IN THE NEWS / Imperial Oil Gets $140M Tax Windfall
BY CLAUDIA CATTANEO
Calgary Bureau Chief The Financial Post
Imperial Oil Ltd. said yesterday it has received a tax windfall of $140 million stemming from a 1992 court settlement on overpayment of income taxes.
Canada's largest integrated oil company said the refund will boost 1998 earnings by $60 million. It will be booked in the third quarter.
The settlement, of which $100 million is taxable interest, is on top of a rebate of $843 million the company received in March 1996, that resulted in a gain of $322 million in 1996, out of net earnings of $786 million.
The latest refund covers taxes paid to seven provinces that were collected by the federal government, said spokesman Richard O'Farrell.
Negotiations for related provincial tax refunds are still under way with Alberta, Ontario and Quebec.
Another 25 oil companies have reached settlements with Ottawa since a 1992 Federal Court of Appeal decision involving an income tax formula called the natural resource allowance.
At the time, companies were disputing how the government was calculating the allowance. Gulf Canada Ltd. took it to court and won.
The windfall was not unexpected. For years, Imperial's annual financial statements have noted the company could get back its income tax overpayments.
However, it couldn't have come at a better time. The industry is expected to post poor third-quarter results compared with last year, although integrated companies like Imperial will reduce the impact of low commodity prices with good margins in refining and marketing operations.
Shares of Imperial (IMO/TSE), which is 69.6% owned by Exxon Corp., closed at $23.30 yesterday, down 30¢.
Before the windfall, Imperial was expected to post a third-quarter profit of 28¢ a share, down from 45¢ last year.
"No question, crude oil prices have been low and the industry is not performing at the same level as in previous years," said O'Farrell.
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