Table of Contents
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 September 30, 2019March 31, 2020
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
 
(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
 
(Address of principal executive offices)
  
(Postal Code)
Registrant’s telephone number, including area code:
1-800-567-3776
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol
 
Name of each exchange on
which registered
None
  
None
The registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
  YES  
  
✓
  
   NO  
        
The registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
  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).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 September 30, 2019March 31, 2020 was 752,947,924.734,076,755.
Table of Contents
IMPERIAL OIL LIMITED
Table of contents
Page
PART I.   FINANCIAL INFORMATION
  
3
 
Item 1.   Financial statements
  
3
 
Consolidated statement of income
  
3
 
Consolidated statement of comprehensive income
  
4
 
Consolidated balance sheet
  
5
 
Consolidated statement of shareholders’ equity
  
6
 
Consolidated statement of cash flows
  
7
 
Notes to the consolidated financial statements
  
8
 
Item 2.   Management’s discussion and analysis of financial condition and results of operations
  
19
16
 
Item 3.   Quantitative and qualitative disclosures about market risk
  
23
21
 
Item 4.   Controls and procedures
  
23
21
 
     
PART II.   OTHER INFORMATION
22
Item 1A. Risk factors
  
24
22
 
Item 2.   Unregistered sales of equity securities and use of proceeds
  
24
23
 
Item 6.   Exhibits
  
25
24
 
     
SIGNATURES
  
26
25
 
 
In this report all dollar amounts are expressed in Canadian dollars unless otherwise stated. This report should be read in conjunction with the company’s annual report on Form
10-K
for the year ended December 31, 2018.2019. 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
Table of Contents
IMPERIAL OIL LIMITED
PART I.  FINANCIAL INFORMATION
Item 1.
Financial statements
Consolidated statement of income (U.S. GAAP, unaudited)
 
    Third Quarter
  
    Nine Months
    to September 30
 
millions of Canadian dollars
 
2019
  
2018
  
2019
  
2018
 
Revenues and other income
            
Revenues
(a)
  
8,687
   
9,697
   
25,880
 
  
27,113
 
Investment and other income
(note 4)
  
49
   
35
   
99
 
  
96
 
Total revenues and other income
  
8,736
   
9,732
   
25,979
 
  
27,209
 
            
 
    
Expenses
        
 
   
Exploration
  
4
   
4
   
42
 
  
13
 
Purchases of crude oil and products
(b)
  
5,399
   
6,099
   
15,956
 
  
17,416
 
Production and manufacturing
(c)
  
1,601
   
1,480
   
4,911
 
  
4,557
 
Selling and general
(c)
  
217
   
224
   
666
 
  
691
 
Federal excise tax and fuel charge
  
486
   
432
   
1,343
 
  
1,241
 
Depreciation and depletion
  
419
   
410
   
1,201
 
  
1,145
 
Non-service
pension and postretirement benefit
  
36
   
27
   
108
 
  
80
 
Financing
(d) (note 6)
  
20
   
30
   
71
 
  
79
 
Total expenses
  
8,182
   
8,706
   
24,298
 
  
25,222
 
            
 
    
Income (loss) before income taxes
  
554
   
1,026
   
1,681
 
  
1,987
 
            
 
    
Income taxes
  
130
   
277
   
(248
)
  
526
 
            
 
    
Net income (loss)
  
424
   
749
   
1,929
 
  
1,461
 
     
Per share information
(Canadian dollars)
   
                 
Net income (loss) per common share - basic
(note 11)
  
0.56
   
0.94
   
2.51
 
  
1.79
 
Net income (loss) per common share - diluted
(note 11)
  
0.56
   
0.94
   
2.51
 
  
1.79
 
            
 
    
(a)
Amounts from related parties included in revenues.
  
2,313
   
1,809
   
6,269
 
  
4,951
 
            
 
    
(b)
Amounts to related parties included in purchases of crude oil and products.
  
717
   
1,071
   
2,353
 
  
3,337
 
            
 
    
(c)
Amounts to related parties included in production and manufacturing, and selling and general expenses.
  
157
   
136
   
479
 
  
433
 
            
 
    
(d)
Amounts to related parties included in financing, (note 6).
  
23
   
22
   
75
 
  
64
 
The information in the notes to consolidated financial statements is an integral part of these statements.

Table of Contents
IMPERIAL OIL LIMITED
Consolidated statement of comprehensive income (U.S. GAAP, unaudited)
                 
 
    Third Quarter
  
    Nine Months
    to September 30
 
millions of Canadian dollars
 
2019
  
2018
  
2019
  
2018
 
Net income (loss)
  
424
   
749
   
1,929
   
1,461
 
                 
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
   
34
   
83
   
101
 
Total other comprehensive income (loss)
  
28
   
34
   
101
   
82
 
            
Comprehensive income (loss)
  
452
   
783
   
2,030
   
1,543
 
         
 
    Three Months
    to March 31
 
millions of Canadian dollars
 
2020
  
2019
 
Revenues and other income
      
Revenues
(a)
  
6,664
   
7,965
 
Investment and other income
(note 4)
  
26
   
17
 
Total revenues and other income
  
6,690
   
7,982
 
         
Expenses
      
Exploration
  
1
   
33
 
Purchases of crude oil and products
(b) (note 13)
  
4,226
   
4,895
 
Production and manufacturing
(c)
  
1,579
   
1,595
 
Selling and general
(c)
  
166
 
  
213
 
Federal excise tax and fuel charge
  
451
 
  
394
 
Depreciation and depletion
 (note 13)
  
473
 
  
390
 
Non-service
pension and postretirement benefit
  
30
 
  
36
 
Financing
(d) (note 7)
  
19
 
  
28
 
Total expenses
  
6,945
 
  
7,584
 
         
Income (loss) before income taxes
  
(255
)  
398
 
    
 
    
Income taxes
  
(67
)  
105
 
    
 
    
Net income (loss)
  
(188
)  
293
 
     
Per share information
(Canadian dollars)
   
Net income (loss) per common share - basic
(note 11)
  
(0.25
)  
0.38
 
Net income (loss) per common share - diluted
(note 11)
  
(0.25
)  
0.38
 
(a)
Amounts from related parties included in revenues.
  
1,736
   
1,722
 
(b)
Amounts to related parties included in purchases of crude oil and products.
  
739
   
728
 
(c)
Amounts to related parties included in production and manufacturing, and selling and general expenses.
  
183
   
161
 
(d)
Amounts to related parties included in financing,
(note 7).
  
24
   
28
 
 
 
 
The information in the notes to consolidated financial statements is an integral part of these statements.

Table of Contents
 
IMPERIAL OIL LIMITED
 
Consolidated balance sheet (U.S. GAAP, unaudited)
 
As at
Sept 30
  
As at
Dec 31
 
millions of Canadian dollars
 
2019
  
2018
 
Assets
      
Current assets
      
Cash
  
1,531
 
  
988
 
Accounts receivable, less estimated doubtful accounts
(a)
  
2,884
 
  
2,529
 
Inventories of crude oil and products
  
989
 
  
1,297
 
Materials, supplies and prepaid expenses
  
606
 
  
541
 
Total current assets
  
6,010
 
  
5,355
 
Investments and long-term receivables
(b)
  
912
 
  
857
 
Property, plant and equipment,
  
54,531
 
  
53,944
 
less accumulated depreciation and depletion
  
(20,299
)
  
(19,719
)
Property, plant and equipment, net
  
34,232
 
  
34,225
 
Goodwill
  
186
 
  
186
 
Other assets, including intangibles, net
  
567
 
  
833
 
Total assets
  
41,907
 
  
41,456
 
    
 
    
Liabilities
  
 
   
Current liabilities
  
 
   
Notes and loans payable
(c)
  
197
 
  
202
 
Accounts payable and accrued liabilities
(a) (note 9)
  
3,904
 
  
3,688
 
Income taxes payable
  
36
 
  
65
 
Total current liabilities
  
4,137
 
  
3,955
 
Long-term debt
(d) (note 7)
  
4,964
 
  
4,978
 
Other long-term obligations
(e) (note 9)
  
3,073
 
  
2,943
 
Deferred income tax liabilities
  
4,768
 
  
5,091
 
Total liabilities
  
16,942
 
  
16,967
 
    
 
    
Shareholders’ equity
  
 
   
Common shares at stated value
(f) (note 11)
  
1,391
 
  
1,446
 
Earnings reinvested
  
24,990
 
  
24,560
 
Accumulated other comprehensive income (loss)
(note 12)
  
(1,416
)
  
(1,517
)
Total shareholders’ equity
  
24,965
 
  
24,489
 
    
 
    
Total liabilities and shareholders’ equity
  
41,907
 
  
41,456
 
(a)Accounts receivable, less estimated doubtful accounts included net amounts receivable from related parties of $1,121 million (2018 - $666 million).
(b)Investments and long-term receivables included amounts from related parties of $275 million (2018 - $146 million).
(c)Notes and loans payable included amounts to related parties of $75 million (2018 - $75 million).
(d)Long-term debt included amounts to related parties of $4,447 million (2018 - $4,447 million).
(e)Other long-term obligations included amounts to related parties of $0 million (2018 - $15 million).
(f)Number of common shares authorized and outstanding were 1,100 million and 753 million, respectively (2018 - 1,100 million and 783 million, respectively).
The information in the notes to consolidated financial statements is an integral part of these statements.

Table of Contents
 
IMPERIAL OIL LIMITED
Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)
                 
 
    Third Quarter
  
Nine Months
to September 30
 
millions of Canadian dollars
 
2019
  
2018
  
2019
  
2018
 
Common shares at stated value 
(note 11)
            
At beginning of period
  
1,410
 
  
1,483
   
1,446
 
  
1,536
 
Issued under the stock option plan
  
-
 
  
-
   
-
 
  
-
 
Share purchases at stated value
  
(19
)
  
(18
)  
(55
)
  
(71
)
At end of period
  
1,391
 
  
1,465
   
1,391
 
  
1,465
 
    
 
       
 
    
Earnings reinvested
  
 
     
 
   
At beginning of period
  
25,056
 
  
24,049
   
24,560
 
  
24,714
 
Net income (loss) for the period
  
424
 
  
749
   
1,929
 
  
1,461
 
Share purchases in excess of stated value
  
(324
)
  
(400
)  
(1,017
)
  
(1,490
)
Dividends declared
  
(166
)
  
(151
)  
(482
)
  
(438
)
At end of period
  
24,990
 
  
24,247
   
24,990
 
  
24,247
 
    
 
       
 
    
Accumulated other comprehensive income (loss)
(note 12)
  
 
     
 
   
At beginning of period
  
(1,444
)
  
(1,767
)  
(1,517
)
  
(1,815
)
Other comprehensive income (loss)
  
28
 
  
34
   
101
 
  
82
 
At end of period
  
(1,416
)
  
(1,733
)  
(1,416
)
  
(1,733
)
    
 
       
 
    
Shareholders’ equity at end of period
  
24,965
 
  
23,979
   
24,965
 
  
23,979
 
 
 
 
 
The information in the notes to consolidated financial statements is an integral part of these statements.

3
Table of Contents
IMPERIAL OIL LIMITED
Consolidated statement of cash flowscomprehensive income (U.S. GAAP, unaudited)
Inflow (outflow)
 
    Third Quarter
  
Nine Months
to September 30
 
millions of Canadian dollars
 
2019
  
2018
  
2019
  
2018
 
Operating activities
            
Net income (loss)
  
424
 
  
749
   
1,929
 
  
1,461
 
Adjustments for
non-cash
items:
  
 
     
 
   
Depreciation and depletion
  
419
 
  
364
   
1,201
 
  
1,099
 
Impairment of intangible assets
(note 3)
  
-
 
  
46
   
-
 
  
46
 
(Gain) loss on asset sales
(note 4)
  
(28
)
  
(10
)  
(34
)
  
(29
)
Deferred income taxes and other
  
116
 
  
276
   
(359
)
  
485
 
Changes in operating assets and liabilities:
  
 
     
 
   
Accounts receivable
  
250
 
  
(104
)  
(355
)
  
(17
)
Inventories, materials, supplies and prepaid expenses
  
264
 
  
(179
)  
243
 
  
(356
)
Income taxes payable
  
8
 
  
(78
)  
(29
)
  
(46
)
Accounts payable and accrued liabilities
  
(82
)
  
78
   
646
 
  
102
 
All other items - net
(a) (
c
)
  
5
 
  
65
   
163
 
  
306
 
Cash flows from (used in) operating activities
  
1,376
 
  
1,207
   
3,405
 
  
3,051
 
    
 
       
 
    
Investing activities
  
 
     
 
   
Additions to property, plant and equipment
(
a
)
  
(417
)
  
(327
)  
(1,242
)
  
(1,055
)
Proceeds from asset sales
(note 4)
  
30
 
  
13
   
66
 
  
34
 
Loan to equity company
  
(26
)
  
(38
)  
(129
)
  
(75
)
Cash flows from (used in) investing activities
  
(413
)
  
(352
)  
(1,305
)
  
(1,096
)
    
 
       
 
    
Financing activities
  
 
     
 
   
Reduction in finance lease obligations
(note 8)
  
(7
)
  
(7
)  
(20
)
  
(20
)
Dividends paid
  
(169
)
  
(155
)  
(465
)
  
(421
)
Common shares purchased
(note 11)
  
(343
)
  
(418
)  
(1,072
)
  
(1,561
)
Cash flows from (used in) financing activities
  
(519
)
  
(580
)  
(1,557
)
  
(2,002
)
    
 
       
 
    
Increase (decrease) in cash
  
444
 
  
275
   
543
 
  
(47
)
Cash at beginning of period
  
1,087
 
  
873
   
988
 
  
1,195
 
Cash at end of period
(
b
)
  
1,531
 
  
1,148
   
1,531
 
  
1,148
 
 
    Three Months
    to March 31
 
millions of Canadian dollars
 
2020
  
2019
 
Net income (loss)
  
(188
)  
293
 
         
Other comprehensive income (loss), net of income taxes
      
Postretirement benefits liability adjustment (excluding amortization)
  
(114
)  
18
 
Amortization of postretirement benefits liability adjustment included in net periodic benefit costs
  
34
   
27
 
Total other comprehensive income (loss)
  
(80
)  
45
 
      
Comprehensive income (loss)
  
(268
)  
338
 
(a) The impact of carbon emission programs are included in additions to property, plant and equipment, and all other items - net.
(b) Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all highly liquid securities with maturity of three months or less when purchased.
(c)
 
 
Included contribution to registered pension plans.
 
 
 
 
 
(57
)
  
 
 
(52
)
  
 
(155
)
 
 
 
(153​​​​​​​
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income taxes (paid) refunded.
 
 
35
 
 
 
(75
)
 
 
84
 
 
(85
)
Interest (paid), net of capitalization.
 
 
(11
)
 
 
(16
)
 
 
(41
)
 
(44
)
Non-cash transaction
In 2019, 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.

4
Table of Contents
IMPERIAL OIL LIMITED
Consolidated balance sheet (U.S. GAAP, unaudited)
         
 
As at
Mar 31
  
As at
Dec 31
 
millions of Canadian dollars
 
2020
  
2019
 
Assets
      
Current assets
      
Cash
  
1,388
   
1,718
 
Accounts receivable, less estimated doubtful accounts
(a) (note 5)
  
1,556
   
2,699
 
Inventories of crude oil and products
(note 13)
  
1,051
   
1,296
 
Materials, supplies and prepaid expenses
  
692
   
616
 
Total current assets
  
4,687
   
6,329
 
Investments and long-term receivables
(b) (note 5)
  
902
   
891
 
Property, plant and equipment,
  
55,168
   
54,868
 
less accumulated depreciation and depletion
  
(21,092
)
 
  
(20,665
)
Property, plant and equipment, net
  
34,076
   
34,203
 
Goodwill
(note 13)
  
166
   
186
 
Other assets, including intangibles, net
  
582
   
578
 
Total assets
  
40,413
   
42,187
 
         
Liabilities
      
Current liabilities
      
Notes and loans payable
(c)
  
229
   
229
 
Accounts payable and accrued liabilities
(a) (note 9)
  
3,235
   
4,260
 
Income taxes payable
  
2
   
106
 
Total current liabilities
  
3,466
   
4,595
 
Long-term debt
(d) (note 8)
  
4,969
   
4,961
 
Other long-term obligations
(note 9)
  
3,733
   
3,637
 
Deferred income tax liabilities
  
4,675
   
4,718
 
Total liabilities
  
16,843
   
17,911
 
         
Shareholders’ equity
      
Common shares at stated value
(e) (note 11)
  
1,357
   
1,375
 
Earnings reinvested
  
24,204
   
24,812
 
Accumulated other comprehensive income
(loss)
(note 12)
  
(1,991
)  
(1,911
)
Total shareholders’ equity
  
23,570
   
24,276
 
         
Total liabilities and shareholders’ equity
  
40,413
   
42,187
 
(a)Accounts receivable, less estimated doubtful accounts included net amounts receivable from related parties of $264 million (2019 - $1,007 million).
(b)Investments and long-term receivables included amounts from related parties of $303 million (2019 - $296 million).
(c)Notes and loans payable included amounts to related parties of $111 million (2019 - $111 million).
(d)Long-term debt included amounts to related parties of $4,447 million (2019 - $4,447 million).
(e)Number of common shares authorized and outstanding were 1,100 million and 734 million, respectively (2019 - 1,100 million and 744 million, respectively).
The information in the notes to consolidated financial statements is an integral part of these statements.
5
Table of Contents
IMPERIAL OIL LIMITED
Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)
 
    Three Months
    to March 31
 
millions of Canadian dollars
 
2020
  
2019
 
Common shares at stated value
(note 11)
      
At beginning of period
  
1,375
   
1,446
 
Share purchases at stated value
  
(18
)
  
(19
)
At end of period
  
1,357
   
1,427
 
         
Earnings reinvested
      
At beginning of period
  
24,812
   
24,560
 
Net income (loss) for the period
  
(188
)
  
293
 
Share purchases in excess of stated value
  
(256
)
  
(342
)
Dividends declared
  
(162
)
  
(147
)
Cumulative effect of accounting change
(note 5)
  
(2
)
  - 
At end of period
  
24,204
   
24,364
 
         
Accumulated other comprehensive income (loss)
(note 12)
      
At beginning of period
  
(1,911
)
  
(1,517
)
Other comprehensive income (loss)
  
(80
)
  
45
 
At end of period
  
(1,991
)
  
(1,472
)
         
Shareholders’ equity at end of period
  
23,570
   
24,319
 
The information in the notes to consolidated financial statements is an integral part of these statements.
6
Table of Contents
IMPERIAL OIL LIMITED
Consolidated statement of cash flows (U.S. GAAP, unaudited)
Inflow (outflow)
 
    Three Months
    to March 31
 
millions of Canadian dollars
 
2020
  
2019
 
Operating activities
      
Net income (loss)
  
(188
)
 
  
293
 
Adjustments for
non-cash
items:
      
Depreciation and depletion
  
453
   
390
 
Impairment of intangible assets
(note 13)
  
20
   - 
(Gain) loss on asset sales
(note 4)
  
(7
) 
  
5
 
Inventory write-down to current market value
(note 13)
  
281
   
-
 
Deferred income taxes and other
  
43
   
(4
)
Changes in operating assets and liabilities:
      
Accounts receivable
  
1,143
   
(704
)
Inventories, materials, supplies and prepaid expenses
  
(199
)
 
  
19
 
Income taxes payable
  
(104
)
 
  
(28
)
Accounts payable and accrued liabilities
  
(1,028
)
 
  
903
 
All other items - net
 (b)
  
9
   
129
 
Cash flows from (used in) operating activities
  
423
   
1,003
 
         
Investing activities
      
Additions to property, plant and equipment  
(310
)
 
  
(431
)
Proceeds from asset sales
(note 4)
  
9
   
22
 
Loans to equity companies - net
  
(7
)
 
  
(54
)
Cash flows from (used in) investing activities
  
(308
)
 
  
(463
)
         
Financing activities
      
Reduction in finance lease obligations
(note 8)
  
(7
)
 
  
(7
)
Dividends paid
  
(164
) 
  
(149
)
Common shares purchased
(note 11)
  
(274
)
 
  
(361
)
Cash flows from (used in) financing activities
  
(445
) 
  
(517
)
         
Increase (decrease) in cash
  
(330
) 
  
23
 
Cash at beginning of period
  
1,718
   
988
 
Cash at end of period
 
(a)
  
1,388
   
1,011
 
(a)  Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all highly liquid securities with maturity of three months or less when purchased.
 
(b)  Included contributions to registered pension plans.
  (59
) 
  
(41
)
         
Income
 
taxes (paid) refunded.
  
(153
)
 
  
23
 
Interest
 
(paid), net of capitalization.
  
(19
) 
  
(28
)
The information in the notes to consolidated financial statements is an integral part of these statements.
7
Table of Contents
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 20182019 annual report on Form
10-K.
In the opinion of the company, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments
 are of a normal recurring nature.
The company’s exploration and production activities are accounted for under the “successful efforts” method.
The results for the ninethree months ended September 30, 2019,March 31, 2020, are not necessarily indicative of the operations to be expected for the full year.
All amounts are in Canadian dollars unless otherwise indicated.indicated
.
2.  Accounting changes
Effective January 1, 2019,2020, Imperial adopted the Financial Accounting Standards Board’s standard,update,
LeasesFinancial Instruments - Credit Losses (Topic 842)326)
, as amended. The standard requires all leases toa valuation allowance for credit losses be recorded onrecognized for certain financial assets that reflects the balance sheet as a rightcurrent expected credit loss over the asset’s contractual life. The valuation allowance considers the risk of use assetloss, even if remote and a lease liability.considers past events, current conditions and expectations of the future. 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 and also elected certain practical expedients at adoption. As permitted, Imperial did not reassess whether existing contracts are or contain leases,have a material impact on the lease classification for any existing leases, initial direct costs for any existing lease and whether existing land easements and right of way, which were not previously accounted for as leases, are or contain a lease. At adoption of the lease accounting change, 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.
company’s financial statements.

8
Table of Contents
IMPERIAL OIL LIMITED
 
3.  Business segments
Third Quarter
 
Upstream         
 
  Downstream       
 
Chemical        
Three Months to March 31
 
Upstream         
 
Downstream       
 
Chemical           
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
 
2019 
 
2018 
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
Revenues and other income
 
 
  
 
 
 
 
 
 
 
       
Revenues
(a)
 
2,185
 
2,489
 
6,266
 
6,880
 
236
 
328
 
1,652
 
2,240
 
4,796
 
5,474
 
216
 
251
Intersegment sales
 
913
 
771
 
314
 
425
 
61
 
79
 
722
 
948
 
568
 
448
 
44
 
72
Investment and other income
(note 4)
 
7
 
2
 
32
 
25
 
1
 
1
 
-
 
-
 
15
 
10
 
-
 
-
 
3,105
 
3,262
 
6,612 
 
7,330
 
298
 
408
 
2,374
 
3,188
 
5,379
 
5,932
 
260
 
323
Expenses
   
 
  
 
 
 
      
Exploration
 
4
 
4
 
-
 
-
 
-
 
-
 
1
 
33
 
-
 
-
 
-
 
-
Purchases of crude oil and products
 
1,376
 
1,566
 
5,142
 
5,567
 
167
 
239
Purchases of crude oil and products
(note 13)
 
1,650
 
1,586
 
3,769
 
4,582
 
140
 
193
Production and manufacturing
 
1,087
 
1,073
 
460
 
356
 
54
 
51
 
1,108
 
1,156
 
408
 
381
 
63
 
58
Selling and general
 
-
 
-
 
191
 
199
 
23
 
21
 
-
 
-
 
181
 
179
 
25
 
21
Federal excise tax and fuel charge
 
-
 
-
 
486
 
432
 
-
 
-
 
-
 
-
 
451
 
394
 
-
 
-
Depreciation and depletion
(b)
 
364
 
309
 
45
 
91
 
4
 
4
Depreciation and depletion
(note 13)
 
417
 
334
 
46
 
46
 
4
 
4
Non-service
pension and postretirement benefit
 
-
 
-
 
-
 
-
 
-
 
-
 
-
 
-
 
-
 
-
 
-
 
-
Financing
(note 6)
 
-
 
-
 
-
 
-
 
-
 
-
Financing
(note 7)
 
-
 
-
 
-
 
-
 
-
 
-
Total expenses
 
2,831
 
2,952
 
6,324
 
6,645
 
248
 
315
 
3,176
 
3,109
 
4,855
 
5,582
 
232
 
276
Income (loss) before income taxes
 
274
 
310
 
288
 
685
 
50
 
93
 
(802
) 
79
 
524
 
350
 
28
 
47
Income taxes
 
65
 
88
 
67
 
183
 
12
 
24
Income tax expense (benefit)
 
(194
) 
21
 
122
 
93
 
7
 
13
Net income (loss)
 
209
 
222
 
221
 
502
 
38
 
69
 
(608
) 
58
 
402
 
257
 
21
 
34
Cash flows from (used in) operating activities
 
392
 
872
 
900
 
281
 
75
 
79
 
464
 
280
 
22
 
732
 
(3
) 
48
Capital and exploration expenditures
(c)(b)
 
302
 
257
 
124
 
105
 
4
 
8
 
231
 
372
 
76
 
129
 
9
 
17
      
Third Quarter
 
Corporate and other 
 
Eliminations       
 
Consolidated       
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
 
2019 
 
2018 
Revenues and other income
 
 
 
 
  
 
  
 
Revenues
(a)
 
-
 
-
 
-
 
-
 
8,687
 
9,697
Intersegment sales
 
-
 
-
 
(1,288)
 
(1,275)
 
-
 
-
Investment and other income
(note 4)
 
9
 
7
 
-
 
-
 
49
 
35
 
9
 
7
 
(1,288)
 
(1,275)
 
8,736
 
9,732
Expenses
 
 
 
 
 
 
 
 
 
 
Exploration
 
-
 
-
 
-
 
-
 
4
 
4
Purchases of crude oil and products
 
-
 
-
 
(1,286)
 
(1,273)
 
5,399
 
6,099
Production and manufacturing
 
-
 
-
 
-
 
-
 
1,601
 
1,480
Selling and general
 
5
 
6
 
(2)
 
(2)
 
217
 
224
Federal excise tax and fuel charge
 
-
 
-
 
-
 
-
 
486
 
432
Depreciation and depletion
(b)
 
6
 
6
 
-
 
-
 
419
 
410
Non-service
pension and postretirement benefit
 
36
 
27
 
-
 
-
 
36
 
27
Financing
(note 6)
 
20
 
30
 
-
 
-
 
20
 
30
Total expenses
 
67
 
69
 
(1,288)
 
(1,275)
 
8,182
 
8,706
Income (loss) before income taxes
 
(58)
 
(62)
 
-
 
-
 
554
 
1,026
Income taxes
 
(14)
 
(18)
 
-
 
-
 
130
 
277
Net income (loss)
 
(44)
 
(44)
 
-
 
-
 
424
 
749
Cash flows from (used in) operating activities
 
9
 
(25)
 
-
 
-
 
1,376
 
1,207
Capital and exploration expenditures
(c)
 
12
 
6
 
-
 
-
 
442
 
376
Total assets as at March 31
(c) (note 13)
 
33,367
 
35,235
 
4,580
 
5,556
 
438
 
454
       
Three Months to March 31
 
Corporate and other 
 
Eliminations       
 
Consolidated       
millions of Canadian dollars
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
Revenues and other income
      
Revenues
(a)
 
-
 
-
 
-
 
-
 
6,664
 
7,965
Intersegment sales
 
-
 
-
 
(1,334
) 
(1,468
) 
-
 
-
Investment and other income
 
(note 4)
 
11
 
7
 
-
 
-
 
26
 
17
 
11
 
7
 
(1,334
) 
(1,468
) 
6,690
 
7,982
Expenses
      
Exploration
 
-
 
-
 
-
 
-
 
1
 
33
Purchases of crude oil and products
(note 13)
 
-
 
-
 
(1,333
) 
(1,466
) 
4,226
 
4,895
Production and manufacturing
 
-
 
-
 
-
 
-
 
1,579
 
1,595
Selling and general
 
(39
) 
15
 
(1
) 
(2
) 
166
 
213
Federal excise tax and fuel charge
 
-
 
-
 
-
 
-
 
451
 
394
Depreciation and depletion
 (note 13)
 
6
 
6
 
-
 
-
 
473
 
390
Non-service
pension and postretirement benefit
 
30
 
36
 
-
 
-
 
30
 
36
Financing
(note 7)
 
19
 
28
 
-
 
-
 
19
 
28
Total expenses
 
16
 
85
 
(1,334
) 
(1,468
) 
6,945
 
7,584
Income (loss) before income taxes
 
(5
) 
(78
) 
-
 
-
 
(255
) 
398
Income tax expense (benefit)
 
(2
) 
(22
) 
-
 
-
 
(67
) 
105
Net income (loss)
 
(3
) 
(56
) 
-
 
-
 
(188
) 
293
Cash flows from (used in) operating activities
 
(43
) 
(57
) 
(17
) 
-
 
423
 
1,003
Capital and exploration expenditures
(b)
 
15
 
11
 
-
 
-
 
331
 
529
Total assets as at March 31
(c) (note 13)
 
2,242
 
1,697
 
(214
) 
(445
) 
40,413
 
42,497

9
Table of Contents
IMPERIAL OIL LIMITED
 
(a)Included export sales to the United States of $1,807$1,373 million (2018(2019 - $1,741$1,664 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b)In 2018, the Downstream segment included a
non-cash
impairment charge of $46 million, before tax, associated with the Government of Ontario’s revocation of its cap and trade legislation.
(c)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.

Table of Contents
IMPERIAL OIL LIMITED
             
Nine Months to September 30
 
Upstream         
 
Downstream       
 
Chemical          
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
 
2019
 
2018 
Revenues and other income
      
Revenues
(a)
 
7,012
 
 
6,796
 
 
18,115
 
 
19,357 
 
753 
 
960 
Intersegment sales
 
2,977
 
 
2,078
 
 
1,249
 
 
1,119
 
 
181
 
 
226
 
Investment and other income
(note 4)
 
11 
 
6 
 
61
 
 
66 
 
1 
 
1
 
 
10,000
 
 
8,880 
 
19,425
 
 
20,542 
 
935 
 
1,187 
Expenses
      
Exploration
 
42 
 
13 
 
- 
 
- 
 
- 
 
- 
Purchases of crude oil and products
 
4,764 
 
4,513 
 
15,062 
 
15,664 
 
531 
 
657 
Production and manufacturing
 
3,414 
 
3,191 
 
1,315 
 
1,212 
 
182 
 
154 
Selling and general
 
-
 
- 
 
571 
 
569 
 
67 
 
65 
Federal excise tax and fuel charge
 
-
 
- 
 
1,343 
 
1,241 
 
- 
 
- 
Depreciation and depletion
(b)
 
1,036 
 
927 
 
137 
 
191 
 
11 
 
11 
Non-service
pension and postretirement benefit
 
-
 
- 
 
- 
 
- 
 
- 
 
- 
Financing
(note 6)
 
-
 
- 
 
- 
 
- 
 
- 
 
- 
Total expenses
 
9,256 
 
8,644 
 
18,428 
 
18,877 
 
791 
 
887 
Income (loss) before income taxes
 
744 
 
236 
 
997 
 
1,665 
 
144 
 
300 
Income taxes
 
(508)
 
64 
 
261 
 
441 
 
34 
 
80 
Net income (loss)
 
1,252 
 
172 
 
736 
 
1,224 
 
110 
 
220 
Cash flows from (used in) operating activities
 
1,257 
 
1,199 
 
2,055 
 
1,647 
 
175 
 
278 
Capital and exploration expenditures 
(c)
 
975 
 
646 
 
364 
 
250 
 
27 
 
19 
Total assets as at September 30 
(d) (e)
 
35,066 
 
34,570 
 
4,433 
 
5,426 
 
423 
 
427 
       
Nine Months to September 30
 
Corporate and other 
 
Eliminations       
 
Consolidated       
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
 
2019
 
2018 
Revenues and other income
      
Revenues
(a)
 
- 
 
- 
 
- 
 
- 
 
25,880 
 
27,113 
Intersegment sales
 
- 
 
- 
 
(4,407)
 
(3,423)
 
- 
 
- 
Investment and other income
(note 4)
 
26 
 
23 
 
- 
 
- 
 
99 
 
96 
 
26 
 
23 
 
(4,407)
 
(3,423)
 
25,979
 
27,209
Expenses
      
Exploration
 
- 
 
- 
 
- 
 
- 
 
42
 
13 
Purchases of crude oil and products
 
- 
 
- 
 
(4,401)
 
(3,418)
 
15,956
 
17,416 
Production and manufacturing
 
- 
 
- 
 
- 
 
- 
 
4,911
 
4,557 
Selling and general
 
34 
 
62 
 
(6)
 
(5)
 
666
 
691 
Federal excise tax and fuel charge
 
- 
 
- 
 
- 
 
- 
 
1,343 
 
1,241 
Depreciation and depletion
(b)
 
17 
 
16 
 
- 
 
- 
 
1,201 
 
1,145 
Non-service
pension and postretirement benefit
 
108 
 
80 
 
- 
 
- 
 
108 
 
80 
Financing
(note 6)
 
71 
 
79 
 
- 
 
- 
 
71 
 
79 
Total expenses
 
230 
 
237 
 
(4,407)
 
(3,423)
 
24,298 
 
25,222 
Income (loss) before income taxes
 
(204)
 
(214)
 
- 
 
- 
 
1,681 
 
1,987 
Income taxes
 
(35)
 
(59)
 
- 
 
- 
 
(248)
 
526 
Net income (loss)
 
(169)
 
(155)
 
- 
 
- 
 
1,929
 
1,461 
Cash flows from (used in) operating activities
 
(82)
 
(73)
 
- 
 
- 
 
3,405 
 
3,051 
Capital and exploration expenditures 
(c)
 
34 
 
19 
 
- 
 
- 
 
1,400 
 
934 
Total assets as at September 30 
(d) (e)
 
2,298 
 
1,727 
 
(313)
 
(331)
 
41,907 
 
41,819 

Table of Contents
IMPERIAL OIL LIMITED
(a)Included export sales to the United States of $5,623 million (2018 - $4,509 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b)In 2018, the Downstream segment included a
non-cash
impairment charge of $46 million, before tax, associated with the Government of Ontario’s revocation of its cap and trade legislation.
(c)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.
(d)Effective January 1, 2019, Imperial adopted the Financial Accounting Standards Board’s standard,
Leases (Topic 842)
, as amended. As at September 30, 2019, Total assets include operating lease right of use assets of $283 million. An election was made not to restate prior periods. See note 8 for additional details.
(e)In 2019, the company removed $570 million from Total assets and corresponding liabilities in the Downstream segment associated with the Government of Ontario’s revocation of its cap and trade legislation.

10
Table of Contents
IMPERIAL OIL LIMITED
 
4.  Investment and other income
Investment and other income included gains and losses on asset sales as follows:
 
Third Quarter     
 
         Nine Months
         to September 30
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
Proceeds from asset sales
 
30 
 
13 
 
66 
 
34 
Book value of asset sales
 
2 
 
3 
 
32 
 
5 
Gain (loss) on asset sales, before tax
 
28 
 
10 
 
34 
 
29 
Gain (loss) on asset sales, after tax
 
25 
 
6 
 
31 
 
21 
 
    Three Months
    to March 31
 
millions of Canadian dollars
 
2020
  
2019
 
Proceeds from asset sales
  
9
   
22
 
Book value of asset sales
  
2
   
   27
 
Gain (loss) on asset sales,
before-tax
  
7
   
(5
)
Gain (loss) on asset sales,
after-tax
  
6
   
(4
)
5.  Allowance for current expected credit loss (CECL)
Effective January 1, 2020, the company adopted the Financial Accounting Standards Board’s update,
5.  Employee retirement benefitsFinancial Instruments – Credit Losses (Topic 326),
as amended. The standard requires a valuation allowance for credit losses be recognized 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 reasonable and supportable forecasts. The standard requires this expected loss methodology for trade receivables, certain other financial assets and
off-balance-sheet
credit exposures.
 
The componentscumulative effect adjustment related to the adoption of net benefit ​​​​​​​cost were as follows:
 Third Quarter               Nine Months
         to September 30
millions of Canadian dollars 
2019 
 2018  
2019 
 2018 
Pension benefits:    
Current service cost 
57 
 59  
171 
 179 
Interest cost 
81 
 76  
243 
 227 
Expected return on plan assets 
(87)
 (100) 
(262)
 (301)
Amortization of prior service cost 
- 
 1  
- 
 3 
Amortization of actuarial loss (gain) 
37 
 43  
112 
 130 
Net periodic benefit cost 
88 
 79  
264 
 238 
         
Other postretirement benefits:    
Current service cost 
4 
 5  
12 
 13 
Interest cost 
5 
 5  
16 
 16 
Amortization of actuarial loss (gain) 
- 
 2  
(1)
 5 
Net periodic benefit cost 
9 
 12  
27 
 34 
this standard reduced “Earnings reinvested” in Shareholders’ equity by $2 million.
6.  FinancingThe company is exposed to credit losses primarily through sales of petroleum products, crude oil, natural gas liquids and additional notesnatural gas, as well as loans to equity companies and loans payable informationjoint venture receivables. A counterparty’s ability to pay is assessed through a credit review process that considers payment terms, the counterparty’s established credit rating or the company’s assessment of the counterparty’s credit worthiness, contract terms, and other risks. The company can require prepayment or collateral to mitigate certain credit risks.
The company groups financial assets into portfolios that share similar risk characteristics for purposes of determining the allowance for credit losses. Each reporting period, the company assesses whether a significant change in credit loss or risk has occurred. Among the quantitative and qualitative factors considered are historical financial data, current conditions, industry and country risk, current credit ratings and the quality of third-party guarantees secured from the counterparty. Financial assets are written off in whole, or in part, when practical recovery efforts have been exhausted and no reasonable expectation of recovery exists. Subsequent recoveries of amounts previously written off are recognized in earnings. The company manages receivable portfolios using past due balances as a key credit quality indicator.
 
Third Quarter     
 
         Nine Months
         to September 30
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
Debt-related interest
 
32 
 
36 
 
105 
 
98 
Capitalized interest
 
(12)
 
(6)
 
(34)
 
(19)
Net interest expense
 
20 
 
30 
 
71 
 
79 
Other interest
 
- 
 
- 
 
- 
 
- 
Total financing
 
20 
 
30 
 
71 
 
79 
The company recognizes a credit allowance for
off-balance
-sheet credit exposures as a liability on the balance sheet, separate from the allowance for credit losses related to recognized financial assets. These exposures could include unfunded loans to equity companies and financial guarantees that cannot be cancelled unilaterally by the company.
During the first quarter of 2020, the
COVID-19
pandemic spread rapidly through most areas of the world resulting in economic uncertainty, global financial market volatility, and negative effects in the credit markets. The company has considered these effects, along with the significantly lower balances of trade receivables at the end of the quarter, in its estimate of credit losses and concluded no material adjustment to credit allowances in the quarter was required. As of March 31, 2020, the company’s evaluation of financial assets under
 
7.  Long-term debt
Financial Instruments – Credit Losses (Topic 326)
, as amended included $
1,158 million of accounts receivable, net of allowances of $3 million, investments and long-term receivables of $319 million, and
off-balance
-sheet
 
As at 
 Sept 30 
 
As at 
 Dec 31 
millions of Canadian dollars
 
2019 
 
2018 
Long-term debt
 
4,447 
 
4,447 
Finance leases
(a)
 
517 
 
531 
Total long-term debt
 
4,964 
 
4,978 
credit exposure of $29 million. The company has determined that, at this time, 0 credit allowance is required for investments and long-term receivables, and for off-balance
-sheet credit exposures.
(a)Maturity analysis of finance lease liabilities is disclosed in note 8.
In September 2019, the company extended the maturity date of its existing long-term, variable-rate, Canadian dollar loan from ExxonMobil to June 30, 2025. All other terms and conditions remain
unchanged.

1
1
IMPERIAL OIL LIMITED
 
8.  Leases6.  Employee retirement benefits
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. Rightcomponents 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 fornet benefit cost were 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.follows:
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:
 
Third Quarter
2019
  
Nine Months
to September 30
2019
 
             
millions of Canadian dollars
 
    Operating
leases
  
Finance
leases
  
    Operating
leases
  
Finance
leases
 
Operating lease cost
  
39
      
113
    
Short-term and other (net of sublease rental income)
  
14
      
54
    
                 
Amortization of right of use assets
     
14
      
41
 
Interest on lease liabilities
     
10
      
30
 
Total lease cost
  
53
   
24
   
167
   
71
 
The following table summarizes the amounts related to operating leases and finance leases recorded on the Consolidated balance sheet:
 
As at
September 30
2019
 
       
millions of Canadian dollars
 
    Operating
leases
  
  Finance
leases
 
Right of use assets
      
Included in Other assets, including intangibles, net
  
283
    
Included in Property, plant and equipment, net
     
560
 
Total right of use assets
  
283
   
560
 
         
Lease liability due within one year
      
Included in Accounts payable and accrued liabilities
  
121
   
27
 
Included in Notes and loans payable
     
22
 
Long-term lease liability
      
Included in Other long-term obligations
  
160
   
-
 
Included in Long-term debt
     
517
 
Total lease liability
  
281
   
566
 

         
 
    Three Months
    to March 31
 
millions of Canadian dollars
 
    2020
  
      2019
 
Pension benefits:
      
Current service cost
  
76
   
57
 
Interest cost
  
77
 
  
81
 
Expected return on plan assets
  
(98
) 
  (87)
Amortization of prior service cost
  
4
 
  
-
 
Amortization of actuarial loss (gain)
  
38
   
37
 
Net periodic benefit cost
  
97
   
88
 
         
Other postretirement benefits:
      
Current service cost
  
6
   
4
 
Interest cost
  
6
   
5
 
Amortization of actuarial loss (gain)
  
3
   
-
 
Net periodic benefit cost
  
15
   
9
 
 
Table of Contents
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
September 30
2019
 
       
millions of Canadian dollars, unless noted
 
    Operating
leases
  
    Finance
leases
 
Maturity analysis of lease liabilities
      
2019 remaining months
  
37
   
28
 
2020
  
114
   
71
 
2021
  
66
   
50
 
2022
  
30
   
49
 
2023
  
13
   
48
 
2024
  
11
   
47
 
2025 and beyond
  
30
   
1,086
 
Total lease payments
  
301
   
1,379
 
         
Discount to present value
  
(20)
   
(813
)
Total lease liability
  
281
   
566
 
         
Weighted average remaining lease term
(years)
  
4
   
40
 
Weighted average discount rate
(percent)
  
2.5
   
7.5
 
 
 
 
 
 
In addition to the operating lease liabilities in the table immediately above, at September 30, 2019, additional undiscounted commitments for leases not yet commenced totalled $2 million.
7.   
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:Financing costs
                 
 
Third Quarter
2019
  
Nine Months
to September 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
   
11
   
110
   
33
 
Cash flows from financing activities
     
7
      
20
 
                 
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
        
90
    
         
 
    Three Months
    to March 31
 
millions of Canadian dollars
 
    2020
  
     2019
 
Debt-related interest
  
34
   
39
 
Capitalized interest
 
(15
) 
 
(11
) 
Net interest expense
  
19
   
28
 
Other interest
 
-
  
-
 
Total financing
  
19
   
28
 
 
 
 
 
 

Table of Contents
8.  Long-term debt
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
 
         
 
As at 
Mar 31
  
As at
Dec 31
 
millions of Canadian dollars
 
2020
  
      2019
 
Long-term debt
  
4,447
   
4,447
 
Finance leases
  
522
   
514
 
Total long-term debt
  
       4,969
   
4,961
 
 
 
 
 
 
 
 
 
 
 
12
(a)Net rental cost under cancelable and
Table of Contents
IMPERIAL OIL LIMITED
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
 
 
Sept 30
  
Dec 31
 
millions of Canadian dollars
 
2019
  
2018
 
Employee retirement benefits
(a)
  
1,145
   
1,195
 
Asset retirement obligations and other environmental liabilities
(b)
  
1,445
   
1,435
 
Share-based incentive compensation liabilities
  
94
   
78
 
Operating lease liability
(c)
  
160
   
-
 
Other obligations
  
229
   
235
 
Total other long-term obligations
  
3,073
   
2,943
 
         
 
As at 
Mar 31
  
As at
Dec 31
 
millions of Canadian dollars
 
2020
  
2019
 
Employee retirement benefits
(a)
  
1,963
   
1,822
 
Asset retirement obligations and other environmental liabilities
(b)
  
1,382
   
1,388
 
Share-based incentive compensation liabilities
  
39
   
65
 
Operating lease liability
 
(c)
  
122
   
143
 
Other obligations
  
227
   
219
 
Total other long-term obligations
  
3,733
   
3,637
 
 
 
 
 
 
 
 
 
 
 
(a)Total recorded employee retirement benefits obligations also included $55$58 million in current liabilities (2018(2019 - $55$58 million).
 
 
 
 
 
 
 
 
 
 
(b)Total asset retirement obligations and other environmental liabilities also included $118$124 million in current liabilities (2018(2019 - $118$124 million).
 
 
 
 
 
 
 
 
 
(c)Effective 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 on the balance sheet as a right of use asset and liability. The long-termTotal operating lease liability also included $120 million in current liabilities (2019 - $115 million). In addition to the total operating lease liability, additional undiscounted commitments for operating leases is included in Other long-term obligations (see note 8)not yet commenced totalled $29 million (2019 - $6 million).
 
 
 
 
 
 
10.  Financial and derivative instruments
Financial instruments
The fair value of the company’s financial instruments is determined by reference to various market data and other appropriate valuation techniques. There are no material differences between the fair value of the company’s financial instruments and the recorded carrying value. At September 30, 2019March 31, 2020 and December 31, 20182019 the fair value of long-term debt ($4,447 million, excluding finance lease obligations) was primarily a level 2 measurement.

Derivative instruments
The company’s size, strong capital structure and the complementary nature of the Upstream, Downstream and Chemical businesses reduce the company’s enterprise-wide risk from changes in commodity prices and currency exchange rates. In addition, the company uses commodity-based contracts, including derivative instruments to manage commodity price risk. The company does not designate derivative instruments as a hedge for hedge accounting purposes.
Credit risk associated with the company’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial limits placed on derivative counterparties. The company maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity.
The carrying values of derivative instruments on the Consolidated balance sheet were gross assets of $46 million, gross liabilities of $12 million and collateral payable of $28 million. At December 31, 2019 the carrying values of derivative instruments on the Consolidated balance sheet were gross assets of $0 million, gross liabilities of $2 million and collateral receivable of $6 million.
At March 31, 2020, the net notion
a
l forward long / (short) position of derivative instruments was (450,000) barrels for crude and (60,000) barrels for products. At December 31, 2019, the net notional forward long / (short) position of derivative instruments was (590,000) barrels for crude and 0 barrels for products.
Realized and unrealized gain or (loss) on derivative instruments recognized in the Consolidated statement of income is included in the following lines on a
before-tax
basis:
                         
 
Three Months
to March 31
 
millions of Canadian dollars
 
2020
 
 
2019
 
Revenues
 
 
1
 
  
(2
)
Purchases of crude oil and products
 
 
34
 
  
(6
)
Total
 
 
35
 
  
(8
)
13
Table of Contents
IMPERIAL OIL LIMITED
 
11.  Common shares
     
As of
Mar 31
 
As of
Dec 31
 
thousands of shares
 
As of
Sept 30
2019
  
As of
Dec 31
2018
  
2020
 
2019
 
Authorized
  
1,100,000
   
1,100,000
  
1,100,000
  
    1,100,000
 
Common shares outstanding
  
752,948
   
782,565
  
734,077
  
743,902
 
The current
12-month
normal course issuer bid program came into effect June 27, 2019, under which Imperial will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 38,211,086 common shares (
5
(5 percent of the total shares on June 13, 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.
Effective April 1, 2020, Imperial suspended its share purchase program. The company purchased 28,697,514 common shares out of the 38,211,086 common shares allowable under the existing normal course issuer bid set to expire on June 26, 2020, including shares purchased from Exxon Mobil
Corporation.
Purchase plans may be modified at any time without prior notice.
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		  
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
   
782,565
   
     1,446
 
Issued under employee share-based awards  
-
   
-
   
1
   
-
 
Purchases at stated value  
(29,617
)  
(55
)  
(38,664
)  
(71
)
Balance as at September 30, 2019
  
752,948
   
1,391
 
Balance as at December 31, 2019
  
743,902
 
  
1,375
 
Issued under employee share-based awards
  
-
 
  
-
 
Purchases at stated value
  
(9,825
)   
(18
)
Balance as at March 31, 2020
  
734,077
   
1,357
 
The following table provides the calculation of basic and diluted earnings per common share and the dividends declared by the company on its outstanding common shares:
                 
 
Third Quarter
  
    Nine Months
    to September 30
 
 
2019
  
2018
  
2019
  
2018
 
Net income (loss) per common share - basic
            
Net income (loss)
(millions of Canadian dollars)
  
424
   
749
   
1,929
   
1,461
 
Weighted average number of common shares outstanding
(millions of shares)
  
757.8
   
797.6
   
767.6
   
814.2
 
Net income (loss) per common share
(dollars)
  
0.56
   
0.94
   
2.51
   
1.79
 
                 
Net income (loss) per common share - diluted
            
Net income (loss)
(millions of Canadian dollars)
  
424
   
749
   
1,929
   
1,461
 
Weighted average number of common shares outstanding
(millions of shares)
  
757.8
   
797.6
   
767.6
   
814.2
 
Effect of employee share-based awards
(millions of shares)
  
2.5
   
2.9
   
2.4
   
2.7
 
Weighted average number of common shares outstanding, assuming dilution
(millions of shares)
  
760.3
   
800.5
   
770.0
   
816.9
 
Net income (loss) per common share
(dollars)
  
0.56
   
0.94
   
2.51
   
1.79
 
                 
Dividends per common share - declared
(dollars)
  
0.22
   
0.19
   
0.63
   
0.54
 
 
           Three Months
           to March 31
 
 
2020
 
2019
 
Net income (loss) per common share - basic
     
Net income (loss) (millions of Canadian dollars)
  
(188
) 
 
            
293
 
Weighted average number of common shares outstanding (millions of shares)
  
738.9
 
 
777.5
 
Net income (loss) per common share (dollars)
  
(0.25
) 
 
0.38
 
    
 
   
Net income (loss) per common share - diluted
 
 
                  
 
 
 
 
Net income (loss) (millions of Canadian dollars)
  
(188
) 
 
293
 
Weighted average number of common shares outstanding (millions of shares)
  
738.9
 
 
777.5
 
Effect of employee share-based awards (millions of shares)
  
2.0
 
 
2.3
 
Weighted average number of common shares outstanding, assuming dilution (millions of shares)
  
740.9
 
 
779.8
 
Net income (loss) per common share (dollars)
  
(0.25
) 
 
0.38
 
    
 
   
Dividends per common share - declared
(dollars)
  
0.22
 
 
0.19
 

1
4
Table of Contents
IMPERIAL OIL LIMITED
 
12.  Other comprehensive income (loss) information
Changes in accumulated other comprehensive income (loss):
    
millions of Canadian dollars
 
2019 
 
2018 
 
    2020
  
      2019
 
Balance at January 1
 
(1,517)
 
(1,815)
  
(1,911
) 
  
(1,517
)
Postretirement benefits liability adjustment:
    
 
   
Current period change excluding amounts reclassified from accumulated other comprehensive income 
18 
 
(19)
  
(114
) 
  
18
 
Amounts reclassified from accumulated other comprehensive income
 
83 
 
101
 
  
34
 
      
         27
 
Balance at September 30
 
(1,416)
 
(1,733)
Balance at March 31
  
(1,991
) 
  
(1,472
)
Amounts reclassified out of accumulated other comprehensive income (loss) -
before-tax
before tax income (expense):
         
  Third Quarter      
         Nine Months
         to September 30
millions of Canadian dollars 
2019 
 2018  
2019 
 2018 
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost
(a)
 
(37)
 
(46)
 
(111)
 
(138)
 
    Three Months
    to March 31
 
millions of Canadian dollars
 
    2020
  
    2019
 
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost (a)
  
(45
) 
  
(37
)
(a)This accumulated other comprehensive income component is included in the computation of net periodic benefit cost (note 5)6).
Income tax expense (credit) for components of other comprehensive income (loss):
        
 Third Quarter      
         Nine Months
         to September 30
 
    Three Months
    to March 31
 
millions of Canadian dollars 
2019 
 2018  
2019 
 2018  
    2020
  
      2019
 
Postretirement benefits liability adjustments: 
 
   
 
        
Postretirement benefits liability adjustment (excluding amortization) 
- 
 
- 
 
7 
 
(7)
  
(37
) 
  
7
 
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost 
9 
 
12 
 
28 
 
37 
  
         
11
 
  
10
 
Total 
9 
 
12 
 
35 
 
30 
  
(26
) 
  
17
 
13.  Recently issued accounting standardsMiscellaneous financial information
Effective January 1,
Crude oil and product inventories are carried at the lower of current market value or cost, determined under the
last-in,
first-out
method (LIFO). In the first quarter of 2020, Imperial will adopta
non-cash
charge of $281 million
after-tax
(Upstream - $229 million; Downstream - $52 million) was recorded associated with the Financial Accounting Standards Board’s update,
Financial Instruments - Credit Losses (Topic 326)
, as amended.
The standard requires a valuation allowance for credit losses be recognized for certain financial assets that reflectscarrying value of crude oil inventory exceeding the current expected credit loss overmarket value. The adjustment will be
re-evaluated
at the asset’s contractual life.end of each quarter in 2020. The valuation allowance considersearnings impact may be adjusted upward or downward based on prevailing market prices at the risktime of loss, evenfuture evaluations. At
year-end,
the adjustment is considered permanent and is incorporated into the carrying value of the inventory.
As disclosed in Imperial’s 2019 Form
10-K,
goodwill is tested for impairment annually or more frequently if remote and considers past events currentor circumstances indicate it might be impaired. In light of recent changes in economic conditions and expectations of the future. The company does not expect a material changereduction in the credit allowancecompany’s market capitalization during the first quarter of 2020, the company assessed its goodwill balances for trade receivablesimpairment and continues to evaluaterecognized a
non-cash
goodwill impairment charge of $20 million in the impact on other financial assetscompany’s Upstream segment. The goodwill impairment is reflected in scope“Depreciation and depletion” in the Consolidated statement of income and “Goodwill” in the standardConsolidated balance sheet. The remaining balance of goodwill is associated with the Downstream segment.
.

1
5
Table of Contents
IMPERIAL OIL LIMITED
 
Item 2.Management’s discussion and analysis of financial condition and results of operations
 
 
 
Current economic conditions
During the first quarter of 2020, the balance of supply and demand for petroleum and petrochemical products experienced two significant disruptive effects. On the demand side, the
COVID-19
pandemic spread rapidly across Canada and the world resulting in substantial reductions in consumer and business activity and significantly reduced local and global demand for crude oil, natural gas, and petroleum products. This reduction in demand coincided with announcements of increased production in certain key oil producing countries which led to sharp declines in prices for crude oil, natural gas, and petroleum products. Against this backdrop of economic uncertainty, global financial markets have experienced significant volatility and disruption, which at times have negatively impacted the efficiency of credit markets and available pools of liquidity.
In response to these conditions, the company announced significant reductions in 2020 capital and operating expense spending plans. Capital and exploration expenditures for 2020 are now expected to be $1.1 billion to $1.2 billion, compared to the previously announced $1.6 billion to $1.7 billion. In addition, Imperial has identified opportunities to reduce 2020 operating expenses by $500 million compared to 2019 levels.
At the end of March 31, 2020, the company’s cash balance was $1.4 billion. Imperial’s financial strength represents a competitive advantage of strategic importance. While internally generated funds cover the majority of its financial requirements, Imperial may extend its commercial paper program, access capital markets to issue long-term debt, or draw on unused lines of credit to strengthen its liquidity.
The effect of
COVID-19
and the current business environment on supply and demand patterns is expected to result in negative impacts on Imperial’s financial and operating results over the near-term. Should industry conditions near the end of the first quarter persist for an extended period into the future, the company expects lower realized prices for its products to result in reduced earnings and cash generated from operations compared to previous periods. In response to the current economic conditions, the company plans to operate certain assets at reduced rates in the second quarter of 2020. The company has advanced the start and extended the duration of Kearl’s planned turnaround in an effort to reduce on-site staffing levels and to better balance near-term production with demand. The turnaround will now begin in early May and will continue until late June, and is expected to reduce Kearl’s total gross production to average approximately 150,000 barrels per day for the second quarter of 2020. Regarding Syncrude, the coker turnaround activities, which had previously been deferred to the third quarter, will be advanced and begin in the second quarter. As a result, it is expected that Syncrude’s production will be reduced to average approximately 45,000 to 50,000 barrels per day (Imperial’s share) for the second quarter of 2020. Additionally, the company continues to evaluate the timing and scope of other planned turnaround activities across its operations. These activities will be managed to ensure the health and safety of site personnel. Refinery utilization rates and petroleum product sales were reduced at the end of the first quarter of 2020, driven by the significant decline in demand for petroleum products in Canada, and are expected to remain lower in the second quarter of 2020 compared to previous periods. However, the length and severity of decreased demand due to
COVID-19
and the current business environment are highly uncertain, with the future supply and demand patterns inherently difficult to predict.
While the company’s view of long-term supply and demand fundamentals has not changed significantly, future reductions in the range of its long-term price outlooks could put a portion of its long-lived assets at risk for impairment. However, due to the inherent difficulty in predicting future commodity prices, and the relationship between industry prices and costs, it is not practicable to reasonably estimate the existence or range of any potential future impairment charges related to the company’s long-lived assets.
As disclosed in Imperial’s 2019 Form
10-K,
low crude oil and natural gas prices can impact the company’s proved reserves as reported under U.S. Securities and Exchange Commission (SEC) rules. If prices seen near the end of the first quarter persist for the remainder of the year, under the SEC definition of proved reserves, certain quantities of crude oil and natural gas may not qualify as proved reserves at
year-end
2020. Since proved reserves estimates can be affected by a number of factors including completion of development projects, reservoir performance, regulatory approvals, government policies, consumer preferences, changes in the amount and timing of capital investments, royalty framework and significant changes in long-term oil and gas price levels, it is not practicable to reasonably estimate the range of any potential future revisions to the company’s proved reserves for
year-end
2020 reporting.
Operating results
16
Third quarter 2019 vs. third quarter 2018
The company’s net income for the third quarter of 2019 was $424 million or $0.56 per share on a diluted basis, compared to net income of $749 million or $0.94 per share in the same period of 2018.
Upstream net income was $209 million in the third quarter, compared to net income of $222 million in the same period of 2018. Earnings decreased mainly due to higher operating expenses of about $70 million and higher royalties of about $50 million, partially offset by higher volumes of about $110 million primarily at Syncrude.
West Texas Intermediate (WTI) averaged US$56.44 per barrel in the third quarter of 2019, down from US$69.43 per barrel in the same quarter of 2018. Western Canada Select (WCS) averaged US$44.21 per barrel and US$47.49 per barrel for the same periods. The WTI / WCS differential narrowed during the third quarter of 2019 to average approximately US$12 per barrel for the quarter, compared to around US$22 per barrel in the same period of 2018.
The Canadian dollar averaged US$0.76 in the third quarter of 2019, essentially unchanged from the third quarter of 2018.
Imperial’s average Canadian dollar realizations for bitumen increased in the quarter supported primarily by lower diluent costs partially offset by a decrease in WCS. Bitumen realizations averaged $51.12 per barrel in the third quarter of 2019, up from $50.42 per barrel in the third quarter of 2018. The company’s average Canadian dollar realizations for synthetic crude declined generally in line with WTI in the quarter, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $77.27 per barrel in the third quarter of 2019, compared to $89.70 per barrel in the same period of 2018. 
Gross production of Cold Lake bitumen averaged 142,000 barrels per day in the third quarter, compared to 150,000 barrels per day in the same period of 2018.
Gross production of Kearl bitumen averaged 224,000 barrels per day in the third quarter (159,000 barrels Imperial’s share), compared to 244,000 barrels per day (173,000 barrels Imperial’s share) in the third quarter of 2018. Lower production was mainly due to timing of planned turnaround activity.
The company’s share of gross production from Syncrude averaged 69,000 barrels per day, up from 45,000 barrels per day in the third quarter of 2018. Higher production was mainly due to the absence of production impacts from the 2018 power disruption, partially offset by planned turnaround activity.
Downstream net income was $221 million in the third quarter, compared to $502 million in the third quarter of 2018. Earnings were negatively impacted by lower margins of about $230 million and planned turnaround activity of about $70 million.
Refinery throughput averaged 363,000 barrels per day, compared to 388,000 barrels per day in the third quarter of 2018. Capacity utilization was 86 percent, compared to 92 percent in the third quarter of 2018. Reduced throughput was mainly due to planned turnaround activity at Nanticoke and ongoing impacts from the fractionation tower incident at Sarnia which occurred earlier in 2019.
Petroleum product sales were 488,000 barrels per day, compared to 516,000 barrels per day in the third quarter of 2018. Lower petroleum product sales were mainly due to lower refinery throughput.
Chemical net income was $38 million in the third quarter, compared to $69 million from the same quarter of 2018, primarily reflecting lower margins.
Corporate and other expenses were $44 million in the third quarter, unchanged from the same period of 2018.

Table of Contents
IMPERIAL OIL LIMITED
 
The Government of Canada implemented the Canada Emergency Wage Subsidy as part of Canada’s
COVID-19
response plan, and the company plans to submit an application.
The company has taken steps, in line with federal and provincial guidelines and restrictions, to limit the spread of
COVID-19
among employees, contractors and the broader community, while also maintaining operations to ensure reliable supply of products to customers as a provider of essential services. Further measures have been implemented across the organization, including voluntary
COVID-19
testing and modified work schedules at remote camp facilities. The company maintains robust business continuity plans, which have been activated to minimize the impact of
COVID-19
on workforce productivity.
Nine months 2019 vs. nine months 201817
Table of Contents
IMPERIAL OIL LIMITED
Operating results
Net income in the
First quarter 2020 vs. first nine monthsquarter 2019
The company recorded a net loss of 2019 was $1,929$188 million or $2.51$0.25 per share on a diluted basis up fromin the first quarter of 2020, compared to net income of $1,461$293 million or $1.79$0.38 per share in the same period of 2019. Due to a significant decline in commodity prices at the end of March, first nine months of 2018. 2019quarter 2020 results include a favourable impact, largely
non-cash
charges of $662$281 million associated with the Alberta corporate income tax rate decrease. On June 28, 2019,revaluation of the Alberta government enactedcompany’s inventory and $20 million associated with a 4 percent decreasegoodwill impairment.
Upstream recorded a net loss of $608 million in the provincial tax rate, from 12 percentfirst quarter of 2020, compared to 8 percent by 2022.
Upstream net income was $1,252 million for the first nine 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 $563 million, up from net income of $172$58 million in the same period of 2018. Improved results reflect higher volumes2019, reflecting
non-cash
charges of about $530$229 million at Syncrude, Kearlassociated with the revaluation of the company’s inventory and Norman Wells, as well as the impact of higher$20 million associated with a goodwill impairment. Results were also negatively impacted by lower crude oil realizations of about $220$630 million, partially offset by lower royalties of about $110 million and favourable foreign exchange impactseffects of about $90$50 million. Results were negatively impacted by higher operating expenses of about $270 million, higher royalties of about $130 million, and lower Cold Lake volumes of about $70 million.
West Texas Intermediate (WTI) averaged US$57.1045.78 per barrel in the first nine monthsquarter of 2019,2020, down from US$66.7754.90 per barrel in the same periodquarter of 2018.2019. Western Canada Select (WCS) averaged US$45.3225.60 per barrel and US$44.9842.44 per barrel for the same periods. The WTI / WCS differential narrowedwidened during the first quarter of 2020 to average approximately US$1220 per barrel infor the first nine months of 2019, fromquarter, compared to around US$2212 per barrel in the same period of 2018.2019.
The Canadian dollar averaged US$0.750.74 in the first nine monthsquarter of 2019,2020, a decrease of $0.03US$0.01 from the same period in 2018.first quarter of 2019.
Imperial’s average Canadian dollar realizations for bitumen increaseddecreased in the quarter, primarily due to a decrease in WCS. Bitumen realizations averaged $18.08 per barrel in the first nine monthsquarter of 2019, supported primarily by lower diluent costs. Bitumen realizations averaged $52.442020, compared to $48.85 per barrel up from $45.04 per barrel fromin the same period in 2018.first quarter of 2019. The company’s average Canadian dollar realizations for synthetic crude declineddecreased generally in line with WTI, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $74.59$58.94 per barrel in the first quarter of 2020, compared to $83.66$69.34 per barrel fromin the same period of 2019. 
Total gross production of Kearl bitumen averaged 226,000 barrels per day in 2018.the first quarter (160,000 barrels Imperial’s share), up from 180,000 barrels per day (127,000 barrels Imperial’s share) in the first quarter of 2019. Higher production was mainly due to the
ramp-up
of the supplemental crushing facilities through the first quarter of 2020.
Gross production of Cold Lake bitumen averaged 141,000140,000 barrels per day in the first nine months of 2019,quarter, compared to 145,000 barrels per day in the same period of 2018.2019.
Gross production of Kearl bitumen averaged 204,000 barrels per day in the first nine months of 2019 (145,000 barrels Imperial’s share), up from 202,000 barrels per day (144,000 barrels Imperial’s share) in the same period of 2018.
During the first nine months of 2019, theThe company’s share of gross production from Syncrude averaged 76,00073,000 barrels per day, up from 53,000 barrels per day in the same period of 2018. Higher production was mainly due to the absence of production impacts from the 2018 power disruption.
Downstream net income was $736 million for the first nine months of 2019, compared to $1,224 million for the same period of 2018. Earnings were negatively impacted by lower margins of about $430 million, reliability events of about $140 million, including the fractionation tower incident at Sarnia, and lower sales volumes of about $100 million. These factors were partially offset by lower net turnaround impacts of about $80 million, and favourable foreign exchange effects of about $60 million.
Refinery throughput averaged 363,00078,000 barrels per day in the first nine monthsquarter of 2019, compared2019. Syncrude production was impacted by unplanned maintenance which was partially completed in the quarter, with the remainder to 386,000 barrels per daybe completed in the second quarter.
Downstream net income was $402 million in the first quarter of 2020, up from $257 million in the same period of 2018.2019. Improved results reflect higher margins of about $190 million and lower net impacts from reliability events of about $50 million, partially offset by lower sales volumes of about $50 million and a
non-cash
charge of $52 million associated with the revaluation of the company’s inventory.
Refinery throughput averaged 383,000 barrels per day, unchanged from the first quarter of 2019. Capacity utilization was 86 percent, compared to 91 percent in the same periodfirst quarter of 2018. Reduced throughput was mainly due to higher planned turnaround activities2020 and impacts from the Sarnia fractionation tower incident.2019.
Petroleum product sales were 481,000462,000 barrels per day, compared to 477,000 barrels per day in the first nine monthsquarter of 2019, compared to 503,000 barrels per day in the same period of 2018.2019. Lower petroleum product sales were mainly due to lower refinery throughput.
Chemical net income was $110 millionreduced demand in March from the first nine months of 2019, compared to $220 million in the same period of 2018, primarily reflecting lower margins.
COVID-19
Corporate and other expenses were $169 million in the first nine months of 2019, compared to $155 million in the same period of 2018.
pandemic.

18
Table of Contents
IMPERIAL OIL LIMITED
 
Chemical net income was $21 million in the first quarter, compared to net income of $34 million from the same quarter of 2019.
Corporate and other expenses were $3 million in the first quarter, compared to $56 million in the same period of 2019, mainly due to lower share-based compensation charges.
Liquidity and capital resources
Cash flow generated from operating activities was $1,376$423 million in the thirdfirst quarter, up from $1,207compared with $1,003 million in the corresponding period in 2018,2019, primarily reflecting favourablelower realizations in the Upstream and unfavourable working capital effects, partially offset by lower earnings.impacts.
Investing activities used net cash of $413$308 million in the thirdfirst quarter, compared with $352$463 million used in the same period of 2018.2019, primarily reflecting lower additions to property, plant and equipment.
Cash used in financing activities was $519$445 million in the thirdfirst quarter, compared with $580$517 million used in the thirdfirst quarter of 2018.2019. Dividends paid in the thirdfirst quarter of 20192020 were $169$164 million. The per share dividend paid in the thirdfirst quarter was $0.22, up from $0.19 in the same period of 2018.2019. During the thirdfirst quarter, the company, under its share purchase program, purchased about 9.8 million shares for $343 million, including shares purchased from Exxon Mobil Corporation. In the third quarter of 2018, the company purchased about 10 million shares for $418 million.
The company’s cash balance was $1,531 million at September 30, 2019, versus $1,148 million at the end of third quarter 2018.
Cash flow generated from operating activities was $3,405 million in the first nine months of 2019, up from $3,051 million in the same period of 2018, primarily reflecting favourable working capital effects.
Investing activities used net cash of $1,305 million in the first nine months of 2019, compared with $1,096 million used in 2018, primarily reflecting higher additions to property, plant and equipment.
Cash used in financing activities was $1,557 million in the first nine months of 2019, compared with $2,002 million used in the same period of 2018. Dividends paid in the first nine months of 2019 were $465 million. The per share dividend paid in the first nine months of 2019 was $0.60, up from $0.51 in the same period of 2018. During the first nine months of 2019, the company, under its share purchase program, purchased about 29.6 million shares for $1,072$274 million, including shares purchased from Exxon Mobil Corporation. In the first nine monthsquarter of 2018,2019, the company purchased about 38.510 million shares for $1,561$361 million.
In September 2019,The company’s cash balance was $1,388 million at March 31, 2020, versus $1,011 million at the end of first quarter 2019.
On March 31, 2020, the company extendedannounced by news release the maturity datesuspension of its existing long-term, variable-rate, Canadian dollar loan from ExxonMobil to June 30, 2025. All other terms and conditions remain unchanged.
Recently issued accounting standards
Effective Januaryshare purchase program effective April 1, 2020, Imperial will adopt the Financial Accounting Standards Board’s update,
Financial Instruments - Credit Losses (Topic 326)
, as amended.2020. The standard requires a valuation allowance for credit losses be recognized 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 expectationscompany purchased 28,697,514 common shares out of the future. The company does not expect a material change in38,211,086 common shares allowable under the credit allowance for trade receivables and continuesexisting normal course issuer bid set to evaluate the impactexpire on other financial assets in scope of the standard.June 26, 2020, including shares purchased from Exxon Mobil Corporation. Purchase plans may be modified at any time without prior notice.

19
Table of Contents
IMPERIAL OIL LIMITED
 
Forward-looking statements
Statements of future events or conditions in this report, including projections, targets, expectations, estimates, and business plans are forward-looking statements. Disclosure relatedForward-looking statements can be identified by words such as believe, anticipate, intend, propose, plan, goal, seek, project, predict, target, estimate, expect, strategy, outlook, schedule, future, continue, likely, may, should, will and similar references to future periods. Forward-looking statements in this release include, but are not limited to, references to the use of derivatives instruments and effectiveness of risk mitigation; anticipated purchases under the share purchase program program; the adjusted capital outlook of $1.1 billion to $1.2 billion for 2020; completion of unplanned maintenance at Syncrude in the second quarter; reductions in capital and operating expenses in light of the current business environment; the company’s financial strength as a competitive advantage, including the ability to cover financial requirements with internally generated funds and potential actions to strengthen liquidity; near term impacts from
COVID-19
and the business environment, including negative impacts on Upstream production, Downstream refinery utilization and product sales; impacts from an extended period of current industry conditions, including lower earnings, cash from operations and operating assets at reduced rates; changes to the timing and duration of Kearl and Syncrude turnaround activities, and reduced production for the second quarter; timing and scope of planned turnaround activities across operations; expected lower refinery utilization rates and petroleum products sales in the second quarter; the company’s view of long-term supply and demand fundamentals; the impacts of future reductions in long-term price outlooks, including impairment of long-lived assets; the impact from accounting standard changes constitute forward-looking statements. of extended low oil and natural gas prices on proved reserves under SEC rules; applying for the Canada Emergency Wage Subsidy; the impact of measures implemented in response to
COVID-19
; and the impact of market uncertainty on earnings sensitivities.
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;rates and general market conditions; production rates, growth and mix; project plans, timing, costs, technical evaluations and capacities and the company’s ability to effectively execute on these plans and operate its assets; progression of
COVID-19
and its impacts on Imperial’s ability to operate its assets, including the possible shutdown of facilities due to
COVID-19
outbreaks; the company’s ability to effectively execute on its business continuity plans and pandemic response activities; the ability to achieve cost savings and adjust maintenance work; refinery utilization and product sales; applicable laws and government policies; policies, including production curtailment and restrictions in response to
COVID-19;
financing sources;sources and capital structure, including the ability to issue long-term debt; and capital and environmental expenditures could differ materially depending on a number of factors. These factors include global, regional or local changes in the supply of and demand for crude oil, natural gas, and petroleum and petrochemical products and resulting price, differential and margin impacts;impacts, including foreign government action with respect to supply levels and prices and the impact of
COVID-19
on demand; general economic conditions; availability and allocation of capital; currency exchange rates; transportation for accessing markets; political or regulatory events, including changes in law or government policy; policy such as production curtailment and actions in response to
COVID-19;
availability and performance of third party service providers, including in light of restrictions related to
COVID-19;
management effectiveness and disaster response preparedness, including business continuity plans in response to
COVID-19;
environmental risks inherent in oil and gas exploration and production activities; environmental regulation, including climate change and greenhouse gas regulation and changes to such regulation; currency exchange rates; availability and allocation of capital; unanticipated technical or operational disruptions;difficulties; project management and schedules;schedules and timely completion of projects; 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.10-K
and subsequent interim reports on Form
10-Q.
Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to Imperial. Imperial’s actual results may differ materially from those expressed or implied by its forward-looking statements and readers are cautioned not to place undue reliance on them. Imperial undertakes no obligation to update any forward-looking statements contained herein, except as required by applicable law.
The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.

20
IMPERIAL OIL LIMITED
 
Item 3.Quantitative and qualitative disclosures about market risk
 
 
InformationOverall information about market risks for the ninethree months ended September 30, 2019,March 31, 2020, does not differ materially from that discussed on page 2527 of the company’s annual report on Form
10-K
for the year ended December 31, 2018.2019. Current market conditions of production oversupply as well as demand reduction due to the
COVID-19
pandemic have led to a significant decrease in commodity prices. The company’s earnings sensitivities have changed in response to the recent decline in prices and continue to fluctuate given ongoing market uncertainty.
Item 4.Controls and procedures
 
 
As indicated in the certifications in Exhibit 31 of this report, the company’s principal executive officer and principal financial officer have evaluated the company’s disclosure controls and procedures as of September 30, 2019.March 31, 2020. 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.

21
Table of Contents
IMPERIAL OIL LIMITED
 
PART II. OTHER INFORMATION
Item 1A.Risk factors
The risk factors that are discussed in Item 1A of the company’s annual report on Form
10-K
for the year ended December 31, 2019 reference risk factors related to commodity supply and demand, and public health. These risk factors encompass, among other things, current production oversupply, as a result of increased production in key producing countries as well as demand reduction due to the
COVID-19
pandemic that was characterized as a global pandemic in March, 2020, and have led to a significant decrease in commodity prices.
As a result of
COVID-19,
governments in many countries have mandated quarantines, closures,
stay-at-home
orders and travel restrictions that have had a significant impact on demand for the company’s products. While these effects are expected to be temporary, the duration of the business disruptions internationally and related financial impact cannot be reasonably estimated at this time and continued or new restrictions could further impact the demand for products.
Imperial’s future business results, including cash flows and financing needs, will be affected by the extent and duration of these conditions and the effectiveness of responsive actions that the company and others take, including our actions to reduce capital and operating expenses and government actions to address the
COVID-19
pandemic. The impact of
COVID-19
could also have an effect on the financial markets and result in an increase to the cost of capital. The company’s results will also be affected by any resulting negative impacts on national and global economies and markets from a prolonged decrease of economic activity.
To date, the company has had positive
COVID-19
cases at its operating sites that have not had a material impact on its operations or business. However, if the company’s mitigation and response efforts prove insufficient, large outbreaks of epidemics, pandemics or other health crises such as
COVID-19
at operating sites, particularly in remote locations and where work camps are utilized, could impact the company’s personnel and its operations. The company could also be impacted by disruption to supply chains, methods of distribution and key third party service providers, which could impact the ability to produce or sell its products, as well as increasing the costs associated with its operations and decreasing revenues and margins.
The company has initiated numerous emergency response and business continuity plans, and a substantial portion of the company’s workforce has implemented remote working arrangements. If the company is not able to effectively operate and manage through these plans and alternative arrangements, the negative impacts could include reduced productivity and increased costs.
At this time, the
COVID-19
pandemic continues to rapidly evolve and it is difficult to predict the ultimate impact of it or the timing of any resolution of the current supply imbalances. We continue to monitor market developments and evaluate the impacts of decreased demand on our production levels, as well as impacts on project development and future production.
22
Table of Contents
IMPERIAL OIL LIMITED
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)
  
   
July 2019
             
(July 1 - July 31)
  
3,431,194
   
36.50
   
3,431,194
   
34,779,892
  
August 2019
             
(August 1 - August 31)
  
3,275,232
   
32.84
   
3,275,232
   
31,504,660
  
September 2019
             
(September 1 - September 30)
  
3,119,269
   
35.07
   
3,119,269
   
28,385,391
  
(b)
   
                   
 
Total number of
shares purchased
  
Average price paid
per share
(Canadian dollars)
  
Total number of
shares purchased
as part of publicly
announced plans
or programs
  
Maximum number
of shares that may
yet be purchased
under the plans or
programs (a)
  
   
January 2020
             
(January 1 - January 31)
  
3,431,051
   
34.20
   
3,431,051
   
15,907,810
  
February 2020
             
(February 1 - February 29)
  
2,963,181
   
31.14
   
2,963,181
   
12,944,629
  
March 2020
             
(March 1 - March 31)
  
3,431,057
   
18.86
   
3,431,057
   
9,513,572
  
(b)
   
 
(a)On June 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 38,211,086 common shares during the period June 27, 2019 to June 26, 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, 2020.
 
(b)In its most recent quarterly earningsOn March 31, 2020, the company announced by news release the company stated that it currently anticipates exercisingsuspension of its share purchases uniformly over the durationpurchase program effective April 1, 2020. The company purchased 28,697,514 common shares out of the program.38,211,086 common shares allowable under the existing normal course issuer bid set to expire on June 26, 2020, including shares purchased from Exxon Mobil Corporation. 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.

23
Table of Contents
IMPERIAL OIL LIMITED
 
Item 6.Exhibits
 
 
 
 
(31.1) Certification by the principal executive officer of the company pursuant to Rule
13a-14(a).
 
(31.2) Certification by the principal financial officer of the company pursuant to Rule
13a-14(a).
 
(32.1) Certification by the chief executive officer of the company pursuant to Rule
13a-14(b)
and 18 U.S.C. Section 1350.
 
(32.2) Certification by the chief financial officer of the company pursuant to Rule
13a-14(b)
and 18 U.S.C. Section 1350.
 
(101) Interactive Data Files (formatted as Inline XBRL).
 
(104) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
 
 
25
24
Table of Contents
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:    NovemberMay 6, 20192020
  
/s/ Daniel E. Lyons
---------------------------------------------------
  
(Signature)
  
Daniel E. Lyons
  
Senior vice-president, finance and
administration, and controller
(Principal
 (Principal accounting officer)
 
 
     
     
Date:    NovemberMay 6, 20192020
  
/s/ Cathryn Walker
---------------------------------------------------
  
(Signature)
  
Cathryn Walker
  
Assistant corporate secretary
 
 
2625