Imperial Oil president and CEO Brad Corson answers questions at a press conference in Calgary on Dec. 4, 2019.Todd Korol/The Canadian Press
Imperial Oil Ltd on Friday vowed to move more crude-by-rail to take most advantage of exemptions on production curtailments imposed by the Alberta government.
Last year, Alberta introduced mandatory production limits to cut oversupply that was choking export pipelines, and later extended the restrictions into 2020 due to slow progress in building new pipelines.
The rare government intervention into Canada’s oil industry has helped shore up prices, but faced heavy criticism from integrated producers in the region who argue the move is stifling growth.
In December, producers were allowed exemptions on the curtailments if they committed to move oil by rail instead of pipelines.
Imperial said it will continue to ramp up its crude-by-rail commitment, and sees January shipments from its Edmonton Rail terminal to be over 100,000 barrels a day.
“We see with the current differentials and arbitrage, it makes good economic sense for us to ship barrels on the rail,” said new Chief Executive Officer Brad Corson of the integrated oil company.
Imperial took a hit to its refining margins in the fourth quarter ended Dec. 31, as the curtailments propped up prices of heavy crude, reducing the benefit in refining the low-cost oil.
Its downstream earnings fell over 80% to $225 million, partially impacted by planned turnaround activities.
U.S. refiner Phillips 66 also reported muted refining margins for the fourth quarter on Friday, hit by turnarounds and lower margins on higher crude prices.
“I’m encouraged by the comments that the Alberta government has made where they’ve indicated they would expect curtailment to be eliminated by the end of the year,” said Corson, a veteran of majority-owner Exxon Mobil Corp who took the helm early January.
Imperial reported a profit of 36 cents per share in the quarter, while analysts had expected a profit of 35 cents.
The company’s average gross production of 398,000 barrels of oil equivalent per day (boepd) beat estimates of 388,243 boepd, according to IBES data from Refinitiv.
Overall, Imperial delivered a strong quarter with the completion of Kearl’s supplemental crushing facilities in Alberta providing line of sight to increased reliability, Scotiabank analysts said in a note.
Shares of the company fell 2.7% to C$23.75 as crude prices were hit by rising worries over the potential economic damage from the coronavirus outbreak.