Credit Suisse Upgrades Imperial Oil To Outperform, Says Recent Rebalance Favors Company

Credit Suisse upgraded shares of Imperial Oil Limited (USA) IMO, premising the improved opinion on stronger free cash flow generation that is expected to increase shareholder return in the form of renewed stock buybacks.

Balance Evolving

Analyst Jason Frew highlighted the firm's downward revision of its long-term Brent crude grade of oil price forecast to $65 from $70 due to the industry's ability to lower supply costs against a conservative demand outlook. Thus, the analyst noted that rebalance is evolving, as producers are driving productivity through efficiency gains, innovation and technology.

Great Expectations From Aspen

Credit Suisse said its outlook for Imperial Oil incorporated funding of the Aspen project, which adds material new production beyond 2020, reinforcing the company's leadership within the oil sands industry.

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The firm expects Sycrude utilization to improve and steady production from the company's other core upstream assets such as Cold Lake and Kearl. The firm also noted that its capital outlook includes Aspen, the only visible new greenfield project of scale in the oil sands beyond industry's current committed growth. Regulatory approval for Aspen should be coming forth in 2017, construction done by the 2018–2022 timeframe and production ramp up by 2021, the firm said.

As such, Credit Suisse upgraded its rating on the shares of the company to Outperform from Neutral and raised its price target to C$50 from C$48.

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