Imperial Oil still able to avoid layoffs despite oil woes

Calgary-based Imperial Oil is a rare commodity these days. It's a major oil company that hasn't had to layoff any workers, despite the oil price crash.

Imperial Oil says its first-quarter net income was down 55 per cent from a year ago, falling to $421 million because of oil prices.

Profits would have been lower if not for an uptick in daily production of about 3,000 barrels on the 333,000 barrels per day it did last year.

When oil prices might start cooperating again remains, for Imperial's chief executive Richard Kruger, the great unknown for the industry.  

"The truth is no one knows," said Kruger in a speech to shareholders at the company's annual meeting today. "So at Imperial we are approaching our business as if we may be in for a sustained period of lower prices."

Imperial, like other so-called integrated companies, is somewhat buffered from the sharp drop in crude prices by its downstream business, including its refinery operations and its Esso gas station chain. 

"Our downstream had its second highest quarter in history," said Kruger. "That was awfully strong. That supported our upstream to a large extent in the first quarter."

The company is the country's largest refiner and Kruger said refineries are working as hard as they can during this period of low oil prices. While the downstream businesses are faring well, he said at some point the exploration and production side of the company's operations will have to improve its margins. "We look at all of our businesses and they need to stand on their own two feet," he said.

Other large oil and gas companies to report first quarter results are also being hit hard on the bottom line. Suncor, Canada's largest oil company, lost $341 million in its most recent quarter and slashed 1200 workers. CEO Steve Williams did, however, say the company's cash flow is still in good shape.

"We've got nearly $5 billion on our balance sheet, we've got lines of credit available to us," he said. "So we think we have enough cash to be able to manage our way through this cycle." 

Earlier this week, Cenovus reported a loss of $688 million.

Imperial's CEO is well aware that many of this competitors have chosen to reduce their workforce and bring in hiring and wage freezes. He wouldn't rule out layoffs at Imperial Oil in the future. "My perspective, stay tuned, we are still early in this cycle and the dust hasn't settled," Kruger told shareholders.

Nick Lupick, an energy analyst with Altacorp Capital, said periods of falling oil prices highlight how downstream operations can help stabilize the outlook at companies like Imperial and Suncor. 

"When you look at it for companies that own refining assets, things aren't as bad as those that are purely upstream operators and heavily levered to the commodity environment," he said.

Imperial Oil's capital and exploration expenditures were $1.05 billion in the quarter, down nearly $200 million compared with 2014.