1174 1,316 877 1678 1998
Dividends 0.17 0.1925 0.17 0.17 0.17
73
Analysis of Earnings
74
Performance Measures
Measures 2004 (9 months) 2003 2002 2001 2000 1999
Price to Book 4.02 3.19 3.21 4.21 3.44 3.17
EPS 1.69 2.41 1.70 0.87 0.85 0.42
P/E 24.03 13.51 14.57 30.10 22.53 35.89
NAV 10.13 9.82 7.70 6.23 5.57 4.77
Free Cash Flow(millions) 388 765 563 -847 -1,040 -512
ROA 10.4 17.3 14.7 6.6 9.2 6.5
ROE 16.7 23.6 22.0 14.0 15.3 8.8
Interest Coverage 23.7 21.7 9.6 29.5 78.5 13.0
Debt to Equity 0.51 0.54 0.78 1.13 0.91 0.66
Dividend Yield 0.42 0.59 0.69 0.65 0.89 1.13
Market Cap.(millions) 18432 14641 11086 11680 8493 6674
75
(No Transcript)
76
Recent News
  • Oct 18
  • Suncor CEO Richard George told the downtown
    Toronto business audience
  • American consumption of oil and gas is expected
    to increase almost 50 per cent by 2025,
  • Domestic production is projected to remain flat.
  • The United States is looking north to close the
    gap, and this represents a big opportunity for
    Canada's energy industry.
  • "The bottom line for Canada is that energy is not
    an obstacle to economic growth. It's a key driver
    of economic growth," said George.
  • "This is not just an opportunity for Western
    Canada. Our energy industry is about Canada's
    opportunity, Canada's prosperity, and our role
    globally."

77
More news
  • Suncor profit climbs, but oil hedges limit gain
  • Suncor, known for its huge oil sands mining and
    synthetic crude operations, would have earned 25
    percent more if over a third of its output not
    been sold forward at 22.50 a barrel. Oil
    averaged nearly 44 a barrel in the quarter.

78
What the Brokers say
Strong Buy 5
Buy 8
Hold 6
Sell 2
Strong Sell 0
79
Value Drivers
  • Production of crude oil
  • Since they are essentially price takers, the more
    they produce, the more revenues increase
  • The price of oil
  • This is the price of their product, and if price
    increases, earnings increase.
  • To a lesser extent the success of downstream
    operations

80
Recommendation
  • BUY
  • Pros
  • Sound business plan
  • Product is in constant demand
  • Near unlimited resources, just a matter of
    extracting them
  • Continuous growth in revenue and earnings
  • Cons
  • Stock price has surged over last year, and stock
    is expensive compared to 1 year ago

81
(No Transcript)
82
Talismans Background
  • Large independent oil and gas producer with
    global operations
  • focused mainly on exploration and development 
  • Created in 1992 Formally British Petroleum
    Canada
  • Started out with operations solely in Canada
  • Market Capitalization approximately 500million
  • Produced 51,00 boe/d

83
Talismans Background
  • Through corporate and asset acquisitions ,
    operations were quickly established in the North
    Sea, North Africa, and Southeast Asia
  • Today 11 billion dollar company with global
    operations
  • 2003 production was 437,000 boe/d
  • 60 of reserves are natural gas, 40 crude oil
    and natural gas liquids

84
Mission Statement
  • To create value for its shareholders in the
    upstream oil and gas business

85
Goal
  • Committed to continuing production per share
    growth of at least 5-10 per annum for the next
    three years (2004, 2005, 2006)
  • Most transparent measure of value creation
  • Continue to grow its large North American natural
    gas reserves while pursuing world scale
    international opportunities

86
Management Team
  • James W. Buckee, President CEO
  • 1977-1991 British Petroleum Canada, 1991
    appointed Chief operating officer of Talisman,
    1993 became CEO of Talisman
  • Ron J. Eckhardt, Executive Vice President, North
    America
  • 1986 Joined Talisman (then British Petroleum
    Canada)
  • T.N.D. Hares, Executive Vice-President, Frontier
    International Op.
  • 1972-1994 Worked for British Petroleum, 1994
    joined Talisman
  • Joseph Horler, Executive VP, Marketing
  • 1987 Joined Talisman (BP Canada)
  • Michael D. McDonald, E.V.P. Finance and CFO
  • 1982 Joined BP Canada
  • Robert M. Redgate, E.V.P., Corporate Services
  • 1978 Joined Talisman (BP Canada)
  • Jacqueline Sheppard, E.V.P., Corporate and Legal
  • 1993 Joined Talisman, prior to this she was a
    partner in a law firm
  • John t Hart, E.V.P., Exploration
  • 1978 Joined Talisman (BP Canada)

87
Competitors 
  • EnCana
  • Penn West Petroleum
  • Compton Petroleum
  • Canadian Natural Resources
  • Western Oil Sands Inc
  • Bonavista Energy Trust
  • Nexen
  • Paramount Resources
  • PetroKazakhstan Inc 

88
Areas of Operation
  • North America 50 of companys production
    (2003)
  • International 50 of companys production
    (2003)

89
North America (Canada and US)
  • Mainly Natural Gas, but also oil and liquids
  • Focuses mainly on natural gas in Rocky mountain
    foothills in Alberta
  • New core gas area in upstate New York

90
North Sea (United Kingdom and Norway)
  • Represented 2/3 of international production in
    2003
  • Mainly oil and liquids
  • In UK central North Sea - Established a number of
    commercial hubs
  • Norwegian sector of North Sea building a new
    core area
  • Large drilling program underway designed to
    increase liquid and oil production by 5-10 in
    2005

91
Malaysia/Vietnam (Malaysia, Vietnam, Indonesia)
  • 2003 - Talisman completed a 1billion oil and gas
    development project on time and on budget

92
Southeast Asia
  • Large gas reserves in Indonesia
  • Negotiating new gas sales and transportation
    agreements

93
Caribbean and Latin America (Columbia, Trinidad
and Tobago)
  • Working in a number of high exploration areas.
  • Trinidad development of the Greater Angostura
    oil and gas project is underway
  • Columbia and Trinidad exploration drilling
    programs

94
Africa and Middle East (Algeria, and Qatar)
  • March 2003 completed sale of its indirectly
    held interest in the Greater Nile Oil project in
    Sudan
  • 1.1 billion, gain of 296 million
  • Production and development interests in Algeria
    and exploration acreage in Qatar

95
Stock Information
  • Share Price 30.85 CAD (November 8, 2004)
  • Listed Toronto and New York Stock exchanges
  • Ticker Symbol TLM
  • Shares Outstanding 384,105,983 (November 8,
    2004)
  • Market Capitalization 11,849,669,575.55
    (384,105,983 30.85) 
  • 52 Week low and High 21.25 - 35.10  
  • Dividends - June 30, 2004 - .15 and Dec 31,
    2004 - .15

96
Talisman - 1 Year Prices
97
Talisman - 5 Year Prices
98
 Talisman vs. SP 500 1 Year
99
Talisman vs. Energy 1 year
100
Performance Measures
101
Performance Measures

102
Production
103
Prices
104
2004 - YTD
  • Sept. 30/04 Production up 11 over last year
  • Net Income
  • Sept 30, 2004 - 542m (1.39/share)
  • Sept 30, 2003 - 904m (2.29/share)
  • Income down this year because of the sale of the
    Sudan in 2003
  • Talisman lost 103 million due to hedges to sell
    at below below market prices

105
Breaking News Nov. 9/04
  • Supply cushion only about 1 of the 82.4
    million barrels consumed daily
  • Two key exporters might be vulnerable to
    disruptions in the near future
  • Iraq US military have vowed to disrupt the
    countrys oil exports, and a northern pipeline
    has been knocked out by saboteurs lowering supply
  • Nigeria Oil workers are planning a general
    strike aimed at halting the countrys exports
  • Nigeria is Americas fifth largest source of
    crude oil

106
Value Drivers
  • Production
  • Oil and Gas Prices

107
Recommendations 
  • Sound business plan
  • Product is always in demand
  • Price of stock is down right now and is likely to
    increase
  • Company has increased production by 11 year to
    date
  • BUY!
  •  

108
(No Transcript)
109
Corporate Profile
  • Imperial Oil Limited has been a leading member of
    the Canadian energy industry for more than 120
    years
  • One of the largest producers of crude oil and
    natural gas liquids in Canada and a major
    producer of natural gas
  • Canadas largest refiner and marketer of
    petroleum products sold primarily under the
    Esso brand name
  • Major producer of petrochemicals

110
Management Team
  • Imperial's 2003 Board of Directors (left to
    right) P. Des Marais II, B.J. Fischer, T.J.
    Hearn, R. Phillips, J.F. Shepard, P.A. Smith,
    S.D. Whittaker, K.C. Williams, V.L. Young
  • Majority of management team are from within
    Imperial Oil or Exxon/Mobil
  • (Exxon has a 69.59 interest in Imperial)

111
Management Team
  • T.J. (Tim) Hearn has been a director of Imperial
    Oil since January 1, 2002.
  • With the company since 1967
  • He is currently Imperial's chairman, president
    and CEO
  • P.A. (Paul) SmithMr. Smith has been a director
    of Imperial Oil since February 1, 2002.
  • He is currently controller and senior
    vice-president, finance and administration.
  • Joined Imperial Oil in 1980

112
Management cont
  • B.J. (Brian) FischerMr. Fischer has been a
    director of Imperial since Sept. 1, 1992.
  • He is currently senior vice-president of
    Imperial's products and chemicals division
  • Joined Imperial Oil in 1968
  • J. M. (Mike) YeagerMr. Yeager has been a
    director of Imperial Oil since August 1, 2004.
  • He is currently senior vice-president, resources
    division, and president and chief executive
    officer of Imperial Oil Resources
  • He joined the company from Mobil

113
Business Segments
  1. Natural Resources
  2. Petroleum Products
  3. Chemicals

114
Natural Resources Segment
  • CRUDE OIL
  • Wholly owned Cold Lake operation in Northern
    Alberta
  • 25 percent ownership position in Syncrude.
  • NATURAL GAS
  • Wizard Lake
  • Sable Offshore Energy Project
  • Gwillim Field

115
Crude Oil Cold Lake
  • This is a long-life asset
  • Net proved reserves were 760 MB at year-end 2003
  • Additional untapped resource

116
- Received regulatory approval for further
development in March 2004
117
Crude Oil - Syncrude
  • World's largest mineable oil sands operation.  
  • Syncrude is the single largest crude oil producer
    in Canada with net reserves of about 3 billion
    barrels and production of over 200 kbd in 2003.
  • Imperial was a founding member of Syncrude and
    has a 25 percent interest

118
Crude Oil Syncrude (cont)
  • Syncrude is currently progressing a major
    expansion for the operation -- one that will
    increase production by 50 percent and improve the
    quality and the sales price of the entire sales
    stream.
  • Total expected cost of 7.8 billion
  • Disappointing cost and schedule performance to
    date

119
Natural Gas
  • Full production from the natural gas cap at
    Imperials Wizard Lake oil field in Alberta began
    in July 2003.
  • Production rates of about 180 million cubic feet
    a day will be achieved in 2004 once gas plant
    capacity is available and are expected to
    continue through 2006.
  • In November, the first natural gas was produced
    from the Gwillim field in northeastern BC.
    Additional development of this field is planned.
  • Natural gas production from 9 interest in the
    Sable offshore energy project averaged 40 million
    cubic feet a day before royalties.
  • production began from a fourth Sable field, Alma,
    and construction was started on facilities for a
    fifth field, South Venture.
  • Funding was also approved for a natural gas
    compression facility that will service production
    from all Sable fields by late 2006.

120
Natural Resources - Potential
  • Kearl Oil Sands (200k barrels/day)
  • Mackenzie Gas Project
  • regulatory review process to take about 2 years
  • design and construction should take 3-4 years
  • potential for Mackenzie gas production by the end
    of the decade
  • Cree exploration well abandoned in the third
    quarter
  • Acquired 25 interest in Orphan Basin (Natural
    Gas)

121
Production
122
(No Transcript)
123
(No Transcript)
124
Petroleum Products Segment
  • 787 company-owned sites
  • Average productivity per site for 2003 was 5.2
    million litres a year, up six percent from 2002.
  • 650 Esso convenience stores across Canada,
    including On the Run and Tiger Express, was the
    second largest in Canada.
  • Convenience-store sales rose by about nine
    percent in 2003, well above the industry average.
  • 400 sites with car-wash facilities is the largest
    in the industry.
  • Esso retail sites providing Tim Hortons food and
    refreshments had increased to more than 300 from
    270 in 2002

125
Petroleum Products cont
  • Points-Exchange alliances
  • Market leader in finished lubricants
  • Exclusive Canadian marketer of Mobil products
  • Quadrupled average productivity per site

126
Petroleum Products cont
  • Focus on reducing working capital
  • Decreased days inventory by 4 vs. 2002
  • Freed up more than 35 million in cash
  • Over the last 10 years, this has been reduced by
    about 25 percent.

127
Petroleum Products cont
  • Capital Expenditures of 478 million in 2003
  • Allowed them to meet specifications of 2004
    model-year automobile technology
  • Refineries have improved energy efficiency by
    more than 40 percent over last 30 years

128
Chemicals Segment
  • Earnings of 37 million
  • Cash flow from earnings of 66 million
  • Sales of petrochemical products were 3,300 tonnes
    a day, down slightly from 2002.
  • N.A. demand was low in 2003, with high feedstock
    costs and soft sales volumes.

129
Chemicals cont
  • One of Canadas leading producers of chemical
    products
  • Largest market share in North America for
    polyethylene
  • Largest share of the Canadian market for solvents
  • Annual capacity of 450,000 tonnes

130
Chemicals cont
  • 41 million in Capital Expenditures aimed at
    reducing net costs of ethylene production by 10
    percent.

131
Financial Summary of Segments
132
Net Earnings by Segment
133
Valuation Ratios
Measures Industry 2003 2002 2001 2000 1999
P/E 21.9 12.73 13.92 13.88 11.69 21.30
Price to Book 3.70 3.71 3.27 4.03 3.92 3.09
Price to Sales 0.9 1.11 1.00 1.01 0.91 1.04
Price to CF 11.3 9.76 13.01 11.29 11.50 16.89
EPS 4.3 4.52 3.23 3.19 3.38 1.46
Dividend Yield 1.90 1.51 1.87 1.87 1.98 2.42
134
Ratios cont
Financial Strength Company Industry
Quick Ratio 0.775 0.87
Debt to Equity 0.24 0.86
Interest Coverage 57.2 7.39
Profitability
Gross Margin 60.28 56.90
Net Profit Margin 8.76 14.94
Management
ROA 19.4 6.47
ROE 29.1 16.51
Inventory Turnover 28.45 18.43

Due to repayment of LT Debt
135
Growth Measures
  • Revenue growth of 49.44 from 1999
  • S/H Equity growth of 33.53 from 1999
  • Increased due to increasing net earnings
  • Partly offset by Share Repurchase Program

136
Statement of Cash Flows
137
Cash Flows cont
  2003 2002 2001 2000 1999
Operating Cash Flow(millions) 2194 1676 2004 2089 1470
Capital Expenditures (millions) 1393 1491 1024 312 566
Free Cash Flow(millions) 801 185 980 1777 904
138
Use of Cash Flow
139
Value Drivers and Earnings Sensitivities
140
Stock Information
  • Ticker Symbols
  • (IMO-T) on TSX
  • (IMO-A) on Amex
  • Market Capitalization
  • (IMO-T) 24.79 Billion
  • (IMO-A) 20.69 Billion

141
Stock Information
As of 10/11/04
Ticker Close Open Change Volume 52-Week High 52-Week Low
IMO-T 70.15 68.90 1.25 340,600 73.17 51.12
IMO-A 58.56 57.40 1.10 35,000 59.75 38.84
Prices in U.S. Dollars
2003 2002 2001 2000 1999
Dividend 0.87 0.84 0.83 0.78 0.75
142
IMO vs Oil Gas Index (1 year)
143
IMO vs. Oil Gas Index (5 year)
144
Wall St. Recommendations
145
Recommendation
  • Strong sales and EPS growth
  • High profitability compared to industry and SP
    500
  • High return ratios (ROE, ROA, ROI)
  • Steady return potential for capital investments
  • Strong dividend record and repurchase record
  • BUY
About PowerShow.com