Imperial Oil (IMO): Profit DOUBLED on $92 Oil — and the Stock Moved 0.6% — Is IMO Stock a Buy?

Imperial Oil Limited (IMO) Q2 2026 — Imperial Oil reported Q2 2026 (quarter ended June 30) before the open on July 31. ALL COMPANY FIGURES ARE IN CANADIAN DOLLARS; the NYSE American quote is in USD. Net income C$2,190M vs C$949M (+130.8%), diluted EPS C$4.52 vs C$1.86, total revenues C$16,062M (+43.0%), free cash flow C$2,234M (+125%). No identified items. The stock closed US$128.80 -> US$129.57, about +0.6%. Net income more than doubled, but WTI averaged US$92.69 in the quarter against US$63.69 a year ago — up 45.5%. Underneath that price the operations went BACKWARDS: production fell to 414 kboe/d from 427, Kearl fell 7%, upstream unit cash costs ROSE 11.8% to C$32.41/boe, and Imperial CUT full-year refinery utilisation guidance from 91-93% to 85-88%. Management is now accelerating a 5% buyback (24,179,635 shares, ~C$4.4B) to complete before year end — after repurchasing NOTHING in Q1 or Q2, at a price within 7% of an all-time high. THE CALL: REDUCE (3/5, A GREAT COMPANY AT A PEAK-CYCLE PRICE) — base-case value ~$101.0 vs ~$129.57 today. KEY METRICS: - OUR CALL: REDUCE 3/5 — fair value C$142 (~US$101) vs the C$181.64 close (US$129.57), about -22%. Street: Hold, and already cautious — 22 analysts, 4 buy / 10 hold / 8 SELL, average target ~C$151 (-17%). TD Securities: Sell, C$156. Scotiabank: Sector Perform, C$159 (raised from C$151). We ALIGN with the Street directionally and go further. - CURRENCY: Imperial reports in CANADIAN dollars; the shares trade in USD. C$4.52 diluted EPS converts to ~US$3.27 — if your data feed showed 3.27, it converted and didn't say so. US$129.57 x CADUSD 0.7133 = C$181.64. - THE PRINT (C$): net income 2,190 vs 949 (+130.8%); diluted EPS 4.52 vs 1.86; revenues 16,062 vs 11,232 (+43.0%); cash from ops 2,704 vs 1,465; FREE CASH FLOW 2,234 vs 993 (+125%); capex 531. No identified items in either year. Segments: Upstream 1,299 (vs 664), Downstream 787 (vs 322), Chemical 65 (vs 21), Corporate +39 (vs -58). H1 net income 3,130 = 96% of ALL of 2025. - WHY: WTI averaged US$92.69 vs US$63.69 (+45.5%). Bitumen realisation C$95.79/bbl (+C$29.97); synthetic crude C$141.10 (+C$53.25, +61%). WCS US$77.90; WTI/WCS spread US$14.79. - OPERATIONS WENT BACKWARDS: production 414 kboe/d vs 427; Kearl 182 vs 195 (absence of exceptional high-grade ore); Syncrude 73 vs 77 (extreme rainfall); Cold Lake 149 vs 145. Refinery utilisation 76% vs 87% (planned Strathcona turnaround); throughput 331 vs 376 kbd. Upstream unit cash cost C$32.41/boe vs C$29.00 (+11.8%); Syncrude C$57.81 vs C$46.95 (+23%). - GUIDANCE CUT: full-year refinery throughput 395-405 -> 370-380 kbd; utilisation 91-93% -> 85-88%, for unplanned downtime and a Strathcona rail logistics issue targeted to resolve by year end. - BUYBACK: NCIB renewed June 29 2026 for up to 24,179,635 shares (5%), and management will ACCELERATE to complete it before year end — roughly C$4.4B at C$181.64. Zero shares were repurchased in Q1 OR Q2 2026. ExxonMobil (69.6%) participates pro-rata to hold its stake. Diluted shares 484.9M, down ~27% from ~664M in mid-2022. - BALANCE SHEET: total debt C$3,988M, cash C$2,839M, net debt C$1,149M — effectively debt-free. Equity C$24,543M, total assets C$47,863M. Q3 dividend C$0.87 declared (+21% y/y), a 1.92% yield — thin for an integrated at a cycle peak. - VALUATION: mid-cycle owner earnings ~C$4,780M (C$9.86/sh) = mid-cycle net income C$4,600M + D&D C$2,080M - sustaining capex C$1,900M, normalised to ~US$75 WTI. DCF at 8.5% / 1.5% terminal: base C$144, bear (US$65 oil) C$90, bull (US$85) C$200. Weighted 55/20/25 = C$142. REVERSE DCF: at C$181.64 the EV of C$89.2B demands ~C$6.02B of owner earnings forever — 80% of the best year in company history (2022: C$7,340M), implying WTI near US$85 permanently. - CYCLE CONTEXT: net income 2022 C$7,340M -> 2023 C$4,889M -> 2024 C$4,790M -> 2025 C$3,268M. Annualising this quarter gives ~10x earnings; 2025's actual C$6.48 EPS gives ~27x. Same assets — the barrel is the variable. - UNDER-COVERED: a non-binding trilateral MOU (Canada + Alberta + Oil Sands Alliance) was signed AFTER quarter-end, the vehicle for the stalled Pathways carbon-capture project. Real option, unknowable timing — nothing in our numbers assumes it. What to watch: Bullish: refinery utilisation back above 88% with the Strathcona rail constraint resolved, upstream unit cash costs back below C$30/boe for two consecutive quarters with Kearl above 190 kbd, and the Pathways trilateral MOU converting into definitive agreements. Bearish: WTI averaging below US$70 in Q3, the NCIB completed in full above C$180, or full-year refinery utilisation landing at/below the new 85% floor. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.