Imperial Oil Ltd. is range bound

Jul 16th, 2010 – Comment

Having said all these wonderful things about a bright and prosperous future the charts tell the story of a range bound stock that needs higher prices for its production to generate gains for shareholders.


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Imperial Oil

Hi Lou ,

I hold 200 shares of Imperial Oil Ltd.  bought in 2007 with an adjusted cost basis  of $43.50 share . Dividend @ 1.4 % is low and I am considering selling all or part . Any suggestions ?

Bob

Hi Bob,

 

Imperial Oil Ltd. ( IMO TSX)  is 69.9% owned by ExxonMobil out of the U.S. and will be generating most of its production out of its position in the oil sands by 2020. The output will used to feed its refining and retailing operations. IMO is a major integrated oil and gas company and as such needs lots of pricing power to move the stock. Unlike a junior which can get moving on new production IMO would need to find an ocean of  oil to influence the price of its shares.

Currently the company is reporting a resource base of 13.7 billion barrels of oil equivalent which they say represents 125 years of coverage at today’s production levels. The company has forecast a 35% increase in global energy demand by 2030 and they expect that oil and gas will represent close to 60% of supply needed over the next 20 years.

Having said all these wonderful things about a bright and prosperous future the charts tell the story of a range bound stock that needs higher prices for its production to generate gains for shareholders.

 

 

imo

The three year chart paints a beautiful picture of a stock that can soar when oil is trading at $150 a barrel as it did in 2008, but is just as responsive to the downside when prices falter, as they have over the last two years. What is also evident is that IMO has been trading in a range with solid support at $38.50 and resistance at $42.50

 

 

 

 

imo2

The six month chart clearly defines the support at $38.50 which has formed a large base since 2008. From the tone of your message it seems that you have grown tired of waiting and the dividend yield is not quite what you are looking for.

 

If dividend income is the driver then you might want to look at the better quality energy trusts that are converting to corporations. The income is better and the leverage to energy prices is also strong without the complications of the refining and retailing elements. What you don’t get with other companies is production forecast to last to 2135.

 

Happy Capitalism!

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