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FORM
10-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
June 30, 2018

2019

OR

[
]
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from --- to ---

Commission file number
0-12014

IMPERIAL OIL LIMITED

(Exact name of registrant as specified in its charter)

CANADA 98-0017682

CANADA
98-0017682
(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

505 Quarry Park Boulevard S.E. Calgary, Alberta, Canada
 
T2C 5N1
Calgary, Alberta, Canada T2C 5N1
(Address of principal executive offices)
 
(Postal Code)

Registrant’s telephone number, including area code:
1-800-567-3776

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on
which registered
None
None
The registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 9190 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 Regulation
S-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, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act of 1934).

Large accelerated filer
 
 
Smaller reporting company
 
___
_
 
Non-accelerated
 filer
 
____
 
Emerging growth company
 
____   
 
Accelerated filer
 
____
   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

The registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act of 1934).

YES
  NO

The number of common shares outstanding, as of June 30, 20182019 was 802,679,927.


762,773,619
.
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IMPERIAL OIL LIMITED

Table of contents

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8
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  2325 

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  2426 

Item 1. Legal proceedings

24

24

Item 6. Exhibits

25

SIGNATURES

  26 
27
28

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, 2017.2018. Note that numbers may not add due to rounding.

The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.

In this report, unless the context otherwise indicates, reference to “the company” or “Imperial” includes Imperial Oil Limited and its subsidiaries.

2
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IMPERIAL OIL LIMITED

PART I.   FINANCIAL INFORMATION

Item 1. Financial statements

Item 1.Financial statements

Consolidated statement of income (U.S. GAAP, unaudited)

          Six Months 
   Second Quarter  to June 30 
millions of Canadian dollars  2018   2017  2018   2017 

Revenues and other income

       

Revenues(a)

   9,516    6,985   17,416    13,943 

Investment and other income(note 5)

   27    48   61    246 

Total revenues and other income

   9,543    7,033   17,477    14,189 

Expenses

       

Exploration

   1    -   9    22 

Purchases of crude oil and products(b)

   6,537    4,642   11,317    8,975 

Production and manufacturing(c)

   1,646    1,495   3,077    2,840 

Selling and general(c)

   273    198   467    401 

Federal excise tax

   412    421   809    815 

Depreciation and depletion

   358    352   735    744 

Non-service pension and postretirement benefit(d)

   26    33   53    66 

Financing(note 7)

   26    17   49    31 

Total expenses

   9,279    7,158   16,516    13,894 

Income (loss) before income taxes

   264    (125  961    295 

 

Income taxes

   68    (48  249    39 

Net income (loss)

   196    (77  712    256 

Per share information(Canadian dollars)

       
Net income (loss) per common share - basic(note 10)   0.24    (0.09  0.86    0.30 
Net income (loss) per common share - diluted(note 10)   0.24    (0.09  0.86    0.30 
Dividends per common share - declared   0.19    0.16   0.35    0.31 

(a)  

  

Amounts from related parties included in revenues.

         1,769          1,008         3,142          2,045 

(b)  

  

Amounts to related parties included in purchases of crude oil and products.

   1,374    706   2,266    1,315 

(c)  

  Amounts to related parties included in production and manufacturing, and selling and general expenses.   156    147   297    288 

(d)  

  Prior year amounts have been reclassified. See note 2 for additional details.       

 
Second Quarter
  
Six Months
to June 30
 
millions of Canadian dollars
 
2019
  
2018
  
2019
  
2018
 
Revenues and other income
            
 Revenues
(a)
  
9,228
   
9,516
   
17,193
    
17,416
 
 Investment and other income
(note 4)
  
33
   
27
   
50
   
61
 
Total revenues and other income
  
9,261
   
9,543
   
17,243
   
17,477
 
                 
Expenses
            
Exploration
  
5
   
1
   
38
   
9
 
 Purchases of crude oil and products
(b)
  
5,662
   
6,537
   
10,557
   
11,317
 
 Production and manufacturing
(c)
  
1,715
   
1,646
   
3,310
   
3,077
 
 Selling and general
(c)
  
236
   
273
   
449
   
467
 
Federal excise tax and fuel charge
  
463
   
412
   
857
   
809
 
Depreciation and depletion
  
392
   
358
   
782
   
735
 
Non-service
pension and postretirement benefit
  
36
   
26
   
72
   
53
 
 Financing
(d) (note 6)
  
23
   
26
   
51
   
49
 
Total expenses
  
8,532
   
9,279
   
16,116
   
16,516
 
                 
Income (loss) before income taxes
  
729
   
264
   
1,127
   
961
 
                 
Income taxes
  
(483
)
  
68
   
(378
)
  
249
 
                 
Net income (loss)
  
1,212
   
196
   
1,505
   
712
 
                 
Per share information
 
(Canadian dollars)
            
Net income (loss) per common share - basic
(note 11)
  
1.58
   
0.24
   
1.95
   
0.86
 
Net income (loss) per common share - diluted 
(note 11)
  
1.57
   
0.24
   
1.94
   
0.86
 
                 
(a)
Amounts from related parties included in revenues.
  
2,234
   
1,769
   
3,956
   
3,142
 
                 
(b)
Amounts to related parties included in purchases of crude oil and products.
  
908
   
1,374
   
1,636
   
2,266
 
                 
(c)
Amounts to related parties included in production and manufacturing, and selling and general expenses.
  
161
   
156
   
322
   
297
 
                 
(d)
Amounts to related parties included in financing, (note 6).
  
24
   
22
   
52
   
42
 
The information in the notes to consolidated financial statements is an integral part of these statements.


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IMPERIAL OIL LIMITED

Consolidated statement of comprehensive income (U.S. GAAP, unaudited)

        Six Months
   Second Quarter to June 30

millions of Canadian dollars

 

  2018    2017   2018   2017  

Net income (loss)

   196    (77  712   256 

Other comprehensive income (loss), net of income taxes

      

Postretirement benefits liability adjustment (excluding amortization)

   -    -   (19  41 

Amortization of postretirement benefits liability adjustment
included in net periodic benefit costs

   33    36   67   72 

Total other comprehensive income (loss)

   33              36   48   113 
                   

Comprehensive income (loss)

           229    (41          760           369 

                 
 
    Second Quarter
  
Six Months
to June 30
 
millions of Canadian dollars
 
2019
  
2018
  
2019
  
2018
 
Net income (loss)
  
1,212
   
196
   
1,505
   
712
 
                 
Other comprehensive income (loss), net of income taxes
            
Postretirement benefits liability adjustment (excluding amortization)
  
-
   
-
   
18
   
(19
)
Amortization of postretirement benefits liability adjustment included in net periodic benefit costs
  
28
   
33
   
55
   
67
 
Total other comprehensive income (loss)
  
28
   
33
   
73
   
48
 
            
Comprehensive income (loss)
  
1,240
   
229
   
1,578
   
760
 
The information in the notes to consolidated financial statements is an integral part of these statements.


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IMPERIAL OIL LIMITED

Consolidated balance sheet (U.S. GAAP, unaudited)

   As at   As at  
   June 30   Dec 31  
millions of Canadian dollars  2018   2017  

Assets

   
Current assets   

Cash

   873   1,195 

Accounts receivable, less estimated doubtful accounts(a)

   2,625   2,712 

Inventories of crude oil and products

   1,221   1,075 

Materials, supplies and prepaid expenses(b)

   456   425 
Total current assets   5,175   5,407 
Investments and long-term receivables(b)   860   865 
Property, plant and equipment,   53,272   52,778 

less accumulated depreciation and depletion

   (19,028  (18,305
Property, plant and equipment, net   34,244   34,473 
Goodwill   186   186 
Other assets, including intangibles, net(note 9)   925   670 
Total assets   41,390   41,601 
Liabilities   
Current liabilities   

Notes and loans payable(c)

   202   202 

Accounts payable and accrued liabilities(a) (note 9)

   3,923   3,877 

Income taxes payable

   89   57 
Total current liabilities   4,214   4,136 
Long-term debt(d) (note 8)   4,992   5,005 
Other long-term obligations(e) (note 9)   3,943   3,780 
Deferred income tax liabilities   4,476   4,245 
Total liabilities   17,625   17,166 
Shareholders’ equity   
Common shares at stated value(f) (note 10)   1,483   1,536 
Earnings reinvested(note 11)   24,049   24,714 
Accumulated other comprehensive income (loss)(note 12)   (1,767  (1,815
Total shareholders’ equity   23,765   24,435 
Total liabilities and shareholders’ equity         41,390         41,601 
         
 
As at
June 30
  
As at
Dec 31
 
millions of Canadian dollars
 
2019
  
2018
 
Assets
      
Current assets
      
Cash
  
1,087
   
988
 
 Accounts receivable, less estimated doubtful accounts
(a)
  
3,134
   
2,529
 
Inventories of crude oil and products
  
1,228
   
1,297
 
Materials, supplies and prepaid expenses
  
631
   
541
 
Total current assets
  
6,080
   
5,355
 
Investments and long-term receivables
(b)
  
894
   
857
 
Property, plant and equipment,
  
54,263
   
53,944
 
less accumulated depreciation and depletion
  
(20,025
)
 
 
(19,719
)
Property, plant and equipment, net
  
34,238
 
 
 
34,225
 
Goodwill
  
186
 
 
 
186
 
Other assets, including intangibles, net
  
531
 
 
 
833
 
Total assets
  
41,929
 
 
 
41,456
 
    
 
 
   
Liabilities
  
 
 
  
Current liabilities
  
 
 
  
 Notes and loans payable
(c)
  
200
 
 
 
202
 
 Accounts payable and accrued liabilities
(a) (note 9)
  
3,985
 
 
 
3,688
 
Income taxes payable
  
28
 
 
 
65
 
Total current liabilities
  
4,213
 
 
 
3,955
 
Long-term debt
(d) (note 7)
  
4,968
 
 
 
4,978
 
Other long-term obligations
(e) (note 9)
  
3,076
 
 
 
2,943
 
Deferred income tax liabilities
  
4,650
 
 
 
5,091
 
Total liabilities
  
16,907
 
 
 
16,967
 
    
 
 
   
Shareholders’ equity
  
 
 
  
Common shares at stated value
(f) (note 11)
  
1,410
 
 
 
1,446
 
Earnings reinvested
  
25,056
 
 
 
24,560
 
Accumulated other comprehensive income (loss)
(note 12)
  
(1,444
)
 
 
(1,517
)
Total shareholders’ equity
  
25,022
 
 
 
24,489
 
    
 
 
   
Total liabilities and shareholders’ equity
  
41,929
   
41,456
 
(a)Accounts receivable, less estimated doubtful accounts included net amounts receivable from related parties of $344$1,200 million (2017(2018 - $509$666 million).
(b)Investments and long-term receivables included amounts from related parties of $56$249 million (2017(2018 - $19$146 million).
(c)Notes and loans payable included amounts to related parties of $75 million (2017(2018 - $75 million).
(d)Long-term debt included amounts to related parties of $4,447 million (2017(2018 - $4,447 million).
(e)Other long-term obligations included amounts to related parties of $38$0 million (2017(2018 - $60$15 million).
(f)Number of common shares authorized and outstanding were 1,100 million and 803763 million, respectively (2017(2018 - 1,100 million and 831783 million, respectively).

The information in the notes to consolidated financial statements is an integral part of these statements.


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IMPERIAL OIL LIMITED

Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)
                 
 
    Second Quarter
  
Six Months
to June 30
 
millions of Canadian dollars
 
2019
  
2018
  
2019
  
2018
 
Common shares at stated value
 
(note 11)
            
At beginning of period
  
1,427
   
1,523
   
1,446
   
1,536
 
Issued under the stock option plan
  
-
   
-
   
-
   
-
 
Share purchases at stated value
  
(17
)
  
(40
)  
(36
)
  
(53
)
At end of period
  
1,410
   
1,483
   
1,410
   
1,483
 
                 
Earnings reinvested
            
At beginning of period
  
24,364
   
24,861
   
24,560
   
24,714
 
Net income (loss) for the period
  
1,212
   
196
   
1,505
   
712
 
Share purchases in excess of stated value
  
(351
)
  
(853
)  
(693
)
  
(1,090
)
Dividends declared
  
(169
)
  
(155
)  
(316
)
  
(287
)
At end of period
  
25,056
   
24,049
   
25,056
   
24,049
 
                 
Accumulated other comprehensive income (loss)
(note 12)
            
At beginning of period
  
(1,472
)
  
(1,800
)  
(1,517
)
  
(1,815
)
Other comprehensive income (loss)
  
28
   
33
   
73
   
48
 
At end of period
  
(1,444
)
  
(1,767
)  
(1,444
)
  
(1,767
)
                 
Shareholders’ equity at end of period
  
25,022
   
23,765
   
25,022
   
23,765
 
The information in the notes to consolidated financial statements is an integral part of these statements.
6
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IMPERIAL OIL LIMITED
Consolidated statement of cash flows (U.S. GAAP, unaudited)

       Six Months
Inflow (outflow)  Second Quarter to June 30
millions of Canadian dollars  2018   2017   2018   2017  
Operating activities     
Net income (loss)   196   (77  712   256 
Adjustments fornon-cash items:     

Depreciation and depletion

   358   352   735   744 

(Gain) loss on asset sales(note 5)

   (9  (31  (19  (213

Deferred income taxes and other

   24   (37  209   163 
Changes in operating assets and liabilities:     

Accounts receivable

   (340  146   87   424 

Inventories, materials, supplies and prepaid expenses

   40   (45  (177  (117

Income taxes payable

   16   16   32   (448

Accounts payable and accrued liabilities

   439   (30  24   (240

All other items - net (a) (b)

   135   198   241   277 
Cash flows from (used in) operating activities   859   492   1,844   846 
Investing activities     
Additions to property, plant and equipment(b)   (357  (320  (728  (442
Proceeds from asset sales(note 5)   9   39   21   222 
Loan to equity company   (31  -   (37  - 
Cash flows from (used in) investing activities   (379  (281  (744  (220
Financing activities     
Reduction in capitalized lease obligations(note 8)   (7  (6  (13  (13
Dividends paid   (132  (127  (266  (254
Common shares purchased(note 10)   (893  (127  (1,143  (127
Cash flows from (used in) financing activities   (1,032  (260  (1,422  (394
Increase (decrease) in cash   (552  (49  (322  232 
Cash at beginning of period       1,425         672       1,195         391 
Cash at end of period(c)   873   623   873   623 
(a)    Included contribution to registered pension plans.   (57  (58  (101  (98
(b)    The impact of carbon emission programs are included in additions to property, plant and equipment, and all other items, net. 
(c)    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. 

Inflow (outflow)
 
    Second Quarter
  
Six Months
to June 30
 
millions of Canadian dollars
 
2019
  
2018
  
2019
  
2018
 
Operating activities
            
Net income (loss)
  
1,212
   
196
   
1,505
   
712
 
Adjustments for
non-cash
items:
            
Depreciation and depletion
  
392
   
358
   
782
   
735
 
(Gain) loss on asset sales
(note 4)
  
(11
)  
(9
)  
(6
)  
(19
)
Deferred income taxes and other
  
(471
)  
24
   
(475
)  
209
 
Changes in operating assets and liabilities:
            
Accounts receivable
  
99
   
(340
)  
(605
)  
87
 
Inventories, materials, supplies and prepaid expenses
  
(40
)  
40
   
(21
)  
(177
)
Income taxes payable
  
(9
)  
16
   
(37
)  
32
 
Accounts payable and accrued liabilities
  
(175
)  
439
   
728
   
24
 
All other items - net
(a) (b)
  
29
   
135
   
158
   
241
 
Cash flows from (used in) operating activities
  
1,026
   
859
   
2,029
   
1,844
 
                 
Investing activities
            
Additions to property, plant and equipment
(b)
  
(394
)  
(357
)  
(825
)  
(728
)
Proceeds from asset sales
(note 4)
  
14
   
9
   
36
   
21
 
Loan to equity company
  
(49
)  
(31
)  
(103
)  
(37
)
Cash flows from (used in) investing activities
  
(429
)  
(379
)  
(892
)  
(744
)
                 
Financing activities
            
Reduction in finance lease obligations
(note 8)
  
(6
)  
(7
)  
(13
)  
(13
)
Dividends paid
  
(147
)  
(132
)  
(296
)  
(266
)
Common shares purchased
(note 11)
  
(368
)  
(893
)  
(729
)  
(1,143
)
Cash flows from (used in) financing activities
  
(521
)  
(1,032
)  
(1,038
)  
(1,422
)
                 
Increase (decrease) in cash
  
76
   
(552
)  
99
   
(322
)
Cash at beginning of period
  
1,011
   
1,425
   
988
   
1,195
 
Cash at end of period
(c)
  
1,087
   
873
   
1,087
   
873
 
(a)    Included contribution to registered pension plans.
  
(57
  (57)  
(98
)  
(101
(b)    The impact of carbon emission programs are included in additions to property, plant and equipment, and all other items, net.
(c)    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.
Non-cash transaction
The company removed $570 million of assets and corresponding liabilities associated with the Government of Ontario’s revocation of its cap and trade legislation. The impact of this removal was not reflected in “Accounts payable and accrued liabilities” and “All other items - net” lines on the Consolidated statement of cash flows as it was not a cash transaction.
The information in the notes to consolidated financial statements is an integral part of these statements.

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IMPERIAL OIL LIMITED

Notes to consolidated financial statements (unaudited)

1.  Basis of financial statement preparation

These unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) and follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC) in the company’s 20172018 annual report on Form
10-K.
In the opinion of the company, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature. Prior year’s 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 six months ended June 30, 2018,2019, 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.  Accounting changes

Effective January 1, 2018,2019, Imperial adopted the Financial Accounting Standards Board’s standard,Revenue from Contracts with Customers,
Leases (Topic 842)
, as amended. The standard establishesrequires all leases to be recorded on the balance sheet as a single revenueright of use asset and a lease liability. The company used a transition method that applies the new lease standard at January 1, 2019. The company applied a policy election to exclude short-term leases from the balance sheet recognition model for alland also elected certain practical expedients at adoption. As permitted, Imperial did not reassess whether existing contracts with customers, eliminates industry and transaction specific requirements, and expands disclosure requirements. The standard was adopted usingare or contain leases, the modified retrospective method, under which prior year results are not restated, but supplemental information is providedlease classification for any material impactsexisting leases, initial direct costs for any existing lease and whether existing land easements and right of the standard on 2018 results. Theway, which were not previously accounted for as leases, are or contain a lease. At adoption of the standard did not have a material impactlease accounting change, on any of the lines reported in the company’s consolidated financial statements. The cumulative effect of adoption of the new standard was de minimis. The company did not elect any practical expedients that require disclosure. See note 4 for additional details.

Effective January 1, 2018, Imperial adopted2019, an operating lease liability of $298 million was recorded and the Financial Accounting Standards Board’s standard update, Compensation – Retirement Benefits (Topic 715):Improving the Presentationoperating lease right of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The update requires separate presentation of the service cost component from other components of net benefit costs. The other components are reported in a new line on the company’s consolidated statement of income,“Non-service pension and postretirement benefit”. Imperial elected to use the practical expedient which uses the amounts disclosed in the pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements, as it is impracticable to determine the amounts capitalized in those periods. Beginning in 2018, the other components of net benefit costs are included in the Corporate and other expenses. The“Non-service pension and postretirement benefit” line reflects thenon-service costs, which primarily includes interest costs, expected return on plan assets, and amortization of actuarial gains and losses, that were previously included in “Production and manufacturing” and “Selling and general” expenses. Additionally, only the service cost component of net benefit costs is eligible for capitalization in situations where it is otherwise appropriate to capitalize employee costs in connection with the construction or production of an asset.

The impact of the retrospective presentation change on Imperial’s consolidated statement of income for the period ended June 30, 2018 is shown below.

   Second Quarter       Six Months to 
millions of Canadian dollars  2017        June 30, 2017 
    

As

reported

     Change   

As

  adjusted

       

As

reported

     Change   

As

  adjusted

 

Production and manufacturing

   1,525    (30)    1,495      2,900    (60)    2,840   

Selling and general

   201    (3)    198      407    (6)    401   

Non-service pension and postretirement benefit

   -    33    33         -    66    66   

Effective January 1, 2018, Imperial adopted the Financial Accounting Standards Board’s standard update, Financial Instruments - Overall (Subtopic825-10):Recognition and Measurement of Financial Assets and Financial Liabilities. The standard requires investments in equity securities other than consolidated subsidiaries and equity method investments to be measured at fair value, with changes in the fair value recognized through net income. The company elected a modified approach for equity securities that do not have a readily determinable fair value. This modified approach measures investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.asset was $298 million. There was no cumulative earnings effect related to the adoptionadjustment.


Table of this standard. The carrying value of equity securities without readily determinable fair values as at June 30, 2018 were not significant to Imperial.

The standard also expanded disclosures related to financial statements. The company’s only notable financial instrument is long-term debt ($4,447 million, excluding capitalized lease obligations), where the difference between fair value and carrying value was de minimis. The fair value of long-term debt was primarily a level 2 measurement.

Contents

IMPERIAL OIL LIMITED

3.  Business segments

Second Quarter  Upstream Downstream Chemical
millions of Canadian dollars  2018   2017   2018   2017   2018    2017  

Revenues and other income

        

Revenues(a)

     2,318     1,787     6,870     4,909       328        289 

Intersegment sales

   650   289   332   242   74    62 

Investment and other income(note 5)

   3   5   19   42   -    (2
    2,971   2,081   7,221   5,193   402    349 

Expenses

        

Exploration

   1   -   -   -   -    - 

Purchases of crude oil and products

   1,573   1,026   5,803   4,014   216    193 

Production and manufacturing(b)

   1,106   1,051   488   426   52    48 

Selling and general(b)

   -   (7  197   185   23    19 

Federal excise tax

   -   -   412   421   -    - 

Depreciation and depletion

   300   298   49   47   4    3 

Non-service pension and postretirement benefit(b)

   -   -   -   -   -    - 

Financing(note 7)

   -   -   -   -   -    - 

Total expenses

   2,980   2,368   6,949   5,093   295    263 

Income (loss) before income taxes

   (9  (287  272   100   107    86 

Income taxes

   (3  (86  71   22   29    22 

Net income (loss)

   (6  (201  201   78   78    64 

Cash flows from (used in) operating activities

   (10  117   776   302   116    100 

Capital and exploration expenditures(c)

   183   91   88   39   7    3 
Second Quarter  Corporate and other Eliminations Consolidated
millions of Canadian dollars  2018   2017   2018   2017   2018    2017  

Revenues and other income

        

Revenues(a)

   -   -   -   -   9,516    6,985 

Intersegment sales

   -   -   (1,056  (593  -    - 

Investment and other income(note 5)

   5   3   -   -   27    48 
    5   3   (1,056  (593  9,543    7,033 

Expenses

        

Exploration

   -   -   -   -   1    - 

Purchases of crude oil and products

   -   -   (1,055  (591  6,537    4,642 

Production and manufacturing(b)

   -   -   -   -   1,646    1,525 

Selling and general(b)

   54   6   (1  (2  273    201 

Federal excise tax

   -   -   -   -   412    421 

Depreciation and depletion

   5   4   -   -   358    352 

Non-service pension and postretirement benefit(b)

   26   -   -   -   26    - 

Financing(note 7)

   26   17   -   -   26    17 

Total expenses

   111   27   (1,056  (593  9,279    7,158 

Income (loss) before income taxes

   (106  (24  -   -   264    (125

Income taxes

   (29  (6  -   -   68    (48

Net income (loss)

   (77  (18  -   -   196    (77

Cash flows from (used in) operating activities

   (23  (27  -   -   859    492 

Capital and exploration expenditures(c)

   6   10   -   -   284    143 

                     
Second Quarter
  
Upstream       
 
Downstream       
   
Chemical          
millions of Canadian dollars
  
2019
      
2018
 
2019
     
2018
   
2019
       
2018 
Revenues and other income
              
 
Revenues
(a)
  
2,587
        
2,318
          
6,375
            
6,870
        
266
             
328 
Intersegment sales  
1,116
   
650
 
487
   
332
   
48
  
74 
Investment and other income
(note 4)
  
4
   
3
 
19
   
19
   
-
  
  
3,707
   
2,971
 
6,881
   
7,221
   
314
  
402 
Expenses
              
 
Exploration
  
5
   
1
 
-
   
-
   
-
  
Purchases of crude oil and products
  
1,802
   
1,573
 
5,338
   
5,803
   
171
  
216 
Production and manufacturing
  
1,171
   
1,106
 
474
   
488
   
70
  
52 
Selling and general
  
-
   
-
 
201
   
197
   
23
  
23 
Federal excise tax and fuel charge
  
-
   
-
 
463
   
412
   
-
  
Depreciation and depletion
  
338
   
300
 
46
   
49
   
3
  
Non-service
pension and postretirement benefit
  
-
   
-
 
-
   
-
   
-
  
Financing
(note 6)
  
-
   
-
 
-
   
-
   
-
  
Total expenses
  
3,316
   
2,980
 
6,522
   
6,949
   
267
  
295 
Income (loss) before income taxes
  
391
   
(9
)
359
   
272
   
47
  
107 
Income taxes
  
(594
)
 
  
(3
)
101
   
71
   
9
  
29 
Net income (loss)
  
985
   
(6
)
258
   
201
   
38
  
78 
Cash flows from (used in) operating activities
  
585
   
(10
)
423
   
776
   
52
  
116 
Capital and exploration expenditures
 
(b)
  
301
   
183
 
111
   
88
   
6
  
 
Second Quarter
  
   Corporate and other
 
Eliminations       
   
Consolidated    
millions of Canadian dollars
  
2019
       
2018
 
2019
     
2018
   
2019
          
2018 
Revenues and other income
                  
 
Revenues
(a)
  
-
   
-
        
-
   
-
   
9,228
  
9,516 
Intersegment sales
  
-
   
-
 
(1,651
)
         
(1,056
)    
-
  
Investment and other income
(note 4)
  
10
   
5
 
-
 
  
-
   
33
  
27 
  
10
   
5
 
(1,651
)
  
(1,056
  
9,261
  
9,543 
Expenses
      
 
       
 
Exploration
  
-
   
-
 
-
 
  
-
   
5
  
Purchases of crude oil and products
  
-
   
-
 
(1,649
)
  
(1,055
  
5,662
  
6,537 
Production and manufacturing
  
-
   
-
 
-
 
  
-
   
1,715
  
1,646 
Selling and general
  
14
   
54
 
(2
)
  
(1
)  
236
  
273 
Federal excise tax and fuel charge
  
-
   
-
 
-
   
-
   
463
  
412 
Depreciation and depletion
  
5
   
5
 
-
   
-
   
392
  
358 
Non-service
pension and postretirement benefit
  
36
   
26
 
-
   
-
   
36
  
26 
Financing
(note 6)
  
23
   
26
 
-
   
-
   
23
  
26 
Total expenses
  
78
   
111
 
(1,651
)
  
(1,056
)
 
 
8,532
  
9,279 
Income (loss) before income taxes
  
(68
)
  
(106
)
-
   
-
   
729
  
264 
Income taxes
  
1
 
  
(29
-
   
-
   
(483
)
 
68 
Net income (loss)
  
(69
  
(77
-
   
-
   
1,212
  
196 
Cash flows from (used in) operating activities
  
(34
)
  
(23
)
-
   
-
   
1,026
  
859 
Capital and exploration expenditures
 
(b)
  
11
   
6
 
-
   
-
   
429
  
284 
9
Table of Contents
IMPERIAL OIL LIMITED

(a)Included export sales to the United States of $1,561$
2,152
 million (2017(2018 - $1,045 $
1,561
million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b)As part of the implementation of Accounting Standard Update, Compensation – Retirement Benefits (Topic 715), beginning January 1, 2018, Corporate and other includes allnon-service pension and postretirement benefit expense. Prior to 2018, the majority of these costs were allocated to the operating segments. See note 2 for additional details.
(c)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to capitalfinance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.

10
Table of Contents
IMPERIAL OIL LIMITED

Six Months to June 30  Upstream Downstream Chemical
millions of Canadian dollars  2018   2017   2018   2017   2018    2017  

Revenues and other income

        

Revenues(a)

   4,307   3,498   12,477   9,883   632    562 

Intersegment sales

   1,307   907   694   551   147    129 

Investment and other income(note 5)

   4   10   41   233   -    (1
    5,618     4,415     13,212     10,667   779    690 

Expenses

        

Exploration

   9   22   -   -   -    - 

Purchases of crude oil and products

   2,947   2,142   10,097   8,023   418    394 

Production and manufacturing(b)

   2,118   2,024   856   775   103    101 

Selling and general(b)

   -   (4  370   373   44    41 

Federal excise tax

   -   -   809   815   -    - 

Depreciation and depletion

   618   634   100   95   7    6 

Non-service pension and postretirement benefit(b)

   -   -   -   -   -    - 

Financing(note 7)

   -   4   -   -   -    - 

Total expenses

   5,692   4,822   12,232   10,081   572    542 

Income (loss) before income taxes

   (74  (407  980   586   207    148 

Income taxes

   (24  (120  258   128   56    39 

Net income (loss)

   (50  (287  722   458   151    109 

Cash flows from (used in) operating activities

   327   425   1,366   358   199    77 

Capital and exploration expenditures(c)

   389   194   145   73   11    7 

Total assets as at June 30

   34,781   35,527   5,090   4,334   408    384 
Six Months to June 30  Corporate and other Eliminations Consolidated
millions of Canadian dollars  2018   2017   2018   2017   2018    2017  

Revenues and other income

        

Revenues(a)

   -   -   -   -   17,416    13,943 

Intersegment sales

   -   -   (2,148  (1,587  -    - 

Investment and other income(note 5)

   16   4   -   -   61    246 
    16   4   (2,148  (1,587  17,477    14,189 

Expenses

        

Exploration

   -   -   -   -   9    22 

Purchases of crude oil and products

   -   -   (2,145  (1,584  11,317    8,975 

Production and manufacturing(b)

   -   -   -   -   3,077    2,900 

Selling and general(b)

   56   -   (3  (3  467    407 

Federal excise tax

   -   -   -   -   809    815 

Depreciation and depletion

   10   9   -   -   735    744 

Non-service pension and postretirement benefit (b)

   53   -   -   -   53    - 

Financing(note 7)

   49   27   -   -   49    31 

Total expenses

   168   36   (2,148  (1,587    16,516      13,894 

Income (loss) before income taxes

   (152  (32  -   -   961    295 

Income taxes

   (41  (8  -   -   249    39 

Net income (loss)

   (111  (24  -   -   712    256 

Cash flows from (used in) operating activities

   (48  (14  -   -   1,844    846 

Capital and exploration expenditures(c)

   13   22   -   -   558    296 

Total assets as at June 30

   1,438   1,071   (327  (211  41,390    41,105 

             
Six Months to June 30
 
Upstream        
 
Downstream      
 
Chemical          
millions of Canadian dollars
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018 
Revenues and other income
         
 
Revenues
(a)
 
4,827
 
4,307
 
11,849
 
12,477
 
517
 
632 
Intersegment sales
 
2,064
 
1,307
 
935
 
694
 
120
 
147 
Investment and other income
(note 4)
 
4
 
4
 
29
 
41
 
-
 
 
6,895
 
5,618
 
12,813
 
13,212
 
637
 
779 
Expenses
      
 
Exploration
 
38
 
9
 
-
 
-
 
-
 
Purchases of crude oil and products
 
3,388
 
2,947
 
9,920
 
10,097
 
364
 
418 
Production and manufacturing
 
2,327
 
2,118
 
855
 
856
 
128
 
103 
Selling and general
 
-
 
-
 
380
 
370
 
44
 
44 
Federal excise tax and fuel charge
 
-
 
-
 
857
 
809
 
-
 
Depreciation and depletion
 
672
 
618
 
92
 
100
 
7
 
Non-service
pension and postretirement benefit
 
-
 
-
 
-
 
-
 
-
 
Financing
(note 6)
 
-
 
-
 
-
 
-
 
-
 
Total expenses
 
6,425
 
5,692
 
12,104
 
12,232
 
543
 
572 
Income (loss) before income taxes
 
470
 
(74
)
709
 
980
 
94
 
207 
Income taxes
 
(573
)
(24
)
194
 
258
 
22
 
56 
Net income (loss)
 
1,043
 
(50
)
515
 
722
 
72
 
151 
Cash flows from (used in) operating activities
 
865
 
327
 
1,155
 
1,366
 
100
 
199 
Capital and exploration expenditures
 
(b)
 
673
 
389
 
240
 
145
 
23
 
11 
Total assets as at June
  30 
(c) (d)
 
35,059
 
34,781
 
5,041
 
5,090
 
451
 
408 
       
Six Months to June 30
 
    Corporate and other 
Eliminations      
 
Consolidated       
millions of Canadian dollars
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018 
Revenues and other income
      
 
Revenues
(a)
 
-
 
-
 
-
 
-
 
17,193
 
17,416 
Intersegment sales
 
-
 
-
 
(3,119
)
(2,148
)
-
 
Investment and other income
(note 4)
 
17
 
16
 
-
 
-
 
50
 
61 
 
17
 
16
 
(3,119
)
(2,148
)
17,243
 
17,477 
Expenses
      
 
Exploration
 
-
 
-
 
-
 
-
 
38
 
Purchases of crude oil and products
 
-
 
-
 
(3,115
)
(2,145
)
10,557
 
11,317 
Production and manufacturing
 
-
 
-
 
-
 
-
 
3,310
 
3,077 
Selling and general
 
29
 
56
 
(4
)
(3
)
449
 
467 
Federal excise tax and fuel charge
 
-
 
-
 
-
 
-
 
857
 
809 
Depreciation and depletion
 
11
 
10
 
-
 
-
 
782
 
735 
Non-service
pension and postretirement benefit
 
72
 
53
 
-
 
-
 
72
 
53 
Financing
(note 6)
 
51
 
49
 
-
 
-
 
51
 
49 
Total expenses
 
163
 
168
 
(3,119
)
(2,148
)
16,116
 
16,516 
Income (loss) before income taxes
 
(146
)
(152
)
-
 
-
 
1,127
 
961 
Income taxes
 
(21
)
(41
)
-
 
-
 
(378
)
249 
Net income (loss)
 
(125
)
(111
)
-
 
-
 
1,505
 
712 
Cash flows from (used in) operating activities
 
(91
)
(48
)
-
 
-
 
2,029
 
1,844 
Capital and exploration expenditures
 
(b)
 
22
 
13
 
-
 
-
 
958
 
558 
Total assets as at June
  30 
(c) (d)
 
1,822
 
1,438
 
(444
)
(327
)
41,929
 
41,390 
11
Table of Contents
IMPERIAL OIL LIMITED

(a)Included export sales to the United States of $2,768$
3,816
 million (2017(2018 - $1,944 $
2,768
million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b)As part of the implementation of Accounting Standard Update, Compensation – Retirement Benefits (Topic 715), beginning    January 1, 2018, Corporate and other includes allnon-service pension and postretirement benefit expense. Prior to 2018, the majority of these costs were allocated to the operating segments. See note 2 for additional details.
(c)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to capitalfinance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.

(c)Effective January 1, 2019, Imperial adopted the Financial Accounting Standards Board’s standard,
Leases (Topic 842)
, as amended. As at June 30, 2019, Total assets include operating lease right of use assets of $
261
 million. An election was made not to restate prior periods. See note 8 for additional details.
(d)The company removed $570 million from Total assets and corresponding liabilities associated with the Government of Ontario’s revocation of its cap and trade legislation.

12
Table of Contents
IMPERIAL OIL LIMITED

4.  Accounting policy for revenue recognition

Imperial generally sells crude oil, natural gas and petroleum and chemical products under short-term agreements at prevailing market prices. In some cases, products may be sold under long-term agreements, with periodic price adjustments to reflect market conditions.

Revenue is recognized at the amount the company expects to receive when the customer has taken control, which is typically when title transfers and the customer has assumed the risks and rewards of ownership. The prices of certain sales are based on price indexes that are sometimes not available until the next period. In such cases, estimated realizations are accrued when the sale is recognized, and are finalized when final information is available. Such adjustments to revenue from performance obligations satisfied in previous periods are not significant. Payment for revenue transactions is typically due within 30 days. Future volume delivery obligations that are unsatisfied at the end of the period are expected to be fulfilled through ordinary production or purchases. These performance obligations are based on market prices at the time of the transaction and are fully constrained due to market price volatility.

“Revenues” and “Accounts receivable, less estimated doubtful accounts” primarily arise from contracts with customers. Long-term receivables are primarily fromnon-customers. Contract assets are mainly from marketing assistance programs and are not significant. Contract liabilities are mainly customer prepayments, loyalty programs and accruals of expected volume discounts, and are not significant.

5.  Investment and other income

Investment and other income included gains and losses on asset sales as follows:

         Six Months
   Second Quarter  to June 30
millions of Canadian dollars      2018        2017             2018         2017  
Proceeds from asset sales   9    39    21    222 
Book value of asset sales   -    9    2    10 
Gain (loss) on asset sales, before tax(a)   9    31    19    213 

Gain (loss) on asset sales, after tax(a)

   8    28    15    186 
(a)The six months ended June 30, 2017 included a gain of $174 million ($151 million after tax) from the sale of surplus property in Ontario.

6.

                 
 
    Second Quarter
  
  Six Months
  to June 30
 
millions of Canadian dollars
 
2019
  
2018
  
    2019
  
    2018
 
Proceeds from asset sales
  
14
   
9
   
36
      
21
 
Book value of asset sales
  
3
   
-
   
30
   
2
 
Gain (loss) on asset sales, before tax
  
11
   
9
   
6
   
19
 
Gain (loss) on asset sales, after tax
  
10
   
8
   
6
   
15
 
5.  Employee retirement benefits

The components of net benefit cost were as follows:

       Six Months
   Second Quarter to June 30
millions of Canadian dollars      2018       2017           2018       2017  
Pension benefits:     

Current service cost

   60   54   120   109 

Interest cost

   75   79   151   158 

Expected return on plan assets

   (100  (101  (201  (202

Amortization of prior service cost

   1   2   2   5 

Amortization of actuarial loss (gain)

   43   45   87   89 

Net periodic benefit cost

   79   79   159   159 
Other postretirement benefits:     

Current service cost

   4   4   8   8 

Interest cost

   6   6   11   12 

Amortization of actuarial loss (gain)

   1   2   3   4 

Net periodic benefit cost

   11   12   22   24 

IMPERIAL OIL LIMITED

7.

                 
 
    Second Quarter
  
  Six Months   to June 30
 
millions of Canadian dollars
 
2019
  
2018
  
    2019
  
   2018
 
Pension benefits:
            
Current service cost
  
57
   
60
   
114
   
120
 
Interest cost
  
81
   
75
   
162
   
151
 
Expected return on plan assets
  
(88
)  
(100
)  
(175
)  
(201
)
Amortization of prior service cost
  
-
   
1
   
-
   
2
 
Amortization of actuarial loss (gain)
  
38
   
43
   
75
   
87
 
Net periodic benefit cost
  
88
   
79
   
176
   
159
 
                 
Other postretirement benefits:
            
Current service cost
  
4
   
4
   
8
   
8
 
Interest cost
  
6
   
6
   
11
   
11
 
Amortization of actuarial loss (gain)
  
(1
)  
1
   
(1
)
  
3
 
Net periodic benefit cost
  
9
   
11
   
18
   
22
 
6.  Financing and additional notes and loans payable information

       Six Months
   Second Quarter to June 30
millions of Canadian dollars    2018   2017        2018      2017  
Debt-related interest   32   27   62   49 
Capitalized interest   (6  (10  (13  (22
Net interest expense   26   17   49   27 
Other interest   -   -   -   4 

Total financing

   26   17   49   31 

8.

                 
 
    Second Quarter
  
  Six Months
  to June 30
 
millions of Canadian dollars
 
2019
  
2018
  
     2019
  
    2018
 
Debt-related interest
  
34
   
32
   
73
   
62
 
Capitalized interest
  
(11
)  
(6
)  
(22
)  
(13
)
Net interest expense
  
23
   
26
   
51
   
49
 
Other interest
  
-
   
-
   
-
   
-
 
Total financing
  
23
   
26
   
51
   
49
 
7.  Long-term debt

   As at    As at  
   June 30    Dec 31  
millions of Canadian dollars  2018    2017  
Long-term debt   4,447    4,447 
Capital leases   545    558 

Total long-term debt

   4,992    5,005 

                 
     
As at
June 30
  
As at
Dec 31
 
millions of Canadian dollars
     
2019
  
2018
 
Long-term debt
        
4,447
   
4,447
 
Finance leases
(a)
        
521
   
531
 
Total long-term debt
        
4,968
   
4,978
 
(a)Maturity analysis of finance lease liabilities is disclosed in note 8.
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IMPERIAL OIL LIMITED
8.  Leases
The company generally purchases the property, plant and equipment used in operations, but there are situations where assets are leased, primarily rail cars, marine vessels, storage tanks and other moveable equipment. Right of use assets and lease liabilities are established on the balance sheet for leases with an expected term greater than one year, by discounting the amounts fixed in the lease agreement for the duration of the lease which is reasonably certain, considering the probability of exercising any early termination and extension options. The portion of the fixed payment related to service costs for long-term transportation agreements is excluded from the calculation of right of use assets and lease liabilities. Usually, assets are leased only for a portion of their useful lives and are accounted for as operating leases. In limited situations assets are leased for nearly all of their useful lives and are accounted for as finance leases. In general, leases are capitalized using the company’s incremental borrowing rate.
Variable payments under these lease agreements are not significant. Residual value guarantees, restrictions, or covenants related to leases, and transactions with related parties are also not significant. The company’s activities as a lessor are not material.
At adoption of the lease accounting change (see note 2), on January 1, 2019, an operating lease liability of $
298
 million was recorded and the operating lease right of use asset was $
298
 million. There was no cumulative earnings effect adjustment.
The table below summarizes the total lease cost incurred:
                 
 
 Second Quarter
 2019
  
Six Months
to June 30
2019
 
             
millions of Canadian dollars       Operating
leases
  Finance
leases
      Operating
leases
  Finance
leases
 
Operating lease cost  37      74    
Short-term and other (net of sublease rental income)  25      40    
                 
Amortization of right of use assets     14      27 
Interest on lease liabilities     10      20 
Total lease cost  62   24   114   47 
The following table summarizes the amounts related to operating leases and finance leases recorded on the Consolidated balance sheet:
                 
     
As at
June 30
2019
 
             
millions of Canadian dollars         Operating
leases
      Finance
leases
 
Right of use assets            
Included in Other assets, including intangibles, net        261    
Included in Property, plant and equipment, net           574 
Total right of use assets        261   574 
                 
Lease liability due within one year            
Included in Accounts payable and accrued liabilities        118   38 
Included in Notes and loans payable           25 
Long-term lease liability            
Included in Other long-term obligations        141   - 
Included in Long-term debt           521 
Total lease liability        259   584 

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IMPERIAL OIL LIMITED
The maturity analysis of the company’s lease liabilities, weighted average remaining lease term and weighted average discount rates applied are summarized below:
                 
     
As at
June 30
2019
 
             
millions of Canadian dollars, unless noted         Operating
leases
      Finance
leases
 
Maturity analysis of lease liabilities            
2019 remaining months        68   55 
2020        94   71 
2021        46   50 
2022        15   49 
2023        13   48 
2024        11   47 
2025 and beyond        30   1,086 
Total lease payments        277   1,406 
                 
Discount to present value        (18)  (822)
Total lease liability        259   584 
                 
Weighted average remaining lease term
(years)
        4   41 
Weighted average discount rate
(percent)
        2.7   7.5 
In addition to the operating lease liabilities in the table immediately above, at June 30, 2019, additional undiscounted commitments for leases not yet commenced totalled $1 million.
The table below summarizes the cash paid for amounts included in the measurement of lease liabilities and the right of use assets obtained in exchange for new lease liabilities:
                 
 
Second Quarter
2019
  
Six Months
to June 30
2019
 
             
millions of Canadian dollars     Operating
leases
      Finance
leases
      Operating
leases
      Finance
leases
 
Cash paid for amounts included in the measurement of lease liabilities            
Cash flows from operating activities  37      73    
Cash flows from financing activities     28      35 
                 
Non-cash right of use assets recorded for lease liabilities            
For January 1 adoption of
Leases (Topic 842)
        298    
In exchange for new lease liabilities during the period        34    
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IMPERIAL OIL LIMITED
At December 31, 2018, the company held
non-cancelable
operating leases covering primarily storage tanks, rail cars and marine vessels, with minimum undiscounted lease commitments totaling $291 million as indicated in the following table:
     
millions of Canadian dollars
 
As at
Dec 31
2018
 
Payments due by period
    
2019  
130
 
2020
  
82
 
2021
  
43
 
2022
  
13
 
2023
  
11
 
2024 and beyond
  
12
 
Total lease payments under minimum commitments
(a)
  
291
 
(a)Net rental cost under cancelable and
non-cancelable
operating leases incurred in 2018 was $
221
 million (2017 - $
206
 million, 2016 - $
253
million). Related rental income was not material.
9.  Other long-term obligations

   As at    As at  
   June 30    Dec 31  
millions of Canadian dollars  2018    2017  
Employee retirement benefits(a)   1,501    1,529 
Asset retirement obligations and other environmental liabilities(b)   1,471    1,460 
Share-based incentive compensation liabilities   129    99 
Other obligations(c)   842    692 

Total other long-term obligations

   3,943    3,780 
         
 
As at
  
As at
 
 
June 30
  
Dec 31
 
millions of Canadian dollars
 
2019
  
2018
 
Employee retirement benefits
(a)
  
1,153
   
1,195
 
Asset retirement obligations and other environmental liabilities
(b)
  
1,446
   
1,435
 
Share-based incentive compensation liabilities
  
95
   
78
 
Operating lease liability
(c)
  
141
   
-
 
Other obligations
  
241
   
235
 
Total other long-term obligations
  
3,076
   
2,943
 
(a)Total recorded employee retirement benefits obligations also included $56$
55
 million in current liabilities (2017(2018 - $56 $
55
million).
(b)Total asset retirement obligations and other environmental liabilities also included $101$
118
 million in current liabilities (2017(2018 - $101 $
118
million).
(c)Included carbon emission program obligations. Carbon emission program credits areEffective January 1, 2019, Imperial adopted the Financial Accounting Standards Board’s standard,
Leases (Topic 842)
, as amended. The standard requires all leases to be recorded under other assets, including intangibles, net.on the balance sheet as a right of use asset and liability. The long-term lease liability for operating leases is included in Other long-term obligations (see note 8).

On July 3,

10.  Financial instruments
The fair value of the company’s financial instruments is determined by reference to various market data and other appropriate valuation techniques. There are no material differences between the fair value of the company’s financial instruments and the recorded carrying value. At June 30, 2019 and December 31, 2018 the Governmentfair value of Ontario revoked its carbon emission cap and trade regulation, prohibiting all tradinglong-term debt ($
4,447
 million, excluding finance lease obligations) was primarily a level 2 measurement.
16
Table of emissions allowances. On July 25, 2018, the Government of Ontario introduced legislation proposing to repeal Ontario’s cap and trade legislation and providing the framework for the wind down of the cap and trade program. The company’s net carbon emission program credits (obligations) reflected in the Consolidated balance sheet approximately totalled $65 million at June 30, 2018. Imperial will continue to assess this financial position in light of these announcements and the anticipated legislative process.

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IMPERIAL OIL LIMITED

10.

11.  Common shares

   As of   As of 
   June 30   Dec 31 
thousands of shares  2018   2017 
Authorized   1,100,000             1,100,000  

Common shares outstanding

   802,680     831,242  

                 
thousands of shares
     
As of
June 30
2019
  
As of
Dec 31
2018
 
Authorized
        
1,100,000
   
1,100,000
 
Common shares outstanding
        
762,774
   
782,565
 
The
12-month
normal course issuer bid program that was in place during the second quarter of 20182019 came into effect in June of 2017 and was amended on April 27, 2018. The program enabled the company to purchase up to a maximum of 42,326,54540,391,196 common shares (5(
5
 percent of the total shares on June 13, 2017)2018), which included shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. Exxon Mobil Corporation participated to maintain its ownership percentage in Imperial at approximately 69.6 percent.

The company announced anothercurrent
12-month
normal course issuer bid program effectivecame into effect June 27, 2018 and2019, under which Imperial will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 40,391,19638,211,086 common shares (5 percent of the total shares on June 13, 2018)2019) which includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent.

The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.

The company’s common share activities are summarized below:

    Thousands of  
shares  
   Millions of  
dollars  
Balance as at December 31, 2016   847,599   1,566 
Issued under employee share-based awards   2   - 
Purchases at stated value   (16,359  (30
Balance as at December 31, 2017   831,242   1,536 
Issued under employee share-based awards   -   - 
Purchases at stated value   (28,562  (53

Balance as at June 30, 2018

   802,680   1,483 

                 
     
Thousands of
shares
  
Millions of
dollars
 
Balance as at December 31, 2017
        
831,242
   
     1,536
 
Issued under employee share-based awards
        
2
   
-
 
Purchases at stated value
        
(48,679
)  
(90
)
Balance as at December 31, 2018
        
782,565
   
1,446
 
Issued under employee share-based awards
        
-
   
-
 
Purchases at stated value
        
(19,791
)  
(36
)
Balance as at June 30, 2019
        
   762,774
   
1,410
 
The following table provides the calculation of basic and diluted earnings per common share:

   Second Quarter 

Six Months

to June 30

   2018   2017   2018   2017 
Net income (loss) per common share - basic       
Net income (loss)(millions of Canadian dollars)   196    (77  712    256 
Weighted average number of common shares outstanding(millions of shares)   816.1    847.0   822.6    847.3 
Net income (loss) per common share(dollars)   0.24    (0.09  0.86    0.30 
Net income (loss) per common share - diluted       
Net income (loss)(millions of Canadian dollars)   196    (77  712    256 
Weighted average number of common shares outstanding(millions of shares)   816.1    847.0   822.6    847.3 
Effect of employee share-based awards(millions of shares)   2.7    2.9   2.6    2.8 

Weighted average number of common shares outstanding, assuming dilution(millions of shares)

   818.8    849.9   825.2    850.1 

Net income (loss) per common share(dollars)

   0.24    (0.09  0.86    0.30 

share and the dividends declared by the company on its outstanding common shares:

                 
 
    Second Quarter
  
Six Months
to June 30
 
 
2019
  
2018
  
2019
  
   2018
 
Net income (loss) per common share - basic
            
Net income (loss)
(millions of Canadian dollars)
  
1,212
   
196
   
1,505
   
712
 
Weighted average number of common shares outstanding
(millions of shares)
  
767.4
   
816.1
   
772.5
   
822.6
 
Net income (loss) per common share
(dollars)
  
1.58
   
0.24
   
1.95
   
0.86
 
                 
Net income (loss) per common share - diluted
            
Net income (loss)
(millions of Canadian dollars)
  
1,212
   
196
   
1,505
   
712
 
Weighted average number of common shares outstanding
(millions of shares)
  
767.4
   
816.1
   
772.5
   
822.6
 
Effect of employee share-based awards
(millions of shares)
  
2.5
   
2.7
   
2.4
   
2.6
 
Weighted average number of common shares outstanding, assuming dilution 
(millions of shares)
  
769.9
   
818.8
   
774.9
   
825.2
 
Net income (loss) per common share
(dollars)
  
1.57
   
0.24
   
1.94
   
0.86
 
                 
Dividends per common share - declared
(dollars)
  
0.22
   
0.19
   
0.41
   
0.35
 
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IMPERIAL OIL LIMITED

11. Earnings reinvested

   Second Quarter  

Six Months

to June 30

 
millions of Canadian dollars  2018  2017  2018  2017 
Earnings reinvested at beginning of period   24,861   25,558   24,714   25,352 
Net income (loss) for the period   196   (77  712   256 
Share purchases in excess of stated value   (853  (121  (1,090  (121
Dividends declared   (155  (136  (287  (263
Earnings reinvested at end of period   24,049   25,224   24,049   25,224 

12.  Other comprehensive income (loss) information

Changes in accumulated other comprehensive income (loss):

millions of Canadian dollars  2018       2017  

Balance at January 1

   (1,815  (1,897

Postretirement benefits liability adjustment:

   

Current period change excluding amounts reclassified
from accumulated other comprehensive income

   (19  41 

Amounts reclassified from accumulated other comprehensive income

   67   72 

Balance at June 30

   (1,767  (1,784

                 
millions of Canadian dollars
     
2019
  
   2018
 
Balance at January 1
        
(1,517
)  
(1,815
)
Postretirement benefits liability adjustment:
            
Current period change excluding amounts reclassified from accumulated other comprehensive income
        
18
   
(19
)
Amounts reclassified from accumulated other comprehensive income
        
55
   
67
 
Balance at June 30
        
(1,444
)  
(1,767
)
Amounts reclassified out of accumulated other comprehensive income (loss) -
before-tax
income (expense):

   Second Quarter 

Six Months

to June 30

millions of Canadian dollars  2018   2017   2018   2017  

Amortization of postretirement benefits liability adjustment
included in net periodic benefit cost(a)

   (46  (49  (92  (98
                 
 
    Second Quarter
  
Six Months
to June 30
 
millions of Canadian dollars
 
2019
  
2018
  
   2019
  
    2018
 
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost
(a)
  
(37
)  
(46
)  
(74
)  
(92
)
(a)This accumulated other comprehensive income component is included in the computation of net periodic benefit cost, (note 6)5).

Income tax expense (credit) for components of other comprehensive income (loss):

   Second Quarter  

Six Months

to June 30

millions of Canadian dollars  2018    2017    2018   2017  
Postretirement benefits liability adjustments:       

Postretirement benefits liability adjustment (excluding amortization)

   -    -    (7  16 

Amortization of postretirement benefits liability adjustment included
in net periodic benefit cost

   13    13    25   26 
Total   13    13    18   42 

                 
 
    Second Quarter
  
Six Months 
to June 30
 
millions of Canadian dollars
 
2019
  
  2018
  
   2019
  
   2018
 
Postretirement benefits liability adjustments:
            
Postretirement benefits liability adjustment (excluding amortization)
  
-
   
-
   
7
   
(7
)
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost
  
9
   
13
   
19
   
25
 
Total
  
9
   
13
   
26
   
18
 
13.  Recently issued accounting standards

Effective January 1, 2019,2020, Imperial will adopt the Financial Accounting Standards Board’s standard,Leasesupdate,
Financial Instruments - Credit Losses (Topic 842)326)
, as amended. The standard requires all leases with an initial term greater than one yeara valuation allowance for credit losses be recordedrecognized for certain financial assets that reflects the current expected credit loss over the asset’s contractual life. The valuation allowance considers the risk of loss, even if remote and considers past events, current conditions and expectations of the future. Imperial is evaluating the standard and its effect on the balance sheet as a rightcompany’s financial statements.
18
Table of use asset and a lease liability. The company acquired lease accounting software to facilitate implementation, and is currently installing, configuring and testing the software. Based on leases outstanding at the end of 2017, the company estimates the operating lease right of use asset and lease liability would have been in the range of $200 million to $250 million at that time. The effect on Imperial’s consolidated balance sheet as a result of implementing the standard on January 1, 2019 could differ considerably depending on operating leases commenced in 2018 as well as interest rates and other factors such as the expiry or renewal of leases during the year.

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IMPERIAL OIL LIMITED

Item 2.
Management’s discussion and analysis of financial condition and results of operations

Operating results

Second quarter 20182019 vs. second quarter 2017

2018

The company’s net income for the second quarter of 20182019 was $1,212 million or $1.57 per share on a diluted basis, up from net income of $196 million or $0.24 per share on a diluted basis, an increase of $273 million compared to the net loss of $77 million or $0.09 per share, forin the same period last year.

of 2018. Second quarter 2019 results include a favourable impact, largely

non-cash,
of $662 million associated with the Alberta corporate income tax rate decrease. On June 28, 2019, the Alberta government enacted a 4 percent decrease in the provincial tax rate, from 12 percent to 8 percent by 2022.
Upstream recorded a net lossincome was $985 million in the second quarter, reflecting the favourable impact associated with the decreased Alberta corporate income tax rate of $6$689 million. Excluding this impact, second quarter 2019 net income was $296 million, an increase of $302 million compared to a net loss of $201$6 million in the same period of 2017.2018. Improved results reflect higher volumes of about $310 million, primarily at Syncrude, Kearl and Norman Wells, as well as the impact of higher Canadian crude oil realizations of about $280 million, partially offset$80 million. Results were negatively impacted by higher royalty costs of about $50 million and higher operating expenses of about $60 million and higher royalties of about $50 million mainly associated with planned turnarounds.

million.

West Texas Intermediate (WTI) averaged US$67.9159.91 per barrel in the second quarter of 2018, up2019, down from US$48.2067.91 per barrel in the same quarter of 2017.2018. Western Canada Select (WCS) averaged US$48.8149.31 per barrel and US$37.1848.81 per barrel respectively for the same periods. The WTI / WCS differential widenednarrowed during the second quarter of 2019 to average approximately US$11 per barrel for the quarter, compared to around US$19 per barrel in the same period of 2018.
The Canadian dollar averaged US$0.75 in the second quarter of 2019, a decrease of US$0.03 from the second quarter of 2018.
Imperial’s average Canadian dollar realizations for bitumen increased in the quarter, supported primarily by lower diluent costs. Bitumen realizations averaged $57.19 per barrel in the second quarter of 2018,2019, up from approximately US$11$48.90 per barrel in the same period of 2017.

The Canadian dollar averaged US$0.78 in the second quarter of 2018, an increase of US$0.04 from the second quarter of 2017.

Imperial’s2018. The company’s average Canadian dollar realizations for bitumen and synthetic crudes increasedcrude declined generally in line with WTI in the North American benchmarks,quarter, adjusted for changes in exchange rates and transportation costs. BitumenSynthetic crude realizations averaged $48.90$79.96 per barrel forin the second quarter of 2018, an increase of $10.68 per barrel versus the second quarter of 2017. Synthetic crude realizations averaged2019, compared to $86.31 per barrel an increase of $21.24 per barrel forin the same period of 2017.

2018. 

Gross production of Cold Lake bitumen averaged 133,000135,000 barrels per day in the second quarter, compared to 160,000up from 133,000 barrels per day in the same period last year. Lower volumes were primarily due to planned maintenance and production timing.

of 2018.

Gross production of Kearl bitumen averaged 180,000207,000 barrels per day in the second quarter (128,000(147,000 barrels Imperial’s share), up from 171,000180,000 barrels per day (121,000(128,000 barrels Imperial’s share) duringin the second quarter of 2017.2018. Higher production was mainly the result of mining optimization, partially offset by planned turnaround activities.

due to improved reliability.

The company’s share of gross production from Syncrude averaged 50,00080,000 barrels per day, up from 27,00050,000 barrels per day in the second quarter of 2017.2018. Higher production was mainly due to the absence of the Syncrude Mildred Lake upgrader fire that occurred in March 2017, partially offset by planned turnaround activities and a power disruption that occurred on June 20, 2018, resulting in a complete shutdown of all processing units for the remainder of the second quarter. Recoveryimpacts from the 2018 power outage is ongoing with partial production restored in July and return to full rates anticipated in September.

disruption.

Downstream net income was $201$258 million in the second quarter, up from $78$201 million in the second quarter of 2017.2018. Earnings increased mainlyprimarily due to stronger marginslower net turnaround impacts of about $390$150 million partially offset by the impact of increased planned turnaround activityreliability events of about $200$70 million, andincluding the impact of a stronger Canadian dollar.

Sarnia tower incident.

Refinery throughput averaged 363,000344,000 barrels per day, up from 358,000compared to 363,000 barrels per day in the second quarter of 2017.2018. Capacity utilization increasedwas 81 percent, compared to 86 percent from 85 percent in the second quarter of 2017.

2018. Reduced throughput was mainly due to the impact of a planned turnaround and the tower incident at Sarnia, partially offset by the absence of the 2018 planned turnaround at Strathcona.


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IMPERIAL OIL LIMITED
Petroleum product sales were 510,000477,000 barrels per day, up from 486,000compared to 510,000 barrels per day in the second quarter of 2017. Sales growth continues2018. Lower petroleum product sales were mainly due to be driven by optimization across the full Downstream value chain, and the expansion of Imperial’s logistics capabilities.

IMPERIAL OIL LIMITED

lower refinery throughput.

Chemical net income of $78 million in the second quarter matched best-ever quarterly results. Earnings increased $14 million from the same period of 2017, benefitting from increased volumes and margins.

Corporate and other expenses were $77was $38 million in the second quarter, compared to $18$78 million from the same quarter of 2018, primarily reflecting lower margins.

Corporate and other expenses were $69 million in the second quarter, compared to $77 million in the same period of 2017, primarily due to higher share-based compensation charges. In addition, as part2018.

Table of the implementation of the Financial Accounting Standards Board’s update, Compensation – Retirement Benefits (Topic 715):Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, beginning January 1, 2018, Corporate and other includes allnon-service pension and postretirement benefit expenses. Prior to 2018, the majority of these costs were allocated to the operating segments.

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IMPERIAL OIL LIMITED

Six months 20182019 vs. six months 2017

2018

Net income in the first six months of 20182019 was $712$1,505 million, or $0.86$1.94 per share on a diluted basis, an increase of $456 million compared to aup from net income of $256$712 million or $0.30$0.86 per share in the first six months of 2017.

2018. 2019 results include a favourable impact, largely

non-cash,
of $662 million associated with the Alberta corporate income tax rate decrease. On June 28, 2019, the Alberta government enacted a 4 percent decrease in the provincial tax rate, from 12 percent to 8 percent by 2022.
Upstream recordednet income was $1,043 million for the first six months of the year, reflecting the favourable impact associated with the decreased Alberta corporate income tax rate of $689 million. Excluding this impact, 2019 net income was $354 million, an increase of $404 million compared to a net loss of $50 million in the first six months of 2018, compared to a net loss of $287 million from the same period of 2017.2018. Improved results reflect higher volumes of about $330 million, primarily at Syncrude, Kearl and Norman Wells, as well as the impact of higher Canadian crude oil realizations of about $350$260 million partially offsetand favourable foreign exchange impacts of about $60 million. Results were negatively impacted by the impact of higher operating costsexpenses of about $50$180 million mainly associated with planned turnarounds. Results also reflect the impact ofand higher royalties and the strengthening of the Canadian dollar compared to the prior year.

about $80 million.

West Texas Intermediate averaged US$65.4457.45 per barrel in the first six months of 2018, up2019, down from US$49.9665.44 per barrel in the prior year.same period of 2018. Western Canada Select averaged US$43.7445.88 per barrel and US$37.2243.74 per barrel respectively for the same periods. The WTI / WCS differential widenednarrowed to average approximately US$2212 per barrel in the first six months of 2018,2019, from approximatelyaround US$1322 per barrel in the same period of 2017.

2018.

The Canadian dollar averaged US$0.780.75 in the first six months of 2018, an increase2019, a decrease of about US$0.03$0.03 from the same period of 2017.

in 2018.

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 $41.84 per barrel for the first six months of 2018,2019, supported primarily by lower diluent costs and an increase of $4.63in WCS. Bitumen realizations averaged $53.20 per barrel, versus 2017. Synthetic crude realizations averaged $81.24 per barrel, an increase of $14.24up from $41.84 per barrel from the same period of 2017.

in 2018. The company’s average Canadian dollar realizations for synthetic crude declined generally in line with WTI, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $74.77 per barrel, compared to $81.24 per barrel from the same period in 2018.

Gross production of Cold Lake bitumen averaged 143,000140,000 barrels per day in the first six months of 2018,2019, compared to 159,000143,000 barrels per day fromin the same period of 2017. Lower volumes were primarily due to planned maintenance and production timing.

2018.

Gross production of Kearl bitumen averaged 181,000193,000 barrels per day in the first six months of 2018 (128,0002019 (137,000 barrels Imperial’s share) up from 177,000181,000 barrels per day (125,000(128,000 barrels Imperial’s share) fromin the same period of 2017.

2018. Higher production was mainly due to improved reliability.

During the first six months of 2018,2019, the company’s share of gross production from Syncrude averaged 57,00079,000 barrels per day, up from 46,00057,000 barrels per day fromin the same period of 2017.2018. Higher production was mainly due to the absence of the impact associated with the March 2017 fire at the Syncrude Mildred Lake upgrader, partially offset by planned turnaround activities and a power disruption that occurred on June 20, 2018, resulting in a complete shutdown of all processing units for the remainder of the second quarter. Recoveryimpacts from the 2018 power outage is ongoing with partial production restored in July and return to full rates anticipated in September.

disruption.

Downstream net income was $515 million for the first six months of 2019, compared to $722 million an increasefor the same period of $264 million versus the prior year. Higher earnings reflect stronger2018. Earnings were negatively impacted by lower margins of about $690$210 million, reliability events of about $130 million, including the Sarnia tower incident, and lower sales volumes of about $70 million. These factors were partially offset by the impact of increased plannedlower net turnaround activityimpacts of about $200$150 million the impact of a stronger Canadian dollarand favourable foreign exchange effects of about $60 million and the absence of the $151 million gain on the sale of a surplus property in 2017.

$70 million.

Refinery throughput averaged 386,000364,000 barrels per day in the first six months of 2018, up from 378,0002019, compared to 386,000 barrels per day fromin the same period of 2017.2018. Capacity utilization increasedwas 86 percent, compared to 91 percent from 90 percent in the same period of 2017.

2018. Reduced throughput was mainly due to the impact of a planned turnaround and the tower incident at Sarnia, partially offset by the absence of the 2018 planned turnaround at Strathcona.

Petroleum product sales were 494,000477,000 barrels per day in the first six months of 2018, up from 486,0002019, compared to 494,000 barrels per day fromin the same period of 2017. Sales growth continues2018. Lower petroleum product sales were mainly due to be driven by optimization across the full Downstream value chain, and the expansionlower refinery throughput.

Table of Imperial’s logistics capabilities.

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IMPERIAL OIL LIMITED
Chemical net income was $151$72 million up from $109 million in the first half of 2017, primarily due to higher margins and volumes.

IMPERIAL OIL LIMITED

Corporate and other expenses were $111 million for the first six months of 2018,2019, compared to $24$151 million in the same period of 2017,2018, primarily due to higher share-based compensation charges. In addition, beginning January 1, 2018, reflecting lower margins.

Corporate and other includes allnon-service pension and postretirement benefit expenses. Priorexpenses were $125 million in the first six months of 2019, compared to 2018,$111 million in the majoritysame period of these costs were allocated to the operating segments.

2018.


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IMPERIAL OIL LIMITED

Liquidity and capital resources

Cash flow generated from operating activities was $859$1,026 million in the second quarter, an increase of $367up from $859 million fromin the corresponding period in 2017,2018, reflecting higher earnings.

earnings partially offset by working capital effects.

Investing activities used net cash of $379$429 million in the second quarter, compared with $281$379 million used in the same period of 2017.

2018.

Cash used in financing activities was $1,032$521 million in the second quarter, compared with $260$1,032 million used in the second quarter of 2017.2018. Dividends paid in the second quarter of 20182019 were $132$147 million. The per share dividend paid in the second quarter was $0.16,$0.19, up from $0.15$0.16 in the same period of 2017.2018. During the second quarter, the company, under its share purchase program, purchased about 9.8 million shares for $368 million, including shares purchased from Exxon Mobil Corporation. In the second quarter of 2018, the company purchased about 21.4 million shares for $893 million.

million following the increase of its share purchase program.

The company’s cash balance was $873$1,087 million at June 30, 2018,2019, versus $623$873 million at the end of second quarter 2017.

2018.

Cash flow generated from operating activities was $1,844$2,029 million in the first six months of 2018, compared with $8462019, up from $1,844 million fromin the same period of 2017,2018, primarily reflecting higher earnings and working capital effects.

earnings.

Investing activities used net cash of $744$892 million in the first six months of 2018,2019, compared with $220$744 million used in 2018, primarily reflecting higher additions to property, plant and equipment.
Cash used in financing activities was $1,038 million in the first six months of 2019, compared with $1,422 million used in the same period of 2017, reflecting higher additions to property, plant and equipment, and lower proceeds from asset sales.

Cash used in financing activities was $1,422 million in the first six months of 2018, compared with $394 million used in the same period of 2017.2018. Dividends paid in the first six months of 20182019 were $266$296 million. The per share dividend paid in the first six months of 20182019 was $0.32,$0.38, up from $0.30 from$0.32 in the same period of 2017.2018. During the first six months of 2019, the company, under its share purchase program, purchased about 19.8 million shares for $729 million, including shares purchased from Exxon Mobil Corporation. In the first six months of 2018, the company purchased about 28.6 million shares for $1,143 million including shares purchased from Exxon Mobil Corporation.

On April 27, 2018,following the company announced by news release that it had received final approval from the Toronto Stock Exchange for an amendment toincrease of its normal course issuer bid to increase the number of common shares that it may purchase. Under the amendment, the number of common shares eligible forshare purchase increased to a maximum of 42,326,545 common shares during the period June 27, 2017 to June 26, 2018.

program.

On June 22, 2018,21, 2019, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid and will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 40,391,19638,211,086 common shares during the period June 27, 20182019 to June 26, 2019.2020. This maximum includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent. The program will end should the company purchase the maximum allowable number of shares, or on June 26, 2019.

2020.

Recently issued accounting standards

Effective January 1, 2019,2020, Imperial will adopt the Financial Accounting Standards Board’s standard,Leasesupdate,
Financial Instruments - Credit Losses (Topic 842)326)
, as amended. The standard requires all leases with an initial term greater than one yeara valuation allowance for credit losses be recordedrecognized for certain financial assets that reflects the current expected credit loss over the asset’s contractual life. The valuation allowance considers the risk of loss, even if remote and considers past events, current conditions and expectations of the future. Imperial is evaluating the standard and its effect on the balance sheet as a rightcompany’s financial statements.

Table of use asset and a lease liability. The company acquired lease accounting software to facilitate implementation, and is currently installing, configuring and testing the software. Based on leases outstanding at the end of 2017, the company estimates the operating lease right of use asset and lease liability would have been in the range of $200 million to $250 million at that time. The effect on Imperial’s consolidated balance sheet as a result of implementing the standard on January 1, 2019 could differ considerably depending on operating leases commenced in 2018 as well as interest rates and other factors such as the expiry or renewal of leases during the year.

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IMPERIAL OIL LIMITED

Forward-looking statements

Statements in this report regardingof future events or conditions in this report, including projections, targets, expectations, estimates, and business plans are forward-looking statements. Disclosure related to the share purchase program and capital activities constitute forward-looking statements. Forward-looking statements are based on the company’s current expectations, estimates, projections and assumptions at the time the statements are made. Actual future financial and operating results, including expectations and assumptions concerning demand growth and energy source, supply and mix; commodity prices and foreign exchange rates; production rates, growth and mix; applicable laws and government policies; financing sources; and capital and environmental expenditures could differ materially due todepending on a number of factors. These factors include changes in the impactsupply of market conditions,and demand for crude oil, natural gas, and petroleum and petrochemical products and resulting price and margin impacts; transportation for accessing markets; political or regulatory events, including changes in law or governmental policy, changesgovernment policy; environmental risks inherent in operating conditions and costs, changes in project schedules, operating performance, demand for oil and gas commercial negotiationsexploration and production activities; environmental regulation; currency exchange rates; availability and allocation of capital; unanticipated operational disruptions; project management and schedules; operational hazards and risks; cybersecurity incidents; disaster response preparedness; and other factors discussed in Item 1A risk factors and Item 7 management’s discussion and analysis of financial condition and results of operations of Imperial Oil Limited’s most recent annual report on Form
10-K.
Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to Imperial. Imperial’s actual results may differ materially from those expressed or other technicalimplied by its forward-looking statements and economic factors.

readers are cautioned not to place undue reliance on them. Imperial undertakes no obligation to update any forward-looking statements contained herein, except as required by applicable law.

The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.
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IMPERIAL OIL LIMITED

Item 3.

Quantitative and qualitative disclosures about market risk

Information about market risks for the six months ended June 30, 2018,2019, does not differ materially from that discussed on page 4925 of the company’s annual report on Form
10-K
for the year ended December 31, 2017. The following table details those earnings sensitivities that have been updated from the fiscalyear-end to reflect current market conditions.

Earnings Sensitivities (a)

millions of Canadian dollars after tax

One dollar (U.S.) per barrel change in heavy crude oil prices

+ (-)75

Ten cents per thousand cubic feet decrease (increase) in natural gas prices

+ (-)4

One cent decrease (increase) in the value of the Canadian dollar versus the U.S. dollar

+ (-)    100
(a)

Each sensitivity calculation shows the impact on net income resulting from a change in one factor, after tax and royalties and holding all other factors constant. These sensitivities have been updated to reflect current conditions. They may not apply proportionately to larger fluctuations.

2018.
Item 4.

Controls and procedures

As indicated in the certifications in Exhibit 31 of this report, the company’s principal executive officer and principal financial officer have evaluated the company’s disclosure controls and procedures as of June 30, 2018.2019. 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.

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IMPERIAL OIL LIMITED

PART II. OTHER INFORMATION

Item 1.Legal proceedings

On May 15, 2018, Imperial entered a guilty plea in the Ontario Court of Justice with respect to committing the offence of discharging or causing or permitting the discharge of a contaminant, namely coker stabilizer thermocracked gas and coker stabilizer thermocracked gas condensate, on June 11, 2015 from Imperial’s refinery in Sarnia, Ontario 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. Imperial is required 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

    Total number of    
shares purchased    
   

Average price paid    
per share    

(Canadian dollars)    

   

Total number of    
shares purchased    

as part of publicly    

announced plans    

or programs    

   

Maximum number
of shares that may

yet be purchased

under the plans or

programs (a) (b)

   

April 2018

         

(April 1 - April 30)

   675,513          34.13          675,513          21,373,108  

May 2018

         

(May 1 - May 31)

   10,876,173          41.39          10,876,173          10,496,935  

June 2018

         

(June 1 - June 26) (a)

   9,322,449          42.80          9,322,449          -  

(June 27 - June 30) (b)

   482,763          43.50          482,763          39,908,433  (c)
                   
 
Total number of
shares purchased
  
Average price paid
per share
(Canadian dollars)
  
Total number of
shares purchased
as part of publicly
announced plans
or programs
  
Maximum number
of shares that may
yet be purchased
under the plans or
programs 
(a) (b)
  
   
April 2019
             
(April 1 - April 30)
  
3,378,870
   
38.43
   
3,378,870
   
6,436,046
  
May 2019
             
(May 1 - May 31)
  
3,539,821
   
37.63
   
3,539,821
   
2,896,225
  
June 2019
             
(June 1 - June 26)
(a)
  
2,896,225
   
36.42
   
2,896,225
   
-
  
(June 27 - June 30)
(b)
  
-
   
-
   
-
   
38,211,086
  
(c)
   
(a)On June 22, 2017, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a The
12-month
normal course issuer bid and continuationprogram that was in place during the second quarter of its share purchase program.2019, came into effect on June 27, 2018. The program enabled the company to purchase up to a maximum of 25,395,92740,391,196 common shares during(5 percent of the periodtotal shares on June 27, 2017 to June 26, 2018,13, 2018), which includesincluded shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. Exxon Mobil Corporation participated to maintain its ownership percentage in Imperial at approximately 69.6 percent.

On April 27, 2018, the company announced by news release that it had received final approval from the Toronto Stock Exchange for an amendment to its normal course issuer bid to increase the number of common shares that it may purchase. Under the amendment, the number of common shares eligible for purchase increased to a maximum of 42,326,545 common shares during the period June 27, 2017 to June 26, 2018. No other provisions of the normal course issuer bid were changed.

The program ended on June 26, 2018.2019. Upon expiration, the company had purchased a total of 41,152,059 shares (of the maximum 42,326,54540,391,196 shares available)allowed under the program.

(b)On June 22, 2018,21, 2019, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid and will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 40,391,19638,211,086 common shares during the period June 27, 20182019 to June 26, 2019.2020. This maximum includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent. The program will end should the company purchase the maximum allowable number of shares, or on June 26, 2019.2020.

(c)In its most recent quarterly earnings release, the company stated that it currently anticipates exercising its share purchases uniformly over the duration of the program. Purchase plans may be modified at any time without prior notice.

The company will continue to evaluate its share purchase program in the context of its overall capital activities.

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Item 6. Exhibits

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.

(101) Interactive data files.

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IMPERIAL OIL LIMITED

SIGNATURES

Pursuant to the requirements of the
Securities Exchange
Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  
Imperial Oil Limited
(Registrant)
Date:    August 7, 2019
/s/ Daniel E. Lyons
---------------------------------------------------
  (Registrant)
Date:   August 1, 2018

/s/ Daniel E. Lyons

------------------------------------------------

(Signature)
  (Signature)
Daniel E. Lyons
  Daniel E. Lyons
Senior vice-president, finance and
administration, and controller
(Principal accounting officer)
Date:    August 7, 2019
/s/ Cathryn Walker
---------------------------------------------------
  

Senior vice-president, finance and

administration, and controller

(Signature)
  (Principal accounting officer)
Date:   August 1, 2018

/s/

Cathryn Walker

------------------------------------------------

  (Signature)
Cathryn Walker
Assistant corporate secretary

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