Imperial Oil Limited Company

Introduction

The oil and gas industry in Canada is the third-best globally and turns out to be the world innovator in equipment which supports exploring, extracting, and processing hydrocarbon reserves on offshore as well as onshore. This industry is thriving and has thrived more than in other countries. The success of this industry is directly linked to the favorable environment that attracts both foreign and local investors[1]. Oil is not managed by public companies but allowed to be operated by all companies. Imperial Oil Limited Company is one of the top-performing oil companies in Canada. It is a public company that has thrived in this competitive industry despite the high competition. The focus of this analysis is on Imperial oil limited company. Therefore, this paper will begin by describing and analyzing the Canadian oil and gas industry then describe Imperial oil limited company. It will also examine the strengths and weaknesses of this company as well as undertake environmental trend analysis.

Canadian industry description and analysis

The Canadian oil and gas industry is among the leading industry which supports supports exploring, extracting, and processing hydrocarbon reserves on offshore as well as onshore. Both local and foreign investors in this industry can depend on an extensive research and development community including private businesses, educational institutions, government as well as research organizations[2]. To increase this type of innovation, Canada is operating some important research and development tax incentive programs including Scientific Research and Experimental Development program which has helped to transform this industry and make it to be among the top best in the world. The Canadian oil and gas industry is the most important crude oil and refined petroleum supplier to the United States. This industry continuously establish infrastructure to deliver crude oil as well as natural gas supplies to Europe and Asian markets. It takes only two weeks to transport LNG from West Canada to East Asia. This gives investors in Canada’s oil industry a cost advantage. Canada is ranked to be the fifth-largest oil producer. It has an average crude oil production of approximately 172.5 billion barrels as well as 71 trillion natural gas billion cubic feet[3]. The Canadian business environment is conducive and encouraging substantial investment within this industry. Essentially, Canada is the destination of choice for the world’s top oil and gas companies. Being a large producer of oil and gas, it makes Canada a precise location for making investments in the oil and gas industry.

The oil and gas industry in Canada is also conducive and supportive to businesses and investors due to the availability of innovative technologies such as carbon storage, improved oil recovery as well as seismic exploration. The Canadian energy industry creates employment opportunities both directly and indirectly, to more than 900,000 workers in the country.  Moreover, the foreign direct investment within the energy industry is about $182 billion. One of the main economic drivers in Canada is the oil and gas industry. The market and consumers of petroleum products have increased significantly, making this industry very profitable. Essentially, upstream and downstream activities have increased significantly. The Canadian oil and gas industry is conducive to foreign investment since the oil resources are not controlled by the national oil company situated at the oil sands. Therefore, this offers Canada a big opportunity for growth. Currently, due to this favorable business environment, most of the world’s largest companies are now investing in Canada. Players in this industry include Penn West Petroleum, Athabasca Oil Corporation, Suncor Energy, Inc. and TransCanada Corporation.

This industry is governed by NAICS codes, specifically NAICS Code 211111, that focuses on the extraction of crude oil and natural gas. This code requires oil companies to explore and production of petroleum utilizing standard pumping strategies or produce petroleum from reservoirs with semisolid hydrocarbons[4]. This code grants oil companies to conduct their operations on their own or instead based on a contract or a fee. This industry is also governed by SIC code. For instance, the SIC code 1382 requires oil and gas companies to undertake geological, geophysical, and other explorations based on either a contract or a fee.

The oil and gas industry in Canada has experienced a big trend in the past decade. Even as the oil and gas industry as adjustments to fit the ups and downs it has encountered, come corresponding shifts occurred within the workforce distribution of the industry as well as the worker’s daily experiences. This industry recorded a fifteen percent increment in its workforce size as from 2006 to 2018 through growth was most of its growth was centered in production and exploration. Essentially, the workforce increased in 2006 from 164,900 to 179,000 in 2011 then increased to 189,600 in 2018[5]. The industry trend was also shown through alterations in its occupational composition that existed between 2011 and 2018, whereby engineering positions, as well as applied sciences, turned out to be conspicuous and occupations such as testing, drilling, and services were affected negatively. A significant trend was also noted on the shift among the industry’s workforce towards more of part-time positions as well as temporary positions by 2016 due to the uncertainty within the industry.

Company description and analysis

Imperial Oil limited company is a highly developed oil company. The company’s processes and business is engaged in all stages of the Canadian oil and gas industry, which includes exploring, producing, and selling crude oil and natural gas. Imperial Oil Limited Company’s operations are carried out in three phases, including the downstream, upstream as well as chemical. Its upstream operations entail exploiting oil bases and also producing crude oil, bitumen, natural gas as well as synthetic oil[6]. This company’s most interest is in the Kearl oil sands project. Moreover, its downstream operations entail transporting, refining crude oil, blending refined products and distributing and also marketing these products.  Imperial’s chemical operations entail manufacturing and marketing of its diverse petrochemicals. Imperial takes part in exploring and developing Canadian crude oil as well as natural gas. Imperial also transports its crude oil products as well as third-party crude oil needed to make supplies to refineries by rail, contracted pipelines as well as standard carrier pipelines. Imperial’s current situation is at stake. Recently, the company announced that it obtained earning worth $293 million an amount obtained from operations worth 1 billion. Its downstream financial results were affected by industry product limits[7]. However, the company expects increasing its annual average production by the end of the year by increasing its average annual output to 240,000 barrels daily.

Operating revenue.

Source: https://www.statista.com/statistics/566505/revenue-of-imperial-oil/

Company strengths and weaknesses

Imperial Oil Limited has established top-class competence in entering new markets and performing well. Such kind of expansions has assisted this company in building new revenue channel as well as the diversification of the economic cycle risk within the market it is conducting its businesses. This company also has a positive reputation for its ability to develop new products. The company also has a strong free cash flows providing resources within the hand of the firm in expanding into new projects[8]. The quality of Imperial Oil Limited is enhanced through automation. Automation maintains the consistency of products, thus enabling the company to scale down or scale up depending on the demand situation within the market.

Income statement.

Source: https://ycharts.com/companies/IMO.TO

Price Chart

Source: https://ycharts.com/companies/IMO.TO

One of the weaknesses of this company is that it is not quite right in forecasting product demand resulting in a high rate of wasted opportunities compared to other competitors. Due to its poor forecasting of product demand, its competitors gain a competitive advantage over Imperial Oil limited as they tend to retain high inventory in channel and also in-house. Moreover, product marketing created more desire. Even though the sales of the product is successful, its positioning, as well as its unique selling proposition, failed to be clearly defined, which can result in attacks from competitors[9]. The company also has a higher abrasion rate within its workforce more than other organizations. Therefore, Imperial Oil Limited are forced to spend more than its competitors during training and development for its employees.

Environmental trend analysis

Imperial Oil Limited is impacted by political factors such as the risk of being invaded by the military, the emergence of political instability, increased levels of corruption, high taxation rates, and also stringent industrial safety regulations. The economic factors impacting the company’s performance include slow economic growth rate, high labor costs, and the inefficiency in the financial markets. Moreover, social conventions tend to affect the performance of Imperial Oil Limited. This includes the culture differences, especially when entering new markets[10]. It also tends to be affected by the entrepreneurial spirit as well as the broader nature of the society. Technological factors also have a significant impact on the company. Technology has a substantial effect on the cost structure; it also causes a significant impact on its value chain structure — environmental factors like weather, climate change, waste management, endangered species. Imperial can also be affected by legal issues such as discrimination law, consumer protection, copyright, employment law, and intellectual property law.

Conclusion

To sum it all, the Canadian oil and gas industry is very big and conducive for investors to invest. Due to the conducive nature and the lack of controlling nature in the industry, this industry has remained among the top industries worldwide. Imperial Oil Company is a public company that besides currently having poor performance, it still enthusiastic and has opportunities to improve its profitability. To improve performance, I would recommend that the company exploit new technologies since they provide an opportunity for it to practice a different pricing strategy. The company should also monitor and adapt to consumer behavior since it will help in opening up new markets.


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