Imperial Oil Ltd ($IMO)

Imperial Oil is a Canadian integrated oil company that is majority (69.6%) owned by ExxonMobil. Their upstream production is 308k bbl/d and their refining (downstream) is 407k bbl/d. They are an oil sands producer and they own 25% of Syncrude (in partnership with Suncor, Sinopec and CNOOC) which gives them 85k bbl/d. Their other upstream projects are Cold Lake (140k bbl/d, thermal in situ) and Kearl (218k bbl/d their share, from open pit oil sands). For their downstream operations, Imperial has three refineries: Nanticoke, Sarnia, and Strathcona.

Two things about Imperial have caught our eye recently. First is their upstream operations are avoiding the "shale treadmill" effect. Production in the fourth quarter was up 8.5% versus the prior year, while capex for the quarter was down 34% versus the prior year. (See results. Full year capex was down 2% from 2022.) Free cash flow for the quarter was $667 million, which is about an 8.6% yield on the enterprise value.

Second, Imperial is a share cannibal. During 2023, they shrank the share count by 8.3%.