☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 0-12014
IMPERIAL OIL LIMITED
(Exact name of registrant as specified in its charter)
Canada
98-0017682
(State or other jurisdiction
(I.R.S. Employer
of incorporation or organization)
Identification No.)
505 Quarry Park Boulevard S.E.Calgary, Alberta, Canada
T2C 5N1
(Address of principal executive offices)
(Postal Code)
1-800-567-3776
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on
which registered
None
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
✓
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
✓
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act of 1934.
Large accelerated filer
✓
Smaller reporting company
Non-accelerated filer
Emerging growth company
Accelerated filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ___
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act of 1934).
Yes
No
✓
The number of common shares outstanding, as of June 30, 2023 was 584,152,718.
In this report, all dollar amounts are expressed in Canadian dollars unless otherwise stated. This report should be read in conjunction with the company’s annual report on Form 10-K for the year ended December 31, 2022. Note that numbers may not add due to rounding.
The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.
In this report, unless the context otherwise indicates, reference to “the company” or “Imperial” includes Imperial Oil Limited and its subsidiaries.
2
IMPERIAL OIL LIMITED
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated statement of income (U.S. GAAP, unaudited)
Second Quarter
Six Months
to June 30
millions of Canadian dollars
2023
2022
2023
2022
Revenues and other income
Revenues (a)
11,764
17,285
23,821
29,942
Investment and other income (note 3)
55
22
119
51
Total revenues and other income
11,819
17,307
23,940
29,993
Expenses
Exploration
1
1
2
3
Purchases of crude oil and products (b)
7,856
11,021
15,334
19,371
Production and manufacturing (c)
1,785
1,908
3,541
3,567
Selling and general (c)
206
191
392
416
Federal excise tax and fuel charge
598
553
1,127
1,032
Depreciation and depletion
453
451
943
877
Non-service pension and postretirement benefit
20
5
40
9
Financing (d)(note 5)
16
11
32
18
Total expenses
10,935
14,141
21,411
25,293
Income (loss) before income taxes
884
3,166
2,529
4,700
Income taxes
209
757
606
1,118
Net income (loss)
675
2,409
1,923
3,582
Per share information (Canadian dollars)
Net income (loss) per common share - basic (note 9)
1.16
3.63
3.29
5.37
Net income (loss) per common share - diluted (note 9)
1.15
3.63
3.29
5.36
(a) Amounts from related parties included in revenues.
3,556
5,175
6,692
9,134
(b) Amounts to related parties included in purchases of crude oil and products.
964
1,129
2,042
1,779
(c) Amounts to related parties included in production and manufacturing,
and selling and general expenses.
125
116
260
234
(d) Amounts to related parties included in financing.
41
13
80
17
The information in the notes to consolidated financial statements is an integral part of these statements.
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IMPERIAL OIL LIMITED
Consolidated statement of comprehensive income (U.S. GAAP, unaudited)
Second Quarter
Six Months
to June 30
millions of Canadian dollars
2023
2022
2023
2022
Net income (loss)
675
2,409
1,923
3,582
Other comprehensive income (loss), net of income taxes
Amortization of postretirement benefits liability adjustment
included in net benefit costs
10
21
20
42
Total other comprehensive income (loss)
10
21
41
66
Comprehensive income (loss)
685
2,430
1,964
3,648
The information in the notes to consolidated financial statements is an integral part of these statements.
4
IMPERIAL OIL LIMITED
Consolidated balance sheet (U.S. GAAP, unaudited)
millions of Canadian dollars
As at
June 30
2023
As at
Dec 31
2022
Assets
Current assets
Cash and cash equivalents
2,376
3,749
Accounts receivable - net (a)
4,585
4,719
Inventories of crude oil and products
1,460
1,514
Materials, supplies and prepaid expenses
869
754
Total current assets
9,290
10,736
Investments and long-term receivables (b)
998
893
Property, plant and equipment,
55,424
54,568
less accumulated depreciation and depletion
(24,945)
(24,062)
Property, plant and equipment, net
30,479
30,506
Goodwill
166
166
Other assets, including intangibles - net
1,193
1,223
Total assets
42,126
43,524
Liabilities
Current liabilities
Notes and loans payable
122
122
Accounts payable and accrued liabilities (a)(note 7)
5,923
6,194
Income taxes payable
184
2,582
Total current liabilities
6,229
8,898
Long-term debt (c)(note 6)
4,022
4,033
Other long-term obligations (note 7)
3,418
3,467
Deferred income tax liabilities
4,629
4,713
Total liabilities
18,298
21,111
Shareholders’ equity
Common shares at stated value (d)(note 9)
1,079
1,079
Earnings reinvested
23,220
21,846
Accumulated other comprehensive income (loss) (note 10)
(471)
(512)
Total shareholders’ equity
23,828
22,413
Total liabilities and shareholders’ equity
42,126
43,524
(a) Accounts receivable - net included net amounts receivable from related parties of $1,029 million (2022 - $1,108 million).
(b) Investments and long-term receivables included amounts from related parties of $286 million (2022 - $288 million).
(c) Long-term debt included amounts to related parties of $3,447 million (2022 - $3,447 million).
(d) Number of common shares authorized and outstanding were 1,100 million and 584 million, respectively (2022 - 1,100 million and 584 million, respectively).
The information in the notes to consolidated financial statements is an integral part of these statements.
5
IMPERIAL OIL LIMITED
Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)
Second Quarter
Six Months
to June 30
millions of Canadian dollars
2023
2022
2023
2022
Common shares at stated value (note 9)
At beginning of period
1,079
1,237
1,079
1,252
Share purchases at stated value
—
(60)
—
(75)
At end of period
1,079
1,177
1,079
1,177
Earnings reinvested
At beginning of period
22,837
22,171
21,846
21,660
Net income (loss) for the period
675
2,409
1,923
3,582
Share purchases in excess of stated value
—
(2,440)
—
(2,874)
Dividends declared
(292)
(227)
(549)
(455)
At end of period
23,220
21,913
23,220
21,913
Accumulated other comprehensive income (loss) (note 10)
At beginning of period
(481)
(1,132)
(512)
(1,177)
Other comprehensive income (loss)
10
21
41
66
At end of period
(471)
(1,111)
(471)
(1,111)
Shareholders’ equity at end of period
23,828
21,979
23,828
21,979
The information in the notes to consolidated financial statements is an integral part of these statements.
6
IMPERIAL OIL LIMITED
Consolidated statement of cash flows (U.S. GAAP, unaudited)
Second Quarter
Six Months
to June 30
millions of Canadian dollars
2023
2022
2023
2022
Operating activities
Net income (loss)
675
2,409
1,923
3,582
Adjustments for non-cash items:
Depreciation and depletion
453
451
943
877
(Gain) loss on asset sales (note 3)
(13)
(4)
(22)
(24)
Deferred income taxes and other
(15)
(149)
(71)
(480)
Changes in operating assets and liabilities:
Accounts receivable
(302)
(1,426)
134
(2,970)
Inventories, materials, supplies and prepaid expenses
420
(27)
(59)
(391)
Income taxes payable
(321)
853
(2,398)
1,312
Accounts payable and accrued liabilities
(48)
499
(303)
2,643
All other items - net (c)
36
76
(83)
47
Cash flows from (used in) operating activities
885
2,682
64
4,596
Investing activities
Additions to property, plant and equipment
(499)
(333)
(928)
(637)
Proceeds from asset sales (note 3) (b)
9
102
23
126
Loans to equity companies - net
1
1
2
2
Cash flows from (used in) investing activities
(489)
(230)
(903)
(509)
Financing activities
Finance lease obligations - reduction (note 6)
(6)
(6)
(11)
(11)
Dividends paid
(257)
(228)
(523)
(413)
Common shares purchased (note 9)
—
(2,500)
—
(2,949)
Cash flows from (used in) financing activities
(263)
(2,734)
(534)
(3,373)
Increase (decrease) in cash and cash equivalents
133
(282)
(1,373)
714
Cash and cash equivalents at beginning of period
2,243
3,149
3,749
2,153
Cash and cash equivalents at end of period (a)
2,376
2,867
2,376
2,867
(a) Cash equivalents are all highly liquid securities with maturity of three months or less.
(b) In the second quarter of 2022, a deposit of $94 million was received for the pending sale of XTO Energy Canada.
(c) Included contributions to registered pension plans.
(44)
(46)
(86)
(96)
Income taxes (paid) refunded.
(557)
(52)
(3,189)
(275)
Interest (paid), net of capitalization.
(16)
(10)
(37)
(22)
The information in the notes to consolidated financial statements is an integral part of these statements.
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IMPERIAL OIL LIMITED
Notes to consolidated financial statements (unaudited)
1. Basis of financial statement preparation
These unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) and follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC) in the company’s 2022 annual report on Form 10-K. In the opinion of the company, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature.
The company’s exploration and production activities are accounted for under the “successful efforts” method.
The results for the six months ended June 30, 2023, are not necessarily indicative of the operations to be expected for the full year.
All amounts are in Canadian dollars unless otherwise indicated.
8
IMPERIAL OIL LIMITED
2. Business segments
Second Quarter
Upstream
Downstream
Chemical
millions of Canadian dollars
2023
2022
2023
2022
2023
2022
Revenues and other income
Revenues (a) (b)
61
119
11,355
16,752
348
414
Intersegment sales
3,519
5,827
1,365
2,024
89
149
Investment and other income (note 3)
10
3
15
9
—
—
3,590
5,949
12,735
18,785
437
563
Expenses
Exploration
1
1
—
—
—
—
Purchases of crude oil and products
1,432
2,357
11,133
16,261
263
401
Production and manufacturing
1,256
1,423
475
418
54
67
Selling and general
—
—
160
153
22
22
Federal excise tax and fuel charge
—
—
597
553
1
—
Depreciation and depletion
398
395
44
45
4
4
Non-service pension and postretirement benefit
—
—
—
—
—
—
Financing (note 5)
—
1
—
—
—
—
Total expenses
3,087
4,177
12,409
17,430
344
494
Income (loss) before income taxes
503
1,772
326
1,355
93
69
Income tax expense (benefit)
119
426
76
322
22
16
Net income (loss)
384
1,346
250
1,033
71
53
Cash flows from (used in) operating activities
573
2,087
228
641
55
64
Capital and exploration expenditures (c)
303
233
152
69
5
2
Second Quarter
Corporate and other
Eliminations
Consolidated
millions of Canadian dollars
2023
2022
2023
2022
2023
2022
Revenues and other income
Revenues (a) (b)
—
—
—
—
11,764
17,285
Intersegment sales
—
—
(4,973)
(8,000)
—
—
Investment and other income (note 3)
30
10
—
—
55
22
30
10
(4,973)
(8,000)
11,819
17,307
Expenses
Exploration
—
—
—
—
1
1
Purchases of crude oil and products
—
—
(4,972)
(7,998)
7,856
11,021
Production and manufacturing
—
—
—
—
1,785
1,908
Selling and general
25
18
(1)
(2)
206
191
Federal excise tax and fuel charge
—
—
—
—
598
553
Depreciation and depletion
7
7
—
—
453
451
Non-service pension and postretirement benefit
20
5
—
—
20
5
Financing (note 5)
16
10
—
—
16
11
Total expenses
68
40
(4,973)
(8,000)
10,935
14,141
Income (loss) before income taxes
(38)
(30)
—
—
884
3,166
Income tax expense (benefit)
(8)
(7)
—
—
209
757
Net income (loss)
(30)
(23)
—
—
675
2,409
Cash flows from (used in) operating activities
29
(110)
—
—
885
2,682
Capital and exploration expenditures (c)
33
10
—
—
493
314
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IMPERIAL OIL LIMITED
(a)Includes export sales to the United States of $2,034 million (2022 - $3,871 million).
(b)Revenues include both revenue within the scope of ASC 606 and outside the scope of ASC 606. Trade receivables in "Accounts receivable – net" reported on the Consolidated balance sheet include both receivables within the scope of ASC 606 and those outside the scope of ASC 606. Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives. Contractual terms, credit quality, and type of customer are generally similar between those revenues and receivables within the scope of ASC 606 and those outside it.
Revenues
Second Quarter
millions of Canadian dollars
2023
2022
Revenue from contracts with customers
10,922
15,871
Revenue outside the scope of ASC 606
842
1,414
Total
11,764
17,285
(c)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions and the company’s share of similar costs for equity companies. CAPEX excludes the purchase of carbon emission credits.
10
IMPERIAL OIL LIMITED
Six Months to June 30
Upstream
Downstream
Chemical
millions of Canadian dollars
2023
2022
2023
2022
2023
2022
Revenues and other income
Revenues (a) (b)
137
218
22,994
28,943
690
781
Intersegment sales
7,141
10,258
3,188
3,857
180
253
Investment and other income (note 3)
12
7
35
30
—
—
7,290
10,483
26,217
32,830
870
1,034
Expenses
Exploration
2
3
—
—
—
—
Purchases of crude oil and products
2,975
4,247
22,329
28,773
537
716
Production and manufacturing
2,543
2,672
886
774
112
121
Selling and general
—
—
317
300
48
45
Federal excise tax and fuel charge
—
—
1,125
1,032
2
—
Depreciation and depletion
832
768
89
86
8
9
Non-service pension and postretirement benefit
—
—
—
—
—
—
Financing (note 5)
—
1
—
—
—
—
Total expenses
6,352
7,691
24,746
30,965
707
891
Income (loss) before income taxes
938
2,792
1,471
1,865
163
143
Income tax expense (benefit)
224
664
351
443
39
34
Net income (loss)
714
2,128
1,120
1,422
124
109
Cash flows from (used in) operating activities
175
3,534
(191)
1,016
23
131
Capital and exploration expenditures(c)
624
455
226
137
9
3
Total assets as at June 30
28,603
28,961
9,629
11,649
482
505
Six Months to June 30
Corporate and other
Eliminations
Consolidated
millions of Canadian dollars
2023
2022
2023
2022
2023
2022
Revenues and other income
Revenues (a) (b)
—
—
—
—
23,821
29,942
Intersegment sales
—
—
(10,509)
(14,368)
—
—
Investment and other income (note 3)
72
14
—
—
119
51
72
14
(10,509)
(14,368)
23,940
29,993
Expenses
Exploration
—
—
—
—
2
3
Purchases of crude oil and products
—
—
(10,507)
(14,365)
15,334
19,371
Production and manufacturing
—
—
—
—
3,541
3,567
Selling and general
29
74
(2)
(3)
392
416
Federal excise tax and fuel charge
—
—
—
—
1,127
1,032
Depreciation and depletion
14
14
—
—
943
877
Non-service pension and postretirement benefit
40
9
—
—
40
9
Financing (note 5)
32
17
—
—
32
18
Total expenses
115
114
(10,509)
(14,368)
21,411
25,293
Income (loss) before income taxes
(43)
(100)
—
—
2,529
4,700
Income tax expense (benefit)
(8)
(23)
—
—
606
1,118
Net income (loss)
(35)
(77)
—
—
1,923
3,582
Cash flows from (used in) operating activities
57
(85)
—
—
64
4,596
Capital and exploration expenditures (c)
63
15
—
—
922
610
Total assets as at June 30
3,915
4,016
(503)
(239)
42,126
44,892
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IMPERIAL OIL LIMITED
(a)Includes export sales to the United States of $4,409 million (2022 - $6,375 million).
(b)Revenues include both revenue within the scope of ASC 606 and outside the scope of ASC 606. Trade receivables in "Accounts receivable – net" reported on the Consolidated balance sheet include both receivables within the scope of ASC 606 and those outside the scope of ASC 606. Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives. Contractual terms, credit quality, and type of customer are generally similar between those revenues and receivables within the scope of ASC 606 and those outside it.
Revenues
Six Months
to June 30
millions of Canadian dollars
2023
2022
Revenue from contracts with customers
21,442
26,735
Revenue outside the scope of ASC 606
2,379
3,207
Total
23,821
29,942
(c)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions and the company’s share of similar costs for equity companies. CAPEX excludes the purchase of carbon emission credits.
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IMPERIAL OIL LIMITED
3. Investment and other income
Investment and other income included gains and losses on asset sales as follows:
Second Quarter
Six Months
to June 30
millions of Canadian dollars
2023
2022
2023
2022
Proceeds from asset sales
9
8
23
32
Book value of asset sales
(4)
4
1
8
Gain (loss) on asset sales, before tax
13
4
22
24
Gain (loss) on asset sales, after tax
10
3
18
19
4. Employee retirement benefits
The components of net benefit cost were as follows:
Second Quarter
Six Months
to June 30
millions of Canadian dollars
2023
2022
2023
2022
Pension benefits:
Service cost
40
70
81
140
Interest cost
93
74
186
147
Expected return on plan assets
(93)
(103)
(186)
(206)
Amortization of prior service cost
4
4
8
8
Amortization of actuarial loss (gain)
11
21
22
43
Net benefit cost
55
66
111
132
Other postretirement benefits:
Service cost
3
5
6
11
Interest cost
7
6
14
12
Amortization of actuarial loss (gain)
(2)
3
(4)
5
Net benefit cost
8
14
16
28
5. Financing costs
Second Quarter
Six Months
to June 30
millions of Canadian dollars
2023
2022
2023
2022
Debt-related interest
49
20
95
32
Capitalized interest
(33)
(10)
(63)
(15)
Net interest expense
16
10
32
17
Other interest
—
1
—
1
Total financing
16
11
32
18
13
IMPERIAL OIL LIMITED
6. Long-term debt
As at
June 30
As at
Dec 31
millions of Canadian dollars
2023
2022
Long-term debt
3,447
3,447
Finance leases
575
586
Total long-term debt
4,022
4,033
7. Other long-term obligations
As at
June 30
As at
Dec 31
millions of Canadian dollars
2023
2022
Employee retirement benefits (a)
875
902
Asset retirement obligations and other environmental liabilities (b)
2,165
2,150
Share-based incentive compensation liabilities
107
101
Operating lease liability (c)
127
151
Other obligations
144
163
Total other long-term obligations
3,418
3,467
(a)Total recorded employee retirement benefits obligations also included $63 million in current liabilities (2022 - $63 million).
(b)Total asset retirement obligations and other environmental liabilities also included $116 million in current liabilities (2022 - $116 million).
(c)Total operating lease liability also included $106 million in current liabilities (2022 - $100 million). In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled $60 million (2022 - $14 million).
14
IMPERIAL OIL LIMITED
8. Financial and derivative instruments
Financial instruments
The fair value of the company’s financial instruments is determined by reference to various market data and other appropriate valuation techniques. There are no material differences between the fair value of the company’s financial instruments and the recorded carrying value. At June 30, 2023 and December 31, 2022, the fair value of long-term debt ($3,447 million, excluding finance lease obligations) was primarily a level 2 measurement.
Derivative instruments
The company’s size, strong capital structure and the complementary nature of its business segments reduce the company’s enterprise-wide risk from changes in commodity prices and currency exchange rates. In addition, the company uses commodity-based contracts, including derivatives, to manage commodity price risk and to generate returns from trading. Commodity contracts held for trading purposes are presented in the Consolidated statement of income on a net basis in the line “Revenues”. The company does not designate derivative instruments as a hedge for hedge accounting purposes.
Credit risk associated with the company’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial limits placed on derivative counterparties. The company maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity.
The net notional long/(short) position of derivative instruments was:
As at
June 30
As at Dec 31
thousands of barrels
2023
2022
Crude
8,040
1,800
Products
(670)
(350)
Realized and unrealized gain/(loss) on derivative instruments recognized in the Consolidated statement of income is included in the following lines on a before-tax basis:
Second Quarter
Six Months
to June 30
millions of Canadian dollars
2023
2022
2023
2022
Revenues
10
(51)
(13)
(14)
15
IMPERIAL OIL LIMITED
The estimated fair value of derivative instruments, and the related hierarchy level for the fair value measurement were as follows:
At June 30, 2023
millions of Canadian dollars
Fair value
Effect of counterparty netting
Effect of collateral netting
Net carrying value
Level 1
Level 2
Level 3
Total
Assets
Derivative assets (a)
11
31
—
42
(11)
—
31
Liabilities
Derivative liabilities (b)
13
26
—
39
(11)
(2)
26
(a)Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”, “Accounts receivable - net” and “Other assets, including intangibles - net”.
(b)Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities” and “Other long-term obligations”.
At December 31, 2022
millions of Canadian dollars
Fair value
Effect of counterparty netting
Effect of collateral netting
Net carrying value
Level 1
Level 2
Level 3
Total
Assets
Derivative assets (a)
17
32
—
49
(27)
—
22
Liabilities
Derivative liabilities (b)
21
20
—
41
(27)
(4)
10
(a)Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”, “Accounts receivable - net” and “Other assets, including intangibles - net”.
(b)Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities” and “Other long-term obligations”.
At June 30, 2023 and December 31, 2022, the company had $8 million and $14 million, respectively, of collateral under a master netting arrangement not offset against the derivatives on the Consolidated balance sheet in “Accounts receivable - net”, primarily related to initial margin requirements.
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IMPERIAL OIL LIMITED
9. Common shares
thousands of shares
As at
June 30
2023
As at
Dec 31
2022
Authorized
1,100,000
1,100,000
Outstanding
584,153
584,153
The current 12-month normal course issuer bid program came into effect June 29, 2023 under which Imperial will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 29,207,635 common shares (5 percent of the total shares on June 15, 2023) which includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent. Imperial plans to accelerate its share purchases under the normal course issuer bid program, and anticipates repurchasing all remaining allowable shares prior to year end.Purchase plans may be modified at any time without prior notice.
The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.
The company’s common share activities are summarized below:
Thousands of shares
Millions of dollars
Balance as at December 31, 2021
678,080
1,252
Issued under employee share-based awards
—
—
Purchases at stated value
(93,927)
(173)
Balance as at December 31, 2022
584,153
1,079
Issued under employee share-based awards
—
—
Purchases at stated value
—
—
Balance as at June 30, 2023
584,153
1,079
The following table provides the calculation of basic and diluted earnings per common share and the dividends declared by the company on its outstanding common shares:
Second Quarter
Six Months
to June 30
2023
2022
2023
2022
Net income (loss) per common share – basic
Net income (loss) (millions of Canadian dollars)
675
2,409
1,923
3,582
Weighted average number of common shares outstanding (millions of shares)
584.2
663.0
584.2
666.7
Net income (loss) per common share (dollars)
1.16
3.63
3.29
5.37
Net income (loss) per common share – diluted
Net income (loss) (millions of Canadian dollars)
675
2,409
1,923
3,582
Weighted average number of common shares outstanding (millions of shares)
584.2
663.0
584.2
666.7
Effect of employee share-based awards (millions of shares)
1.1
1.4
1.1
1.4
Weighted-average number of common shares outstanding,
assuming dilution (millions of shares)
585.3
664.4
585.3
668.1
Net income (loss) per common share (dollars)
1.15
3.63
3.29
5.36
Dividends per common share – declared (dollars)
0.50
0.34
0.94
0.68
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IMPERIAL OIL LIMITED
10. Other comprehensive income (loss) information
Changes in accumulated other comprehensive income (loss):
millions of Canadian dollars
2023
2022
Balance at January 1
(512)
(1,177)
Postretirement benefits liability adjustment:
Current period change excluding amounts reclassified
from accumulated other comprehensive income
21
24
Amounts reclassified from accumulated other comprehensive income
20
42
Balance at June 30
(471)
(1,111)
Amounts reclassified out of accumulated other comprehensive income (loss) - before-tax income (expense):
Second Quarter
Six Months
to June 30
millions of Canadian dollars
2023
2022
2023
2022
Amortization of postretirement benefits liability adjustment
included in net benefit cost (a)
(13)
(27)
(26)
(55)
(a) This accumulated other comprehensive income component is included in the computation of net benefit cost (note 4).
Income tax expense (credit) for components of other comprehensive income (loss):
Amortization of postretirement benefits liability adjustment
included in net benefit cost
3
6
6
13
Total
3
6
13
21
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IMPERIAL OIL LIMITED
Item 2. Management’s discussion and analysis of financial condition and results of operations
Non-GAAP financial measures and other specified financial measures
Certain measures included in this document are not prescribed by U.S. Generally Accepted Accounting Principles (GAAP). These measures constitute “non-GAAP financial measures” under Securities and Exchange Commission Regulation G and Item 10(e) of Regulation S-K, and “specified financial measures” under National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure of the Canadian Securities Administrators.
Reconciliation of these non-GAAP financial measures to the most comparable GAAP measure, and other information required by these regulations, have been provided. Non-GAAP financial measures and specified financial measures are not standardized financial measures under GAAP and do not have a standardized definition. As such, these measures may not be directly comparable to measures presented by other companies, and should not be considered a substitute for GAAP financial measures.
Net income (loss) excluding identified items
Net income (loss) excluding identified items is a non-GAAP financial measure that is total net income (loss) excluding individually significant non-operational events with an absolute corporate total earnings impact of at least $100 million in a given quarter. The net income (loss) impact of an identified item for an individual segment in a given quarter may be less than $100 million when the item impacts several segments or several periods. The most directly comparable financial measure that is disclosed in the financial statements is "Net income (loss)" within the company’s Consolidated statement of income. Management uses these figures to improve comparability of the underlying business across multiple periods by isolating and removing significant non-operational events from business results. The company believes this view provides investors increased transparency into business results and trends, and provides investors with a view of the business as seen through the eyes of management. Net income (loss) excluding identified items is not meant to be viewed in isolation or as a substitute for net income (loss) as prepared in accordance with U.S. GAAP. All identified items are presented on an after-tax basis.
Reconciliation of net income (loss) excluding identified items
There were no identified items in the second quarter or year-to-date 2023 and 2022.
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IMPERIAL OIL LIMITED
Recent business environment
During the first half of 2023, the price of crude oil decreased as the global oil market saw higher inventory levels. In addition, the Canadian WTI/WCS spread continued to recover in the second quarter, but remains weaker than the first half of 2022. Refining margins declined on steady supply of diesel.
Operating results
Second quarter 2023 vs. second quarter 2022
Second Quarter
millions of Canadian dollars, unless noted
2023
2022
Net income (loss) (U.S. GAAP)
675
2,409
Net income (loss) per common share, assuming dilution (dollars)
1.15
3.63
Upstream
Net income (loss) factor analysis
millions of Canadian dollars
Price – Lower bitumen realizations were primarily driven by lower marker prices and the widening WTI/WCS spread. Average bitumen realizations decreased by $43.63 per barrel, generally in line with WCS, and synthetic crude oil realizations decreased by $43.75 per barrel, generally in line with WTI.
Volumes – Lower volumes were primarily driven by the timing of planned turnaround activities at Syncrude, and production and steam cycle timing at Cold Lake.
Royalty – Lower royalties were primarily driven by weakened commodity prices.
Other – Includes favourable foreign exchange impacts of about $180 million, and lower operating expenses of about $130 million, resulting primarily from lower energy prices.
Marker prices and average realizations
Second Quarter
Canadian dollars, unless noted
2023
2022
West Texas Intermediate (US$ per barrel)
73.56
108.52
Western Canada Select (US$ per barrel)
58.49
95.80
WTI/WCS Spread (US$ per barrel)
15.07
12.72
Bitumen (per barrel)
68.64
112.27
Synthetic crude oil (per barrel)
100.92
144.67
Average foreign exchange rate (US$)
0.74
0.78
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IMPERIAL OIL LIMITED
Production
Second Quarter
thousands of barrels per day
2023
2022
Kearl (Imperial's share)
154
159
Cold Lake
132
144
Syncrude (a)
66
81
Kearl total gross production (thousands of barrels per day)
217
224
(a)In the second quarter of 2023, Syncrude gross production included about 0 thousand barrels per day of bitumen and other products (2022 - 2 thousand barrels per day) that were exported to the operator's facilities using an existing interconnect pipeline.
Lower production at Cold Lake was primarily driven by timing of production and steam cycles.
Lower production at Syncrude was primarily driven by the timing of the annual coker turnaround.
Other – Includes higher turnaround impacts of about $230 million, reflecting the planned turnaround activities at Strathcona refinery, partially offset by favourable foreign exchange impacts of about $110 million.
Refinery utilization and petroleum product sales
Second Quarter
thousands of barrels per day, unless noted
2023
2022
Refinery throughput
388
412
Refinery capacity utilization (percent)
90
96
Petroleum product sales
475
480
Lower refinery throughput in the second quarter of 2023 reflects the impact of planned turnaround activities at the Strathcona refinery.
Chemicals
Net income (loss) factor analysis
millions of Canadian dollars
21
IMPERIAL OIL LIMITED
Corporate and other
Second Quarter
millions of Canadian dollars
2023
2022
Net income (loss) (U.S. GAAP)
(30)
(23)
Liquidity and capital resources
Second Quarter
millions of Canadian dollars
2023
2022
Cash flow generated from (used in):
Operating activities
885
2,682
Investing activities
(489)
(230)
Financing activities
(263)
(2,734)
Increase (decrease) in cash and cash equivalents
133
(282)
Cash and cash equivalents at period end
2,376
2,867
Cash flow generated from operating activities primarily reflects lower Upstream realizations and Downstream margins.
Cash flow used in investing activities primarily reflects higher additions to property, plant and equipment, and lower proceeds from asset sales.
Cash flow used in financing activities primarily reflects:
Second Quarter
millions of Canadian dollars, unless noted
2023
2022
Dividends paid
257
228
Per share dividend paid (dollars)
0.44
0.34
Share repurchases (a)
—
2,500
Number of shares purchased (millions) (a)
—
32.5
(a)The company did not purchase shares during the second quarter of 2023. In the second quarter of 2022, share repurchases were made under the company's substantial issuer bid that commenced on May 6, 2022 and expired on June 10, 2022, and included shares purchased from Exxon Mobil Corporation by way of a proportionate tender to maintain its ownership percentage at approximately 69.6 percent.
On June 27, 2023, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid and will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 29,207,635common shares during the period June 29, 2023 to June 28, 2024. This maximum includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent. The program will end should the company purchase the maximum allowable number of shares or on June 28, 2024. Imperial plans to accelerate its share purchases under the normal course issuer bid program, and anticipates repurchasing all remaining allowable shares prior to year end. Purchase plans may be modified at any time without prior notice.
Contractual obligations
In the second quarter of 2023, the company entered into a long-term purchase agreement with a third party for about $3 billion. It has no impact on the 2023 and 2024 obligations disclosed in Imperial's 2022 annual report on Form 10-K. The company does not believe that the increased obligation will have a material effect on Imperial's operations, financial condition or financial statements.
22
IMPERIAL OIL LIMITED
Six months 2023 vs. six months 2022
Six Months
millions of Canadian dollars, unless noted
2023
2022
Net income (loss) (U.S. GAAP)
1,923
3,582
Net income (loss) per common share, assuming dilution (dollars)
3.29
5.36
Upstream
Net income (loss) factor analysis
millions of Canadian dollars
Price – Lower bitumen realizations were primarily driven by lower marker prices and the widening WTI/WCS spread. Average bitumen realizations decreased by $42.59 per barrel, generally in line with WCS, and synthetic crude oil realizations decreased by $29.68 per barrel, generally in line with WTI.
Volumes – Lower volumes were primarily driven by the timing of planned turnaround activities at Syncrude, and production and steam cycle timing at Cold Lake, partially offset by the absence of extreme cold weather and reduced unplanned downtime at Kearl.
Royalty – Lower royalties were primarily driven by weakened commodity prices.
Other – Includes favourable foreign exchange impacts of about $330 million, and lower operating expenses of about $50 million.
Marker prices and average realizations
Six Months
Canadian dollars, unless noted
2023
2022
West Texas Intermediate (US$ per barrel)
74.77
101.77
Western Canada Select (US$ per barrel)
54.92
88.13
WTI/WCS Spread (US$ per barrel)
19.85
13.64
Bitumen (per barrel)
58.94
101.53
Synthetic crude oil (per barrel)
101.73
131.41
Average foreign exchange rate (US$)
0.74
0.79
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IMPERIAL OIL LIMITED
Production
Six Months
thousands of barrels per day
2023
2022
Kearl (Imperial's share)
169
146
Cold Lake
137
142
Syncrude (a)
71
79
Kearl total gross production (thousands of barrels per day)
238
205
(a)In 2023, Syncrude gross production included about 1 thousand barrels per day of bitumen and other products (2022 - 2 thousand barrels per day) that were exported to the operator's facilities using an existing interconnect pipeline.
Higher production at Kearl was primarily driven by the absence of extreme cold weather, and reduced unplanned downtime as a result of the successful rollout of the winterization strategy.
Other – Favourable foreign exchange impacts of about $190 million and improved volumes of about $110 million, partially offset by higher turnaround impacts of about $250 million, reflecting the planned turnaround activities at Strathcona refinery.
Refinery utilization and petroleum product sales
Six Months
thousands of barrels per day, unless noted
2023
2022
Refinery throughput
403
406
Refinery capacity utilization (percent)
93
95
Petroleum product sales
465
464
Lower refinery throughput in 2023 reflects the impact of planned turnaround activities at the Strathcona refinery.
Chemicals
Net income (loss) factor analysis
millions of Canadian dollars
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IMPERIAL OIL LIMITED
Corporate and other
Six Months
millions of Canadian dollars
2023
2022
Net income (loss) (U.S. GAAP)
(35)
(77)
Liquidity and capital resources
Six Months
millions of Canadian dollars
2023
2022
Cash flow generated from (used in):
Operating activities
64
4,596
Investing activities
(903)
(509)
Financing activities
(534)
(3,373)
Increase (decrease) in cash and cash equivalents
(1,373)
714
Cash flow generated from operating activities primarily reflects unfavourable working capital impacts, including an income tax catch-up payment of $2.1 billion, as well as lower Upstream realizations and Downstream margins.
Cash flow used in investing activities primarily reflects higher additions to property, plant and equipment, and lower proceeds from asset sales.
Cash flow used in financing activities primarily reflects:
Six Months
millions of Canadian dollars, unless noted
2023
2022
Dividends paid
523
413
Per share dividend paid (dollars)
0.88
0.61
Share repurchases (a)
—
2,949
Number of shares purchased (millions) (a)
—
41.4
(a)The company did not purchase shares during the six months ended June 30, 2023. In the six months ended June 30, 2022, share repurchases were made under the company's normal course issuer bid program and substantial issuer bid that commenced on May 6, 2022 and expired on June 10, 2022. Includes shares purchased from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid, and by way of a proportionate tender under the company's substantial issuer bid.
25
IMPERIAL OIL LIMITED
Forward-looking statements
Statements of future events or conditions in this report, including projections, targets, expectations, estimates, and business plans are forward-looking statements. Forward-looking statements can be identified by words such as believe, anticipate, intend, propose, plan, goal, seek, project, predict, target, estimate, expect, strategy, outlook, schedule, future, continue, likely, may, should, will and similar references to future periods. Forward-looking statements in this release include, but are not limited to, references to the use of derivative instruments and effectiveness of risk mitigation; The company’s purchases under the normal course issuer bid and plans to accelerate completion prior to year end; and the company’s belief that the commitment related to long-term purchase agreement will not have a material adverse effect on the company.
Forward-looking statements are based on the company's current expectations, estimates, projections and assumptions at the time the statements are made. Actual future financial and operating results, including expectations and assumptions concerning demand growth and energy source, supply and mix; production rates, growth and mix; for shareholder returns, assumptions such as cash flow forecasts, financing sources and capital structure, participation of the company’s majority shareholder and the results of periodic and ongoing evaluation of alternate uses of capital; project plans, timing, costs, technical evaluations and capacities and the company’s ability to effectively execute on these plans and operate its assets; capital and environmental expenditures; and commodity prices, foreign exchange rates and general market conditions could differ materially depending on a number of factors.
These factors include global, regional or local changes in supply and demand for oil, natural gas, and petroleum and petrochemical products and resulting price, differential and margin impacts, including foreign government action with respect to supply levels and prices, the impact of COVID-19 on demand and the occurrence of wars; availability and allocation of capital; project management and schedules and timely completion of projects; unanticipated technical or operational difficulties; availability and performance of third-party service providers; environmental risks inherent in oil and gas exploration and production activities; political or regulatory events, including changes in law or government policy; management effectiveness and disaster response preparedness; operational hazards and risks; cybersecurity incidents, including increased reliance on remote working arrangements; currency exchange rates; general economic conditions; and other factors discussed in Item 1A risk factors and Item 7 management’s discussion and analysis of financial condition and results of operations of Imperial Oil Limited’s most recent annual report on Form 10-K and subsequent interim reports.
Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to Imperial. Imperial’s actual results may differ materially from those expressed or implied by its forward-looking statements and readers are cautioned not to place undue reliance on them. Imperial undertakes no obligation to update any forward-looking statements contained herein, except as required by applicable law.
The term "project" as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.
26
IMPERIAL OIL LIMITED
Item 3. Quantitative and qualitative disclosures about market risk
Information about market risks for the six months ended June 30, 2023, does not differ materially from that discussed on page 32 of the company’s annual report on Form 10-K for the year ended December 31, 2022.
Item 4. Controls and procedures
As indicated in the certifications in Exhibit 31 of this report, the company’s principal executive officer and principal financial officer have evaluated the company’s disclosure controls and procedures as of June 30, 2023. Based on that evaluation, these officers have concluded that the company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to them in a manner that allows for timely decisions regarding required disclosures and are effective in ensuring that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There has not been any change in the company’s internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.
27
IMPERIAL OIL LIMITED
PART II. OTHER INFORMATION
Item 1. Legal proceedings
Imperial has elected to use a $1 million (U.S. dollars) threshold for disclosing environmental proceedings.
Item 2. Unregistered sales of equity securities and use of proceeds
Issuer purchases of equity securities
Total number of
shares purchased
Average price paid
per share
(Canadian dollars)
Total number of
shares purchased
as part of publicly
announced plans
or programs
Maximum number of shares that may yet be purchased under the plans or programs (a) (b)
April 2023
(April 1 - April 30)
—
—
—
—
May 2023
(May 1 - May 31)
—
—
—
—
June 2023
(June 1 - June 30)
—
—
—
—
(a)On June 27, 2022, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid and to continue its existing share purchase program. The program enabled the company to purchase up to a maximum of 31,833,809 common shares during the period June 29, 2022 to June 28, 2023. This maximum included shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid. As in the past, Exxon Mobil Corporation advised the company that it intended to participate to maintain its ownership percentage at approximately 69.6 percent. The program ended on October 21, 2022 as a result of the company purchasing the maximum allowable number of shares under the program.
(b)On June 27, 2023, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid and will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 29,207,635 common shares during the period June 29, 2023 to June 28, 2024. This maximum includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent. The program will end should the company purchase the maximum allowable number of shares or on June 28, 2024. Imperial plans to accelerate its share purchases under the normal course issuer bid program and anticipates repurchasing all remaining allowable shares prior to year end.
The company will continue to evaluate its share purchase program in the context of its overall capital activities. Purchase plans may be modified at any time without prior notice.
Item 5. Other information
During the three months ended June 30, 2023, none of the Company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
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IMPERIAL OIL LIMITED
Item 6. Exhibits
(31.1) Certification by the principal executive officer of the company pursuant to Rule 13a-14(a).
(31.2) Certification by the principal financial officer of the company pursuant to Rule 13a-14(a).
(32.1) Certification by the chief executive officer of the company pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.
(32.2) Certification by the chief financial officer of the company pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.
(101) Interactive Data Files (formatted as Inline XBRL).
(104) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
29
IMPERIAL OIL LIMITED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Imperial Oil Limited
(Registrant)
Date:
August 1, 2023
/s/ Daniel E. Lyons
(Signature)
Daniel E. Lyons
Senior vice-president, finance and administration, and controller
