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 March 31,September 30, 2017
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, 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 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 March 31,September 30, 2017 was 847,599,011.837,581,329.
Table of contents
| Page | ||||||
| PART I. FINANCIAL INFORMATION | 3 | |||||
| Item 1. | Financial statements | 3 | ||||
| 3 | ||||||
| 4 | ||||||
| 5 | ||||||
| 6 | ||||||
| 7 | ||||||
| Item 2. | Management’s discussion and analysis of financial condition and results of operations | |||||
| Item 3. | Quantitative and qualitative disclosures about market risk | |||||
| Item 4. | Controls and procedures | |||||
| PART II. OTHER INFORMATION | ||||||
| Item 2. | Unregistered sales of equity securities and use of proceeds | |||||
| Item 6. | | Exhibits | ||||
| SIGNATURES | ||||||
In this report all dollar amounts are expressed in Canadian dollars unless otherwise stated. Note that numbers may not add due to rounding. This report should be read in conjunction with the company’s annual report on Form10-K for the year ended December 31, 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)
| Three Months to March 31 | Third Quarter | Nine Months to September 30 | ||||||||||||||||||||||||||
| millions of Canadian dollars | millions of Canadian dollars | 2017 | 2016 | millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
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Revenues and other income | Revenues and other income | Revenues and other income | ||||||||||||||||||||||||||
Operating revenues (a) | Operating revenues (a) | 6,958 | 5,174 | Operating revenues(a) | 7,134 | 6,568 | 21,077 | 17,967 | ||||||||||||||||||||
Investment and other income (note 3) | Investment and other income (note 3) | 198 | 48 | Investment and other income(note 3) | 24 | 874 | 270 | 945 | ||||||||||||||||||||
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Total revenues and other income | Total revenues and other income | 7,156 | 5,222 | Total revenues and other income | 7,158 | 7,442 | 21,347 | 18,912 | ||||||||||||||||||||
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Expenses | Expenses | Expenses | ||||||||||||||||||||||||||
Exploration | Exploration | 22 | 17 | Exploration | 7 | 16 | 29 | 75 | ||||||||||||||||||||
Purchases of crude oil and products (b) | Purchases of crude oil and products (b) | 4,333 | 2,986 | Purchases of crude oil and products(b) | 4,251 | 3,857 | 13,226 | 10,884 | ||||||||||||||||||||
Production and manufacturing (c) | Production and manufacturing (c) | 1,375 | 1,271 | Production and manufacturing(c) | 1,338 | 1,261 | 4,238 | 3,842 | ||||||||||||||||||||
Selling and general (c) | Selling and general (c) | 206 | 270 | Selling and general(c) | 219 | 275 | 626 | 812 | ||||||||||||||||||||
Federal excise tax | Federal excise tax | 394 | 388 | Federal excise tax | 438 | 434 | 1,253 | 1,237 | ||||||||||||||||||||
Depreciation and depletion | Depreciation and depletion | 392 | 424 | Depreciation and depletion | 391 | 398 | 1,135 | 1,229 | ||||||||||||||||||||
Financing costs (note 5) | Financing costs (note 5) | 14 | 15 | Financing costs(note 5) | 18 | 19 | 49 | 52 | ||||||||||||||||||||
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Total expenses | Total expenses | 6,736 | 5,371 | Total expenses | 6,662 | 6,260 | 20,556 | 18,131 | ||||||||||||||||||||
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Income (loss) before income taxes | Income (loss) before income taxes | 420 | (149) | Income (loss) before income taxes | 496 | 1,182 | 791 | 781 | ||||||||||||||||||||
Income taxes | Income taxes | 87 | (48) | Income taxes | 125 | 179 | 164 | 60 | ||||||||||||||||||||
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Net income (loss) | Net income (loss) | 333 | (101) | Net income (loss) | 371 | 1,003 | 627 | 721 | ||||||||||||||||||||
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Per-share information(Canadian dollars) | Per-share information(Canadian dollars) | Per-share information(Canadian dollars) | ||||||||||||||||||||||||||
Net income (loss) per common share - basic (note 8) | Net income (loss) per common share - basic (note 8) | 0.39 | (0.12) | 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) | Net income (loss) per common share - diluted (note 8) | 0.39 | (0.12) | Net income (loss) per common share - diluted(note 8) | 0.44 | 1.18 | 0.74 | 0.85 | ||||||||||||||||||||
Dividends per common share | Dividends per common share | 0.15 | 0.14 | 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. | 1,037 | 563 | 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. | 609 | 631 | 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. | 141 | 104 | 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)
| Three Months to March 31 | Third Quarter | Nine Months to September 30 | ||||||||||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
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Net income (loss) | 333 | (101) | 371 | 1,003 | 627 | 721 | ||||||||||||||||||
Other comprehensive income (loss), net of income taxes | ||||||||||||||||||||||||
Post-retirement benefits liability adjustment (excluding amortization) | 41 | 100 | - | - | 41 | 100 | ||||||||||||||||||
Amortization of post-retirement benefits liability adjustment included in net periodic benefit costs | 36 | 41 | 34 | 34 | 106 | 108 | ||||||||||||||||||
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Total other comprehensive income (loss) | 77 | 141 | 34 | 34 | 147 | 208 | ||||||||||||||||||
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Comprehensive income (loss) | 410 | 40 | 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)
| millions of Canadian dollars | As at Mar 31 2017 | As at Dec 31 2016 | As at Sept 30 | As at Dec 31 | ||||||||||||
Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Cash | 672 | 391 | 833 | 391 | ||||||||||||
Accounts receivable, less estimated doubtful accounts (a) | 1,745 | 2,023 | 1,896 | 2,023 | ||||||||||||
Inventories of crude oil and products | 1,032 | 949 | 989 | 949 | ||||||||||||
Materials, supplies and prepaid expenses | 457 | 468 | 441 | 468 | ||||||||||||
Total current assets | 3,906 | 3,831 | 4,159 | 3,831 | ||||||||||||
Investments and long-term receivables | 1,014 | 1,030 | 931 | 1,030 | ||||||||||||
Property, plant and equipment, | 53,620 | 53,515 | 53,844 | 53,515 | ||||||||||||
less accumulated depreciation and depletion | (17,557 | ) | (17,182 | ) | (18,248 | ) | (17,182 | ) | ||||||||
Property, plant and equipment, net | 36,063 | 36,333 | 35,596 | 36,333 | ||||||||||||
Goodwill | 186 | 186 | 186 | 186 | ||||||||||||
Other assets, including intangibles, net | 241 | 274 | 498 | 274 | ||||||||||||
Total assets | 41,410 | 41,654 | 41,370 | 41,654 | ||||||||||||
Liabilities | ||||||||||||||||
Current liabilities | ||||||||||||||||
Notes and loans payable (b) | 202 | 202 | 202 | 202 | ||||||||||||
Accounts payable and accrued liabilities (a) (note 7) | 2,983 | 3,193 | 3,041 | 3,193 | ||||||||||||
Income taxes payable | 24 | 488 | 59 | 488 | ||||||||||||
Total current liabilities | 3,209 | 3,883 | 3,302 | 3,883 | ||||||||||||
Long-term debt (c) (note 6) | 5,026 | 5,032 | 5,013 | 5,032 | ||||||||||||
Other long-term obligations (d) (note 7) | 3,620 | 3,656 | 3,698 | 3,656 | ||||||||||||
Deferred income tax liabilities | 4,251 | 4,062 | 4,336 | 4,062 | ||||||||||||
Total liabilities | 16,106 | 16,633 | 16,349 | 16,633 | ||||||||||||
Shareholders’ equity | ||||||||||||||||
Common shares at stated value (e) | 1,566 | 1,566 | ||||||||||||||
Earnings reinvested | 25,558 | 25,352 | ||||||||||||||
Accumulated other comprehensive income (loss) (note 9) | (1,820 | ) | (1,897 | ) | ||||||||||||
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 | ) | ||||||||||||
Total shareholders’ equity | 25,304 | 25,021 | 25,021 | 25,021 | ||||||||||||
Total liabilities and shareholders’ equity | 41,410 | 41,654 | 41,370 | 41,654 | ||||||||||||
| (a) | Accounts receivable, less estimated doubtful accounts included net amounts receivable from related parties of |
| (b) | Notes and loans payable included amounts to related parties of $75 million (2016 - $75 million). |
| (c) | Long-term debt included amounts to related parties of $4,447 million (2016 - $4,447 million). |
| (d) | Other long-term obligations included amounts to related parties of |
| (e) | 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)
| Inflow (outflow) | Inflow (outflow) | Three Months to March 31 | Third Quarter | Nine Months to September 30 | ||||||||||||||||||||||
| millions of Canadian dollars | millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
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Operating activities | Operating activities | |||||||||||||||||||||||||
Net income (loss) | Net income (loss) | 333 | (101) | 371 | 1,003 | 627 | 721 | |||||||||||||||||||
Adjustments fornon-cash items: | Adjustments fornon-cash items: | |||||||||||||||||||||||||
Depreciation and depletion | Depreciation and depletion | 392 | 424 | 391 | 398 | 1,135 | 1,229 | |||||||||||||||||||
(Gain) loss on asset sales (note 3) | (Gain) loss on asset sales (note 3) | (182 | ) | (30) | (6 | ) | (909 | ) | (219 | ) | (952 | ) | ||||||||||||||
Deferred income taxes and other | Deferred income taxes and other | 200 | (82) | 131 | 215 | 294 | 35 | |||||||||||||||||||
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | |||||||||||||||||||||||||
Accounts receivable | Accounts receivable | 278 | (58) | (297 | ) | 275 | 127 | (121 | ) | |||||||||||||||||
Inventories, materials, supplies and prepaid expenses | Inventories, materials, supplies and prepaid expenses | (72 | ) | (32) | 104 | (7 | ) | (13 | ) | 112 | ||||||||||||||||
Income taxes payable | Income taxes payable | (464 | ) | (9) | 19 | (13 | ) | (429 | ) | - | ||||||||||||||||
Accounts payable and accrued liabilities | Accounts payable and accrued liabilities | (210 | ) | (189) | 81 | (241 | ) | (159 | ) | (59 | ) | |||||||||||||||
All other items - net (a) | All other items - net (a) | 79 | 126 | 43 | 51 | 320 | 299 | |||||||||||||||||||
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Cash flows from (used in) operating activities | Cash flows from (used in) operating activities | 354 | 49 | 837 | 772 | 1,683 | 1,264 | |||||||||||||||||||
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Investing activities | Investing activities | |||||||||||||||||||||||||
Additions to property, plant and equipment | Additions to property, plant and equipment | (122 | ) | (391) | (241 | ) | (189 | ) | (683 | ) | (893 | ) | ||||||||||||||
Proceeds from asset sales (note 3) | Proceeds from asset sales (note 3) | 183 | 33 | 8 | 1,194 | 230 | 1,244 | |||||||||||||||||||
Additional investments | (1 | ) | - | (1 | ) | (1 | ) | |||||||||||||||||||
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Cash flows from (used in) investing activities | Cash flows from (used in) investing activities | 61 | (358) | (234 | ) | 1,005 | (454 | ) | 350 | |||||||||||||||||
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Financing activities | Financing activities | |||||||||||||||||||||||||
Short-term debt - net | Short-term debt - net | - | (108) | - | (1,591 | ) | - | (1,679 | ) | |||||||||||||||||
Long-term debt - additions (note 6) | Long-term debt - additions (note 6) | - | 495 | - | - | - | 495 | |||||||||||||||||||
Reduction in capitalized lease obligations | (7 | ) | (7) | |||||||||||||||||||||||
Reduction in capitalized lease obligations(note 6) | (7 | ) | (6 | ) | (20 | ) | (21 | ) | ||||||||||||||||||
Dividends paid | Dividends paid | (127 | ) | (119) | (136 | ) | (127 | ) | (390 | ) | (364 | ) | ||||||||||||||
Common shares purchased(note 8) | (250 | ) | - | (377 | ) | - | ||||||||||||||||||||
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Cash flows from (used in) financing activities | Cash flows from (used in) financing activities | (134 | ) | 261 | (393 | ) | (1,724 | ) | (787 | ) | (1,569 | ) | ||||||||||||||
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Increase (decrease) in cash | Increase (decrease) in cash | 281 | (48) | 210 | 53 | 442 | 45 | |||||||||||||||||||
Cash at beginning of period | Cash at beginning of period | 391 | 203 | 623 | 195 | 391 | 203 | |||||||||||||||||||
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Cash at end of period(b) | Cash at end of period(b) | 672 | 155 | 833 | 248 | 833 | 248 | |||||||||||||||||||
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(a) | Included contribution to registered pension plans. | (40 | ) | (31) | ||||||||||||||||||||||
(b) | 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. | |||||||||||||||||||||||||
(a) Included contribution to registered pension plans. | (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 maturity of three months or less when purchased. |
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 2016 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 threenine months ended March 31,September 30, 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
| Three Months to March 31 | Upstream | Downstream | Chemical | |||||||||||||||||||||||||||||||||||||||||||||
| Third Quarter | Upstream | Downstream | Chemical | |||||||||||||||||||||||||||||||||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||||||||
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Revenues and other income | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues(a) | 1,668 | 1,316 | 5,204 | 4,971 | 262 | 281 | ||||||||||||||||||||||||||||||||||||||||||
Intersegment sales | 587 | 709 | 241 | 253 | 62 | 58 | ||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||
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Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||
Exploration | 7 | 16 | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
Purchases of crude oil and products | 947 | 861 | 4,014 | 3,827 | 179 | 188 | ||||||||||||||||||||||||||||||||||||||||||
Production and manufacturing | 893 | 887 | 394 | 323 | 51 | 51 | ||||||||||||||||||||||||||||||||||||||||||
Selling and general | 5 | (1 | ) | 167 | 238 | 19 | 22 | |||||||||||||||||||||||||||||||||||||||||
Federal excise tax | - | - | 438 | 434 | - | - | ||||||||||||||||||||||||||||||||||||||||||
Depreciation and depletion | 330 | 346 | 53 | 46 | 3 | 2 | ||||||||||||||||||||||||||||||||||||||||||
Financing costs(note 5) | 1 | (2 | ) | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Total expenses | 2,183 | 2,107 | 5,066 | 4,868 | 252 | 263 | ||||||||||||||||||||||||||||||||||||||||||
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Income (loss) before income taxes | 79 | (81 | ) | 394 | 1,226 | 72 | 77 | |||||||||||||||||||||||||||||||||||||||||
Income taxes | 17 | (55 | ) | 102 | 224 | 20 | 21 | |||||||||||||||||||||||||||||||||||||||||
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Net income (loss) | 62 | (26 | ) | 292 | 1,002 | 52 | 56 | |||||||||||||||||||||||||||||||||||||||||
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Cash flows from (used in) operating activities | 479 | 432 | 268 | 264 | 99 | 73 | ||||||||||||||||||||||||||||||||||||||||||
Capital and exploration expenditures(b) | 92 | 149 | 55 | 38 | 5 | 7 | ||||||||||||||||||||||||||||||||||||||||||
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| Third Quarter | Corporate and Other | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||
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Revenues and other income | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues (a) | 1,711 | 980 | 4,974 | 3,940 | 273 | 254 | - | - | - | - | 7,134 | 6,568 | ||||||||||||||||||||||||||||||||||||
Intersegment sales | 618 | 479 | 309 | 225 | 67 | 44 | - | - | (890 | ) | (1,020 | ) | - | - | ||||||||||||||||||||||||||||||||||
Investment and other income (note 3) | 5 | 19 | 191 | 29 | 1 | - | 2 | 2 | - | - | 24 | 874 | ||||||||||||||||||||||||||||||||||||
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| 2,334 | 1,478 | 5,474 | 4,194 | 341 | 298 | 2 | 2 | (890 | ) | (1,020 | ) | 7,158 | 7,442 | |||||||||||||||||||||||||||||||||||
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Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||
Exploration | 22 | 17 | - | - | - | - | - | - | - | - | 7 | 16 | ||||||||||||||||||||||||||||||||||||
Purchases of crude oil and products | 1,116 | 818 | 4,009 | 2,757 | 201 | 159 | - | - | (889 | ) | (1,019 | ) | 4,251 | 3,857 | ||||||||||||||||||||||||||||||||||
Production and manufacturing | 973 | 909 | 349 | 315 | 53 | 47 | - | - | - | - | 1,338 | 1,261 | ||||||||||||||||||||||||||||||||||||
Selling and general | 3 | 1 | 188 | 238 | 22 | 22 | 29 | 17 | (1 | ) | (1 | ) | 219 | 275 | ||||||||||||||||||||||||||||||||||
Federal excise tax | - | - | 394 | 388 | - | - | - | - | - | - | 438 | 434 | ||||||||||||||||||||||||||||||||||||
Depreciation and depletion | 336 | 357 | 48 | 61 | 3 | 2 | 5 | 4 | - | - | 391 | 398 | ||||||||||||||||||||||||||||||||||||
Financing costs (note 5) | 4 | (3 | ) | - | - | - | - | 17 | 21 | - | - | 18 | 19 | |||||||||||||||||||||||||||||||||||
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Total expenses | 2,454 | 2,099 | 4,988 | 3,759 | 279 | 230 | 51 | 42 | (890 | ) | (1,020 | ) | 6,662 | 6,260 | ||||||||||||||||||||||||||||||||||
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Income (loss) before income taxes | (120 | ) | (621 | ) | 486 | 435 | 62 | 68 | (49 | ) | (40 | ) | - | - | 496 | 1,182 | ||||||||||||||||||||||||||||||||
Income taxes | (34 | ) | (173 | ) | 106 | 115 | 17 | 19 | (14 | ) | (11 | ) | - | - | 125 | 179 | ||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | (86 | ) | (448 | ) | 380 | 320 | 45 | 49 | (35 | ) | (29 | ) | - | - | 371 | 1,003 | ||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
Cash flows from (used in) operating activities | 308 | (482 | ) | 56 | 469 | (23 | ) | 60 | (9 | ) | 3 | - | - | 837 | 772 | |||||||||||||||||||||||||||||||||
Capital and exploration expenditures(b) | 103 | 346 | 34 | 43 | 4 | 6 | 7 | 11 | - | - | 159 | 205 | ||||||||||||||||||||||||||||||||||||
Total assets as at March 31 | 35,898 | 37,086 | 4,251 | 5,368 | 391 | 394 | ||||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months to March 31 | Corporate and Other | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
Revenues and other income | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating revenues (a) | - | - | - | - | 6,958 | 5,174 | ||||||||||||||||||||||||||||||||||||||||||
Intersegment sales | - | - | (994 | ) | (748 | ) | - | - | ||||||||||||||||||||||||||||||||||||||||
Investment and other income (note 3) | 1 | - | - | - | 198 | 48 | ||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | - | (994 | ) | (748 | ) | 7,156 | 5,222 | |||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||
Exploration | - | - | - | - | 22 | 17 | ||||||||||||||||||||||||||||||||||||||||||
Purchases of crude oil and products | - | - | (993 | ) | (748 | ) | 4,333 | 2,986 | ||||||||||||||||||||||||||||||||||||||||
Production and manufacturing | - | - | - | - | 1,375 | 1,271 | ||||||||||||||||||||||||||||||||||||||||||
Selling and general | (6 | ) | 9 | (1 | ) | - | 206 | 270 | ||||||||||||||||||||||||||||||||||||||||
Federal excise tax | - | - | - | - | 394 | 388 | ||||||||||||||||||||||||||||||||||||||||||
Depreciation and depletion | 5 | 4 | - | - | 392 | 424 | ||||||||||||||||||||||||||||||||||||||||||
Financing costs (note 5) | 10 | 18 | - | - | 14 | 15 | ||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
Total expenses | 9 | 31 | (994 | ) | (748 | ) | 6,736 | 5,371 | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes | (8 | ) | (31 | ) | - | - | 420 | (149) | ||||||||||||||||||||||||||||||||||||||||
Income taxes | (2 | ) | (9 | ) | - | - | 87 | (48) | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | (6 | ) | (22 | ) | - | - | 333 | (101) | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
Cash flows from (used in) operating activities | 13 | 2 | - | - | 354 | 49 | ||||||||||||||||||||||||||||||||||||||||||
Capital and exploration expenditures(b) | 12 | 13 | - | - | 153 | 408 | ||||||||||||||||||||||||||||||||||||||||||
Total assets as at March 31 | 1,128 | 643 | (258 | ) | (306 | ) | 41,410 | 43,185 | ||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
| (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 | |||||||||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| ||||||||||||||||||||||||
Revenues and other income | ||||||||||||||||||||||||
Operating revenues(a) | 5,166 | 3,699 | 15,087 | 13,470 | 824 | 798 | ||||||||||||||||||
Intersegment sales | 1,494 | 1,516 | 792 | 689 | 191 | 156 | ||||||||||||||||||
Investment and other income(note 3) | 17 | 22 | 248 | 919 | (1 | ) | 1 | |||||||||||||||||
| ||||||||||||||||||||||||
| 6,677 | 5,237 | 16,127 | 15,078 | 1,014 | 955 | |||||||||||||||||||
| ||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Exploration | 29 | 75 | - | - | - | - | ||||||||||||||||||
Purchases of crude oil and products | 3,089 | 2,584 | 12,037 | 10,139 | 573 | 518 | ||||||||||||||||||
Production and manufacturing | 2,917 | 2,634 | 1,169 | 1,059 | 152 | 149 | ||||||||||||||||||
Selling and general | 1 | (3 | ) | 540 | 729 | 60 | 63 | |||||||||||||||||
Federal excise tax | - | - | 1,253 | 1,237 | - | - | ||||||||||||||||||
Depreciation and depletion | 964 | 1,053 | 148 | 158 | 9 | 6 | ||||||||||||||||||
Financing costs(note 5) | 5 | (6 | ) | - | - | - | - | |||||||||||||||||
| ||||||||||||||||||||||||
Total expenses | 7,005 | 6,337 | 15,147 | 13,322 | 794 | 736 | ||||||||||||||||||
| ||||||||||||||||||||||||
Income (loss) before income taxes | (328 | ) | (1,100 | ) | 980 | 1,756 | 220 | 219 | ||||||||||||||||
Income taxes | (103 | ) | (336 | ) | 230 | 363 | 59 | 59 | ||||||||||||||||
| ||||||||||||||||||||||||
Net income (loss) | (225 | ) | (764 | ) | 750 | 1,393 | 161 | 160 | ||||||||||||||||
| ||||||||||||||||||||||||
Cash flows from (used in) operating activities | 904 | 32 | 626 | 1,028 | 176 | 205 | ||||||||||||||||||
Capital and exploration expenditures(b) | 286 | 745 | 128 | 145 | 12 | 21 | ||||||||||||||||||
Total assets as at September 30 | 35,387 | 36,975 | 4,671 | 4,403 | 365 | 379 | ||||||||||||||||||
| Nine Months to September 30 | Corporate and Other | Eliminations | Consolidated | |||||||||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| ||||||||||||||||||||||||
Revenues and other income | ||||||||||||||||||||||||
Operating revenues(a) | - | - | - | - | 21,077 | 17,967 | ||||||||||||||||||
Intersegment sales | - | - | (2,477 | ) | (2,361 | ) | - | - | ||||||||||||||||
Investment and other income(note 3) | 6 | 3 | - | - | 270 | 945 | ||||||||||||||||||
| ||||||||||||||||||||||||
| 6 | 3 | (2,477 | ) | (2,361 | ) | 21,347 | 18,912 | |||||||||||||||||
| ||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Exploration | - | - | - | - | 29 | 75 | ||||||||||||||||||
Purchases of crude oil and products | - | - | (2,473 | ) | (2,357 | ) | 13,226 | 10,884 | ||||||||||||||||
Production and manufacturing | - | - | - | - | 4,238 | 3,842 | ||||||||||||||||||
Selling and general | 29 | 27 | (4 | ) | (4 | ) | 626 | 812 | ||||||||||||||||
Federal excise tax | - | - | - | - | 1,253 | 1,237 | ||||||||||||||||||
Depreciation and depletion | 14 | 12 | - | - | 1,135 | 1,229 | ||||||||||||||||||
Financing costs(note 5) | 44 | 58 | - | - | 49 | 52 | ||||||||||||||||||
| ||||||||||||||||||||||||
Total expenses | 87 | 97 | (2,477 | ) | (2,361 | ) | 20,556 | 18,131 | ||||||||||||||||
| ||||||||||||||||||||||||
Income (loss) before income taxes | (81 | ) | (94 | ) | - | - | 791 | 781 | ||||||||||||||||
Income taxes | (22 | ) | (26 | ) | - | - | 164 | 60 | ||||||||||||||||
| ||||||||||||||||||||||||
Net income (loss) | (59 | ) | (68 | ) | - | - | 627 | 721 | ||||||||||||||||
| ||||||||||||||||||||||||
Cash flows from (used in) operating activities | (23 | ) | (1 | ) | - | - | 1,683 | 1,264 | ||||||||||||||||
Capital and exploration expenditures(b) | 29 | 37 | - | - | 455 | 948 | ||||||||||||||||||
Total assets as at September 30 | 1,283 | 674 | (336 | ) | (337 | ) | 41,370 | 42,094 | ||||||||||||||||
| ||||||||||||||||||||||||
| (a) | Included export sales to the United States of $3,024 million (2016 - $2,704 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment. |
| (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 |
Investment and other income included gains and losses on asset sales as follows:
| Three Months to March 31 | ||||||||
| millions of Canadian dollars | 2017 | 2016 | ||||||
Proceeds from asset sales | 183 | 33 | ||||||
Book value of assets sold | 1 | 3 | ||||||
Gain (loss) on asset sales, before tax (a) | 182 | 30 | ||||||
Gain (loss) on asset sales, after tax (a) | 158 | 24 | ||||||
| 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. |
| 4. | Employee retirement benefits |
The components of net benefit cost were as follows:
| Three Months to March 31 | ||||||||
| millions of Canadian dollars | 2017 | 2016 | ||||||
Pension benefits: | ||||||||
Current service cost | 55 | 51 | ||||||
Interest cost | 79 | 79 | ||||||
Expected return on plan assets | (101) | (99) | ||||||
Amortization of prior service cost | 3 | 2 | ||||||
Amortization of actuarial loss (gain) | 44 | 41 | ||||||
Net periodic benefit cost | 80 | 74 | ||||||
Other post-retirement benefits: | ||||||||
Current service cost | 4 | 4 | ||||||
Interest cost | 6 | 7 | ||||||
Amortization of actuarial loss (gain) | 2 | 3 | ||||||
Net periodic benefit cost | 12 | 14 | ||||||
| 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 | ||||||||||||
| 5. | Financing costs and additional notes and loans payable information |
| Three Months to March 31 | Third Quarter | Nine Months to September 30 | ||||||||||||||||||||||
| millions of Canadian dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Debt-related interest | 22 | 31 | 24 | 32 | 73 | 95 | ||||||||||||||||||
Capitalized interest | (12) | (13) | (7) | (11) | (29) | (37) | ||||||||||||||||||
Net interest expense | 10 | 18 | 17 | 21 | 44 | 58 | ||||||||||||||||||
Other interest | 4 | (3) | 1 | (2) | 5 | (6) | ||||||||||||||||||
Total financing costs | 14 | 15 | 18 | 19 | 49 | 52 | ||||||||||||||||||
IMPERIAL OIL LIMITED
| 6. | Long-term debt |
| As at Mar 31 | As at Dec 31 | As at Sept 30 | As at Dec 31 | |||||||||||||||||
| millions of Canadian dollars | millions of Canadian dollars | 2017 | 2016 | millions of Canadian dollars | 2017 | 2016 | ||||||||||||||
|
| |||||||||||||||||||
Long-term debt | Long-term debt | 4,447 | 4,447 | Long-term debt | 4,447 | 4,447 | ||||||||||||||
Capital leases | Capital leases | 579 | 585 | Capital leases | 566 | 585 | ||||||||||||||
|
| |||||||||||||||||||
Total long-term debt | Total long-term debt | 5,026 | 5,032 | Total long-term debt | 5,013 | 5,032 | ||||||||||||||
|
| |||||||||||||||||||
| 7. | Otherlong-term obligations |
| As at Mar 31 | As at Dec 31 | As at Sept 30 | As at Dec 31 | |||||||||||||||||
| millions of Canadian dollars | millions of Canadian dollars | 2017 | 2016 | millions of Canadian dollars | 2017 | 2016 | ||||||||||||||
|
| |||||||||||||||||||
Employee retirement benefits (a) | Employee retirement benefits (a) | 1,516 | 1,645 | Employee retirement benefits(a) | 1,410 | 1,645 | ||||||||||||||
Asset retirement obligations and other environmental liabilities (b) | Asset retirement obligations and other environmental liabilities (b) | 1,564 | 1,544 | Asset retirement obligations and other environmental liabilities(b) | 1,577 | 1,544 | ||||||||||||||
Share-based incentive compensation liabilities | Share-based incentive compensation liabilities | 126 | 139 | Share-based incentive compensation liabilities | 138 | 139 | ||||||||||||||
Other obligations | Other obligations | 414 | 328 | Other obligations | 573 | 328 | ||||||||||||||
|
| |||||||||||||||||||
Total other long-term obligations | Total other long-term obligations | 3,620 | 3,656 | Total other long-term obligations | 3,698 | 3,656 | ||||||||||||||
|
|
| ||||||||||||||||||
| (a) | Total recorded employee retirement benefits obligations also included $58 million in current liabilities (2016 - $58 million). |
| (b) | Total asset retirement obligations and other environmental liabilities also included $108 million in current liabilities (2016 - $108 million). |
| 8. |
| Three Months to March 31 | ||||||||||
| 2017 | 2016 | |||||||||
| ||||||||||
Net income (loss) per common share - basic | ||||||||||
Net income (loss) (millions of Canadian dollars) | 333 | (101) | ||||||||
Weighted average number of common shares outstanding (millions of shares) | 847.6 | 847.6 | ||||||||
Net income (loss) per common share (dollars) | 0.39 | (0.12) | ||||||||
| ||||||||||
Net income (loss) per common share - diluted | ||||||||||
Net income (loss) (millions of Canadian dollars) | 333 | (101) | ||||||||
Weighted average number of common shares outstanding (millions of shares) | 847.6 | 847.6 | ||||||||
Effect of employee share-based awards (millions of shares) | 2.7 | 2.8 | ||||||||
| ||||||||||
Weighted average number of common shares outstanding, assuming dilution (millions of shares) | 850.3 | 850.4 | ||||||||
Net income (loss) per common share (dollars) | 0.39 | (0.12) | ||||||||
| ||||||||||
| 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
| Other comprehensive income (loss) information |
Changes in accumulated other comprehensive income (loss):
| Changes in accumulated other comprehensive income (loss): | ||||||
| millions of Canadian dollars | 2017 | 2016 | ||||
| ||||||
Balance at January 1 | (1,897) | (1,828) | ||||
Post-retirement benefits liability adjustment: | ||||||
Current period change excluding amounts reclassified from accumulated other comprehensive income | 41 | 100 | ||||
Amounts reclassified from accumulated other comprehensive income | 36 | 41 | ||||
| ||||||
Balance at March 31 | (1,820) | (1,687) | ||||
| ||||||
Amounts reclassified out of accumulated other comprehensive income (loss) -before-tax income (expense):
| ||||||
| Three Months to March 31 | ||||||
| millions of Canadian dollars | 2017 | 2016 | ||||
| ||||||
Amortization of post-retirement benefits liability adjustment included in net periodic benefit cost (a) | (49) | (46) | ||||
| ||||||
(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 | 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 net periodic benefit cost | 13 | 5 | ||||
| ||||||
Total | 29 | 42 | ||||
| ||||||
10. Recently issued accounting standards
| millions of Canadian dollars | 2017 | 2016 | ||||||
| ||||||||
Balance at January 1 | (1,897 | ) | (1,828 | ) | ||||
Post-retirement benefits liability adjustment: | ||||||||
Current period change excluding amounts reclassified from accumulated other comprehensive | 41 | 100 | ||||||
Amounts reclassified from accumulated other comprehensive income | 106 | 108 | ||||||
| ||||||||
Balance at September 30 | (1,750 | ) | (1,620 | ) | ||||
| ||||||||
Amounts reclassified out of accumulated other comprehensive income (loss) -before-tax income (expense):
| 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). |
| |||||||||||||||
Income tax expense (credit) for components of other comprehensive income (loss):
| 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 | ||||||||||||
| 11. | Recently issued accounting standards |
In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard,Revenue from Contracts with Customers. The standard establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements and expands disclosure requirements. The standard is required to be adopted beginning January 1, 2018. The company expects to adopt the standard using the modified retrospective method, under which prior years’ results are not restated, but supplemental information on the impact of the new standard is provided forwill be included in the 2018 results. Imperial continues to evaluate other areas of the standard. 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 a 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 and plans to adopt it in 2019.
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.Cost. The update requires that the service cost component of net benefit costs to be reported in the same line in the income statement as other compensation costs and that the other components of net benefit costs to be presented separately from the service cost component. Additionally, only the service cost component of net benefit costs will be eligible for capitalization. TheImperial will adopt the update is required to be adopted beginning January 1, 2018. Imperial is evaluatingAs a result of Imperial’s adoption of the standardupdate, the company expects to add a new lineNon-service pension and other postretirement benefit expense to its effectconsolidated 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 financial statements.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
FirstThird quarter 2017 vs. firstthird quarter 2016
The company’s net income for the firstthird quarter of 2017 was $333$371 million or $0.39$0.44per-share on a diluted basis, an increase of $434 million compared to the net lossincome of $101$1,003 million or $(0.12)$1.18per-share for the same period last year. Third quarter 2016 results included a $716 million gain from the sale of retail sites.
Upstream recorded a net lossincome in the firstthird quarter of $86$62 million, compared to a net loss of $448$26 million in the same period of 2016. EarningsResults in the firstthird quarter of 2017 reflectreflected the impact of higher Canadian crude oil realizations of about $600$190 million and higher Kearl volumes of about $50 million. These impacts were partially offset by lower Syncrude and conventional volumes of about $80 million, including the absence of production at Norman Wells, and higher royalties of about $80 million, lower volumes of about $70 million and higher operating expenses of about $50 million primarily due to higher energy costs.million.
West Texas Intermediate (WTI) averaged US$51.7848.23 per barrel in the firstthird quarter of 2017, up from US$33.6344.94 per barrel in the same quarter of 2016. Western Canada Select (WCS) averaged US$37.2638.29 per barrel and US$19.3031.43 per barrel respectively for the same periods. The WTI / WCS differential narrowed to 2821 percent in the firstthird quarter of 2017, from 4330 percent in the same period of 2016.
The Canadian dollar averaged US$0.760.80 in the firstthird quarter of 2017, an increase of US$0.03 from the firstthird quarter of 2016.
Imperial’s average Canadian dollar realizations for bitumen and synthetic crudes increased essentiallygenerally in line with the North American benchmarks, adjusted for changes in exchange rates and transportation costs. Bitumen realizations averaged $36.21$39.02 per barrel for the firstthird quarter of 2017, an increase of $24.29$8.86 per barrel versus the firstthird quarter of 2016. Synthetic crude realizations averaged $67.79$61.14 per barrel, an increase of $21.47$2.17 per barrel for the same period of 2016.
Gross production of Cold Lake bitumen averaged 158,000163,000 barrels per day in the firstthird quarter, compared to 165,000up from 157,000 barrels per day in the same period last year,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 firstthird quarter (129,000 barrels Imperial’s share) compared to 194,000up from 159,000 barrels per day (138,000(113,000 barrels Imperial’s share) during the firstthird quarter of 2016. LowerHigher production was mainly the result of planned and unplanned maintenance activities.improved reliability.
The company’s share of gross production from Syncrude averaged 66,00074,000 barrels per day, compared to 80,00085,000 barrels per day in the firstthird quarter of 2016. Syncrude production was reduced by about 14,000 barrels per day mainly due to a fire atRepairs associated with the Syncrude Mildred Lake upgrader.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 $380$292 million in the firstthird quarter, compared to $320$1,002 million in the same period of 2016. Earnings increaseddecreased mainly due to the absence of a $716 million gain of $151 million from the sale of a surplus property, partiallycompany-owned retail sites and higher refining turnaround activity of about $100 million. These factors were partly offset by lower marketinghigher refining margins of approximately $60about $140 million.
Refinery throughput averaged 398,000385,000 barrels per day, unchanged fromcompared to 407,000 barrels per day in the same periodthird quarter of 2016. Reduced throughput reflects increased turnaround activity associated with the Nanticoke refinery in 2016.the third quarter 2017.
Petroleum product sales were 486,000500,000 barrels per day, up from 469,000compared to 505,000 barrels per day in the firstthird quarter of 2016. Sales growth was primarily driven by the company’s focus on securing long-term supply agreements.
IMPERIAL OIL LIMITED
Chemical net income was $45$52 million in the firstthird quarter, compared to $49$56 million in the same quarter of 2016.
Net income effects from Corporate and Other were negative $6$35 million in the firstthird quarter, compared to negative $22$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 $37.82 per barrel for the first nine months of 2017, an increase of $14.05 per barrel versus the same period of 2016. Synthetic crude realizations averaged $64.37 per barrel, an increase of $10.92 per barrel from the same period of 2016.
Gross production of Cold Lake bitumen averaged 161,000 barrels per day in the first nine months of 2017, 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) from the same period of 2016. Increased 2017 production reflects improved reliability associated with the mining and ore preparation operations.
During the first nine months of 2017, the company’s share of gross production from Syncrude averaged 56,000 barrels per day, compared to 61,000 barrels per day from the same period of 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 $750 million, compared to $1,393 million from the same period of 2016. Earnings decreased 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 $151 million from the sale of a surplus property and higher industry refining margins of about $90 million.
Refinery throughput averaged 381,000 barrels per day in the first nine months of 2017, up from 351,000 barrels per day from the same period of 2016. Capacity utilization increased to 90 percent from 83 percent in the same period of 2016, reflecting reduced turnaround maintenance activity.
Petroleum product sales were 492,000 barrels per day in the first nine months of 2017, up from 481,000 barrels per day from the same period of 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 from the same period of 2016.
IMPERIAL OIL LIMITED
For the first nine months of 2017, net income effects from Corporate and Other were negative $59 million, versus negative $68 million from the same period of 2016.
IMPERIAL OIL LIMITED
Liquidity and capital resources
Cash flow generated from operating activities was $354$837 million in the firstthird quarter, compared with $49$772 million in the corresponding period in 2016, reflecting higher earnings.2016.
Investing activities generatedused net cash of $61$234 million in the firstthird quarter, compared with $358$1,005 million usedcash generated from investing activities in the same period of 2016, reflecting lower additions to property, plant and equipment and higher proceeds from asset sales.
Cash used in financing activities was $134$393 million in the third quarter, compared with $1,724 million in the third quarter of 2016, reflecting the absence of debt repayments. Dividends paid in the third quarter of 2017 were $136 million. Theper-share dividend paid in the third quarter was $0.16, up from $0.15 in the same period of 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 $833 million at September 30, 2017, versus $248 million at the end of the third quarter of 2016.
Cash flow generated from operating activities was $1,683 million in the first quarter,nine months of 2017, compared with $1,264 million in 2016, reflecting higher earnings, excluding the impact of asset sales, partially offset by unfavourable working capital effects.
Investing activities used net cash from financing activities of $261$454 million in the first quarternine months of 2016.2017, compared with cash generated from investing activities of $350 million from the same period of 2016, reflecting lower proceeds from asset sales partially offset by lower additions to property, plant and equipment.
Cash used in financing activities was $787 million in the first nine months of 2017, compared with $1,569 million from the same period of 2016, reflecting the absence of debt repayments. Dividends paid in the first quarternine months of 2017 were $127$390 million. Theper-share dividend paid in the first quarternine months of 2017 was $0.15,$0.46, up from $0.14 in$0.43 for the same period of 2016.
The company’s cash balance was $672 million at March 31, 2017, versus $155 million at the end ofDuring the first quarternine months of 2016.
The2017 the company has entered into additional long-term pipeline transportation agreements to ship crude oil and products. These agreements, which have a total commitment ofpurchased about $2 billion, will support the company’s plans10 million shares for long-term growth. The company expects to fulfill these commitments in the normal course of business.$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. The standard establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements and expands disclosure requirements. The standard is required to be adopted beginning January 1, 2018. The company expects to adopt the standard using the modified retrospective method, under which prior years’ results are not restated, but supplemental information on the impact of the new standard is provided forwill be included in the 2018 results. Imperial continues to evaluate other areas of the standard. 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 a 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 and plans to adopt it in 2019.
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.Cost. The update requires that the service cost component of net benefit costs to be reported in the same line in the income statement as other compensation costs and that the other components of net benefit costs to be presented separately from the service cost component. Additionally, only the service cost component of net benefit costs will be eligible for capitalization. TheImperial will adopt the update is required to be adopted beginning January 1, 2018. Imperial is evaluatingAs a result of Imperial’s adoption of the standardupdate, the company expects to add a new lineNon-service pension and other postretirement benefit expense to its effectconsolidated 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 financial statements.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.
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 threenine months ended March 31,September 30, 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, 2016.
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,September 30, 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
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) 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: | /s/ Beverley A. Babcock | |||
| (Signature) | ||||
| Beverley A. Babcock | ||||
| Senior Vice-President, Finance and Administration and Controller | ||||
| (Principal Accounting Officer) | ||||
Date: | /s/ Cathryn Walker | |||
| (Signature) | ||||
| Cathryn Walker | ||||
| Assistant Corporate Secretary | ||||
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