FORM10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[✓] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20162017
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 number0-12014
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) | |||||
Registrant’s telephone number, including area code:1-800-567-3776
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 91 days.
YES ✓ NO
The registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES ✓ NO
The registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, (seesmaller reporting company, or an emerging growth company. See the definition of “accelerated filer” and “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule12b-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.
The registrant is a shell company (as defined in Rule12b-2 of the Exchange Act of 1934).
YES NO ✓
The number of common shares outstanding, as of September 30, 20162017 was 847,599,011.837,581,329.
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Item 2. | Management’s discussion and analysis of financial condition and results of operations | 15 | ||||||||
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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 Form10-K for the year ended December 31, 2015.2016. 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.
IMPERIAL OIL LIMITED
Consolidated statement of income (U.S. GAAP, unaudited)
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | ||||||||||||
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Revenues and other income | ||||||||||||||||
Operating revenues(a) (b) | 6,568 | 7,111 | 17,967 | 20,553 | ||||||||||||
Investment and other income(note 3) | 874 | 44 | 945 | 106 | ||||||||||||
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Total revenues and other income | 7,442 | 7,155 | 18,912 | 20,659 | ||||||||||||
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Expenses | ||||||||||||||||
Exploration(note 11) | 16 | 19 | 75 | 52 | ||||||||||||
Purchases of crude oil and products(c) | 3,857 | 4,053 | 10,884 | 11,653 | ||||||||||||
Production and manufacturing(d) | 1,261 | 1,351 | 3,842 | 4,105 | ||||||||||||
Selling and general(d) | 275 | 267 | 812 | 803 | ||||||||||||
Federal excise tax(a) | 434 | 416 | 1,237 | 1,180 | ||||||||||||
Depreciation and depletion | 398 | 400 | 1,229 | 1,052 | ||||||||||||
Financing costs(note 5) | 19 | 12 | 52 | 20 | ||||||||||||
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Total expenses | 6,260 | 6,518 | 18,131 | 18,865 | ||||||||||||
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Income (loss) before income taxes | 1,182 | 637 | 781 | 1,794 | ||||||||||||
Income taxes | 179 | 158 | 60 | 774 | ||||||||||||
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Net income (loss) | 1,003 | 479 | 721 | 1,020 | ||||||||||||
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Per-share information(Canadian dollars) |
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Net income (loss) per common share - basic(note 8) | 1.18 | 0.56 | 0.85 | 1.20 | ||||||||||||
Net income (loss) per common share - diluted(note 8) | 1.18 | 0.56 | 0.85 | 1.20 | ||||||||||||
Dividends per common share | 0.15 | 0.14 | 0.44 | 0.40 | ||||||||||||
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(a) Federal excise tax included in operating revenues. | 434 | 416 | 1,237 | 1,180 | ||||||||||||
(b) Amounts from related parties included in operating revenues.* | 448 | 856 | 1,457 | 2,399 | ||||||||||||
(c) Amounts to related parties included in purchases of crude oil and products.* | 623 | 663 | 1,540 | 2,046 | ||||||||||||
(d) Amounts to related parties included in production and manufacturing, and selling and general expenses. | 133 | 106 | 394 | 333 | ||||||||||||
*Note: Restated 2015.
| Third Quarter | Nine Months to September 30 | |||||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||||
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Revenues and other income | ||||||||||||||||||
Operating revenues(a) | 7,134 | 6,568 | 21,077 | 17,967 | ||||||||||||||
Investment and other income(note 3) | 24 | 874 | 270 | 945 | ||||||||||||||
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Total revenues and other income | 7,158 | 7,442 | 21,347 | 18,912 | ||||||||||||||
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Expenses | ||||||||||||||||||
Exploration | 7 | 16 | 29 | 75 | ||||||||||||||
Purchases of crude oil and products(b) | 4,251 | 3,857 | 13,226 | 10,884 | ||||||||||||||
Production and manufacturing(c) | 1,338 | 1,261 | 4,238 | 3,842 | ||||||||||||||
Selling and general(c) | 219 | 275 | 626 | 812 | ||||||||||||||
Federal excise tax | 438 | 434 | 1,253 | 1,237 | ||||||||||||||
Depreciation and depletion | 391 | 398 | 1,135 | 1,229 | ||||||||||||||
Financing costs(note 5) | 18 | 19 | 49 | 52 | ||||||||||||||
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Total expenses | 6,662 | 6,260 | 20,556 | 18,131 | ||||||||||||||
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Income (loss) before income taxes | 496 | 1,182 | 791 | 781 | ||||||||||||||
Income taxes | 125 | 179 | 164 | 60 | ||||||||||||||
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Net income (loss) | 371 | 1,003 | 627 | 721 | ||||||||||||||
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Per-share information(Canadian dollars) | ||||||||||||||||||
Net income (loss) per common share - basic(note 8) | 0.44 | 1.18 | 0.74 | 0.85 | ||||||||||||||
Net income (loss) per common share - diluted(note 8) | 0.44 | 1.18 | 0.74 | 0.85 | ||||||||||||||
Dividends per common share | 0.16 | 0.15 | 0.47 | 0.44 | ||||||||||||||
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(a) | Amounts from related parties included in operating revenues. | 756 | 448 | 2,801 | 1,457 | |||||||||||||
(b) | Amounts to related parties included in purchases of crude oil and products. | 604 | 623 | 1,919 | 1,540 | |||||||||||||
(c) | Amounts to related parties included in production and manufacturing, and selling and general expenses. | 127 | 133 | 415 | 394 | |||||||||||||
The information in the notes to consolidated financial statements is an integral part of these statements.
IMPERIAL OIL LIMITED
Consolidated statement of comprehensive income (U.S. GAAP, unaudited)
| Third Quarter | Nine Months
to September 30 | Third Quarter | Nine Months to September 30 | |||||||||||||||||||||||||||||
| millions of Canadian dollars |
2016 | 2015 | 2016 | 2015 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
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Net income (loss) | 1,003 | 479 | 721 | 1,020 | 371 | 1,003 | 627 | 721 | ||||||||||||||||||||||||
Other comprehensive income (loss), net of income taxes | ||||||||||||||||||||||||||||||||
Post-retirement benefits liability adjustment (excluding amortization) | - | - | 41 | 100 | ||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income taxes | ||||||||||||||||||||||||||||||||
Post-retirement benefit liability adjustment (excluding amortization) | - | - | 100 | (176) | ||||||||||||||||||||||||||||
Amortization of post-retirement benefit liability adjustment included in net periodic benefit costs | 34 | 42 | 108 | 126 | ||||||||||||||||||||||||||||
Amortization of post-retirement benefits liability adjustment included in net periodic benefit costs | 34 | 34 | 106 | 108 | ||||||||||||||||||||||||||||
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Total other comprehensive income (loss) | 34 | 42 | 208 | (50) | 34 | 34 | 147 | 208 | ||||||||||||||||||||||||
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Comprehensive income (loss) | 1,037 | 521 | 929 | 970 | 405 | 1,037 | 774 | 929 | ||||||||||||||||||||||||
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The information in the notes to consolidated financial statements is an integral part of these statements.
IMPERIAL OIL LIMITED
Consolidated balance sheet (U.S. GAAP, unaudited)
As at Sept 30 | As at Dec 31 | |||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | As at Sept 30 | As at Dec 31 | ||||||||||||
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Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Cash | 248 | 203 | 833 | 391 | ||||||||||||
Accounts receivable, less estimated doubtful accounts(a) | 1,702 | 1,581 | 1,896 | 2,023 | ||||||||||||
Inventories of crude oil and products | 941 | 1,190 | 989 | 949 | ||||||||||||
Materials, supplies and prepaid expenses | 547 | 424 | 441 | 468 | ||||||||||||
Deferred income tax assets(b) | - | 272 | ||||||||||||||
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Total current assets | 3,438 | 3,670 | 4,159 | 3,831 | ||||||||||||
Long-term receivables, investments and other long-term assets | 1,224 | 1,414 | ||||||||||||||
Investments and long-term receivables | 931 | 1,030 | ||||||||||||||
Property, plant and equipment, | 53,626 | 54,203 | 53,844 | 53,515 | ||||||||||||
less accumulated depreciation and depletion | (16,884 | ) | (16,404) | (18,248 | ) | (17,182 | ) | |||||||||
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Property, plant and equipment, net | 36,742 | 37,799 | 35,596 | 36,333 | ||||||||||||
Goodwill | 186 | 224 | 186 | 186 | ||||||||||||
Other assets, including intangibles, net(b) | 60 | 63 | ||||||||||||||
Assets held for sale(note 10) | 444 | - | ||||||||||||||
Other assets, including intangibles, net | 498 | 274 | ||||||||||||||
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Total assets | 42,094 | 43,170 | 41,370 | 41,654 | ||||||||||||
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Liabilities | ||||||||||||||||
Current liabilities | ||||||||||||||||
Notes and loans payable(c) | 271 | 1,952 | ||||||||||||||
Accounts payable and accrued liabilities(a) (b) (note 7) | 2,898 | 2,989 | ||||||||||||||
Notes and loans payable(b) | 202 | 202 | ||||||||||||||
Accounts payable and accrued liabilities(a) (note 7) | 3,041 | 3,193 | ||||||||||||||
Income taxes payable | 452 | 452 | 59 | 488 | ||||||||||||
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Total current liabilities | 3,621 | 5,393 | 3,302 | 3,883 | ||||||||||||
Long-term debt(d) (note 6) | 7,039 | 6,564 | ||||||||||||||
Other long-term obligations(e) (note 7) | 3,444 | 3,597 | ||||||||||||||
Deferred income tax liabilities(b) | 4,008 | 4,191 | ||||||||||||||
Long-term debt(c) (note 6) | 5,013 | 5,032 | ||||||||||||||
Other long-term obligations(d) (note 7) | 3,698 | 3,656 | ||||||||||||||
Deferred income tax liabilities | 4,336 | 4,062 | ||||||||||||||
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Total liabilities | 18,112 | 19,745 | 16,349 | 16,633 | ||||||||||||
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Shareholders’ equity | ||||||||||||||||
Common shares at stated value(f) | 1,566 | 1,566 | ||||||||||||||
Earnings reinvested | 24,036 | 23,687 | ||||||||||||||
Accumulated other comprehensive income (loss)(note 9) | (1,620 | ) | (1,828) | |||||||||||||
Common shares at stated value(e) (note 8) | 1,547 | 1,566 | ||||||||||||||
Earnings reinvested(note 9) | 25,224 | 25,352 | ||||||||||||||
Accumulated other comprehensive income (loss)(note 10) | (1,750 | ) | (1,897 | ) | ||||||||||||
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Total shareholders’ equity | 23,982 | 23,425 | 25,021 | 25,021 | ||||||||||||
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Total liabilities and shareholders’ equity | 42,094 | 43,170 | 41,370 | 41,654 | ||||||||||||
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| (a) | Accounts |
| (b) |
| Notes and loans payable included amounts to related parties of $75 million |
| Long-term debt included amounts to related parties of |
| Other long-term obligations included amounts to related parties of |
| Number of common shares authorized and outstanding were 1,100 million and |
The information in the notes to consolidated financial statements is an integral part of these statements.
IMPERIAL OIL LIMITED
Consolidated statement of cash flows (U.S. GAAP, unaudited)
| Nine Months | ||||||||||||||||||||||||||||||||
| Inflow (outflow) | Third Quarter | to September 30 | Third Quarter | Nine Months to September 30 | ||||||||||||||||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
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Operating activities | ||||||||||||||||||||||||||||||||
Net income (loss) | 1,003 | 479 | 721 | 1,020 | 371 | 1,003 | 627 | 721 | ||||||||||||||||||||||||
Adjustments for non-cash items: | ||||||||||||||||||||||||||||||||
Depreciation and depletion | 398 | 400 | 1,229 | 1,052 | 391 | 398 | 1,135 | 1,229 | ||||||||||||||||||||||||
(Gain) loss on asset sales(note 3) | (909 | ) | (29 | ) | (952 | ) | (80 | ) | (6 | ) | (909 | ) | (219 | ) | (952 | ) | ||||||||||||||||
Deferred income taxes and other | 215 | 86 | 35 | 358 | 131 | 215 | 294 | 35 | ||||||||||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||||||||||||||
Accounts receivable | 275 | 403 | (121 | ) | (163 | ) | (297 | ) | 275 | 127 | (121 | ) | ||||||||||||||||||||
Inventories, materials, supplies and prepaid expenses | (7 | ) | (65 | ) | 112 | (228 | ) | 104 | (7 | ) | (13 | ) | 112 | |||||||||||||||||||
Income taxes payable | (13 | ) | 58 | - | 390 | 19 | (13 | ) | (429 | ) | - | |||||||||||||||||||||
Accounts payable and accrued liabilities | (241 | ) | (271 | ) | (59 | ) | (634 | ) | 81 | (241 | ) | (159 | ) | (59 | ) | |||||||||||||||||
All other items - net(a) | 51 | 43 | 299 | 47 | 43 | 51 | 320 | 299 | ||||||||||||||||||||||||
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Cash flows from (used in) operating activities | 772 | 1,104 | 1,264 | 1,762 | 837 | 772 | 1,683 | 1,264 | ||||||||||||||||||||||||
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Investing activities | ||||||||||||||||||||||||||||||||
Additions to property, plant and equipment | (189 | ) | (647 | ) | (893 | ) | (2,431 | ) | (241 | ) | (189 | ) | (683 | ) | (893 | ) | ||||||||||||||||
Proceeds from asset sales(note 3) | 1,194 | 28 | 1,244 | 118 | 8 | 1,194 | 230 | 1,244 | ||||||||||||||||||||||||
Additional investments | - | - | (1 | ) | (32 | ) | (1 | ) | - | (1 | ) | (1 | ) | |||||||||||||||||||
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Cash flows from (used in) investing activities | 1,005 | (619 | ) | 350 | (2,345 | ) | (234 | ) | 1,005 | (454 | ) | 350 | ||||||||||||||||||||
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Financing activities | ||||||||||||||||||||||||||||||||
Short-term debt - net | (1,591 | ) | (30 | ) | (1,679 | ) | (29 | ) | - | (1,591 | ) | - | (1,679 | ) | ||||||||||||||||||
Long-term debt issued(note 6) | - | - | 495 | 1,106 | ||||||||||||||||||||||||||||
Reduction in capitalized lease obligations | (6 | ) | (7 | ) | (21 | ) | (13 | ) | ||||||||||||||||||||||||
Long-term debt - additions(note 6) | - | - | - | 495 | ||||||||||||||||||||||||||||
Reduction in capitalized lease obligations(note 6) | (7 | ) | (6 | ) | (20 | ) | (21 | ) | ||||||||||||||||||||||||
Dividends paid | (127 | ) | (110 | ) | (364 | ) | (330 | ) | (136 | ) | (127 | ) | (390 | ) | (364 | ) | ||||||||||||||||
Common shares purchased(note 8) | (250 | ) | - | (377 | ) | - | ||||||||||||||||||||||||||
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Cash flows from (used in) financing activities | (1,724 | ) | (147 | ) | (1,569 | ) | 734 | (393 | ) | (1,724 | ) | (787 | ) | (1,569 | ) | |||||||||||||||||
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Increase (decrease) in cash | 53 | 338 | 45 | 151 | 210 | 53 | 442 | 45 | ||||||||||||||||||||||||
Cash at beginning of period | 195 | 28 | 203 | 215 | 623 | 195 | 391 | 203 | ||||||||||||||||||||||||
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Cash at end of period(b) | 248 | 366 | 248 | 366 | 833 | 248 | 833 | 248 | ||||||||||||||||||||||||
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(a) Included contribution to registered pension plans. | (44 | ) | (46 | ) | (120 | ) | (178 | ) | (78 | ) | (44 | ) | (176 | ) | (120 | ) | ||||||||||||||||
| (b) | Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all highly liquid securities with |
NON-CASH TRANSACTIONS
In 2015, a capital lease of approximately $480 million was not included in “Additions to property, plant and equipment” or “Long-term debt issued” lines
on the consolidated statement of cash flows.
The information in the notes to consolidated financial statements is an integral part of these statements.
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 Generally Accepted Accounting Principles of the United States of America (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 20152016 annual report on Form10-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. Prior data has been reclassified in certain cases to conform to the current presentation basis.
The company’s exploration and production activities are accounted for under the “successful efforts” method.
The results for the nine months ended September 30, 2016,2017, are not necessarily indicative of the operations to be expected for the full year.
All amounts are in Canadian dollars unless otherwise indicated.
IMPERIAL OIL LIMITED
2. Business segments
| Third Quarter | Upstream | Downstream | Chemical | Upstream | Downstream | Chemical | ||||||||||||||||||||||||||||||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||
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Revenues and other income | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues(a) | 1,316 | 1,467 | 4,971 | 5,344 | 281 | 300 | 1,668 | 1,316 | 5,204 | 4,971 | 262 | 281 | ||||||||||||||||||||||||||||||||||||
Intersegment sales | 709 | 610 | 253 | 239 | 58 | 60 | 587 | 709 | 241 | 253 | 62 | 58 | ||||||||||||||||||||||||||||||||||||
Investment and other income | 1 | 4 | 870 | 40 | 1 | - | ||||||||||||||||||||||||||||||||||||||||||
Investment and other income(note 3) | 7 | 1 | 15 | 870 | - | 1 | ||||||||||||||||||||||||||||||||||||||||||
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| 2,262 | 2,026 | 5,460 | 6,094 | 324 | 340 | |||||||||||||||||||||||||||||||||||||||||||
| 2,026 | 2,081 | 6,094 | 5,623 | 340 | 360 |
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Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||
Exploration | 16 | 19 | - | - | - | - | 7 | 16 | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Purchases of crude oil and products | 861 | 879 | 3,827 | 3,906 | 188 | 176 | 947 | 861 | 4,014 | 3,827 | 179 | 188 | ||||||||||||||||||||||||||||||||||||
Production and manufacturing | 887 | 923 | 323 | 377 | 51 | 51 | 893 | 887 | 394 | 323 | 51 | 51 | ||||||||||||||||||||||||||||||||||||
Selling and general | (1 | ) | 1 | 238 | 256 | 22 | 23 | 5 | (1 | ) | 167 | 238 | 19 | 22 | ||||||||||||||||||||||||||||||||||
Federal excise tax | - | - | 434 | 416 | - | - | - | - | 438 | 434 | - | - | ||||||||||||||||||||||||||||||||||||
Depreciation and depletion | 346 | 333 | 46 | 61 | 2 | 3 | 330 | 346 | 53 | 46 | 3 | 2 | ||||||||||||||||||||||||||||||||||||
Financing costs(note 5) | (2 | ) | 2 | - | - | - | - | 1 | (2 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||
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Total expenses | 2,107 | 2,157 | 4,868 | 5,016 | 263 | 253 | 2,183 | 2,107 | 5,066 | 4,868 | 252 | 263 | ||||||||||||||||||||||||||||||||||||
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Income (loss) before income taxes | (81 | ) | (76 | ) | 1,226 | 607 | 77 | 107 | 79 | (81 | ) | 394 | 1,226 | 72 | 77 | |||||||||||||||||||||||||||||||||
Income taxes | (55 | ) | (24 | ) | 224 | 153 | 21 | 29 | 17 | (55 | ) | 102 | 224 | 20 | 21 | |||||||||||||||||||||||||||||||||
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Net income (loss) | (26 | ) | (52 | ) | 1,002 | 454 | 56 | 78 | 62 | (26 | ) | 292 | 1,002 | 52 | 56 | |||||||||||||||||||||||||||||||||
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Cash flows from (used in) operating activities | 432 | 696 | 264 | 313 | 73 | 109 | 479 | 432 | 268 | 264 | 99 | 73 | ||||||||||||||||||||||||||||||||||||
Capital and exploration expenditures(b) | 149 | 1,050 | 38 | 55 | 7 | 17 | ||||||||||||||||||||||||||||||||||||||||||
Capital and exploration expenditures(b) | 92 | 149 | 55 | 38 | 5 | 7 | ||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
| Third Quarter | Corporate and Other | Eliminations | Consolidated | Corporate and Other | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Revenues and other income | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues(a) | - | - | - | - | 6,568 | 7,111 | - | - | - | - | 7,134 | 6,568 | ||||||||||||||||||||||||||||||||||||
Intersegment sales | - | - | (1,020 | ) | (909 | ) | - | - | - | - | (890 | ) | (1,020 | ) | - | - | ||||||||||||||||||||||||||||||||
Investment and other income | 2 | - | - | - | 874 | 44 | ||||||||||||||||||||||||||||||||||||||||||
Investment and other income(note 3) | 2 | 2 | - | - | 24 | 874 | ||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
| 2 | 2 | (890 | ) | (1,020 | ) | 7,158 | 7,442 | |||||||||||||||||||||||||||||||||||||||||
| 2 | - | (1,020 | ) | (909 | ) | 7,442 | 7,155 |
| ||||||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||
Exploration | - | - | - | - | 16 | 19 | - | - | - | - | 7 | 16 | ||||||||||||||||||||||||||||||||||||
Purchases of crude oil and products | - | - | (1,019 | ) | (908 | ) | 3,857 | 4,053 | - | - | (889 | ) | (1,019 | ) | 4,251 | 3,857 | ||||||||||||||||||||||||||||||||
Production and manufacturing | - | - | - | - | 1,261 | 1,351 | - | - | - | - | 1,338 | 1,261 | ||||||||||||||||||||||||||||||||||||
Selling and general | 17 | (12 | ) | (1 | ) | (1 | ) | 275 | 267 | 29 | 17 | (1 | ) | (1 | ) | 219 | 275 | |||||||||||||||||||||||||||||||
Federal excise tax | - | - | - | - | 434 | 416 | - | - | - | - | 438 | 434 | ||||||||||||||||||||||||||||||||||||
Depreciation and depletion | 4 | 3 | - | - | 398 | 400 | 5 | 4 | - | - | 391 | 398 | ||||||||||||||||||||||||||||||||||||
Financing costs(note 5) | 21 | 10 | - | - | 19 | 12 | 17 | 21 | - | - | 18 | 19 | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total expenses | 42 | 1 | (1,020 | ) | (909 | ) | 6,260 | 6,518 | 51 | 42 | (890 | ) | (1,020 | ) | 6,662 | 6,260 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes | (40 | ) | (1 | ) | - | - | 1,182 | 637 | (49 | ) | (40 | ) | - | - | 496 | 1,182 | ||||||||||||||||||||||||||||||||
Income taxes | (11 | ) | - | - | - | 179 | 158 | (14 | ) | (11 | ) | - | - | 125 | 179 | |||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | (29 | ) | (1 | ) | - | - | 1,003 | 479 | (35 | ) | (29 | ) | - | - | 371 | 1,003 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Cash flows from (used in) operating activities | 3 | (14 | ) | - | - | 772 | 1,104 | (9 | ) | 3 | - | - | 837 | 772 | ||||||||||||||||||||||||||||||||||
Capital and exploration expenditures(b) | 11 | 20 | - | - | 205 | 1,142 | 7 | 11 | - | - | 159 | 205 | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
| (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 capital leases, additional investments and acquisitions. |
IMPERIAL OIL LIMITED
| Nine Months to September 30 | Upstream | Downstream | Chemical | Upstream | Downstream | Chemical | ||||||||||||||||||||||||||||||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Revenues and other income | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues(a) | 3,699 | 4,462 | 13,470 | 15,191 | 798 | 900 | 5,166 | 3,699 | 15,087 | 13,470 | 824 | 798 | ||||||||||||||||||||||||||||||||||||
Intersegment sales | 1,516 | 1,926 | 689 | 763 | 156 | 182 | 1,494 | 1,516 | 792 | 689 | 191 | 156 | ||||||||||||||||||||||||||||||||||||
Investment and other income | 22 | 22 | 919 | 83 | 1 | - | ||||||||||||||||||||||||||||||||||||||||||
Investment and other income(note 3) | 17 | 22 | 248 | 919 | (1 | ) | 1 | |||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
| 6,677 | 5,237 | 16,127 | 15,078 | 1,014 | 955 | |||||||||||||||||||||||||||||||||||||||||||
| 5,237 | 6,410 | 15,078 | 16,037 | 955 | 1,082 |
| ||||||||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||
Exploration | 75 | 52 | - | - | - | - | 29 | 75 | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Purchases of crude oil and products | 2,584 | 2,787 | 10,139 | 11,172 | 518 | 563 | 3,089 | 2,584 | 12,037 | 10,139 | 573 | 518 | ||||||||||||||||||||||||||||||||||||
Production and manufacturing | 2,634 | 2,826 | 1,059 | 1,125 | 149 | 154 | 2,917 | 2,634 | 1,169 | 1,059 | 152 | 149 | ||||||||||||||||||||||||||||||||||||
Selling and general | (3 | ) | - | 729 | 720 | 63 | 65 | 1 | (3 | ) | 540 | 729 | 60 | 63 | ||||||||||||||||||||||||||||||||||
Federal excise tax | - | - | 1,237 | 1,180 | - | - | - | - | 1,253 | 1,237 | - | - | ||||||||||||||||||||||||||||||||||||
Depreciation and depletion | 1,053 | 865 | 158 | 169 | 6 | 8 | 964 | 1,053 | 148 | 158 | 9 | 6 | ||||||||||||||||||||||||||||||||||||
Financing costs(note 5) | (6 | ) | 5 | - | - | - | - | 5 | (6 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total expenses | 6,337 | 6,535 | 13,322 | 14,366 | 736 | 790 | 7,005 | 6,337 | 15,147 | 13,322 | 794 | 736 | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes | (1,100 | ) | (125 | ) | 1,756 | 1,671 | 219 | 292 | (328 | ) | (1,100 | ) | 980 | 1,756 | 220 | 219 | ||||||||||||||||||||||||||||||||
Income taxes | (336 | ) | 290 | 363 | 437 | 59 | 79 | (103 | ) | (336 | ) | 230 | 363 | 59 | 59 | |||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | (764 | ) | (415 | ) | 1,393 | 1,234 | 160 | 213 | (225 | ) | (764 | ) | 750 | 1,393 | 161 | 160 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Cash flows from (used in) operating activities | 32 | 181 | 1,028 | 1,368 | 205 | 269 | 904 | 32 | 626 | 1,028 | 176 | 205 | ||||||||||||||||||||||||||||||||||||
Capital and exploration expenditures(b) | 745 | 2,644 | 145 | 276 | 21 | 33 | 286 | 745 | 128 | 145 | 12 | 21 | ||||||||||||||||||||||||||||||||||||
Total assets as at September 30 | 36,975 | 36,817 | 4,403 | 5,645 | 379 | 386 | 35,387 | 36,975 | 4,671 | 4,403 | 365 | 379 | ||||||||||||||||||||||||||||||||||||
| Nine Months to September 30 | Corporate and Other | Eliminations | Consolidated | Corporate and Other | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Revenues and other income | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues(a) | - | - | - | - | 17,967 | 20,553 | - | - | - | - | 21,077 | 17,967 | ||||||||||||||||||||||||||||||||||||
Intersegment sales | - | - | (2,361 | ) | (2,871 | ) | - | - | - | - | (2,477 | ) | (2,361 | ) | - | - | ||||||||||||||||||||||||||||||||
Investment and other income | 3 | 1 | - | - | 945 | 106 | ||||||||||||||||||||||||||||||||||||||||||
Investment and other income(note 3) | 6 | 3 | - | - | 270 | 945 | ||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
| 6 | 3 | (2,477 | ) | (2,361 | ) | 21,347 | 18,912 | |||||||||||||||||||||||||||||||||||||||||
| 3 | 1 | (2,361 | ) | (2,871 | ) | 18,912 | 20,659 |
| ||||||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||
Exploration | - | - | - | - | 75 | 52 | - | - | - | - | 29 | 75 | ||||||||||||||||||||||||||||||||||||
Purchases of crude oil and products | - | - | (2,357 | ) | (2,869 | ) | 10,884 | 11,653 | - | - | (2,473 | ) | (2,357 | ) | 13,226 | 10,884 | ||||||||||||||||||||||||||||||||
Production and manufacturing | - | - | - | - | 3,842 | 4,105 | - | - | - | - | 4,238 | 3,842 | ||||||||||||||||||||||||||||||||||||
Selling and general | 27 | 20 | (4 | ) | (2 | ) | 812 | 803 | 29 | 27 | (4 | ) | (4 | ) | 626 | 812 | ||||||||||||||||||||||||||||||||
Federal excise tax | - | - | - | - | 1,237 | 1,180 | - | - | - | - | 1,253 | 1,237 | ||||||||||||||||||||||||||||||||||||
Depreciation and depletion | 12 | 10 | - | - | 1,229 | 1,052 | 14 | 12 | - | - | 1,135 | 1,229 | ||||||||||||||||||||||||||||||||||||
Financing costs(note 5) | 58 | 15 | - | - | 52 | 20 | 44 | 58 | - | - | 49 | 52 | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total expenses | 97 | 45 | (2,361 | ) | (2,871 | ) | 18,131 | 18,865 | 87 | 97 | (2,477 | ) | (2,361 | ) | 20,556 | 18,131 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes | (94 | ) | (44 | ) | - | - | 781 | 1,794 | (81 | ) | (94 | ) | - | - | 791 | 781 | ||||||||||||||||||||||||||||||||
Income taxes | (26 | ) | (32 | ) | - | - | 60 | 774 | (22 | ) | (26 | ) | - | - | 164 | 60 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | (68 | ) | (12 | ) | - | - | 721 | 1,020 | (59 | ) | (68 | ) | - | - | 627 | 721 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Cash flows from (used in) operating activities | (1 | ) | (56 | ) | - | - | 1,264 | 1,762 | (23 | ) | (1 | ) | - | - | 1,683 | 1,264 | ||||||||||||||||||||||||||||||||
Capital and exploration expenditures(b) | 37 | 58 | - | - | 948 | 3,011 | 29 | 37 | - | - | 455 | 948 | ||||||||||||||||||||||||||||||||||||
Total assets as at September 30 | 674 | 777 | (337 | ) | (173 | ) | 42,094 | 43,452 | 1,283 | 674 | (336 | ) | (337 | ) | 41,370 | 42,094 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
| (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 capital leases, additional investments and acquisitions. |
IMPERIAL OIL LIMITED
3. Investment and other income
| 3. | Investment and other income |
Investment and other income included gains and losses on asset sales as follows:
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Proceeds from asset sales | 1,194 | 28 | 1,244 | 118 | ||||||||||||
Book value of assets sold(a) | 285 | (1 | ) | 292 | 38 | |||||||||||
Gain (loss) on asset sales, before tax(b) | 909 | 29 | 952 | 80 | ||||||||||||
Gain (loss) on asset sales, after tax(b) | 774 | 26 | 808 | 65 | ||||||||||||
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Proceeds from asset sales | 8 | 1,194 | 230 | 1,244 | ||||||||||||
Book value of asset sales | 2 | 285 | 12 | 292 | ||||||||||||
Gain (loss) on asset sales, before tax(a) (b) | 6 | 909 | 219 | 952 | ||||||||||||
Gain (loss) on asset sales, after tax(a) (b) | 5 | 774 | 191 | 808 | ||||||||||||
| (a) |
| (b) | Third quarter and nine months ended September 30, 2016, included gains of $0.8 billion ($0.7 billion, after tax) from the sale of company-owned Esso retail sites in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia and Newfoundland. |
Subsequent to the quarter, on November 1, 2016, the company completed the sale of its general aviation business and converted to an unbranded wholesaler operating model for approximately $177 million, having an approximate net book value of $18 million.
4. Employee retirement benefits
| 4. | Employee retirement benefits |
The components of net benefit cost were as follows:
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Pension benefits: | ||||||||||||||||
Current service cost | 50 | 56 | 152 | 158 | ||||||||||||
Interest cost | 82 | 77 | 240 | 231 | ||||||||||||
Expected return on plan assets | (101 | ) | (101 | ) | (300 | ) | (294 | ) | ||||||||
Amortization of prior service cost | 2 | 4 | 7 | 12 | ||||||||||||
Amortization of actuarial loss | 39 | 50 | 121 | 149 | ||||||||||||
Net benefit cost | 72 | 86 | 220 | 256 | ||||||||||||
Other post-retirement benefits: | ||||||||||||||||
Current service cost | 4 | 4 | 12 | 12 | ||||||||||||
Interest cost | 7 | 7 | 20 | 19 | ||||||||||||
Amortization of actuarial loss | 3 | 3 | 10 | 9 | ||||||||||||
Net benefit cost | 14 | 14 | 42 | 40 | ||||||||||||
5. Financing costs and additional notes and loans payable information
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Pension benefits: | ||||||||||||||||
Current service cost | 54 | 50 | 163 | 152 | ||||||||||||
Interest cost | 77 | 82 | 235 | 240 | ||||||||||||
Expected return on plan assets | (104 | ) | (101 | ) | (306 | ) | (300 | ) | ||||||||
Amortization of prior service cost | 2 | 2 | 7 | 7 | ||||||||||||
Amortization of actuarial loss (gain) | 43 | 39 | 132 | 121 | ||||||||||||
Net periodic benefit cost | 72 | 72 | 231 | 220 | ||||||||||||
Other post-retirement benefits: | ||||||||||||||||
Current service cost | 4 | 4 | 12 | 12 | ||||||||||||
Interest cost | 6 | 7 | 18 | 20 | ||||||||||||
Amortization of actuarial loss (gain) | 2 | 3 | 6 | 10 | ||||||||||||
Net periodic benefit cost | 12 | 14 | 36 | 42 | ||||||||||||
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Debt-related interest | 32 | 30 | 95 | 73 | ||||||||||||
Capitalized interest | (11 | ) | (20 | ) | (37 | ) | (58 | ) | ||||||||
Net interest expense | 21 | 10 | 58 | 15 | ||||||||||||
Other interest | (2 | ) | 2 | (6 | ) | 5 | ||||||||||
Total financing costs | 19 | 12 | 52 | 20 | ||||||||||||
| 5. | Financing costs and additional notes and loans payable information |
In March 2016, the company extended the maturity date of its existing $500 million 364-day short-term unsecured committed bank credit facility to March 2017. The company has not drawn on the facility.
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Debt-related interest | 24 | 32 | 73 | 95 | ||||||||||||
Capitalized interest | (7) | (11) | (29) | (37) | ||||||||||||
Net interest expense | 17 | 21 | 44 | 58 | ||||||||||||
Other interest | 1 | (2) | 5 | (6) | ||||||||||||
Total financing costs | 18 | 19 | 49 | 52 | ||||||||||||
IMPERIAL OIL LIMITED
| 6. | Long-term debt |
6. Long-term debt
| As at Sept 30 | As at Dec 31 | |||||||||||||||||
| millions of Canadian dollars | As at Sept 30 2016 | As at Dec 31 2015 | millions of Canadian dollars | 2017 | 2016 | |||||||||||||
|
| |||||||||||||||||
Long-term debt | 6,447 | 5,952 | Long-term debt | 4,447 | 4,447 | |||||||||||||
Capital leases | 592 | 612 | Capital leases | 566 | 585 | |||||||||||||
|
| |||||||||||||||||
Total long-term debt | 7,039 | 6,564 | Total long-term debt | 5,013 | 5,032 | |||||||||||||
|
| |||||||||||||||||
In August 2016, the company extended the maturity date of its existing $500 million stand-by long-term bank credit facility to October 31, 2017.
| 7. | Other long-term obligations |
Subsequent to September 30, 2016, in October 2016, the company reduced the amount of its existing $500 million stand-by long-term bank credit facility to $250 million and extended the maturity date to November 30, 2018.
In the nine months ended September 30, 2016, the company increased its long-term debt by $495 million by drawing on an existing facility with an affiliated company of Exxon Mobil Corporation. The increased debt was used to supplement normal operations and capital projects.
In July 2015, the company entered into a long-term capital lease related to the Woodland pipeline for approximately $480 million. A commitment related to this obligation was previously reported as a firm capital commitment in the company’s 2014 Form 10-K.
7. Other long-term obligations
| As at Sept 30 | As at Dec 31 | |||||||||||||||||
| millions of Canadian dollars | As at Sept 30 2016 | As at Dec 31 2015 | millions of Canadian dollars | 2017 | 2016 | |||||||||||||
|
| |||||||||||||||||
Employee retirement benefits(a) | 1,255 | 1,470 | Employee retirement benefits(a) | 1,410 | 1,645 | |||||||||||||
Asset retirement obligations and other environmental liabilities(b) | 1,682 | 1,628 | Asset retirement obligations and other environmental liabilities(b) | 1,577 | 1,544 | |||||||||||||
Share-based incentive compensation liabilities | 154 | 134 | Share-based incentive compensation liabilities | 138 | 139 | |||||||||||||
Other obligations | 353 | 365 | Other obligations | 573 | 328 | |||||||||||||
|
| |||||||||||||||||
Total other long-term obligations | 3,444 | 3,597 | Total other long-term obligations | 3,698 | 3,656 | |||||||||||||
|
|
| ||||||||||||||||
| (a) | Total recorded employee retirement benefits obligations also included $58 million in current liabilities |
| (b) | Total asset retirement obligations and other environmental liabilities also included |
| 8. | Common shares |
| As of Sept 30 | As of Dec 31 | |||||||||
| thousands of shares | 2017 | 2016 | ||||||||
| ||||||||||
Authorized | 1,100,000 | 1,100,000 | ||||||||
Common shares outstanding | 837,581 | 847,599 | ||||||||
| ||||||||||
From 1995 through September 2017, the company had a series of12-month normal course issuer bid share purchase programs. Cumulatively, 916,563 thousand shares were purchased under these programs. Exxon Mobil Corporation’s participation in these programs, including concurrent programs outside the normal course issuer bids, maintained its ownership interest in Imperial at approximately 69.6 percent.
The current12-month normal course issuer bid program was announced on June 22, 2017, under which Imperial plans to continue its share purchase program. The program enables the company to purchase up to a maximum of 25,395,927 common shares (3 percent of the total shares on June 13, 2017), 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 results of these activities are as shown below:
| year | Purchased shares thousands | Millions of dollars | ||||||
| ||||||||
1995 - 2015 | 906,544 | 15,708 | ||||||
2016 - Third quarter | - | - | ||||||
- Full year | 1 | - | ||||||
2017 - Third quarter | 6,732 | 250 | ||||||
-Year-to-date | 10,018 | 377 | ||||||
| ||||||||
Cumulative purchase to date | 916,563 | 16,085 | ||||||
| ||||||||
IMPERIAL OIL LIMITED
The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.
The following table provides the calculation of net income per common share:
| Nine Months | ||||||||||||||||
| Third Quarter | to September 30 | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income (loss) per common share - basic | ||||||||||||||||
Net income (loss)(millions of Canadian dollars) | 371 | 1,003 | 627 | 721 | ||||||||||||
Weighted average number of common shares outstanding(millions of shares) | 841.8 | 847.6 | 845.5 | 847.6 | ||||||||||||
Net income (loss) per common share(dollars) | 0.44 | 1.18 | 0.74 | 0.85 | ||||||||||||
Net income (loss) per common share - diluted | ||||||||||||||||
Net income (loss)(millions of Canadian dollars) | 371 | 1,003 | 627 | 721 | ||||||||||||
Weighted average number of common shares outstanding(millions of shares) | 841.8 | 847.6 | 845.5 | 847.6 | ||||||||||||
Effect of employee share-based awards(millions of shares) | 3.1 | 3.2 | 2.9 | 3.0 | ||||||||||||
Weighted average number of common shares outstanding, assuming dilution(millions of shares) | 844.9 | 850.8 | 848.4 | 850.6 | ||||||||||||
Net income (loss) per common share(dollars) | 0.44 | 1.18 | 0.74 | 0.85 | ||||||||||||
| 9. | Earnings reinvested |
| Nine Months | ||||||||||||||||
| Third Quarter | to September 30 | |||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Earnings reinvested at beginning of period | 25,224 | 23,160 | 25,352 | 23,687 | ||||||||||||
Net income (loss) for the period | 371 | 1,003 | 627 | 721 | ||||||||||||
Share purchases in excess of stated value | (237 | ) | - | (358 | ) | - | ||||||||||
Dividends declared | (134 | ) | (127 | ) | (397 | ) | (373 | ) | ||||||||
Earnings reinvested at end of period | 25,224 | 24,036 | 25,224 | 24,036 | ||||||||||||
IMPERIAL OIL LIMITED
8. Net income (loss) per-share
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
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Net income (loss) per common share - basic | ||||||||||||||||
Net income (loss)(millions of Canadian dollars) | 1,003 | 479 | 721 | 1,020 | ||||||||||||
Weighted average number of common shares outstanding(millions of shares) | 847.6 | 847.6 | 847.6 | 847.6 | ||||||||||||
Net income (loss) per common share(dollars) | 1.18 | 0.56 | 0.85 | 1.20 | ||||||||||||
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Net income (loss) per common share - diluted | ||||||||||||||||
Net income (loss)(millions of Canadian dollars) | 1,003 | 479 | 721 | 1,020 | ||||||||||||
Weighted average number of common shares outstanding(millions of shares) | 847.6 | 847.6 | 847.6 | 847.6 | ||||||||||||
Effect of share-based awards(millions of shares) | 3.2 | 3.3 | 3.0 | 3.1 | ||||||||||||
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Weighted average number of common shares outstanding assuming dilution (millions of shares) | 850.8 | 850.9 | 850.6 | 850.7 | ||||||||||||
Net income (loss) per common share(dollars) | 1.18 | 0.56 | 0.85 | 1.20 | ||||||||||||
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9. Other comprehensive income (loss) information
| 10. | Other comprehensive income (loss) information |
Changes in accumulated other comprehensive income (loss):
| millions of Canadian dollars | 2016 | 2015 | 2017 | 2016 | ||||||||||||
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Balance at January 1 | (1,828 | ) | (2,059) | (1,897 | ) | (1,828 | ) | |||||||||
Post-retirement benefits liability adjustment: | ||||||||||||||||
Current period change excluding amounts reclassified from accumulated other | 100 | (176) | 41 | 100 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income | 108 | 126 | 106 | 108 | ||||||||||||
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Balance at September 30 | (1,620 | ) | (2,109) | (1,750 | ) | (1,620 | ) | |||||||||
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Amounts reclassified out of accumulated other comprehensive income (loss) -before-tax income (expense):
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | ||||||||||||
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Amortization of post-retirement benefits liability adjustment included in net periodic benefit cost (a) | (44 | ) | (57 | ) | (138 | ) | (170) | |||||||||
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| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Amortization of post-retirement benefits liability adjustment | (47 | ) | (44 | ) | (145 | ) | (138 | ) | ||||||||
(a) This accumulated other comprehensive income component is included in the computation of net periodic benefit cost (note 4). |
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Income tax expense (credit) for components of other comprehensive income (loss):
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2016 | 2015 | 2016 | 2015 | ||||||||||||
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Post-retirement benefits liability adjustments: | ||||||||||||||||
Post-retirement benefits liability adjustment (excluding amortization) | - | - | 37 | (61) | ||||||||||||
Amortization of post-retirement benefits liability adjustment included in net periodic benefit cost | 10 | 15 | 30 | 44 | ||||||||||||
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Total | 10 | 15 | 67 | (17) | ||||||||||||
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IMPERIAL OIL LIMITED
| Third Quarter | Nine Months to September 30 | |||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Post-retirement benefits liability adjustments: | ||||||||||||||||
Post-retirement benefits liability adjustment (excluding amortization) | - | - | 16 | 37 | ||||||||||||
Amortization of post-retirement benefits liability adjustment included in | 13 | 10 | 39 | 30 | ||||||||||||
Total | 13 | 10 | 55 | 67 | ||||||||||||
10. Assets held for sale
On March 8, 2016, the company announced that it had entered into agreements which will result in the sale and transition of its remaining company-owned Esso retail stations to a branded wholesaler operating model for approximately $2.8 billion. Under the branded wholesaler model, Imperial supplies fuel to independent third parties who own and/or operate the sites in alignment with Esso brand standards. The company’s gain on sale, which is subject to final closing adjustments, is anticipated to be in the range of $2.0 billion to $2.1 billion ($1.7 billion to $1.8 billion after tax).
During the third quarter, the company completed the sale of a number of sites in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia and Newfoundland for approximately $1.2 billion (note 3). Subsequent to the quarter, the company completed the sale of additional sites in British Columbia, Alberta, Ontario and Quebec for approximately $1.6 billion, having an approximate net book value of $0.4 billion. The remaining transactions are anticipated to close by year-end 2016.
The major classes of assets classified as held for sale within the Downstream segment at September 30, 2016, were as follows:
| 11. | ||||
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| Recently issued accounting standards | ||||
11. Accounting for suspended exploratory well costs
For the category of exploratory well costs at year-end 2015 that were capitalized for a period greater than 12 months, a total of $24 million was expensed in the first nine months of 2016.
IMPERIAL OIL LIMITED
12. Recently issued accounting standards
In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard,Revenue from Contracts with Customers.Customers. The standard establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements and expands disclosure requirements. The standard willis required to be adopted beginning January 1, 2018. Imperial continuesThe company expects to evaluateadopt the standard and itsusing the modified retrospective method, under which prior years’ results are not restated, but supplemental information on the impact of the new standard will be included in the 2018 results. The impact from the standard is not expected to have a material effect on the company’s financial statements.
In February 2016, the FASB issued a new standard, Leases. The standard requires all leases with an initial term greater than one year be recorded on the balance sheet as ana lease asset and lease liability. The standard is required to be adopted beginning January 1, 2019. Imperial is evaluating the standard and its effect on the company’s financial statements.statements and plans to adopt it in 2019.
Effective September 30, 2016, Imperial early adoptedAccounting Standards Update (ASU) no. 2015-17 Income Taxes (Topic 740):Balance sheet classification of deferred taxes, on a prospective basis. This update eliminates the requirement to classify deferred tax assets and liabilities as current and non-current, and instead requires all deferred tax assets and liabilities to be classified as non-current.
The balance sheet classification of deferred income tax asset / (liability) is shown below.
| millions of Canadian dollars | As at Sept 30 2016 | As at Dec 31 2015 | ||||||
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Deferred income tax asset | - | 272 | ||||||
Other assets, including intangibles, net | 35 | - | ||||||
Accounts payable and accrued liabilities | - | (41) | ||||||
Deferred income tax liabilities | (4,008) | (4,191) | ||||||
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Net deferred tax liabilities | (3,973) | (3,960) | ||||||
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IMPERIAL OIL LIMITED
In March 2017, the FASB issued an Accounting Standards Update2017-07, Compensation – Retirement Benefits (Topic 715):Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The update requires that the service cost component of net benefit costs be reported in the same line in the income statement as other compensation costs and that the other components of net benefit costs be presented separately from the service cost component. Additionally, only the service cost component of net benefit costs will be eligible for capitalization. Imperial will adopt the update beginning January 1, 2018. As a result of Imperial’s adoption of the update, the company expects to add a new lineNon-service pension and other postretirement benefit expense to its consolidated statement of income. This line would reflect the other components of net benefit costs as described in the Accounting Standards Update and would include amounts that were previously included in Production and manufacturing expenses, and Selling and general expenses. As of January 1, 2018, these costs will no longer be considered for capitalization. The impact from this change on the company’s net income is not expected to be material. Furthermore, as part of the adoption of the update, the company expects it will include all of these costs in its Corporate and Other expenses.
IMPERIAL OIL LIMITED
| Item 2. | Management’s discussion and analysis of financial condition and results of operations |
Operating results
Third quarter 20162017 vs. third quarter 20152016
The company’s net income for the third quarter of 20162017 was $1,003$371 million or $1.18 $0.44per-share on a diluted basis, compared to the net income of $479$1,003 million or $0.56 $1.18per-share for the same period last year. Third quarter 2016 results included a $716 million ($0.84 per-share) gain from the sale of retail sites.
Upstream recorded a net lossincome in the third quarter of $26$62 million, compared to a net loss of $52$26 million in the same period of 2015.2016. Results in the third quarter of 2016 mainly reflect2017 reflected the impact of higher SyncrudeCanadian crude oil realizations of about $190 million and higher Kearl volumes of about $90 million and lower operating expenses,$50 million. These impacts were partially offset by lower realizationsSyncrude and conventional volumes of about $90$80 million, including the absence of production at Norman Wells, and higher royalties of about $50 million.
West Texas Intermediate (WTI) averaged US$44.9448.23 per barrel in the third quarter of 2016, down2017, up from US$46.5744.94 per barrel in the same quarter of 2015.2016. Western Canada Select (WCS) averaged US$31.4338.29 per barrel and US$33.3831.43 per barrel respectively for the same periods. The WTI / WCS differential widenednarrowed to 3021 percent in the third quarter of 2016,2017, from 2830 percent in the same period of 2015.2016.
The Canadian dollar averaged US$0.770.80 in the third quarter of 2016 and was essentially unchanged versus2017, an increase of US$0.03 from the same periodthird quarter of 2015.2016.
Imperial’s average Canadian dollar realizations for bitumen and synthetic crudes declined essentiallyincreased generally in line with the North American benchmarks, adjusted for changes in exchange rates and transportation costs. Bitumen realizations averaged $39.02 per barrel for the third quarter of 2017, an increase of $8.86 per barrel versus the third quarter of 2016. Synthetic crude realizations averaged $61.14 per barrel, an increase of $2.17 per barrel for the same period of 2016.
Gross production of Cold Lake bitumen averaged 163,000 barrels per day in the third quarter, up from 157,000 barrels per day in the same period last year. The higher production was mainly due to the timing of the steam cycles.
Gross production of Kearl bitumen averaged 182,000 barrels per day in the third quarter (129,000 barrels Imperial’s share) up from 159,000 barrels per day (113,000 barrels Imperial’s share) during the third quarter of 2016. Higher production was mainly the result of improved reliability.
The company’s share of gross production from Syncrude averaged 74,000 barrels per day, compared to 85,000 barrels per day in the third quarter of 2016. Repairs associated with the Syncrude Mildred Lake upgrader fire were completed in late July. Lower third quarter volumes reflect the impact of the fire on operations, when compared to the same quarter in 2016.
Downstream net income was $292 million in the third quarter, compared to $1,002 million in the same period of 2016. Earnings decreased mainly due to the absence of a $716 million gain from the sale of company-owned retail sites and higher refining turnaround activity of about $100 million. These factors were partly offset by higher refining margins of about $140 million.
Refinery throughput averaged 385,000 barrels per day, compared to 407,000 barrels per day in the third quarter of 2016. Reduced throughput reflects increased turnaround activity associated with the Nanticoke refinery in the third quarter 2017.
Petroleum product sales were 500,000 barrels per day, compared to 505,000 barrels per day in the third quarter of 2016.
IMPERIAL OIL LIMITED
Chemical net income was $52 million in the third quarter, compared to $56 million in the same quarter of 2016.
Net income effects from Corporate and Other were negative $35 million in the third quarter, compared to negative $29 million in the same period of 2016.
IMPERIAL OIL LIMITED
Nine months 2017 vs. nine months 2016
Net income in the first nine months of 2017 was $627 million, or $0.74per-share on a diluted basis versus net income of $721 million or $0.85 per-share in the first nine months of 2016.
Upstream recorded a net loss of $225 million in the first nine months of 2017, compared to a net loss of $764 million from the same period of 2016. Results reflected the impact of higher Canadian crude oil realizations of about $940 million and higher Kearl volumes of about $50 million. These impacts were partially offset by higher royalties of about $150 million, lower Syncrude and conventional volumes of about $130 million, including the absence of production at Norman Wells, higher energy costs of about $90 million, and higher operating expenses at Syncrude of about $90 million.
West Texas Intermediate averaged US$49.40 per barrel in the first nine months of 2017, up from US$41.54 per barrel in the same period of 2016. Western Canada Select averaged US$37.57 per barrel and US$27.74 per barrel respectively for the same periods. The WTI / WCS differential narrowed to 24 percent in the first nine months of 2017, from 33 percent in the same period of 2016.
During the first nine months of 2017, the Canadian dollar strengthened relative to the US dollar versus the same period of 2016. The Canadian dollar averaged US$0.77 in the first nine months of 2017, an increase of about US$0.01 from the same period of 2016.
Imperial’s average Canadian dollar realizations for bitumen and synthetic crudes increased generally in line with the North American benchmarks, adjusted for changes in the exchange rate and transportation costs. Bitumen realizations averaged $30.16$37.82 per barrel for the third quarterfirst nine months of 2016, a decrease2017, an increase of $2.45$14.05 per barrel versus the third quartersame period of 2015.2016. Synthetic crude realizations averaged $58.97$64.37 per barrel, a decreasean increase of $2.24$10.92 per barrel forfrom the same period of 2015.2016.
Gross production of Cold Lake bitumen averaged 157,000 barrels per day in the third quarter, compared to 166,000 barrels in the same period last year. The lower production was mainly due to the timing of steam cycles.
Gross production of Kearl bitumen averaged 159,000 barrels per day in the third quarter (113,000 barrels Imperial’s share) compared to 181,000 barrels per day (128,000 barrels Imperial’s share) during the third quarter of 2015. Lower production was the result of planned and unplanned maintenance activities.
The company’s share of gross production from Syncrude averaged 85,000 barrels per day, up from 59,000 barrels in the third quarter of 2015. Increased production reflects ongoing efforts to improve the reliability of operations.
Downstream net income was $1,002 million in the third quarter, compared to $454 million in the same period of 2015. Earnings increased mainly due to a gain of $716 million from the sale of retail sites, improved refinery operations of $80 million and higher marketing sales volumes of $50 million, partially offset by lower industry margins of about $300 million.
Refinery throughput averaged 407,000 barrels per day, up from 390,000 barrels in the third quarter of 2015. Increased throughput reflects lower maintenance activities than in the same period of 2015.
Petroleum product sales were 505,000 barrels per day, up from 495,000 barrels per day in the third quarter of 2015, with growth concentrated in the higher value commercial and retail channels.
Chemical net income was $56 million in the third quarter, compared to $78 million in the same quarter of 2015.
IMPERIAL OIL LIMITED
Net income effects from Corporate and Other were negative $29 million in the third quarter, compared to negative $1 million in the same period of 2015.
Nine months 2016 vs. nine months 2015
Net income in the first nine months of 2016 was $721 million, or $0.85 per-share on a diluted basis, including a gain of $719 million ($0.85 per-share) from the sale of retail sites, versus net income of $1,020 million or $1.20 per-share for the first nine months of 2015.
Upstream recorded a net loss of $764 million for the first nine months of 2016, compared to a net loss of $415 million for the same period last year. The loss in 2016 reflected lower realizations of about $970 million, the impact of the northern Alberta wildfires of about $155 million and higher depreciation expense of about $90 million. These factors were partially offset by higher volumes of about $230 million, the impact of a weaker Canadian dollar of about $130 million, the favourable impact of lower royalties of about $90 million and lower energy cost of about $60 million. Earnings in 2015 reflected the impact associated with the Alberta corporate income tax rate increase of about $327 million.
West Texas Intermediate averaged US$41.54 per barrel in the first nine months of 2016, down from US$51.03 per barrel in the same period last year. Western Canada Select averaged US$27.74 per barrel and US$37.89 per barrel respectively for the same periods. The WTI/WCS differential widened to 33 percent in the first nine months of 2016, up from 26 percent in the same period of 2015.
During the first nine months of 2016, the Canadian dollar weakened relative to the U.S. dollar versus the same period of 2015. The Canadian dollar averaged US$0.76 in the first nine months of 2016, a decrease of almost US$0.04 from the same period of 2015.
Imperial’s average Canadian dollar realizations for bitumen and synthetic crudes declined essentially in line with the North American benchmarks, adjusted for changes in the exchange rate and transportation costs. Bitumen realizations averaged $23.77 (US$18.18) for the first nine months of 2016, a decrease of $12.71 per barrel versus the same period of 2015. Synthetic crude realizations averaged $53.45 (US$40.33) per barrel, a decrease of $9.58 per barrel for the same period of 2015.
Gross production of Cold Lake bitumen averaged 162,000 barrels per day in the first nine months, up from 160,000 barrels from the same period last year. Production from the expansion project offset the impacts from cycle timing.
Gross production of Kearl bitumen averaged 169,000161,000 barrels per day in the first nine months of 20162017, compared to 162,000 barrels per day from the same period of 2016.
Gross production of Kearl bitumen averaged 179,000 barrels per day in the first nine months of 2017 (127,000 barrels Imperial’s share) up from 169,000 barrels per day (120,000 barrels Imperial’s share) compared to 136,000 barrels per day (96,000 barrels Imperial’s share) forfrom the same period of 2015. The increase was the result of start-up of the expansion project and2016. Increased 2017 production reflects improved reliability ofassociated with the initial development.mining and ore preparation operations.
During the first nine months of 2016,2017, the company’s share of gross production from Syncrude averaged 56,000 barrels per day, compared to 61,000 barrels per day consistent withfrom the same period of 2015.2016. Syncrude year to date production was impacted by the March 2017 fire at the Syncrude Mildred Lake upgrader and planned maintenance. In 2016, production was impacted by the Alberta wildfires and planned maintenance.
Downstream net income was $1,393$750 million, up from $1,234compared to $1,393 million from the same period of 2015.2016. Earnings increaseddecreased mainly due to the absence of a $719 million gain from the sale of company-owned retail sites and lower marketing margins of approximately $170 million associated with the impact of the retail divestment. These factors were partially offset by a gain of $719$151 million from the sale of retail sites, the impact of a weaker Canadian dollar of about $130 million,surplus property and higher marketing sales volumes of $70 million and lower fuels marketing operating costs of about $50 million, partially offset by lower downstreamindustry refining margins of about $780$90 million.
Refinery throughput averaged 351,000381,000 barrels per day in the first nine months of 2016, compared to 385,0002017, up from 351,000 barrels inper day from the same period of 2015.2016. Capacity utilization decreasedincreased to 8390 percent from 9283 percent in the same period of 2015,2016, reflecting the more significant scope ofreduced turnaround maintenance activity in the current year.activity.
Petroleum product sales were 481,000492,000 barrels per day in the first nine months of 2016, compared to 482,0002017, up from 481,000 barrels per day infrom the same period of 2015.2016. Sales growth continues to be driven by strong collaboration across our downstream value chain and the expansion of Imperial’s wholesale, industrial and commercial networks.
Chemical net income was $161 million, up from $160 million compared to $213 million infrom the same period of 2015.2016.
IMPERIAL OIL LIMITED
For the first nine months of 2016,2017, net income effects from Corporate and Other were negative $68$59 million, versus negative $12$68 million in 2015, primarily due to lower capitalized interest and the absence of the impact from the Alberta tax rate increase in 2015.same period of 2016.
IMPERIAL OIL LIMITED
Liquidity and capital resources
Cash flow generated from operating activities was $772$837 million in the third quarter, compared with $1,104$772 million in the corresponding period in 2015, reflecting lower earnings, excluding the gain on the sale of retail sites.2016.
Investing activities generatedused net cash of $1,005$234 million in the third quarter, compared with $1,005 million cash used ingenerated from investing activities of $619 million in the same period of 2015,2016, reflecting lower proceeds from asset sales in 2016 and the completion of major upstream growth projects.sales.
Cash used in financing activities was $1,724$393 million in the third quarter, compared with $147$1,724 million in the third quarter of 2015. Cash from operating activities and proceeds from asset sales were mainly used in2016, reflecting the third quarterabsence of 2016 to reduce outstanding short-term debt.debt repayments. Dividends paid in the third quarter of 20162017 were $127$136 million. Theper-share dividend paid in the third quarter was $0.15,$0.16, up from $0.13$0.15 in the same period of 2015.2016. In the second quarter of 2017, Imperial resumed share purchases under its share buyback program. During the third quarter, the company purchased about 6.7 million shares for approximately $250 million.
The company’s cash balance was $248$833 million at September 30, 2016,2017, versus $366$248 million at the end of the third quarter of 2015.2016.
Cash flow generated from operating activities was $1,264$1,683 million in the first nine months of 2016,2017, compared with $1,762$1,264 million in the same period of 2015,2016, reflecting lowerhigher earnings, excluding the gain on retail sites.impact of asset sales, partially offset by unfavourable working capital effects.
Investing activities generatedused net cash of $350$454 million in the first nine months of 2016,2017, compared with cash used ingenerated from investing activities of $2,345$350 million infrom the same period of 2015,2016, reflecting lower proceeds from asset sales partially offset by lower additions to property, plant and the completion of major upstream growth projects.equipment.
Cash used in financing activities was $1,569$787 million in the first nine months of 2016,2017, compared with cash provided by financing activities of $734$1,569 million infrom the same period of 2015. Cash from operating activities and proceeds from2016, reflecting the asset sales were used to reduce outstanding short-term debt.absence of debt repayments. Dividends paid in the first nine months of 20162017 were $364$390 million. Theper-share dividend paid in the first nine months of 2017 was $0.43,$0.46, up from $0.39 in$0.43 for the same period of 2015.2016.
Oil and gas reserves
As disclosed in the 2015 Form 10-K, low crude and natural gas prices can impact Imperial’s reserves as reported under the Securities and Exchange Commissions (SEC) rules. Average year-to-date crude prices have been significantly affected by the very low prices experienced during the first quarter of 2016, but have recovered considerably since that time. If the average prices seen duringDuring the first nine months of 2016 persist for the remainder of the year, under the SEC definition of proved reserves, certain quantities of oil, such as those associated with all or part of the oil sands operations at Kearl and Cold Lake will not qualify as proved reserves at year-end 2016. Quantities that could be required to be de-booked as proved reserves on an SEC basis amount to approximately 2.6 billion barrels of bitumen at Kearl and approximately 0.4 billion barrels at Cold Lake, and will be determined once the price and costs have been finalized at year-end. Among the factors that would result in these reserves being re-booked as proved reserves at some point in the future are a recovery in average price levels, a further decline in costs, and / or operating efficiencies. Under the terms of government royalty regimes, lower prices can also increase proved reserves attributable to Imperial. The company does not expect the de-booking of reported proved reserves under the SEC definitions to affect the operation of the underlying projects or to alter our outlook for future production volumes.
IMPERIAL OIL LIMITED
Impact of oil and gas reserves and prices and margins on testing for impairment
In light of continued weakness in the upstream industry environment during 2016, and as part of Imperial’s annual planning and budgeting process which is currently in progress,2017 the company will perform an assessment of its major long-lived assets, similar to the exercise undertaken in late 2015. The assessment reflects crude and natural gas price outlooks consistent with those that management uses to evaluate investment opportunities and generally consistent with the long-term price forecasts published by third-party industry and government experts. Development of future undiscounted cash flow estimates requires significant management judgement, particularly in cases where an asset’s life is expected to extend decades into the future. An asset group would be impaired if its estimated undiscounted cash flows were less than the asset’s carrying value, and impairment would be measured by the amount by which the carrying value exceeds fair value. Imperial will complete its asset recoverability assessment and analyze the conclusions of that assessment in connection with the preparation and review of the company’s year-end financial statementspurchased about 10 million shares for inclusion in its 2016 Form 10-K. Until these activities are complete, it is not practicable to reasonably estimate the existence or range of potential future impairments related to the company’s long-lived assets.$377 million, including shares purchased from Exxon Mobil Corporation.
Recently issued accounting standards
In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard,Revenue from Contracts with Customers.Customers. The standard establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements and expands disclosure requirements. The standard willis required to be adopted beginning January 1, 2018. Imperial continuesThe company expects to evaluateadopt the standard and itsusing the modified retrospective method, under which prior years’ results are not restated, but supplemental information on the impact of the new standard will be included in the 2018 results. The impact from the standard is not expected to have a material effect on the company’s financial statements.
In February 2016, the FASB issued a new standard, Leases. The standard requires all leases with an initial term greater than one year be recorded on the balance sheet as ana lease asset and lease liability. The standard is required to be adopted beginning January 1, 2019. Imperial is evaluating the standard and its effect on the company’s financial statements.statements and plans to adopt it in 2019.
Effective September 30, 2016,
IMPERIAL OIL LIMITED
In March 2017, the FASB issued an Accounting Standards Update2017-07, Compensation – Retirement Benefits (Topic 715):Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The update requires that the service cost component of net benefit costs be reported in the same line in the income statement as other compensation costs and that the other components of net benefit costs be presented separately from the service cost component. Additionally, only the service cost component of net benefit costs will be eligible for capitalization. Imperial early adoptedwill adopt the update beginning January 1, 2018. As a result of Imperial’s adoption of the update, the company expects to add a new lineNon-service pension and other postretirement benefit expense to its consolidated statement of income. This line would reflect the other components of net benefit costs as described in the Accounting Standards Update (ASU) no. 2015-17 Income Taxes (Topic 740):Balance sheet classificationand would include amounts that were previously included in Production and manufacturing expenses, and Selling and general expenses. As of deferred taxes,January 1, 2018, these costs will no longer be considered for capitalization. The impact from this change on a prospective basis. This update eliminates the requirement to classify deferred tax assets and liabilities as current and non-current, and instead requires all deferred tax assets and liabilitiescompany’s net income is not expected to be classifiedmaterial. Furthermore, as non-current.
The balance sheet classificationpart of deferred income tax asset / (liability) is shown below.the adoption of the update, the company expects it will include all of these costs in its Corporate and Other expenses.
| millions of Canadian dollars | As at Sept 30 | As at Dec 31 2015 | ||||||
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Deferred income tax asset | - | 272 | ||||||
Other assets, including intangibles, net | 35 | - | ||||||
Accounts payable and accrued liabilities | - | (41) | ||||||
Deferred income tax liabilities | (4,008) | (4,191) | ||||||
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Net deferred tax liabilities | (3,973) | (3,960) | ||||||
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Forward-looking statements
Statements in this report regarding future events or conditions are forward-looking statements. Actual future financial and operating results could differ materially due to the impact of market conditions, changes in law or governmental policy, changes in operating conditions and costs, changes in project schedules, operating performance, demand for oil and gas, commercial negotiations or other technical and economic factors.
IMPERIAL OIL LIMITED
Item 3. Quantitative and qualitative disclosures about market risk
Information about market risks for the nine months ended September 30, 2016,2017, does not differ materially from that discussed on page 22 of the company’s annual report on Form10-K for the year ended December 31, 2015 andForm 10-Q for the quarters ended March 31, 2016 and June 30, 2016.
Reference is made to Item 2. Management’s discussion and analysis of financial condition and results of operations, sections entitled Oil and gas reserves and Impact of oil and gas reserves and prices and margins on testing for impairment, for discussion on the risks associated with the current pricing environment.
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 September 30, 2016.2017. 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.
IMPERIAL OIL LIMITED
On September 19, 2016, Imperial entered a guilty plea with respect to a charge involving the discharging or causing or permitting the discharge of a contaminant, namely coker stabilizer thermocracked gas, from Imperial’s chemical plant in Sarnia, into the natural environment that caused or was likely to have caused an adverse effect contrary to section 14(1) of the Environmental Protection Act, R.S.O. 1990, c. E.19, as amended, which offence was alleged to have occurred on February 7, 2014. Imperial agreed to pay $650,000 plus a 25 percent victim fine surcharge.
Item 2. Unregistered sales of equity securities and use of proceeds
Issuer purchases of equity securities
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Total number of | Average price | Total number of | Maximum number | |||||
July 2017 (Jul 1 – Jul 31) | - | - | - | 25,395,927 | ||||
August 2017 (Aug 1 – Aug 31) | 3,876,648 | 36.42 | 3,876,648 | 21,519,279 | ||||
September 2017 (Sept 1 – Sept 30) | 2,855,022 | 38.10 | 2,855,022 | 18,664,257 (b) |
| (a) | On June 22, |
| (b) | In its most recent quarterly earnings release, the company stated that fourth quarter 2017 share purchases are anticipated to equal approximately $250 million. Purchase plans may be modified at any time without prior notice. |
The company will continue to evaluate its share repurchasepurchase program in the context of its overall capital activities.
IMPERIAL OIL LIMITED
| Item 6. | Exhibits |
(31.1)Item 6. Exhibits
(31.1) Certification by the principal executive officer of the company pursuant to Rule13a-14(a).
(31.2) Certification by the principal financial officer of the company pursuant to Rule13a-14(a).
(32.1) Certification by the chief executive officer of the company pursuant to Rule13a-14(b) and 18 U.S.C. Section 1350.
(32.2) Certification by the chief financial officer of the company pursuant to Rule13a-14(b) and 18 U.S.C. Section 1350.
IMPERIAL OIL LIMITED
Pursuant to the requirements of theSecurities 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: October 31, 2017 | /s/ Beverley A. Babcock | |||||
| (Signature) | ||||||
| Beverley A. Babcock | ||||||
Senior Vice-President, Finance and Administration and Controller | ||||||
| (Principal Accounting Officer) | ||||||
| Date: October 31, 2017 | /s/ Cathryn Walker | |||||
| (Signature) | ||||||
| Cathryn Walker | ||||||
| Assistant Corporate Secretary | ||||||
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