Imperial Oil Ltd 10-Q for FY2022 Q1
Imperial Oil Ltd (IMO)
10-Q
2022-05-04
For: 2022-03-31
View Original
Added on
April 10, 2026
About this 10-Q
Imperial Oil Ltd filed this 10-Q on May 4, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- 1.17B CAD
- up 199.2% from net income of 392M CAD a year earlier
- Diluted EPS
- 1.75 CAD
- up 230.2% from 0.53 CAD a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
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
(Exact name of registrant as specified in its charter)
C |
||
(State or other jurisdiction |
(I.R.S. Employer | |
of incorporation or organization) |
Identification No.) | |
(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.
✓
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). ✓
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. ✓ |
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 March 31, 2022 was 669,143,714 .
IMPERIAL OIL LIMITED
Table of contents
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, 2021. 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) |
||||||||
| Three Months | ||||||||
| to March 31 | ||||||||
millions of Canadian dollars |
2022 |
2021 | ||||||
| Revenues and other income |
||||||||
| Revenues (a) |
||||||||
| Investment and other income (note 3) |
||||||||
| Total revenues and other income |
||||||||
| Expenses |
||||||||
| Exploration |
||||||||
| Purchases of crude oil and products (b) |
||||||||
| Production and manufacturing (c) |
||||||||
| Selling and general (c) |
||||||||
| Federal excise tax and fuel charge |
||||||||
| Depreciation and depletion |
||||||||
| Non-service pension and postretirement benefit |
||||||||
| Financing (d) (note 5) |
||||||||
| Total expenses |
||||||||
| Income (loss) before income taxes |
||||||||
| Income taxes |
||||||||
| Net income (loss) |
||||||||
| Per share information (Canadian dollars) |
|
|||||||
| Net income (loss) per common share - basic (note 9) |
||||||||
| Net income (loss) per common share - diluted (note 9) |
||||||||
| (a) Amounts from related parties included in revenues. |
||||||||
| (b) Amounts to related parties included in purchases of crude oil and products. |
||||||||
| (c) Amounts to related parties included in production and manufacturing, and selling and general expenses. |
||||||||
| (d) Amounts to related parties included in financing (note 5). |
||||||||
The information in the notes to consolidated financial statements is an integral part of these statements.
3
IMPERIAL OIL LIMITED
Consolidated statement of comprehensive income (U.S. GAAP, unaudited) |
||||||||
| Three Months | ||||||||
| to March 31 | ||||||||
| millions of Canadian dollars |
2022 |
2021 | ||||||
| Net income (loss) |
||||||||
| Other comprehensive income (loss), net of income taxes |
||||||||
| Postretirement benefits liability adjustment (excluding amortization) |
||||||||
| Amortization of postretirement benefits liability adjustment included in net benefit costs |
||||||||
| Total other comprehensive income (loss) |
||||||||
| Comprehensive income (loss) |
||||||||
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) |
||||||||
| As at | As at | |||||||
| Mar 31 | Dec 31 | |||||||
| millions of Canadian dollars |
2022 |
2021 | ||||||
| Assets |
||||||||
| Current assets |
||||||||
| Cash |
||||||||
| Accounts receivable - net (a) |
||||||||
| Inventories of crude oil and products |
||||||||
| Materials, supplies and prepaid expenses |
||||||||
| Total current assets |
||||||||
| Investments and long-term receivables (b) |
||||||||
| Property, plant and equipment, |
||||||||
| less accumulated depreciation and depletion |
( |
) |
( |
) | ||||
| Property, plant and equipment, net |
||||||||
| Goodwill |
||||||||
| Other assets, including intangibles - net |
||||||||
| Total assets |
||||||||
| Liabilities |
||||||||
| Current liabilities |
||||||||
| Notes and loans payable |
||||||||
| Accounts payable and accrued liabilities (a) (note 7) |
||||||||
| Income taxes payable |
||||||||
| Total current liabilities |
||||||||
| Long-term debt (c) (note 6) |
||||||||
| Other long-term obligations (note 7) |
||||||||
| Deferred income tax liabilities |
||||||||
| Total liabilities |
||||||||
| Shareholders’ equity |
||||||||
| Common shares at stated value (d) (note 9) |
||||||||
| Earnings reinvested |
||||||||
| Accumulated other comprehensive income (loss) (note 10) |
( |
) |
( |
) | ||||
| Total shareholders’ equity |
||||||||
| Total liabilities and shareholders’ equity |
||||||||
| (a) Accounts receivable - net included net amounts receivable from related parties of $ | ||||
| (b) Investments and long-term receivables included amounts from related parties of $ | ||||
| (c) Long-term debt included amounts to related parties of $ | ||||
| (d) Number of common shares authorized and outstanding were | ||||
| 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) |
| |||||||
| Three Months | ||||||||
| to March 31 | ||||||||
| millions of Canadian dollars |
2022 |
2021 | ||||||
| Common shares at stated value (note 9) |
||||||||
| At beginning of period |
||||||||
| Share purchases at stated value |
( |
) |
- | |||||
| At end of period |
||||||||
| Earnings reinvested |
||||||||
| At beginning of period |
||||||||
| Net income (loss) for the period |
||||||||
| Share purchases in excess of stated value |
( |
) |
- | |||||
| Dividends declared |
( |
) |
( |
) | ||||
| At end of period |
||||||||
| Accumulated other comprehensive income (loss) (note 10) |
||||||||
| At beginning of period |
( |
) |
( |
) | ||||
| Other comprehensive income (loss) |
||||||||
| At end of period |
( |
) |
( |
) | ||||
| Shareholders’ equity at end of period |
|
|||||||
| 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) |
| |||||||
| Three Months | ||||||||
| Inflow (outflow) |
to March 31 | |||||||
| millions of Canadian dollars |
2022 |
2021 | ||||||
| Operating activities |
||||||||
| Net income (loss) |
||||||||
| Adjustments for non-cash items: |
||||||||
| Depreciation and depletion |
||||||||
| (Gain) loss on asset sales (note 3) |
( |
) |
( |
) | ||||
| Deferred income taxes and other |
( |
) |
||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
( |
) |
( |
) | ||||
| Inventories, materials, supplies and prepaid expenses |
( |
) |
( |
) | ||||
| Income taxes payable |
||||||||
| Accounts payable and accrued liabilities |
||||||||
| All other items - net (b) |
( |
) |
||||||
| Cash flows from (used in) operating activities |
||||||||
| Investing activities |
||||||||
| Additions to property, plant and equipment |
( |
) |
( |
) | ||||
| Proceeds from asset sales (note 3) |
||||||||
| Loans to equity companies - net |
||||||||
| Cash flows from (used in) investing activities |
( |
) |
( |
) | ||||
| Financing activities |
||||||||
| Short-term debt - net |
( |
) | ||||||
| Reduction in finance lease obligations (note 6) |
( |
) |
( |
) | ||||
| Dividends paid |
( |
) |
( |
) | ||||
| Common shares purchased (note 9) |
( |
) |
||||||
| Cash flows from (used in) financing activities |
( |
) |
( |
) | ||||
| Increase (decrease) in cash |
||||||||
| Cash at beginning of period |
||||||||
| Cash at end of period (a) |
||||||||
| (a) Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all highly liquid securities with maturity of three months or less when purchased. |
| |||||||
| (b) Included contributions to registered pension plans. |
( |
) |
( |
) | ||||
| Income taxes (paid) refunded. |
( |
) |
||||||
| Interest (paid), net of capitalization. |
( |
) |
( |
) | ||||
| The information in the notes to consolidated financial statements is an integral part of these statements. |
| |||||||
7
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 2021 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 three months ended March 31, 2022, 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 |
| Three Months to March 31 |
Upstream | Downstream | Chemical | |||||||||||||||||||||
| millions of Canadian dollars |
2022 |
2021 | 2022 |
2021 | 2022 |
2021 | ||||||||||||||||||
| Revenues and other income |
||||||||||||||||||||||||
| Revenues (a) |
||||||||||||||||||||||||
| Intersegment sales |
||||||||||||||||||||||||
| Investment and other income (note 3) |
||||||||||||||||||||||||
| Expenses |
||||||||||||||||||||||||
| Exploration |
||||||||||||||||||||||||
| Purchases of crude oil and products |
||||||||||||||||||||||||
| Production and manufacturing |
||||||||||||||||||||||||
| Selling and general |
||||||||||||||||||||||||
| Federal excise tax and fuel charge |
||||||||||||||||||||||||
| Depreciation and depletion |
||||||||||||||||||||||||
| Non-service pension and postretirement benefit |
||||||||||||||||||||||||
| Financing (note 5) |
||||||||||||||||||||||||
| Total expenses |
||||||||||||||||||||||||
| Income (loss) before income taxes |
||||||||||||||||||||||||
| Income tax expense (benefit) |
||||||||||||||||||||||||
| Net income (loss) |
||||||||||||||||||||||||
| Cash flows from (used in) operating activities |
||||||||||||||||||||||||
| Capital and exploration expenditures (b) |
||||||||||||||||||||||||
| Total assets as at March 31 |
||||||||||||||||||||||||
| Three Months to March 31 |
Corporate and other | Eliminations | Consolidated | |||||||||||||||||||||
| millions of Canadian dollars |
2022 |
2021 | 2022 |
2021 | 2022 |
2021 | ||||||||||||||||||
| Revenues and other income |
||||||||||||||||||||||||
| Revenues (a) |
||||||||||||||||||||||||
| Intersegment sales |
( |
) |
( |
) | ||||||||||||||||||||
| Investment and other income (note 3) |
||||||||||||||||||||||||
( |
) |
( |
) | |||||||||||||||||||||
| Expenses |
||||||||||||||||||||||||
| Exploration |
||||||||||||||||||||||||
| Purchases of crude oil and products |
( |
) |
( |
) | ||||||||||||||||||||
| Production and manufacturing |
||||||||||||||||||||||||
| Selling and general |
( |
) |
( |
) | ||||||||||||||||||||
| Federal excise tax and fuel charge |
||||||||||||||||||||||||
| Depreciation and depletion |
||||||||||||||||||||||||
| Non-service pension and postretirement benefit |
||||||||||||||||||||||||
| Financing (note 5) |
||||||||||||||||||||||||
| Total expenses |
( |
) |
( |
) | ||||||||||||||||||||
| Income (loss) before income taxes |
( |
) |
( |
) | ||||||||||||||||||||
| Income tax expense (benefit) |
( |
) |
( |
) | ||||||||||||||||||||
| Net income (loss) |
( |
) |
( |
) | ||||||||||||||||||||
| Cash flows from (used in) operating activities |
( |
) | ||||||||||||||||||||||
| Capital and exploration expenditures (b) |
||||||||||||||||||||||||
| Total assets as at March 31 |
|
( |
) |
( |
) | |||||||||||||||||||
9
IMPERIAL OIL LIMITED
| (a) | Included export sales to the United States of $ |
| (b) | 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
3. |
Investment and other income |
Investment and other income included gains and losses on asset sales as follows:
| Three Months to March 31 | ||||||||
millions of Canadian dollars |
2022 |
2021 | ||||||
| Proceeds from asset sales |
||||||||
| Book value of asset sales |
||||||||
| Gain (loss) on asset sales, before tax |
|
|||||||
| Gain (loss) on asset sales, after tax |
||||||||
4. |
Employee retirement benefits |
The components of net benefit cost were as follows:
| Three Months to March 31 |
||||||||
millions of Canadian dollars |
2022 |
2021 | ||||||
| Pension benefits: |
||||||||
| Service cost |
||||||||
| Interest cost |
||||||||
| Expected return on plan assets |
( |
) |
( |
) | ||||
| Amortization of prior service cost |
||||||||
| Amortization of actuarial loss (gain) |
||||||||
| Net benefit cost |
||||||||
| Other postretirement benefits: |
||||||||
| Service cost |
||||||||
| Interest cost |
||||||||
| Amortization of actuarial loss (gain) |
||||||||
| Net benefit cost |
||||||||
5. |
Financing costs |
| Three Months to March 31 |
||||||||
| millions of Canadian dollars |
2022 |
2021 | ||||||
| Debt-related interest |
||||||||
| Capitalized interest |
( |
) |
( |
) | ||||
| Net interest expense |
||||||||
| Other interest |
||||||||
| Total financing |
||||||||
11
IMPERIAL OIL LIMITED
6. |
Long-term debt |
| As at Mar 31 |
As at Dec 31 |
|||||||
millions of Canadian dollars |
2022 |
2021 | ||||||
| Long-term debt |
||||||||
| Finance leases |
||||||||
| |
||||||||
7. |
Other long-term obligations |
| As at Mar 31 |
As at Dec 31 |
|||||||
millions of Canadian dollars |
2022 |
2021 | ||||||
| Employee retirement benefits (a) |
||||||||
| Asset retirement obligations and other environmental liabilities (b) |
||||||||
| Share-based incentive compensation liabilities |
||||||||
| Operating lease liability (c) |
||||||||
| Other obligations |
||||||||
| Total other long-term obligations |
||||||||
| (a) | Total recorded employee retirement benefits obligations also included $ |
| (b) | Total asset retirement obligations and other environmental liabilities also included $ |
| (c) | Total operating lease liability also included $ |
12
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 March 31, 2022 and December 31, 2021, the fair value of long-term debt ($4,447
Derivative instruments
The company’s size, strong capital structure and the complementary nature of the Upstream, Downstream and Chemical businesses 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 derivative instruments 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 Mar 31 |
As at Dec 31 |
|||||||
thousands of barrels |
2022 |
2021 | ||||||
| Crude |
( |
) |
||||||
| Products |
( |
) |
( |
) | ||||
Realized and unrealized gain or (loss) on derivative instruments recognized in the Consolidated statement of income is included in the following lines on a
before-tax
basis: | Three Months to March 31 |
||||||||
millions of Canadian dollars |
2022 |
2021 | ||||||
| Revenues |
||||||||
| Purchases of crude oil and products |
( |
) | ||||||
| Total |
( |
) | ||||||
13
IMPERIAL OIL LIMITED
The estimated fair value of derivative instruments, and the related hierarchy level for the fair value measurement is as follows:
| At March 31, 2022 | ||||||||||||||||||||||||||||
millions of Canadian dollars | ||||||||||||||||||||||||||||
| Fair value | Effect of | Effect of | Net | |||||||||||||||||||||||||
| counterparty | collateral | carrying | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | netting | netting | value | ||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||
Derivative assets (a) |
( |
) |
||||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||
Derivative liabilities (b) |
( |
) |
( |
) |
||||||||||||||||||||||||
| (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, 2021 | ||||||||||||||||||||||||||||
millions of Canadian dollars |
||||||||||||||||||||||||||||
| Fair value | Effect of | Effect of | Net | |||||||||||||||||||||||||
| counterparty | collateral | carrying | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | netting | netting | value | ||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||
Derivative assets (a) |
( |
) | ||||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||
Derivative liabilities (b) |
( |
) | ( |
) | ||||||||||||||||||||||||
| (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 March 31, 2022 and December 31, 2021, the company had $47 million and $6 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.
14
IMPERIAL OIL LIMITED
9. |
Common shares |
| As of | As of | |||||||
| Mar 31 | Dec 31 | |||||||
thousands of shares |
2022 |
2021 | ||||||
Authorized |
||||||||
Common shares outstanding |
||||||||
The most recent 12 -month normal course issuer bid program came into effect June 29, 2021, under which Imperial continued its existing share purchase program. The program enabled the company to purchase up to a maximum of 35,583,671 common shares (5 percent of the total shares on June 15, 2021) which 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 completed on January 31, 2022 as a result of the company purchasing the maximum allowable number of shares under the program.
On April 29, 2022 the company announced its intention to launch a substantial issuer bid pursuant to which the company will offer to purchase for cancellation up to $2,500 ,000,000 of its common shares. The substantial issuer bid will be made through a modified Dutch auction, with a tender price range to be determined by the company at the time of commencement of the offer. Shares may also be tendered by way of a proportionate tender, which will result in a shareholder maintaining their proportionate share ownership. ExxonMobil has advised Imperial that it intends to make a proportionate tender in connection with the offer in order to maintain its proportionate share ownership at approximately 69.6 percent following completion of the offer. Nothing in this report shall constitute an offer to purchase or a solicitation of an offer to sell any shares.
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, 2020 |
||||||||
Issued under employee share-based awards |
||||||||
Purchases at stated value |
( |
) | ( |
) | ||||
Balance as at December 31, 2021 |
||||||||
Issued under employee share-based awards |
||||||||
Purchases at stated value |
( |
) |
( |
) | ||||
Balance as at March 31, 2022 |
||||||||
15
IMPERIAL OIL LIMITED
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:
| Three Months | ||||||||
| to March 31 | ||||||||
2022 |
2021 | |||||||
| Net income (loss) per common share - basic |
||||||||
| Net income (loss) (millions of Canadian dollars) |
||||||||
| Weighted average number of common shares outstanding (millions of shares) |
||||||||
| Net income (loss) per common share (dollars) |
||||||||
| Net income (loss) per common share - diluted |
||||||||
| Net income (loss) (millions of Canadian dollars) |
||||||||
| Weighted average number of common shares outstanding (millions of shares) |
|
|||||||
| Effect of employee share-based awards (millions of shares) |
||||||||
| Weighted average number of common shares outstanding, assuming dilution (millions of shares) |
||||||||
| Net income (loss) per common share (dollars) |
||||||||
| Dividends per common share - declared (dollars) |
||||||||
16
IMPERIAL OIL LIMITED
10. Other comprehensive income (loss) information
Changes in accumulated other comprehensive income (loss):
| millions of Canadian dollars |
2022 |
2021 | ||||||
| Balance at January 1 |
( |
) |
( |
) | ||||
| Postretirement benefits liability adjustment: |
||||||||
| Current period change excluding amounts reclassified from accumulated other comprehensive income |
||||||||
| Amounts reclassified from accumulated other comprehensive income |
||||||||
| Balance at March 31 |
|
( |
) |
|
( |
) |
| Amounts reclassified out of accumulated other comprehensive income (loss) - before tax income (expense): | ||||
| |
Three Months |
| ||||||
| to March 31 | ||||||||
| millions of Canadian dollars |
2022 |
2021 | ||||||
| Amortization of postretirement benefits liability adjustment included in net benefit cost (a) |
( |
) |
( |
) | ||||
| (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): | ||||
| Three Months | ||||||||
| to March 31 | ||||||||
| millions of Canadian dollars |
2022 |
2021 | ||||||
| Postretirement benefits liability adjustments: |
||||||||
| Postretirement benefits liability adjustment (excluding amortization) |
||||||||
| Amortization of postretirement benefits liability adjustment included in net benefit cost |
||||||||
| Total |
||||||||
17
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 of the Canadian Securities Administrators.
“non-GAAP
financial measures” under Securities and Exchange Commission Regulation G, and “specified financial measures” under National Instrument 52-112
Non-GAAP
and Other Financial Measures DisclosureReconciliation 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 first quarter of 2022 and 2021.
18
IMPERIAL OIL LIMITED
Current business environment
During the
COVID-19
pandemic, industry investment to maintain and increase production capacity was restrained to preserve capital, resulting in underinvestment and supply tightness as demand for petroleum and petrochemical products recovered. Across late 2021 and early 2022, this dynamic, along with supply chain constraints, and a continuation of demand recovery led to a steady increase in oil and natural gas prices. In the first quarter of 2022, tightness in the oil and natural gas markets was further exacerbated by Russia’s invasion of Ukraine and subsequent sanctions imposed upon business and other activities in Russia. The price of crude oil and certain regional natural gas indicators increased to levels not seen for several years. Operating results
First quarter 2022 vs. first quarter 2021
| First Quarter | ||||||||
| millions of Canadian dollars, unless noted |
2022 |
2021 | ||||||
| Net income (loss) (U.S. GAAP) |
1,173 |
392 | ||||||
| Net income (loss) per common share, assuming dilution (dollars) |
1.75 |
0.53 | ||||||
Upstream
Net income (loss) factor analysis
millions of Canadian dollars
Price – Higher realizations were generally in line with increases in marker prices, driven primarily by increased demand and supply chain constraints. Average bitumen realizations increased by $42.17 per barrel generally in line with WCS and synthetic crude oil realizations increased by $49.83 per barrel generally in line with WTI.
Volumes – Lower volumes primarily driven by extreme cold weather and unplanned downtime at Kearl.
Royalty – Higher royalties primarily driven by improved commodity prices.
Marker prices and average realizations
| First Quarter | ||||||||
| Canadian dollars, unless noted |
2022 |
2021 | ||||||
| West Texas Intermediate (US$) |
95.01 |
58.14 | ||||||
| Western Canada Select (US$) |
80.46 |
45.64 | ||||||
| WTI/WCS Spread (US$) |
14.55 |
12.50 | ||||||
| Bitumen (per barrel) |
89.36 |
47.19 | ||||||
| Synthetic crude oil (per barrel) |
117.24 |
67.41 | ||||||
| Average foreign exchange rate (US$) |
0.79 |
0.79 | ||||||
19
IMPERIAL OIL LIMITED
Production
| First Quarter | ||||||||
| thousands of barrels per day |
2022 |
2021 | ||||||
| Kearl (Imperial’s share) |
132 |
178 | ||||||
| Cold Lake |
140 |
140 | ||||||
| Syncrude (Imperial’s share) (a) |
77 |
79 | ||||||
| Kearl total gross production (thousands of barrels per day) |
186 |
251 | ||||||
(a) In the first quarter of 2022, Syncrude (Imperial’s share) gross production included about 1 thousand barrels per day of bitumen (2021 - rounded to 0 thousand barrels per day) that was exported to the operator’s facilities using an existing interconnect pipeline.
Lower production at Kearl was primarily a result of extreme cold weather and unplanned downtime.
Downstream
Net income (loss) factor analysis
millions of Canadian dollars
Margins – Higher margins primarily reflect improved market conditions.
Refinery utilization and petroleum product sales |
||||||||
| First Quarter | ||||||||
| thousands of barrels per day, unless noted |
2022 |
2021 | ||||||
| Refinery throughput |
399 |
364 | ||||||
| Refinery capacity utilization (percent) |
93 |
85 | ||||||
| Petroleum product sales |
447 |
414 | ||||||
Improved refinery throughput in the first quarter of 2022 primarily reflects increased demand.
Improved petroleum product sales in the first quarter of 2022 were mainly due to increased demand.
Chemicals
Net income (loss) factor analysis
millions of Canadian dollars
20
IMPERIAL OIL LIMITED
Corporate and other
| First Quarter | ||||||||
| millions of Canadian dollars |
2022 |
2021 | ||||||
| Net income (loss) (U.S. GAAP) |
(54 |
) |
(46 | ) | ||||
Liquidity and capital resources
| First Quarter | ||||||||
| millions of Canadian dollars |
2022 |
2021 | ||||||
| Cash flow generated from (used in): |
||||||||
| Operating activities |
1,914 |
1,045 | ||||||
| Investing activities |
(279 |
) |
(147 | ) | ||||
| Financing activities |
(639 |
) |
(202 | ) | ||||
| Increase (decrease) in cash and cash equivalents |
996 |
696 | ||||||
| Cash and cash equivalents at period end |
3,149 |
1,467 | ||||||
Cash flow generated from operating activities primarily reflects higher Upstream realizations, improved Downstream margins, and favourable working capital impacts.
Cash flow used in investing activities primarily reflects higher additions to property, plant and equipment.
Cash flow used in financing activities primarily reflects:
| First Quarter | ||||||||
| millions of Canadian dollars, unless noted |
2022 |
2021 | ||||||
| Dividends paid |
185 |
162 | ||||||
| Per share dividend paid (dollars) |
0.27 |
0.22 | ||||||
| Share repurchases (a) |
449 |
- | ||||||
| Number of shares purchased (millions) (a) |
8.9 |
- | ||||||
| (a) Share repurchases were made under the company’s normal course issuer bid program, and include shares purchased from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. | | |||||||
The company completed share repurchases under its normal course issuer bid on January 31, 2022. The company did not purchase shares during the first quarter of 2021.
On April 29, 2022 the company announced its intention to launch a substantial issuer bid pursuant to which the company will offer to purchase for cancellation up to $2,500,000,000 of its common shares. The substantial issuer bid will be made through a modified Dutch auction, with a tender price range to be determined by the company at the time of commencement of the offer. Shares may also be tendered by way of a proportionate tender, which will result in a shareholder maintaining their proportionate share ownership. ExxonMobil has advised Imperial that it intends to make a proportionate tender in connection with the offer in order to maintain its proportionate share ownership at approximately 69.6 percent following completion of the offer. Nothing in this report shall constitute an offer to purchase or a solicitation of an offer to sell any shares.
21
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 intention to initiate a substantial issuer bid, including the size, timing for determining the terms and pricing, commencement, structure and ExxonMobil’s intent to make a proportionate tender; updated earnings sensitivities; and the company’s continued evaluation of renewal of its normal course issuer bid program.
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; commodity prices, foreign exchange rates and general market conditions; production rates, growth and mix; project plans, timing, costs, technical evaluations and capacities and the company’s ability to effectively execute on these plans and operate its assets; that the necessary exemptive relief to proceed with the substantial issuer bid under applicable securities laws will be received on the timeline anticipated; ExxonMobil making a proportionate tender in connection with the substantial issuer bid; cash generation, financing sources and capital structure, including the timing and amount of share repurchases; capital and environmental expenditures; the adoption and impact of new facilities or technologies on reductions to GHG emissions intensity; receipt of regulatory approvals; applicable laws and government policies, including with respect to climate change and GHG emissions reductions; progression of
COVID-19
and its impacts on Imperial’s ability to operate its assets; the company’s ability to effectively execute on its business continuity plans and pandemic response activities; 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; the receipt, in a timely manner, of regulatory and third-party approvals; project management and schedules and timely completion of projects; unanticipated technical or operational difficulties; management effectiveness and disaster response preparedness, including business continuity plans in response to COVID-19;
operational hazards and risks; availability and performance of third-party service providers, including in light of restrictions related to COVID-19;
environmental risks inherent in oil and gas exploration and production activities; political or regulatory events, including changes in law or government policy such as tax laws, production curtailment and actions in response to COVID-19;
the results of research programs and new technologies, and ability to bring new technologies to commercial scale on a cost-competitive basis; 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.
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.
22
IMPERIAL OIL LIMITED
Item 3. Quantitative and qualitative disclosures about market risk
Information about market risks for the three months ended March 31, 2022, does not differ materially from that discussed on page 33 of the company’s annual report on Form
10-K
for the year ended December 31, 2021. The following table details those earnings sensitivities that have been updated from the fiscal year-end
to reflect current market conditions. Earnings Sensitivities (a) |
||||||
| millions of Canadian dollars after tax |
| |||||
| One dollar (U.S.) per barrel increase (decrease) in crude oil prices |
+ (-) | 105 | ||||
| One dollar (U.S.) per barrel increase (decrease) in light and heavy crude price differentials |
+ (-) | 35 | ||||
| One cent decrease (increase) in the value of the Canadian dollar versus the U.S. dollar |
+ (-) | 200 | ||||
| (a) |
Each sensitivity calculation shows the annual impact on net income resulting from a change in one factor, after tax and royalties and holding all other factors constant. These sensitivities have been updated to reflect current market conditions. They may not apply proportionately to larger fluctuations. | |||
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 March 31, 2022. 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.
23
IMPERIAL OIL LIMITED
PART II. OTHER INFORMATION
Item 1. Legal proceedings
Imperial has elected to use a $1 million 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) |
| |||||
| January 2022 |
||||||||||||||||
| (January 1 - January 31) |
8,936,150 |
50.30 |
8,936,150 |
- |
||||||||||||
| February 2022 |
||||||||||||||||
| (February 1 - February 28) |
- |
- |
- |
- |
||||||||||||
| March 2022 |
||||||||||||||||
| (March 1 - March 31) |
- |
- |
- |
- |
| (a) | On June 23, 2021, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid to continue its existing share purchase program. The program enabled the company to purchase up to a maximum of 35,583,671 common shares during the period June 29, 2021 to June 28, 2022. 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 January 31, 2022 as a result of the company purchasing the maximum allowable number of shares under the program. |
On April 29, 2022 the company announced its intention to launch a substantial issuer bid pursuant to which the company will offer to purchase for cancellation up to $2,500,000,000 of its common shares. The substantial issuer bid will be made through a modified Dutch auction, with a tender price range to be determined by the company at the time of commencement of the offer. Shares may also be tendered by way of a proportionate tender, which will result in a shareholder maintaining their proportionate share ownership. ExxonMobil has advised Imperial that it intends to make a proportionate tender in connection with the offer in order to maintain its proportionate share ownership at approximately 69.6 percent following completion of the offer. Nothing in this report shall constitute an offer to purchase or a solicitation of an offer to sell any shares.
The company will continue to evaluate the renewal of its normal course issuer bid share purchase program in June 2022 in the context of its overall capital activities.
Purchase plans may be modified at any time without prior notice.
24
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).
25
IMPERIAL OIL LIMITED
SIGNATURES
Pursuant to the requirements of the of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Securities Exchange Act
| Imperial Oil Limited | ||||
| (Registrant) | ||||
Date: |
May 4, 2022 |
/s/ Daniel E. Lyons | ||
| (Signature) | ||||
| Daniel E. Lyons | ||||
| Senior vice-president, finance and | ||||
| administration, and controller | ||||
| (Principal accounting officer) | ||||
Date: |
May 4, 2022 |
/s/ Cathryn Walker | ||
| (Signature) | ||||
| Cathryn Walker | ||||
| Assistant corporate secretary | ||||
26