Noah Zivitz

Managing Editor, BNN Bloomberg

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Imperial Oil could join the ranks of Canadian energy producers that have dished out special dividends as debt levels come down and cash flow booms, according to one Bay Street analyst.

In a report to clients Tuesday, Menno Hulshof at TD Securities stated he sees “strong potential” for the Calgary-based integrated oil and gas producer to launch another substantial issuer bid (SIB), after scooping up $2.5 billion of its shares at a price of $77 apiece in June.

He also pointed out that Imperial recently fast-tracked a normal course issuer bid (NCIB), announcing last month that it plans to tap out the buyback program by the end of October instead of next June.

“Management continues to allude to multiple mechanisms for returning capital to shareholders, potentially before year-end. A second SIB is still most likely, in our view, but we believe a special dividend also remains a possibility,” Hulfshof said in his report, while describing Imperial’s balance sheet as “best-in-class.”

He noted that Canadian Natural Resources Ltd. recently announced a special dividend of $1.50 per share, to be paid to shareholders on Aug. 31.

Tourmaline Oil Corp. has been prolific with special dividends this year, announcing three since the start of the year.

When Imperial reported second-quarter results last month, it said its cash flow from operating activities more than tripled to $2.68 billion from $852 million a year earlier.

“We maintain that commitment to return cash to shareholders. So, I would expect you'll see further actions as the year goes on,” Imperial Oil Chairman, President, and Chief Executive Officer Brad Corson said during a conference call with analysts on July 29.

Hulshof upgraded Imperial to a buy recommendation from a hold Tuesday, while leaving his price target at $73, implying a potential 28 per cent total return from Monday’s closing price.