Imperial Oil Ltd 10-Q for FY2021 Q1
Imperial Oil Ltd (IMO)
10-Q
2021-05-05
For: 2021-03-31
View Original
Added on
April 10, 2026
About this 10-Q
Imperial Oil Ltd filed this 10-Q on May 5, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).
Headline figures
Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- 392M CAD
- compared with a net loss of 188M CAD a year earlier
- Diluted EPS
- 0.53 CAD
- compared with -0.25 CAD a year earlier
Table of Contents
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[
]
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
[
]
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)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |||||
| (Address of principal executive offices) | (Postal Code) | |||||
Registrant’s telephone number, including area code:
1-800 -567-3776
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 |
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.
✓
The registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ✓
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.
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, 2021 was 734,076,755 .
IMPERIAL OIL LIMITED
Table of contents
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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, 2020. 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 |
2021 |
2020 | ||||||
| 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) (note 11) |
||||||||
| Production and manufacturing (c) |
||||||||
| Selling and general (c) |
||||||||
| Federal excise tax and fuel charge |
||||||||
| Depreciation and depletion (note 11) |
||||||||
| 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 |
2021 |
2020 | ||||||
| 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 periodic 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 Mar 31 |
As at Dec 31 |
|||||||
millions of Canadian dollars |
2021 |
2020 | ||||||
| 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 (note 11) |
||||||||
| Other assets, including intangibles - net |
||||||||
| Total assets |
||||||||
| Liabilities |
||||||||
| Current liabilities |
||||||||
| Notes and loans payable (c) |
||||||||
| Accounts payable and accrued liabilities (a) (note 7) |
||||||||
| Income taxes payable |
||||||||
| Total current liabilities |
||||||||
| Long-term debt (d) (note 6) |
||||||||
| Other long-term obligations (note 7) |
||||||||
| Deferred income tax liabilities |
||||||||
| Total liabilities |
||||||||
| Shareholders’ equity |
||||||||
| Common shares at stated value (e) (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) | Notes and loans payable included amounts to related parties of $ |
| (d) | Long-term debt included amounts to related parties of $ |
| (e) | 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 |
2021 |
2020 | ||||||
| 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 |
( |
) |
( |
) | ||||
| Cumulative effect of accounting change |
- |
( |
) | |||||
| 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
Consolida
t
ed statement of cash flows (U.S. GAAP, unaudited) Inflow (outflow) |
Three Months to March 31 |
|||||||
millions of Canadian dollars |
2021 |
2020 |
||||||
| Operating activities |
||||||||
| Net income (loss) |
|
( |
) | |||||
| Adjustments for non-cash items: |
|
|||||||
| Depreciation and depletion |
|
|||||||
| Impairment of intangible assets (note 11) |
|
|||||||
| (Gain) loss on asset sales (note 3) |
( |
) |
|
( |
) | |||
| Inventory write-down to current market value (note 11) |
|
|||||||
| 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 2020 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, 2021, 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 |
2021 |
2020 | 2021 |
2020 | 2021 |
2020 | ||||||
Revenues and other income |
||||||||||||
Revenues (a) |
||||||||||||
Intersegment sales |
||||||||||||
Investment and other income (note 3) |
||||||||||||
Expenses |
||||||||||||
Exploration |
||||||||||||
Purchases of crude oil and products (note 11) |
||||||||||||
Production and manufacturing |
||||||||||||
Selling and general |
||||||||||||
Federal excise tax and fuel charge |
||||||||||||
Depreciation and depletion (note 11) |
||||||||||||
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 (note 11) |
||||||||||||
Three Months to March 31 |
Corporate and other |
Eliminations |
Consolidated | |||||||||
millions of Canadian dollars |
2021 |
2020 |
2021 |
2020 |
2021 |
2020 | ||||||
Revenues and other income |
||||||||||||
Revenues (a) |
||||||||||||
Intersegment sales |
( |
( |
||||||||||
Investment and other income (note 3) |
||||||||||||
( |
( |
|||||||||||
Expenses |
||||||||||||
Exploration |
||||||||||||
Purchases of crude oil and products (note 11) |
( |
( |
||||||||||
Production and manufacturing |
||||||||||||
Selling and general |
( |
( |
( |
|||||||||
Federal excise tax and fuel charge |
||||||||||||
Depreciation and depletion (note 11) |
||||||||||||
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 (note 11) |
( |
( |
||||||||||
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. 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 |
2021 |
2020 | ||||||
| Proceeds from asset sales |
||||||||
| Book value of asset sales |
||||||||
| Gain (loss) on asset sales, before |
||||||||
| Gain (loss) on asset sales, after |
|
|||||||
4. Employee retirement benefits
The components of net benefit cost were as follows:
| Three Months to March 31 |
||||||||
millions of Canadian dollars |
2021 |
2020 | ||||||
| Pension benefits: |
||||||||
| Current service cost |
||||||||
| Interest cost |
||||||||
| Expected return on plan assets |
( |
) |
( |
) | ||||
| Amortization of prior service cost |
||||||||
| Amortization of actuarial loss (gain) |
||||||||
| Net periodic benefit cost |
|
|||||||
| Other postretirement benefits: |
||||||||
| Current service cost |
||||||||
| Interest cost |
||||||||
| Amortization of actuarial loss (gain) |
||||||||
| Net periodic benefit cost |
|
|||||||
5. Financing costs
| Three Months to March 31 |
||||||||
millions of Canadian dollars |
2021 |
2020 | ||||||
| Debt-related interest |
||||||||
| Capitalized interest |
( |
) |
( |
) | ||||
| Net interest expense |
||||||||
| Other interest |
||||||||
| Total financing |
|
|||||||
6. Long-term debt
| As at Mar 31 |
As at Dec 31 |
|||||||
millions of Canadian dollars |
2021 |
2020 | ||||||
| Long-term debt |
||||||||
| Finance leases |
||||||||
| Total long-term debt |
||||||||
11
IMPERIAL OIL LIMITED
7. Other long-term obligations
| As at Mar 31 |
As at Dec 31 |
|||||||
millions of Canadian dollars |
2021 |
2020 | ||||||
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, 2021 and December 31, 2020, 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. 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:
(thousands of barrels) |
As at March 31 2021 |
As at Dec 31 2020 |
||||||
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 |
2021 |
2020 | ||||||
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:
millions of Canadian dollars At March 31, 2021 |
||||||||||||||||||||||||||||
| Fair value | Effect of counterparty netting |
Effect of collateral netting |
Net carrying value |
|||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||
Derivative assets (a) |
( |
) |
( |
) |
- |
|||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||
Derivative liabilities (b) |
( |
) |
- |
|||||||||||||||||||||||||
(a) Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”. (b) Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities”. |
||||||||||||||||||||||||||||
millions of Canadian dollars At December 31, 2020 |
||||||||||||||||||||||||||||
| Fair value | Effect of counterparty netting |
Effect of collateral netting |
Net carrying value |
|||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||
Derivative assets (a) |
( |
) | - | |||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||
Derivative liabilities (b) |
( |
) | ( |
) | - | |||||||||||||||||||||||
(a) Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”. (b) Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities”. |
||||||||||||||||||||||||||||
At March 31, 2021 and December 31, 2020, respectively, the company had $14 million and $5 million 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
thousands of shares |
As of Mar 31 2021 |
As of Dec 31 2020 |
||||||
Authorized |
||||||||
Common shares outstanding |
||||||||
The 12 -month limited normal course issuer bid program that was in place throughout the first quarter of 2021 came into effect on June 29, 2020 and was established primarily to eliminate dilution from shares issued in conjunction with Imperial’s restricted stock unit plan. The program enabled the company to purchase up to a maximum of 50,000 common shares, 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. The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.
On April 30, 2021, the company announced an amendment to its normal course issuer bid to increase the number of common shares that it may purchase. Under the amendment, the number of common shares that may be purchased will increase to a maximum of 29,363,070 common shares (4 percent of the total shares on June 15, 2020) during the period June 29, 2020 to June 28, 2021, 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. No other provisions of the normal course issuer bid have changed.
The company’s common share activities are summarized below:
| Thousands of shares |
Millions of dollars |
|||||||
Balance as at December 31, 2019 |
|
|||||||
Issued under employee share-based awards |
||||||||
Purchases at stated value |
( |
) | ( |
) | ||||
Balance as at December 31, 2020 |
|
|||||||
Issued under employee share-based awards |
||||||||
Purchases at stated value |
||||||||
Balance as at March 31, 2021 |
||||||||
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 |
||||||||
2021 |
2020 | |||||||
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) (a) |
||||||||
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) |
|
|||||||
| (a) | For three months to March 31, 2020, the Net income (loss) per common share – diluted e xcludes the effect of |
15
IMPERIAL OIL LIMITED
10. Other comprehensive income (loss) in
f
ormation Changes in accumulated other comprehensive income (loss):
millions of Canadian dollars |
2021 |
2020 | ||||||
| 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 |
2021 |
2020 | ||||||
| Amortization of postretirement benefits liability adjustment included in net periodic benefit cost (a) |
( |
( |
||||||
| (a) | This accumulated other comprehensive income component is included in the computation of net periodic benefit cost (note 4). |
Income tax expense (credit) for components of other comprehensive income (loss):
| Three Months to March 31 |
||||||||
millions of Canadian dollars |
2021 |
2020 | ||||||
| Postretirement benefits liability adjustments: |
||||||||
| Postretirement benefits liability adjustment (excluding amortization) |
( |
) | ||||||
| Amortization of postretirement benefits liability adjustment included in net periodic benefit cost |
||||||||
| Total |
( |
) | ||||||
11. Miscellaneous financial information
At March 31, 2021, due to the termination of transportation services agreements related to a third-party pipeline project, the company recognized a liability of $62 million, previously reported as a contingent liability in Note 10 of Imperial’s Form 2.9 billion. The majority of these commitments related to years 2026 and beyond.
10-K.
In connection with the same project, commitments under “Other long-term purchase agreements” as reported in Imperial’s Form 10-K
decreased by approximately $In the first quarter of 2020, a 281 million after tax (Upstream - $229 million; Downstream - $52 million) was recorded associated with the carrying value of crude oil inventory exceeding the current market value.
non-cash
charge of $In the first quarter of 2020, with the change in economic conditions and the reduction in the company’s market capitalization, the company assessed its goodwill balances for impairment and recognized a 20 million in the company’s Upstream segment. The goodwill impairment is reflected in “Depreciation and depletion” on the Consolidated statement of income and “Goodwill” on the Consolidated balance sheet. The remaining balance of goodwill is associated with the Downstream segment.
non-cash
goodwill impairment charge of $16
IMPERIAL OIL LIMITED
Item 2. |
Management’s discussion and analysis of financial condition and results of operations |
Operating results
First quarter 2021 vs. first quarter 2020
In early 2020, the balance of supply and demand for petroleum and petrochemical products experienced two significant disruptive effects. On the demand side, the
COVID-19
pandemic spread rapidly through most areas of the world resulting in substantial reductions in consumer and business activity and significantly reduced demand for crude oil, natural gas, and petroleum products. This reduction in demand coincided with announcements of increased production in certain key oil-producing
countries which led to increases in inventory levels and sharp declines in prices for crude oil, natural gas, and petroleum products. While demand has rebounded considerably, the lingering effects of the weak 2020 business environment has continued to have a negative impact on financial results in 2021 when compared to periods prior to the pandemic. Signs of improvement are emerging including higher crude and gas prices through the quarter and stronger Downstream and Chemical margins.
The company recorded net income of $392 million or $0.53 per share on a diluted basis in the first quarter of 2021, compared to a net loss of $188 million or $0.25 per share in the same period of 2020. First quarter 2020 results included
non-cash
charges of $281 million relating to the revaluation of the company’s inventory. Upstream recorded net income of $79 million in the first quarter of 2021, compared to a net loss of $608 million in the same period of 2020. Improved results reflect higher realizations of about $700 million and the absence of the prior year
non-cash
charge of $229 million, related to the revaluation of the company’s inventory. These items were partially offset by higher royalties of about $100 million, unfavourable foreign exchange effects of about $70 million, and higher operating expenses of about $60 million. West Texas Intermediate (WTI) averaged US$58.14 per barrel in the first quarter of 2021, up from US$45.78 per barrel in the same quarter of 2020. Western Canada Select (WCS) averaged US$45.64 per barrel and US$25.60 per barrel for the same periods. The WTI / WCS differential averaged approximately US$13 per barrel for the first quarter of 2021, compared to around US$20 in the same period of 2020.
The Canadian dollar averaged US$0.79 in the first quarter of 2021, an increase of US$0.05 from the first quarter of 2020.
Imperial’s average Canadian dollar realizations for bitumen increased in the quarter, primarily due to an increase in WCS. Bitumen realizations averaged $47.19 per barrel in the first quarter of 2021, up from $18.08 per barrel in the first quarter of 2020. The company’s average Canadian dollar realizations for synthetic crude increased generally in line with WTI, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $67.41 per barrel in the first quarter of 2021, up from $58.94 per barrel in the same period of 2020.
Total gross production of Kearl bitumen averaged 251,000 barrels per day in the first quarter (178,000 barrels Imperial’s share), up from 226,000 barrels per day (160,000 barrels Imperial’s share) in the first quarter of 2020. Higher production was primarily driven by the supplemental crushing facilities.
Gross production of Cold Lake bitumen averaged 140,000 barrels per day in the first quarter, in line with 140,000 barrels per day in the same period of 2020.
The company’s share of gross production from Syncrude averaged 79,000 barrels per day, up from 73,000 barrels per day in the first quarter of 2020.
Downstream recorded net income of $292 million in the first quarter of 2021, compared to net income of $402 million in the same period of 2020. Results were negatively impacted by lower margins of about $150 million and lower sales volumes of about $60 million. These items were partially offset by the absence of the prior year
non-cash
charge of $52 million, related to the revaluation of the company’s inventory and lower operating expenses of about $50 million. 17
IMPERIAL OIL LIMITED
Refinery throughput averaged 364,000 barrels per day, compared to 383,000 barrels per day in the first quarter of 2020. Capacity utilization was 85 percent, compared to 91 percent in the first quarter of 2020. Lower refinery throughput was primarily driven by lower market demand due to the
COVID-19
pandemic. Petroleum product sales were 414,000 barrels per day, compared to 462,000 barrels per day in the first quarter of 2020. Lower petroleum product sales were primarily driven by reduced demand due to the
COVID-19
pandemic. Chemical net income was $67 million in the first quarter, up from net income of $21 million in the same quarter of 2020.
Corporate and other expenses were $46 million in the first quarter, up from $3 million in the same period of 2020, mainly due to higher share-based compensation costs.
Liquidity and capital resources
Cash flow generated from operating activities was $1,045 million in the first quarter, up from $423 million in the corresponding period in 2020, primarily reflecting higher Upstream realizations.
Investing activities used net cash of $147 million in the first quarter, compared with $308 million used in the same period of 2020, primarily reflecting lower additions to property, plant and equipment.
Cash used in financing activities was $202 million in the first quarter, compared with $445 million used in the first quarter of 2020. Dividends paid in the first quarter of 2021 were $162 million. The per share dividend paid in the first quarter was $0.22, consistent with the same period of 2020. The company did not purchase shares during the first quarter. In the first quarter of 2020, the company purchased about 9.8 million shares for $274 million, including shares purchased from Exxon Mobil Corporation.
The company’s cash balance was $1,467 million at March 31, 2021, versus $1,388 million at the end of first quarter 2020.
At March 31, 2021, due to the termination of transportation services agreements related to a third-party pipeline project, the company recognized a liability of $62 million, previously reported as a contingent liability in Note 10 of Imperial’s Form
10-K.
In connection with the same project, commitments under “Other long-term purchase agreements” as reported in Imperial’s Form 10-K
decreased by approximately $2.9 billion. The majority of these commitments related to years 2026 and beyond. On April 30, 2021, the company announced an amendment to its normal course issuer bid to increase the number of common shares that it may purchase. Under the amendment, the number of common shares that may be purchased will increase to a maximum of 29,363,070 common shares during the period June 29, 2020 to June 28, 2021, 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. No other provisions of the normal course issuer bid have changed. The company currently anticipates maximizing its share purchases under the program. Purchase plans may be modified at any time without prior notice.
18
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; signs of improvement emerging in the business environment through higher crude and gas prices and stronger downstream and chemical margins; and plans for purchases under the amended share purchase 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; progression of
COVID-19
and its impacts on Imperial’s ability to operate its assets, including the possible shutdown of facilities due to COVID-19
outbreaks; cash generation, financing sources and capital structure; and capital and environmental expenditures 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 and the impact of COVID-19
on demand; availability and allocation of capital; political or regulatory events, including changes in law or government policy such as tax laws, production curtailment and actions in response to COVID-19;
management effectiveness and disaster response preparedness, including business continuity plans in response to COVID-19;
unanticipated technical or operational difficulties; project management and schedules and timely completion of projects; operational hazards and risks; 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.
19
IMPERIAL OIL LIMITED
Item 3. |
Quantitative and qualitative disclosures about market risk |
Information about market risks for the three months ended March 31, 2021, 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, 2020. 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, 2021. 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.
20
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 2021 |
||||||||||||||||
| (January 1 - January 31) |
- |
- |
- |
43,025 |
||||||||||||
| February 2021 |
||||||||||||||||
| (February 1 - February 28) |
- |
- |
- |
43,025 |
||||||||||||
| March 2021 |
||||||||||||||||
| (March 1 - March 31) |
- |
- |
- |
43,025 |
||||||||||||
| |
||||||||||||||||
| (a) | On June 23, 2020, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a limited normal course issuer bid. The program was established primarily to eliminate dilution from shares issued in conjunction with Imperial’s restricted stock unit plan, and enabled the company to purchase up to a maximum of 50,000 common shares during the period June 29, 2020 to June 28, 2021. 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, 2021. |
On April 30, 2021, the company announced an amendment to its normal course issuer bid to increase the number of common shares that it may purchase. Under the amendment, the number of common shares that may be purchased will increase to a maximum of 29,363,070 common shares during the period June 29, 2020 to June 28, 2021, 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. No other provisions of the normal course issuer bid have changed. The company currently anticipates maximizing its share purchases under the program. Purchase plans may be modified at any time without prior notice.
The company will continue to evaluate its share purchase program in the context of its overall capital activities.
21
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). |
22
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 5, 2021 | /s/ Daniel E. Lyons --------------------------------------------------- | |||
| (Signature) | ||||
| Daniel E. Lyons | ||||
| Senior vice-president, finance and administration, and controller | ||||
| (Principal accounting officer) | ||||
| Date: May 5, 2021 | /s/ Cathryn Walker --------------------------------------------------- | |||
| (Signature) | ||||
| Cathryn Walker | ||||
| Assistant corporate secretary | ||||
23