This Analyst Downgrades Imperial Oil, Slashes Price Target On Gloomy Commodity Outlook

RBC Capital analyst Greg Pardy has downgraded Imperial Oil Ltd IMO to Sector Perform from Outperform and cut the price target to C$78 from C$82 following the updated Global Energy Research commodity Price outlook.
The analyst still believes in Imperial Oil's efficient leadership team, impressive operating performance, long-life-low-decline upstream portfolio, strong balance sheet, and commitment to shareholder returns.
Pardy projects net production at 75,500 bbl/d (86% utilization rate) in Q1 2023, with expected upstream production of 413,400 boe/d.
He expects capital spending of C$413 million and net debt of C$643 million (including net working capital).
The analyst projects operating cash flow at C$1.5 billion, with FCF (before dividends and working capital movements) of C$1.1 billion.
IMO trades at a debt-adjusted cash flow multiple of 5.5x and a free cash flow yield of 14% of 2023 estimates.
The bull case price target of C$94 reflects a 60% weightage toward a multiple of 1.3x of upside NAV and a 40% weightage toward a 2023 estimated mid-cycle debt-adjusted cash flow multiple of 8.7x.
The bear case price target of C$40 reflects a 60% weightage toward a multiple of 0.7x of downside NAV and a 40% weightage toward a 2023 estimated mid-cycle debt-adjusted cash flow multiple of 5.7x.
Price Action: IMO shares are trading higher by 1.75% $55.70 on the last check Wednesday.

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