Table of Contents
FORM
10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[FORM 10-Q
✓
]
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2021
OR
[☐
]
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)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)
1-800
-567-3776
(Registrant’s telephone number, including area code: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
TheIndicate by check mark whether 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  
 
YES
✓
NO
The
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YES
✓
  NO  
 
YES
✓
NO
The
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act of 1934.
 
Large accelerated filer  
  
✓
  
  Smaller reporting company           
Non-accelerated filer            Emerging growth company            
Accelerated filer            .   
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
        
The
Indicate by check mark whether the registrant is a shell company (as(
a
s defined in Rule
12b-2
of the Exchange Act of 1934)
.
  YES  
 
  NO  
  YESNO
    
✓
    
The number of common shares outstanding, as of JuneSeptember 30, 2021 was 704,578,328.
695,611,336.
Table of Contents
IMPERIAL OIL LIMITED
 
 
Table of contents
Page
 
PART I.   FINANCIAL INFORMATION
3
Item 1.   Financial statements
   3 
Item 1.   Financial statementsConsolidated statement of income
   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 
Item 3.   Quantitative and qualitative disclosures about market risk
   24 
Item 4.   Controls and procedures
   24 
PART II.   OTHER INFORMATION
25
Item 1.   Legal proceedings
   25 
Item 1.   Legal proceedings
25
Item 2.   Unregistered sales of equity securities and use of proceeds
   25 
Item 6.   Exhibits
   26 
SIGNATURES
   27 
 
 
In this report all dollar amounts are expressed in Canadian dollars unless otherwise stated. This report should be read in conjunction with the company’s annual report on Form
10-K
for the year ended December 31, 2020. Note that numbers may not add due to rounding.
The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.
In this report, unless the context otherwise indicates, reference to “the company” or “Imperial” includes Imperial Oil Limited and its subsidiaries.
 
2
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  
2021
   2020   
2021
   2020 
Revenues and other income
        
Revenues
(a)
  
 
10,214
 
   5,937   
 
25,213
 
   16,267 
Investment and other income
(note 3)
  
 
19
 
   18   
 
65
 
   88 
Total revenues and other income
  
 
10,233
 
   5,955   
 
25,278
 
   16,355 
Expenses
        
Exploration
  
 
2
 
   2   
 
6
 
   6 
Purchases of crude oil and products
(b)
  
 
6,298
 
   3,634   
 
15,052
 
   9,975 
Production and manufacturing
(c) (note 11)
  
 
1,525
 
   1,246   
 
4,579
 
   4,098 
Selling and general
(c)
  
 
180
 
   150   
 
569
 
   499 
Federal excise tax and fuel charge
  
 
535
 
   470   
 
1,404
 
   1,290 
Depreciation and depletion
(note 11)
  
 
488
 
   409   
 
1,432
 
   1,295 
Non-service pension and postretirement benefit
  
 
11
 
   31   
 
32
 
   91 
Financing
(d) (note 5)
  
 
5
 
   10   
 
32
 
   46 
Total expenses
  
 
9,044
 
   5,952   
 
23,106
 
   17,300 
Income (loss) before income taxes
  
 
1,189
 
   3   
 
2,172
 
   (945) 
Income taxes
  
 
281
 
   0-   
 
506
 
   (234) 
Net income (loss)
  
 
908
 
   3   
 
1,666
 
   (711) 
Per share information
(Canadian dollars)
        
Net income (loss) per common share - basic
(note 9)
  
 
1.30
 
   0-   
 
2.32
 
   (0.97) 
Net income (loss) per common share - diluted
(note 9)
  
 
1.29
 
   0-   
 
2.31
 
   (0.97) 
(a)  Amounts from related parties included in revenues.
  
 
2,731
 
   1,216   
 
5,644
 
   3,699 
(b)  Amounts to related parties included in purchases of crude oil and products.
  
 
828
 
   627   
 
2,009
 
   1,762 
(c)   Amounts to related parties included in production and manufacturing, and selling and general expenses.
  
 
95
 
   107   
 
317
 
   428 
(d)  Amounts to related parties included in financing, (note 5).
  
 
4
 
   12   
 
25
 
   50 
The information in the notes to consolidated financi
a
l statements is an integral part of these statements.
3
       Second Quarter  
    Six Months
    to June 30
 
millions of Canadian dollars  
2021
   2020  
2021
   2020 
Revenues and other income
                   
Revenues
(a)
  
 
8,007
 
   3,666  
 
14,999
 
   10,330 
Investment and other income
(note 3)
  
 
40
 
   44  
 
46
 
   70 
Total revenues and other income
  
 
8,047
 
   3,710  
 
15,045
 
   10,400 
     
Expenses
                   
Exploration
  
 
2
 
   3  
 
4
 
   4 
Purchases of crude oil and products
(b) (note 11)
  
 
4,867
 
   2,115  
 
8,754
 
   6,341 
Production and manufacturing
(c)
  
 
1,569
 
   1,273  
 
3,054
 
   2,852 
Selling and general
(c)
  
 
200
 
   183  
 
389
 
   349 
Federal excise tax and fuel charge
  
 
465
 
   369  
 
869
 
   820 
Depreciation and depletion
(note 11)
  
 
450
 
   413  
 
944
 
   886 
Non-service
pension and postretirement benefit
  
 
10
 
   30  
 
21
 
   60 
Financing
(d) (note 5)
  
 
13
 
   17  
 
27
 
   36 
Total expenses
  
 
7,576
 
   4,403  
 
14,062
 
   11,348 
     
Income (loss) before income taxes
  
 
471
 
   (693)  
 
983
 
   (948) 
     
Income taxes
  
 
105
 
   (167)  
 
225
 
   (234) 
     
Net income (loss)
  
 
366
 
   (526)  
 
758
 
   (714) 
  
Per share information
(Canadian dollars)
 
     
     
Net income (loss) per common share - basic
(note 9)
  
 
0.51
 
   (0.72)  
 
1.04
 
   (0.97) 
Net income (loss) per common share - diluted
(note 9)
  
 
0.50
 
   (0.72)  
 
1.04
 
   (0.97) 
(a)  Amounts from related parties included in revenues.
  
 
1,405
 
   747  
 
2,913
 
   2,483 
     
(b)  Amounts to related parties included in purchases of crude oil and products.
  
 
666
 
   396  
 
1,181
 
   1,135 
     
(c)   Amounts to related parties included in production and manufacturing, and selling and general expenses.
  
 
106
 
   138  
 
222
 
   321 
     
(d)  Amounts to related parties included in financing, (note 5).
  
 
10
 
   14  
 
21
 
   38 
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  
2021
   2020   
2021
   2020 
Net income (loss)
  
 
908
 
   3   
 
1,666
 
   (711) 
Other comprehensive income (loss), net of income taxes
        
Postretirement benefits liability adjustment (excluding amortization)
  
 
0-
 
   0-   
 
54
 
   (114) 
Amortization of postretirement benefits liability adjustment included in net periodic benefit costs
  
 
33
 
   34   
 
99
 
   102 
Total other comprehensive income (loss)
  
 
33
 
   34   
 
153
 
   (12) 
                     
Comprehensive income (loss)
  
 
941
 
   37    
1,819
    (723) 
The information in the notes to consolidatedcons
o
lidated financial statements is an integral part of these statements.
 
3
4
Table of Contents
IMPERIAL OIL LIMITED
 
 
 
Consolidated statement of comprehensive income (U.S. GAAP, unaudited)
         Second Quarter  Six Months
to June 30		 
millions of Canadian dollars  
2021
   2020  
2021
   2020 
Net income (loss)
  
 
366
 
   (526)  
 
758
 
   (714) 
     
Other comprehensive income (loss), net of income taxes
                   
Postretirement benefits liability adjustment (excluding amortization)
  
 
0-
 
   0-  
 
54
 
   (114) 
Amortization of postretirement benefits liability adjustment included in net periodic benefit costs
  
 
33
 
   34  
 
66
 
   68 
Total other comprehensive income (loss)
  
 
33
 
   34  
 
120
 
   (46) 
                    
Comprehensive income (loss)
  
 
399
 
   (492)  
 
878
 
   (760) 
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
June 30		  As at
Dec 31		 
millions of Canadian dollars  
2021
  2020 
Assets
         
Current assets
         
Cash
  
 
776
 
  771 
Accounts receivable - net
(a)
  
 
3,163
 
  1,919 
Inventories of crude oil and products
  
 
1,213
 
  1,161 
Materials, supplies and prepaid expenses
  
 
722
 
  673 
Total current assets
  
 
5,874
 
  4,524 
Investments and long-term receivables
(b)
  
 
748
 
  781 
Property, plant and equipment,
  
 
56,257
 
  55,771 
less accumulated depreciation and depletion
  
 
(24,664
) 
  (23,737) 
Property, plant and equipment, net
  
 
31,593
 
  32,034 
Goodwill
(note 11)
  
 
166
 
  166 
Other assets, including intangibles - net
  
 
558
 
  526 
Total assets
  
 
38,939
 
  38,031 
   
Liabilities
         
Current liabilities
         
Notes and loans payable
(c)
  
 
197
 
  227 
Accounts payable and accrued liabilities
(a) (note 7)
  
 
4,411
 
  3,153 
Income taxes payable
  
 
42
 
  0- 
Total current liabilities
  
 
4,650
 
  3,380 
Long-term debt
(d) (note 6)
  
 
5,065
 
  4,957 
Other long-term obligations
(note 7)
  
 
4,061
 
  4,100 
Deferred income tax liabilities
  
 
4,394
 
  4,176 
Total liabilities
  
 
18,170
 
  16,613 
   
Shareholders’ equity
         
Common shares at stated value
(e) (note 9)
  
 
1,302
 
  1,357 
Earnings reinvested
  
 
21,336
 
  22,050 
Accumulated other comprehensive income (loss)
(note 10)
  
 
(1,869
) 
  (1,989) 
Total shareholders’ equity
  
 
20,769
 
  21,418 
   
Total liabilities and shareholders’ equity
  
 
38,939
 
  38,031 
   
As at
Sept 30
  As at
Dec 31		 
millions of Canadian dollars
  
2021
  2020 
Assets
         
Current assets
         
Cash
  
 
1,875
 
   771 
Accounts receivable - net
(a)
  
 
3,871
 
   1,919 
Inventories of crude oil and products
  
 
1,405
 
   1,161 
Materials, supplies and prepaid expenses
  
 
729
 
   673 
Total current assets
  
 
7,880
 
   4,524 
Investments and long-term receivables
(b)
  
 
753
 
   781 
Property, plant and equipment,
  
 
56,512
 
   55,771 
less accumulated depreciation and depletion
  
 
(25,134
) 
   (23,737) 
Property, plant and equipment, net
  
 
31,378
 
   32,034 
Goodwill
(note 11)
  
 
166
 
   166 
Other assets, including intangibles - net
  
 
698
 
   526 
Total assets
  
 
40,875
 
   38,031 
   
Liabilities
          
Current liabilities
          
Notes and loans payable
(c)
  
 
122
 
   227 
Accounts payable and accrued liabilities
(a) (note 7)
  
 
5,558
 
   3,153 
Income taxes payable
  
 
269
 
   0- 
Total current liabilities
  
 
5,949
 
   3,380 
Long-term debt
(d) (note 6)
  
 
5,060
 
   4,957 
Other long-term obligations
(note 7)
  
 
4,352
 
   4,100 
Deferred income tax liabilities
  
 
4,305
 
   4,176 
Total liabilities
  
 
19,666
 
   16,613 
   
Shareholders’ equity
          
Common shares at stated value
(e) (note 9)
  
 
1,286
 
   1,357 
Earnings reinvested
  
 
21,759
 
   22,050 
Accumulated other comprehensive income (loss)
(note 10)
  
 
(1,836
) 
   (1,989) 
Total shareholders’ equity
  
 
21,209
 
   21,418 
   
Total liabilities and shareholders’ equity
  
 
40,875
 
   38,031 
(a)
Accounts receivable - net included net amounts receivable from related parties of $582$1,064 million (2020 - $384 million).
(b)
Investments and long-term receivables included amounts from related parties of $301$299 million (2020 - $313 million).
(c)
Notes and loans payable included amounts to related parties of $75$0 million (2020 - $111 million).
(d)
Long-term debt included amounts to related parties of $4,447 million (2020 - $4,447 million).
(e)
Number of common shares authorized and outstanding were 1,100 million and 705 696
million, respectively (2020 - 1,100 million and 734 million, respectively).
The information in the notes to consolidated financial statements is an integralint
e
gral part of these statements.
 
5
Table of Contents
IMPERIAL OIL LIMITED
 
 
 
Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)
 
     Second Quarter  
    Six Months
    to June 30
 
millions of Canadian dollars  
2021
  2020  
2021
  2020 
Common shares at stated value
(note 9)
                 
At beginning of period
  
 
1,357
 
  1,357  
 
1,357
 
  1,375 
Share purchases at stated value
  
 
(55
) 
  0-  
 
(55
) 
  (18) 
At end of period
  
 
1,302
 
  1,357  
 
1,302
 
  1,357 
     
Earnings reinvested
                 
At beginning of period
  
 
22,281
 
  24,204  
 
22,050
 
  24,812 
Net income (loss) for the period
  
 
366
 
  (526)  
 
758
 
  (714) 
Share purchases in excess of stated value
  
 
(1,116
) 
  0-  
 
(1,116
) 
  (256) 
Dividends declared
  
 
(195
) 
  (162)  
 
(356
) 
  (324) 
Cumulative effect of accounting change
  
 
0-
 
  -  
 
0-
 
  (2) 
At end of period
  
 
21,336
 
  23,516  
 
21,336
 
  23,516 
     
Accumulated other comprehensive income (loss)
(note 10)
                 
At beginning of period
  
 
(1,902
) 
  (1,991)  
 
(1,989
) 
  (1,911) 
Other comprehensive income (loss)
  
 
33
 
  34  
 
120
 
  (46) 
At end of period
  
 
(1,869
) 
  (1,957)  
 
(1,869
) 
  (1,957) 
     
Shareholders’ equity at end of period
  
 
20,769
 
  22,916  
 
20,769
 
  22,916 
   Third Quarter  
    Nine Months
    to September 30
 
millions of Canadian dollars
  
2021
  2020  
2021
  2020 
Common shares at stated value
(note 9)
                 
At beginning of p
e
riod
  
 
1,302
 
  1,357  
 
1,357
 
  1,375 
Share purchases at stated value
  
 
(16
) 
  0-  
 
(71
) 
  (18) 
At end of period
  
 
1,286
 
  1,357  
 
1,286
 
  1,357 
     
Earnings reinvested
                 
At beginning of period
  
 
21,336
 
  23,516  
 
22,050
 
  24,812 
Net income (loss) for the period
  
 
908
 
  3  
 
1,666
 
  (711) 
Share purchases in excess of stated value
  
 
(297
)  0-  
 
(1,413
)  (256) 
Dividends declared
  
 
(188
)  (161)  
 
(544
)  (485) 
Cumulative effect of accounting change
  
 
0-
 
  -  
 
0-
 
  (2) 
At end of period
  
 
21,759
 
  23,358  
 
21,759
 
  23,358 
     
Accumulated other comprehensive income (loss)
(note 10)
                 
At beginning of period
  
 
(1,869
)  (1,957)  
 
(1,989
)  (1,911) 
Other comprehensive income (loss)
  
 
33
 
  34  
 
153
 
  (12) 
At end of period
  
 
(1,836
)  (1,923)  
 
(1,836
)  (1,923) 
     
Shareholders’ equity at end of period
  
 
21,209
 
  22,792  
 
21,209
 
  22,792 
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 (
o
utflow)
    Second Quarter 
    Six Months
    to June 30
 
Inflow (outflow)           Third Quarter 
        Nine Months
        to September 30
 
millions of Canadian dollars  
2021
 2020 
2021
 2020   
2021
 2020 
2021
 2020 
Operating activities
              
Net income (loss)
  
 
366
 
  (526)  
 
758
 
  (714)   
 
908
 
   3  
 
1,666
 
  (711) 
Adjustments for
non-cash
items:
                    
Depreciation and depletion
  
 
450
 
  413  
 
944
 
  866   
 
488
 
   409  
 
1,432
 
  1,275 
Impairment of intangible assets
(note 11)
  
 
0-
 
  0-  
 
-
 
  20 
Impairment of int
a
ngible assets
(note 11)
  
 
0-
 
   0-  
 
0-
 
  20 
(Gain) loss on asset sales
(note 3)
  
 
(24
) 
  (10)  
 
(27
) 
  (17)   
 
(12
)
 
   (11)  
 
(39
) 
  (28) 
Inventory write-down to current market value
(note 11)
  
 
0-
 
  (281)  
 
0-
 
  0- 
Deferred income taxes and other
  
 
76
 
  (242)  
 
136
 
  (199)   
 
(120
)   (11)  
 
16
 
  (210) 
Changes in operating assets and liabilities:
                     
Accounts receivable
  
 
(775
) 
  (310)  
 
(1,244
) 
  833   
 
(708
)   134  
 
(1,952
)  967 
Inventories, materials, supplies and prepaid expenses
  
 
58
 
  117  
 
(101
) 
  (82)   
 
(199
)   142  
 
(300
)  60 
Income taxes payable
  
 
21
 
  (2)  
 
42
 
  (106)   
 
227
 
   0-  
 
269
 
  (106) 
Accounts payable and accrued liabilities
  
 
655
 
  (46)  
 
1,239
 
  (1,074)   
 
1,123
 
   66  
 
2,362
 
  (1,008) 
All other items - net
(b)
  
 
25
 
  71  
 
150
 
  80   
 
240
 
   143  
 
390
 
  223 
Cash flows from (used in) operating activities
  
 
852
 
  (816)  
 
1,897
 
  (393)   
 
1,947
 
   875  
 
3,844
 
  482 
   
Investing activities
                     
Additions to property, plant and equipment
  
 
(241
) 
  (205)  
 
(408
) 
  (515)   
 
(276
)   (142)  
 
(684
)  (657) 
Proceeds from asset sales
(note 3)
  
 
35
 
  40  
 
42
 
  49   
 
15
 
   19  
 
57
 
  68 
Loans to equity companies - net
  
 
(1
) 
  (7)  
 
12
 
  (14)   
 
2
 
   (2)  
 
14
 
  (16) 
Cash flows from (used in) investing activities
  
 
(207
) 
  (172)  
 
(354
) 
  (480)   
 
(259
)   (125)  
 
(613
)  (605) 
   
Financing activities
                     
Short-term debt - net
  
 
0
 
  0  
 
(36
) 
  0   
 
(75
)   0-  
 
(111
)  0- 
Reduction in finance lease obligations
(note 6)
  
 
(4
) 
  (5)  
 
(8
) 
  (12)   
 
(6
)   (4)  
 
(14
)  (16) 
Dividends paid
  
 
(161
) 
  (162)  
 
(323
) 
  (326)   
 
(195
)   (162)  
 
(518
)  (488) 
Common shares purchased
(note 9)
  
 
(1,171
) 
  0  
 
(1,171
) 
  (274)   
 
(313
)   0-  
 
(1,484
)  (274) 
Cash flows from (used in) financing activities
  
 
(1,336
) 
  (167)  
 
(1,538
) 
  (612)   
 
(589
)   (166)  
 
(2,127
)  (778) 
   
Increase (decrease) in cash
  
 
(691
) 
  (1,155)  
 
5
 
  (1,485)   
 
1,099
 
   584  
 
1,104
 
  (901) 
Cash at beginning of period
  
 
1,467
 
  1,388  
 
771
 
  1,718   
 
776
 
   233  
 
771
 
  1,718 
Cash at end of period
(a)
  
 
776
 
  233  
 
776
 
  233   
 
1,875
 
   817  
 
1,875
 
  817 
(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.(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.  
 
(43
) 
  (59)   
       (113
)
  
        (159) 
 
Income taxes (paid) refunded.
  
 
32
 
     107  
 
60
 
           (45) 
Interest (paid), net of capitalization.
  
 
(5
) 
  (10)  
 
(32
)
 
 
  (46) 
(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.
  
 
(42
)   
  (41)    
 
(70
) 
  (100) 
Income taxes (paid) refunded.
  
 
27
 
  1  
 
28
 
  (152) 
Interest (paid), net of capitalization.
  
 
(14
)   
  (17)    
 
(27
) 
  (36) 
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 2020 annual report on Form
10-K.
In the opinion
o
pinion 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 sixnine months ended JuneSeptember 30, 2021, are not necessarily indicative of the operations to be expected for the full year.
All amounts are in Canadian dollars unless otherwise indicated.
 
8
Table of Contents
IMPERIAL OIL LIMITED
 
 
 
2.  Business segments
 
Second Quarter  Upstream           Downstream         Chemical          
millions of Canadian dollars  
2021 
  2020   
2021 
  2020   
2021 
  2020 
Revenues and other income
                  
Revenues
(a)
  
2,616 
  908   
5,015 
  2,587   
376 
  171 
Intersegment sales
  
1,312 
  262   
788 
  124   
79 
  27 
Investment and other income
(note 3)
  
6 
  10   
28 
  27   
1 
  1 
   
3,934 
  1,180   
5,831 
  2,738   
456 
  199 
Expenses
                  
Exploration
  
2 
  3   
0- 
  0-   
0- 
  0- 
Purchases of crude oil and products
(note 11)
  
2,044 
  512   
4,760 
  1,896   
240 
  119 
Production and manufacturing
  
1,166 
  884   
357 
  343   
46 
  46 
Selling and general
  
0- 
  0-   
142 
  135   
22 
  21 
Federal excise tax and fuel charge
  
0- 
  0-   
465 
  369   
0- 
  0- 
Depreciation and depletion
(note 11)
  
399 
  363   
39 
  40   
5 
  4 
Non-service
pension and postretirement benefit
  
0- 
  0-   
0- 
  0-   
0- 
  0- 
Financing
(note 5)
  
0- 
  0-   
0- 
  0-   
0- 
  0- 
Total expenses
  
3,611 
  1,762   
5,763 
  2,783   
313 
  190 
Income (loss) before income taxes
  
323 
  (582)  
68 
  (45)  
143 
  9 
Income taxes
  
76 
  (138)  
8 
  (13)  
34 
  2 
Net income (loss)
  
247 
  (444)  
60 
  (32)  
109 
  7 
Cash flows from (used in) operating activities
  
595 
  (968)  
136 
  88   
111 
  46 
Capital and exploration expenditures
(b)
  
130 
  145   
120 
  51   
2 
  2 
    
Second Quarter  Corporate and other   Eliminations         Consolidated       
millions of Canadian dollars  
2021 
  2020   
2021 
  2020   
2021 
  2020 
Revenues and other income
                  
Revenues
(a)
  
0- 
  0-   
0- 
  0-   
8,007 
  3,666 
Intersegment sales
  
0- 
  0-   
(2,179)
  (413)  
0- 
  0- 
Investment and other income
(note 3)
  
5 
  6   
0- 
  0-   
40 
  44 
   
5 
  6   
(2,179)
  (413)  
8,047 
  3,710 
Expenses
                  
Exploration
  
0- 
  0-   
0- 
  0-   
2 
  3 
Purchases of crude oil and products
(note 11)
  
0- 
  0-   
(2,177)
  (412)  
4,867 
  2,115 
Production and manufacturing
  
0- 
  0-   
0- 
  0-   
1,569 
  1,273 
Selling and general
  
38 
  28   
(2)
  (1)   
200 
  183 
Federal excise tax and fuel charge
  
0- 
  0-   
0- 
  0-   
465 
  369 
Depreciation and depletion
(note 11)
  
7 
  6   
0- 
  0-   
450 
  413 
Non-service
pension and postretirement benefit
  
10 
  30   
0- 
  0-   
10 
  30 
Financing
(note 5)
  
13 
  17   
0- 
  0-   
13 
  17 
Total expenses
  
68 
  81   
(2,179)
  (413)  
7,576 
  4,403 
Income (loss) before income taxes
  
(63)
  (75)  
0- 
  0-   
471 
  (693)
Income taxes
  
(13)
  (18)  
0- 
  0-   
105 
  (167)
Net income (loss)
  
(50)
  (57)  
0- 
  0-   
366 
  (526)
Cash flows from (used in) operating activities
  
10 
  1   
0- 
  17   
852 
  (816)
Capital and exploration expenditures
(b)
  
7 
  9   
0- 
  0-   
259 
  207 
Third Quarter  Upstream           Downstream         Chemical          
millions of Canadian dollars
  
2021 
  2020   
2021 
  2020   
2021
  2020 
Revenues and other income
                  
Revenues
(a)
  
1,015 
  1,651   
8,813 
  4,061   
386
  225 
Intersegment sales
(b)
  
3,137 
  658   
366 
  321   
91
  43 
Investment and other income
(note 3)
  
0- 
  (6)  
18 
  24   
0-
  0- 
   
4,152 
  2,303   
9,197 
  4,406   
477
  268 
Expenses
                  
Exploration
  
2 
  2   
0- 
  0-   
0-
  0- 
Purchases of crude oil and products
(b)
  
1,902 
  1,176   
7,745 
  3,322   
244
  157 
Production and manufacturing
(note 11)
  
1,120 
  863   
356 
  335   
49
  48 
Selling and general
  
0- 
  0-   
141 
  140   
21
  23 
Federal excise tax and fuel charge
  
0- 
  0-   
535 
  470   
0-
  0- 
Depreciation and depletion
(note 11)
  
439 
  361   
39 
  37   
4
  5 
Non-service pension and postretirement benefit
  
0- 
  0-   
0- 
  0-   
0-
  0- 
Financing
(note 5)
  
0- 
  0-   
0- 
  0-   
0-
  0- 
Total expenses
  
3,463 
  2,402   
8,816 
  4,304   
318
  233 
Income (loss) before income taxes
  
689 
  (99)  
381 
  102   
159
  35 
Income taxes
  
165 
  (25)  
88 
  25   
38
  8 
Net income (loss)
(b)
  
524 
  (74)  
293 
  77   
121
  27 
Cash flows from (used in) operating activities
(b)
  
2,508 
  526   
(733)
  333   
157
  32 
Capital and exploration expenditures
(c)
  
151 
  78   
120 
  50   
2
  4 
Third Quarter  Corporate and other   Eliminations          Consolidated      
millions of Canadian dollars
  
2021 
  2020   
2021 
  2020   
2021
  2020 
Revenues and other income
                  
Revenues
(a)
  
0- 
  0-   
0-
 
  0-   
10,214
  5,937 
Intersegment sales
(b)
  
0- 
  0-   
(3,594)
  (1,022)  
0-
  0- 
Investment and other income
(note 3)
  
1 
  0-   
0 
  0-   
19
  18 
   
1 
  0-   
(3,594)
  (1,022)  
10,233
  5,955 
Expenses
                  
Exploration
  
0- 
  0-   
0- 
  0-   
2
  2 
Purchases of crude oil and products
(b)
  
0- 
  0-   
(3,593)
  (1,021)  
6,298
  3,634 
Production and manufacturing
(note 11)
  
0- 
  0-   
0- 
  0-   
1,525
  1,246 
Selling and general
  
19 
  (12)  
(1)
  (1) 
180
  150 
Federal excise tax and fuel charge
  
0- 
  0-   
0- 
  0-   
535
  470 
Depreciation and depletion
(note 11)
  
6 
  6   
0- 
  0-   
488
  409 
Non-service pension and postretirement benefit
  
11 
  31   
0- 
  0-   
11
  31 
Financing
(note 5)
  
5 
  10   
0- 
  0-   
5
  10 
Total expenses
  
41 
  35   
(3,594)
  (1,022)  
9,044
  5,952 
Income (loss) before income taxes
  
(40)
  (35)  
0- 
  0-   
1,189
  3 
Income taxes
  
(10)
  (8)  
0- 
  0-   
281
  0- 
Net income (loss)
(b)
  
(30)
  (27)  
0- 
  0-   
908
  3 
Cash flows from (used in) operating activities
(b)
  
15 
  (16)  
0- 
  0-   
1,947
  875 
Capital and exploration expenditures
(c)
  
4 
  9   
0- 
  0-   
277
  141 
 
9
Table of Contents
IMPERIAL OIL LIMITED
 
 
 
(a)
Included export sales to the United States of $1,544$1,803 million (2020 - $739$1,227 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b)
In the third quarter of 2021,
 the Downstream segment acquired
a
portion of Upstream crude inventory 
for
$444 million.
There
was no
earnings impact
and t
he effects of this transaction have been eliminated for consolidation purp
o
ses.
(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.
 
10
Table of Contents
IMPERIAL OIL LIMITED
 
Nine Months to September 30  Upstream           Downstream         Chemical          
millions of Canadian dollars
  
2021 
  2020   
2021 
  2020   
2021 
  2020 
Revenues and other inco
m
e
                  
Revenues
(a)
  
5,773
 
  4,211
 
  
18,355
 
  11,444
 
  
1,085
  612
 
Intersegment sales
(b)
  
5,800 
  1,642   
1,927 
  1,013   
223
  114 
Investment and other income
(note 3)
  
6 
  4   
51 
  66   
1
  1 
   
11,579 
  5,857   
20,333 
  12,523   
1,309
  727 
Expenses
                  
Exploration
  
6 
  6   
0- 
  0-   
0-
  0- 
Purchases of crude oil and products
(b)
  
5,780 
  3,338   
16,525 
  8,987 �� 
693
  416 
Production and manufacturing
(note 11)
  
3,395 
  2,855   
1,039 
  1,086   
145
  157 
Selling and general
  
0- 
  0-   
416 
  456   
68
  69 
Federal excise tax and fuel charge
  
0- 
  0-   
1,404 
  1,290   
0-
  0- 
Depreciation and depletion
(note 11)
  
1,283 
  1,141   
117 
  123   
13
  13 
Non-service pension and postretirement benefit
  
0- 
  0-   
0- 
  0-   
0-
  0- 
Financing
(note 5)
  
1 
  0-   
0- 
  0-   
0-
  0- 
Total expenses
  
10,465 
  7,340   
19,501 
  11,942   
919
  655 
Income (loss) before income taxes
  
1,114 
  (1,483)  
832 
  581   
390
  72 
Income tax expense (benefit)
  
264 
  (357)  
187 
  134   
93
  17 
Net income (loss)
(b)
  
850 
  (1,126) 
645 
  447   
297
  55 
Cash flows from (used in) operating activities
(b)
  
3,634 
  22   
(135)
  443   
330
  75 
Capital and exploration expenditures
(c)
  
366 
  454   
308 
  177   
6
  15 
Total assets as at September 30
(b)
 
(note 11)
  
29,540 
  32,941   
8,239 
  4,590   
488
  417 
Nine Months to September 30  Corporate and other   Eliminations         Consolidated      
millions of Canadian dollars
  
2021 
  2020   
2021 
  2020   
2021 
  2020 
Revenues and other income
                  
Revenues
(a)
  
0- 
  0-   
0- 
  0-   
25,213
  16,267 
Intersegment sales
(b)
  
0- 
  0-   
(7,950)
 (2,769) 
0-
  0- 
Investment and other income
(note 3)
  
7 
  17   
0- 
  0-   
65
  88 
   
7 
  17   
(7,950)
 (2,769) 
25,278
  16,355 
Expenses
                  
Exploration
  
0- 
  0-   
0- 
  0-   
6
  6 
Purchases of crude oil and products
(b)
  
0- 
  0-   
(7,946)
 (2,766) 
15
,
052
  9,975 
Production and manufacturing
(note 11)
  
0- 
  0-   
0- 
  0-   
4,579
  4,098 
Selling and general
  
89 
  (23) 
(4)
 (3) 
569
  499 
Federal excise tax and fuel charge
  
0- 
  0-   
0- 
  0-   
1,404
  1,290 
Depreciation and depletion
(note 11)
  
19 
  18   
0- 
  0-   
1,432
  1,295 
Non-service pension and postretirement benefit
  
32 
  91   
0- 
  0-   
32
  91 
Financing
(note 5)
  
31 
  46   
0- 
  0-   
32
  46 
Total expenses
  
171 
  132   
(7,950)
 (2,769) 
23,106
  17,300 
Income (loss) before income taxes
  
(164)
 (115) 
0- 
  0-   
2,172
  (945)
Income tax expense (benefit)
  
(38)
  (28)  
0- 
  0-   
506
  (234)
Net income (loss)
(b)
  
(126)
  (87)  
0- 
  0-   
1,666
  (711)
Cash flows from (used in) operating activities
(b)
  
15 
  (58)  
0- 
  0-   
3,844
  482 
Capital and exploration expenditures
(c)
  
19 
  33   
0- 
  0-   
699
  679 
Total assets as at September 30
(b) (note 11)
  
2,778 
  1,679   
(170)
  (245)  
40,875
  39,382 
 
1
1
Six Months to June 30  Upstream           Downstream         Chemical          
millions of Canadian dollars  
2021 
  2020   
2021 
  2020   
2021 
  2020 
Revenues and other income
                  
Revenues
(a)
  
4,758 
  2,560   
9,542 
  7,383   
699 
  387 
Intersegment sales
  
2,663 
  984   
1,561 
  692   
132 
  71 
Investment and other income
(note 3)
  
6 
  10   
33 
  42   
1 
  1 
   
7,427 
  3,554   
11,136 
  8,117   
832 
  459 
Expenses
                  
Exploration
  
4 
  4   
0- 
  0-   
0- 
  0- 
Purchases of crude oil and products
(note 11)
  
3,878 
  2,162   
8,780 
  5,665   
449 
  259 
Production and manufacturing
  
2,275 
  1,992   
683 
  751   
96 
  109 
Selling and general
  
0- 
  0-   
275 
  316   
47 
  46 
Federal excise tax and fuel charge
  
0- 
  0-   
869 
  820   
0- 
  0- 
Depreciation and depletion
(note 11)
  
844 
  780   
78 
  86   
9 
  8 
Non-service
pension and postretirement benefit
  
0- 
  0-   
0- 
  0-   
0- 
  0- 
Financing
(note 5)
  
1 
  0-   
0- 
  0-   
0- 
  0- 
Total expenses
  
7,002 
  4,938   
10,685 
  7,638   
601 
  422 
Income (loss) before income taxes
  
425 
  (1,384)   
451 
  479   
231 
  37 
Income tax expense (benefit)
  
99 
  (332)   
99 
  109   
55 
  9 
Net income (loss)
  
326 
  (1,052)   
352 
  370   
176 
  28 
Cash flows from (used in) operating activities
  
1,126 
  (504)   
598 
  110   
173 
  43 
Capital and exploration expenditures
(b)
  
215 
  376   
188 
  127   
4 
  11 
Total assets as at June
 30
(note 11)
  
31,931 
  33,591   
5,352 
  4,683   
481 
  404 
    
Six Months to June 30  Corporate and other   Eliminations         Consolidated       
millions of Canadian dollars  
2021 
  2020   
2021 
  2020   
2021 
  2020 
Revenues and other income
                  
Revenues
(a)
  
0- 
  0-   
0- 
  0-   
14,999 
  10,330 
Intersegment sales
  
0- 
  0-   
(4,356)
  (1,747)  
0- 
  0- 
Investment and other income
(note 3)
  
6 
  17   
0- 
  0-   
46 
  70 
   
6 
  17   
(4,356)
  (1,747)  
15,045 
  10,400 
Expenses
                  
Exploration
  
0- 
  0-   
0- 
  0-   
4 
  4 
Purchases of crude oil and products
(note 11)
  
0- 
  0-   
(4,353)
  (1,745)  
8,754
  6,341
Production and manufacturing
  
0- 
  0-   
0- 
  0-   
3,054 
  2,852 
Selling and general
  
70 
  (11)  
(3)
  (2)  
389 
  349 
Federal excise tax and fuel charge
  
0- 
  0-   
0- 
  0-   
869 
  820 
Depreciation and depletion
(note 11)
  
13 
  12   
0- 
  0-   
944 
  886 
Non-service
pension and postretirement benefit
  
21 
  60   
0- 
  0-   
21 
  60 
Financing
(note 5)
  
26 
  36   
0- 
  0-   
27 
  36 
Total expenses
  
130 
  97   
(4,356)
  (1,747)  
14,062 
  11,348 
Income (loss) before income taxes
  
(124)
  (80)  
0- 
  0-   
983 
  (948)
Income tax expense (benefit)
  
(28)
  (20)  
0 
  0   
225 
  (234)
Net income (loss)
  
(96)
  (60)  
0- 
  0-   
758 
  (714)
Cash flows from (used in) operating activities
  
0- 
  (42)  
0- 
  0-   
1,897 
  (393)
Capital and exploration expenditures
(b)
  
15 
  24   
0- 
  0-   
422 
  538 
Total assets as at June
 30
(note 11)
  
1,606 
  1,088   
(431)
  (266)  
38,939 
  39,500 
11
Table of Contents
IMPERIAL OIL LIMITED
 
 
 
(a)
Included export sales to the United States of $3,113$4,916 million (2020 - $2,112$3,339 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b)
In the third quarter of 2021,
 the Downstream segment acquired
a portion of Upstream crude inventory 
for
$444 million.
There
was no
earnings impact
and t
he effects of this transaction have been eliminated for consolidation purposes.
(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.
 
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3.  Investment and other income
Investment and other income included gains and losses on asset sales as follows:
 
        Second Quarter   Six Months
to June 30		 
millions of Canadian dollars  
2021
   2020   
2021
   2020 
Proceeds from asset sales
  
 
35
 
   40   
 
42
 
   49 
Book value of asset sales
  
 
11
 
   30   
 
15
 
   32 
Gain (loss) on asset sales, before tax
  
 
24
 
   10   
 
27
 
   17 
Gain (loss) on asset sales, after tax
  
 
22
 
   9   
 
24
 
   15 
             
             
             
             
           Nine Months      
   Third Quarter     to September 30  
millions of Canadian dollars  
2021
   2020   
2021
   2020 
Proceeds from asset sales
  
 
15
 
   19   
 
57
 
   68  
Book value of asset sales
  
 
3
 
   8   
 
18
 
   40 
Gain (loss) on asset sales, before tax
  
 
12
 
   11   
 
39
 
   28 
Gain (loss) on asset sales, after tax
  
 
 
       10
 
       
 
    10		   
 
 
 
             34
 
   
 
 
           25		 
4.  Employee retirement benefits
The components of net benefit cost were as follows:
 
        Second Quarter  Six Months
to June 30		 
millions of Canadian dollars  
2021
  2020  
2021
  2020 
Pension benefits:
                 
Current service cost
  
 
81
 
  77  
 
162
 
  153 
Interest cost
  
 
68
 
  77  
 
136
 
  154 
Expected return on plan assets
  
 
(107
) 
  (98)  
 
(214
) 
  (196) 
Amortization of prior service cost
  
 
4
 
  3  
 
8
 
  7 
Amortization of actuarial loss (gain)
  
 
36
 
  39  
 
72
 
  77 
Net periodic benefit cost
  
 
82
 
  98  
 
164
 
  195 
     
Other postretirement benefits:
                 
Current service cost
  
 
7
 
  6  
 
14
 
  12 
Interest cost
  
 
5
 
  6  
 
11
 
  12 
Amortization of actuarial loss (gain)
  
 
4
 
  3  
 
8
 
  6 
Net periodic benefit cost
  
 
16
 
  15  
 
33
 
  30 
                                                    
         Nine Months      
   Third Quarter    to September 30  
millions of Canadian dollars  
2021
  2020  
2021
  2020 
Pension benefits:
     
Current service cost
  
 
81
 
   76  
 
243
 
   229 
Interest cost
  
 
68
 
   77  
 
204
 
   231 
Expected return on plan assets
  
 
(107
) 
   (97)  
 
(321
) 
   (293) 
Amortization of prior service cost
  
 
4
 
   4  
 
12
 
   11 
Amortization of actuarial loss (gain)
  
 
36
 
   38  
 
108
 
   115 
Net periodic benefit cost
  
 
82
 
   98  
 
246
 
   293 
     
Other postretirement benefits:
                   
Current service cost
  
 
7
 
   6  
 
21
 
   18 
Interest cost
  
 
6
 
   6  
 
17
 
   18 
Amortization of actuarial loss (gain)
  
 
4
 
   3  
 
12
 
   9 
Net periodic benefit cost
  
 
 
 
 
 
 
 
 
17
 
   
 
 
 
 
 
 
 
 
15		  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50
 
   
 
 
 
 
 
 
 
 
 
 
 
45		 
5.  Financing costs
 
        Second Quarter  Six Months
to June 30		 
millions of Canadian dollars  
2021
  2020  
2021
  2020 
Debt-related interest
  
 
20
 
  26  
 
41
 
  60 
Capitalized interest
  
 
(7
) 
  (9)  
 
(15
) 
  (24) 
Net interest expense
  
 
13
 
  17  
 
26
 
  36 
Other interest
  
 
0
 
  0  
 
1
 
  0 
Total financing
  
 
13
 
  17  
 
27
 
  36 
                                                    
         Nine Months      
   Third Quarter    to September 30  
millions of Canadian dollars  
2021
  2020  
2021
  2020 
Debt-related interest
  
 
9
 
   19  
 
50
 
   79 
Capitalized interest
  
 
(4
)
 
   (9)  
 
(19
)
 
   (33) 
Net interest expense
  
 
5
 
   10  
 
31
 
   46 
Other interest
  
 
0
 
   0  
 
1
 
   0 
Total financing
  
 
 
 
 
 
 
 
 
5
 
   
 
 
 
 
 
 
 
 
10		  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32
 
   
 
 
 
 
 
 
 
 
 
 
 
46		 
In MayDuring the second quarter of 2021, the company extended the maturity datedates of two of its existing committed short-term lines of credit, totalling $750 million, to May 2023, totalling $750 million. In June 2021, the company and extended the maturity date of one of its existing $300 million committed short-term linesline of credit to June 2022. The company has not drawn on any of its $1,300 million of available credit facilities.
During the third quarter of 2021, the c
o
mpany repaid the $75 million, non-interest bearing, revolving demand loan originally issued in 2016 under an arrangement with an affiliate company of ExxonMobil.
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IMPERIAL OIL LIMITED
 
 
 
6.  Long-term debt
 
millions of Canadian dollars  As at
June 30
2021
   As at
Dec 31
2020		 
Long-term debt
  
4,447
   4,447 
Finance leases
  
 
618
 
   510 
Total long-term debt
  
 
5,065
 
   4,957 
   As at
Sept 30		   As at
Dec 31		 
millions of Canadian dollars  
2021
   2020 
Long-term debt
  
 
4,447
 
   4,447 
Finance leases
  
 
613
 
   510 
Total long-term debt
  
 
5,060
 
   4,957 
7.  Other long-term obligations
 
millions of Canadian dollars  As at
June 30
2021
   As at
Dec 31
2020		 
Employee retirement benefits
(a)
  
 
2,023
 
   2,105 
Asset retirement obligations and other environmental liabilities
(b)
  
 
1,699
 
   1,676 
Share-based incentive compensation liabilities
  
 
84
 
   45 
Operating lease liability
(c)
  
 
96
 
   95 
Other obligations
  
 
159
 
   179 
Total other long-term obligations
  
 
4,061
 
   4,100 
   As at
Sept 30		   As at
Dec 31		 
millions of Canadian dollars  
2021
   2020 
Employee retirement benefits
(a)
  
 
2,013
 
   2,105 
Asset retirement obligations and other environmental liabilities
(b)
  
 
1,711
 
   1,676 
Share-based incentive compensation liabilities
  
 
94
 
   45 
Operating lease liability
(c)
  
 
164
 
   95 
Other obligations
  
 
370
 
   179 
Total other long-term obligations
  
 
4,352
 
   4,100 
(a)
Total recorded employee retirement benefits obligations also included $58 million in current liabilities (2020 - $58 million).
(b)
Total asset retirement obligations and other environmental liabilities also included $100 million in current liabilities (2020 - $100 million).
(c)
Total operating lease liability also included $82$114 million in current liabilities (2020 - $97 million). In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled $4$1 million (2020 - $27 million).
 
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8.  Financial and derivative instruments
Financial instruments
The fair value of the company’s financial instruments is determined by reference to various market data and other appropriate valuation techniques. There are no material differences between the fair value of the company’s financial instruments and the recorded carrying value. At JuneSeptember 30, 2021 and December 31, 2020, 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.risk and for trading purposes. Commodity contracts held for trading purposes are presented in the Consolidated statement of income on a net basis in the line “Revenues”. 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 limitsl
i
mits placed on derivative counterparties. The company maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity.
The net notional long/(short) position of derivative instruments was:
 
(thousands of barrels)  As at
June 30
2021
  As at
Dec 31
2020		 
Crude
  
 
(710
) 
  (800) 
Products
  
 
(160
) 
  (390) 
(thousands of barrels)
  
As at
Sept 30
2021
  
As at
Dec 31
2020
 
Crude
  
 
(6,410
) 
   (800) 
Products
  
 
(1,070
)   (390) 
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: 
before-tax
basis:
 
         Second Quarter  Six Months
to June 30		 
millions of Canadian dollars  
2021
  2020  
2021
  2020 
Revenues
  
 
(9
) 
  (9)  
 
(9
) 
  (8) 
Purchases of crude oil and products
  
 
(19
) 
  (52)  
 
(33
) 
  (18) 
Total
  
 
(28
) 
  (61)  
 
(42
) 
  (26) 
                        
   Third Quarter       Nine Months
    to September 30		 
millions of Canadian dollars  
2021
  2020   
2021
  2020 
Revenues
  
 
(21
)
 
   1   
 
(30
)
 
  (7) 
Purchases of crude oil and products
  
 
0-
 
  0-   
 
(33
)  (18) 
Total
  
 
(21
)   1   
 
(63
)  (25) 
 
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The estimated fair value of derivative instruments, and the related hierarchy level for the fair value measurement is asa
s
 follows:
 
millions of Canadian dollars 
At June 30, 2021 
   Fair value   Effect of
counterparty
netting		  Effect of
collateral
netting		  Net
carrying
value		 
    Level 1   Level 2   Level 3   Total 
Assets
                                 
Derivative assets
(a)
  
 
6
 
  
 
0-
 
  
 
0-
 
  
 
6
 
  
 
(6
) 
 
 
0-
 
 
 
-
 
        
Liabilities
                                 
Derivative liabilities
(b)
  
 
8
 
  
 
0-
 
  
 
0-
 
  
 
8
 
  
 
(6
) 
 
 
(2
) 
 
 
-
 
millions of Canadian dollars
At September 30, 2021
 
   Fair value  
Effect of
counterparty
netting
  
Effect of
collateral
netting
  
Net
carrying
value
 
    Level 1  Level 2   Level 3   Total 
Assets
                               
Derivative assets
(a)
  
 
8
  
 
 
16
 
  
 
0-
 
  
 
24
  
 
 
(14
)   
 
 
0
  
 
 
10
 
        
Liabilities
           
 
           
 
  
 
          
 
            
Derivative liabilities
(b)
  
 
29
 
 
 
7
 
  
 
0-
 
  
 
36
 
 
 
(14
) 
 
(21
) 
 
1
 
(a)
Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses” and “Accounts receivable - net”.
(b)
Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities”.
 
millions of Canadian dollars 
At December 31, 2020 
millions of Canadian dollars
At December 31, 2020
millions of Canadian dollars
At December 31, 2020
 
  Fair value   Effect of
counterparty
netting		 Effect of
collateral
netting		 Net
carrying
value		   Fair value   
Effect of
counterparty
netting
 
Effect of
collateral
netting
 
Net
carrying
value
 
  Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total 
Assets
                              
Derivative assets
(a)
   2    0-    0-    2    (2)   0-   -    2    0-    0-    2    (2)   0-   0- 
  
Liabilities
                                      
Derivative liabilities
(b)
   12    0-    0-    12    (2)  (10)   -    12    0-    0-    12    (2)   (10)   0- 
(a)
Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses” and “Accounts receivable - net”.
(b)
Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities”.
At JuneSeptember 30, 2021 and December 31, 2020, respectively, the company had $8$14 million and $5 million of collateral under a master netting arrangement not offset against the derivatives on the Consolidated balance sheet in “Accounts receivable - net”, primarily related to initial margin requirements.
 
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9.  Common shares
 
thousands of shares  As of
June 30
2021
   As of
Dec 31
2020		 
Authorized
  
 
1,100,000
 
   1,100,000 
Common shares outstanding
  
 
704,578
 
   734,077 
The
12-month
thousands of shares
  
As of
      Sept 30
2021
   
As of
        Dec 31
2020
 
Authorized
  
 
1,100,000
 
   1,100,000 
Common shares outstanding
  
 
695,611
 
   734,077 
limited normal course issuer bid program that was in place throughout the second quarter of 2021 came into effect on June 29, 2020 and was amended on April 30, 2021. The program enabled the company to purchase up to a maximum of 29,363,070 common shares (4 percent of the total shares on June 15, 2020), which included shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. Exxon Mobil Corporation participated to maintain its ownership percentage at approximately 69.6 percent.
The current
12-month
normal course issuer bid program came into effect June 29, 2021, under which Imperial will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 35,583,671 common shares (5 percent of the total shares on June 15, 2021) which includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent.
The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.
The company’s common share activities are summarized below:
   Thousands of
shares		 Millions of
dollars		   
Thousands
of shares
 
Millions
of dollars
 
Balance as at December 31, 2019
   743,902   1,375    743,902   1,375 
Issued under employee share-based awards
   7   0-    7   0- 
Purchases at stated value
   (9,832)   (18)    (9,832)   (18) 
Balance as at December 31, 2020
   734,077   1,357    734,077   1,357 
Issued under employee share-based awards
   0-   0-   
 
0-
 
 
 
0-
 
Purchases at stated value
  
 
(29,499
) 
 
 
(55
) 
  
 
(38,466
) 
 
(71
)
Balance as at June 30, 2021
  
 
704,578
 
 
 
1,302
 
Balance as at September 30, 2021
  
 
695,611
 
 
 
1,286
 
The following table provides the calculation of basicb
a
sic and diluted earnings per common share and the dividends declared by the company on its outstanding common shares:
                                                    
      Second Quarter Six Months
to June 30		       Third Quarter   
        Nine Months
        to September 30
 
  
2021
   2020 
2021
   2020   
2021
   2020   
2021
   2020 
Net income (loss) per common share - basic
                     
Net income (loss)
(millions of Canadian dollars)
  
 
366
 
   (526)  
 
758
 
   (714)   
 
908
 
   3   
 
1,666
 
   (711) 
Weighted average number of common shares outstanding
(millions of shares)
  
 
724.1
 
   734.1  
 
729.1
 
   736.5   
 
700.0
 
   734.1   
 
719.4
 
   735.7 
Net income (loss) per common share
(dollars)
  
 
0.51
 
   (0.72)  
 
1.04
 
   (0.97)   
 
1.30
 
   0-   
 
2.32
 
   (0.97) 
  
Net income (loss) per common share - diluted
                       
Net income (loss)
(millions of Canadian dollars)
  
 
366
 
   (526)  
 
758
 
   (714)   
 
908
 
   3   
 
1,666
 
   (711) 
Weighted average number of common shares outstanding
(millions of shares)
  
 
724.1
 
   734.1  
 
729.1
 
   736.5   
 
700.0
 
   734.1   
 
719.4
 
   735.7 
Effect of employee share-based awards
(millions of shares) (a)
  
 
1.7
 
   0-  
 
1.7
 
   0-   
 
1.9
 
   2.2   
 
1.7
 
   0- 
Weighted average number of common shares outstanding, assuming dilution
(millions of shares)
  
 
725.8
 
   734.1  
 
730.8
 
   736.5   
 
701.9
 
   736.3   
 
721.1
 
   735.7 
Net income (loss) per common share
(dollars)
  
 
0.50
 
   (0.72)  
 
1.04
 
   (0.97)   
 
1.29
 
   0-   
 
2.31
 
   (0.97) 
  
Dividends per common share - declared
(dollars)
  
 
0.27
 
   0.22  
 
0.49
 
   0.44   
 
0.27
 
   0.22   
 
0.76
 
   0.66 
(a)
For Second Quarter 2020 and Six Monthsnine months to JuneSeptember 30, 2020, the Net income (loss) per common share – diluted excludes the effect of 2.02.1 million employee share-based awards. Share-based awards have the potential to dilute basic earnings per share in the future.
 
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10.  Other comprehensive income (loss) information
Changes in accumulated other comprehensive income (loss):
 
millions of Canadian dollars  
2021
  2020 
Balance at January 1
  
 
(1,989
) 
  (1,911) 
Postretirement benefits liability adjustment:
         
Current period change excluding amounts reclassified from accumulated other comprehensive income
  
 
54
 
  (114) 
Amounts reclassified from accumulated other comprehensive income
  
 
66
 
  68 
Balance at June 30
  
 
(1,869
) 
  (1,957) 
millions of Canadian dollars
  
2021
  2020 
Balance at January 1
  
 
(1,989
) 
  (1,911) 
Postretirement benefits liability adjustment:
         
Current period change excluding amounts reclassified from accumulated other comprehensive income
  
 
54
 
  (114) 
Amounts reclassified from accumulated other comprehensive income
  
 
99
 
  102 
Balance at September 30
  
 
(1,836
)  (1,923) 
Amounts reclassified out of accumulated other comprehensive income (loss) -
before-tax
income (expense):
 
         Second Quarter  Six Months
to June 30		 
millions of Canadian dollars  
2021
  2020  
2021
  2020 
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost
(a)
  
 
(44
) 
  (45)  
 
(88
) 
  (90) 
   Third Quarter       
     Nine Months
     to September 30
 
millions of Canadian dollars  
2021      
   2020         
2021      
   2020 
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost
(a)
 
 
(44)
     		   (45)       
 
(132)     
 
  (135) 
(a)
This accumulated other comprehensive income component is included in the computation of net periodic benefit cost, (note 4).
Income tax expense (credit) for components of other comprehensive income (loss):
 
         Second Quarter   Six Months
to June 30		 
millions of Canadian dollars  
2021
   2020   
2021
   2020 
Postretirement benefits liability adjustments:
                    
Postretirement benefits liability adjustment (excluding amortization)
  
 
0-
 
   0-   
 
17
 
   (37) 
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost
  
 
11
 
   11   
 
22
 
   22 
Total
  
 
11
 
   11   
 
39
 
   (15) 
   Third Quarter        Nine Months
     to September 30		 
millions of Canadian dollars
  
2021
   2020   
2021
   2020 
Postretirement benefits liability adjustments:
                    
Postretirement benefits liability adjustment (excluding amortization)
  
 
0-
 
   0-   
 
17
 
   (37) 
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost
  
 
11
 
   11   
 
33
 
   33 
Total
  
 
11
 
   11   
 
50
 
   (4) 
11.  Miscellaneous financial information
At March 31, 2021, due to the termination of transportation services agreements related to a third-party pipeline project, the company recognized a liability of $62 million, previously reported as a contingent liability in Note 10 of Imperial’s Form
10-K.
In connection with the same project, commitments under “Other“Oth
e
r long-term purchase agreements” as reported in Imperial’s Form
10-K
decreased by approximately $2.9 billion. The majority of these commitments related to years 2026 and beyond.
In
The company has received subsidies as part of the first quarterGovernment of 2020,Canada’s COVID-19 Economic Response Plan. It was recognized as a
non-cash
charge reduction to expense and was included in the Consolidated statement of $281 income, primarily as part of “Production and manufacturing” (2020 –
$
120
million afterbefore tax, (Upstream - $229 million; Downstream - $52 million) was recorded associated with the carrying value of crude oil inventory exceeding the current market value. In the second quarter of 2020, the first quarter’s temporaryyear-to-date).
non-cash
inventory charge was reversed.
In the first quarter of 2020, with the change in economic conditions and the reduction in the company’s market capitalization, the company assessed its goodwill balances for impairment and recognizedrecogniz
e
d a
non-cash
goodwill impairment charge of $20 million in the company’s Upstream segment. The goodwill impairment is reflected in “Depreciation and depletion” on the Consolidated statement of income and “Goodwill” on the Consolidated balance sheet. The remaining balance of goodwill is associated with the Downstream segment.
 
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Item 2.
Management’s discussion and analysis of financial condition and results of operations
Operating results
In early 2020, the balance of supply and demand for petroleum and petrochemical products experienced two significant disruptive effects. On the demand side, the
COVID-19
pandemic spread rapidly through most areas of the world resulting in substantial reductions in consumer and business activity and significantly reduced demand for crude oil, natural gas, and petroleum products. This reduction in demand coincided with announcements of increased production in certain key
oil-producing
countries which led to increases in inventory levels and sharp declines in prices for crude oil, natural gas, and petroleum products.
Through 2021, demand for petroleum and petrochemical products has continued to improve leading torecover, with each of the company’s sequential quarterly financial results benefiting from stronger prices and margins across all segments. Some lingering effects of the weak 2020 business environment continued to have a negative impact on financial results in the first half of 2021 when compared to periodsthe prior to the pandemic.quarter. The company continues to closely monitor industry and global economic conditions, including recovery from the
COVID-19
pandemic.
Looking beyond the volatility marking recent economic conditions, the company’s annual planning process provides an opportunity to
re-affirm
the fundamentals of supply and demand that underpin our businesses. Consideration is given to a diverse set of risks and other factors that may influence future energy supply and demand trends, including technological advancements, regulation and government policies, climate change, greenhouse gas restrictions, and other general economic conditions. The company views climate change risks as a global issue that requires collaboration among governments, private companies, consumers and other stakeholders to create meaningful solutions. These should meet the world’s increasing demand for affordable and reliable energy while creating opportunities to transition to a lower carbon future. The variety of potential transition pathways for society to a lower-carbon future, influenced by assumptions regarding economic growth, technology and governmental policy, indicates a wide range of uncertainty for the types and demand levels of energy.
SecondThe board of directors evaluates climate change risk in the context of overall enterprise risk, including other operational, strategic, and financial risks. The company considers the interactions among these factors as it pursues a strategy that is resilient to a wide range of potential pathways for society’s energy transition while continuing to grow shareholder value. It takes into account emerging industry and economic conditions and market and government policy uncertainties in developing its strategic plans and longer-term price views as part of its annual business planning process. The company continues to make progress on its greenhouse gas emission reduction plans and efforts to position the company for success in a lower-carbon energy future. It expects to play an important role in providing energy and products that are critical to economic growth while minimizing environmental impacts and supporting society’s ambition to achieve a lower-carbon energy future. The company continues to analyze internal and external scenarios of future energy markets to create a deeper understanding of what resiliency requires and which opportunities could emerge, but the assumptions and outcome of any given scenario or set of scenarios come with a high degree of uncertainty.
To the extent the planning process results in any significant changes to the company’s current development plans for its portfolio, certain assets could be at risk for impairment. The company will complete any required asset recoverability assessments in connection with the preparation and review of the company’s
year-end
financial statements for inclusion in its 2021 Form
10-K.
Until these activities are complete, it is not practicable to reasonably estimate the existence or range of potential future impairments.
Third quarter 2021 vs. secondthird quarter 2020
The company recorded net income of $366$908 million or $0.50$1.29 per share on a diluted basis in the secondthird quarter of 2021, up from net income of $3 million or $0.00 per share in the same period of 2020.
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Upstream recorded net income of $524 million in the third quarter of 2021, compared to a net loss of $526 million or $0.72 per share in the same period of 2020. Second quarter 2020 results included a reversal of the
non-cash
inventory revaluation charge of $281 million recorded in the first quarter of 2020.
Upstream recorded net income of $247 million in the second quarter of 2021, compared to a net loss of $444$74 million in the same period of 2020. Improved results reflect higher realizations of about $1,100$730 million and higher volumes of about $280$350 million. These items were partially offset by the absence of the prior year reversal of the
non-cash
charge of $229 million related to the revaluation of the company’s inventory, higher operating expenses of about $230$210 million, higher royalties of about $200$190 million and unfavourable foreign exchange impacts of about $50$60 million.
West Texas Intermediate (WTI) averaged US$66.1770.52 per barrel in the secondthird quarter of 2021, up from US$27.8340.93 per barrel in the same quarter of 2020. Western Canada Select (WCS) averaged US$54.6457.08 per barrel and US$16.7331.81 per barrel for the same periods. The WTI / WCS differential averaged approximately US$1213 per barrel for the secondthird quarter of 2021, up from around US$119 in the same period of 2020.
The Canadian dollar averaged US$0.810.79 in the secondthird quarter of 2021, an increase of US$0.090.04 from the secondthird quarter of 2020.
Imperial’s average Canadian dollar realizations for bitumen increased in the quarter, primarily due to an increasegenerally in line with WCS. Bitumen realizations averaged $57.26$60.44 per barrel in the secondthird quarter of 2021, up from $12.82$35.95 per barrel in the secondthird quarter of 2020. The company’s average Canadian dollar realizations for synthetic crude increased generally in line with WTI, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $80.80$85.94 per barrel in the secondthird quarter of 2021, up from $32.20$50.79 per barrel in the same period of 2020.
Total gross production of Kearl bitumen averaged 255,000274,000 barrels per day in the secondthird quarter (181,000(194,000 barrels Imperial’s share), up from 190,000189,000 barrels per day (135,000(134,000 barrels Imperial’s share) in the secondthird quarter of 2020. Higher production was mainly due toprimarily driven by the absence of a prior year third-party pipeline outage, market-demand production balancing, with market demands, partially offset byand impacts associated with planned turnaround activities.
Gross production of Cold Lake bitumen averaged 142,000135,000 barrels per day in the secondthird quarter, up from 123,000131,000 barrels per day in the same period of 2020. Higher production was primarily due to improved reliability and lower scheduled downtime.
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The company’s share of gross production from Syncrude averaged 47,00078,000 barrels per day, compared to 50,000up from 67,000 barrels per day in the secondthird quarter of 2020. LowerHigher production was primarily associated with planned turnaround activities, partially offsetdriven by the absence of the prior year production balancing with market demands.turnaround.
Downstream recorded net income of $60$293 million in the secondthird quarter of 2021, compared to a net lossincome of $32$77 million in the same period of 2020. Improved results primarily reflect higher margins of about $200 million, partially offset by unfavourable foreign exchange impacts of about $70 million and the absence of the prior year reversal of the$280 million.
non-cash
charge of $52 million related to the revaluation of the company’s inventory.
Refinery throughput averaged 332,000404,000 barrels per day, up from 278,000341,000 barrels per day in the secondthird quarter of 2020. Capacity utilization was 7894 percent, up from 6681 percent in the secondthird quarter of 2020. Higher throughput was driven by reduced impacts associated with theincreased demand.
COVID-19
pandemic, partially offset by a planned turnaround at Strathcona.
Petroleum product sales were 429,000485,000 barrels per day, up from 357,000449,000 barrels per day in the secondthird quarter of 2020. Improved petroleum product sales were mainly due to reduced impacts associated with the
COVID-19increased demand.
pandemic.
Chemical net income was $109$121 million in the secondthird quarter, up from net income of $7$27 million in the same quarter of 2020, primarily due to higher polyethylene margins.
Corporate and other expenses were $50$30 million in the secondthird quarter, compared to $57up from $27 million in the same period of 2020.
 
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SixNine months 2021 vs. sixnine months 2020
Net income in the first sixnine months of 2021 was $758$1,666 million, or $1.04$2.31 per share on a diluted basis, compared to a net loss of $714$711 million or $0.97 per share in the first sixnine months of 2020.
Upstream recorded net income of $326$850 million for the first sixnine months of the year, compared to a net loss of $1,052$1,126 million in 2020. Improved results reflect higher realizations of about $1,810$2,570 million and higher volumes of about $280$620 million. These items were partially offset by higher royalties of about $300$490 million, higher operating expenses of about $290$490 million, and unfavourable foreign exchange impacts of about $120$180 million.
West Texas Intermediate averaged US$62.2265.04 per barrel in the first sixnine months of 2021, up from US$36.6638.10 per barrel in 2020. Western Canada Select averaged US$50.1452.45 per barrel and US$21.2024.72 per barrel for the same periods. The WTI / WCS differential narrowed toof approximately US$1213 per barrel in the first sixnine months of 2021, from around US$15 per barrelwas generally in line with the same period of 2020.
The Canadian dollar averaged US$0.80 in the first sixnine months of 2021, an increase of US$0.070.06 from 2020.
Imperial’s average Canadian dollar realizations for bitumen increased in the first sixnine months of 2021, primarily due to an increasegenerally in line with WCS. Bitumen realizations averaged $52.45$55.30 per barrel, up from $15.54$22.24 per barrel in the same period of 2020. The company’s average Canadian dollar realizations for synthetic crude increased generally in line with WTI, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $72.42$77.62 per barrel, up from $48.10$49.06 per barrel in the same period of 2020.
Total gross production of Kearl bitumen averaged 253,000260,000 barrels per day in the first sixnine months of 2021 (180,000(185,000 barrels Imperial’s share), up from 208,000202,000 barrels per day (147,000(143,000 barrels Imperial’s share) in the same period of 2020. Higher production was mainly due toprimarily driven by the absence of prior year production balancing with market demands partially offset by impacts associated with planned turnaround activities.and the outage of a third-party pipeline.
Gross production of Cold Lake bitumen averaged 141,000139,000 barrels per day in the first sixnine months of 2021, up from 131,000 barrels per day in the same period of 2020. Higher production was primarily due to improved reliability.
During the first sixnine months of 2021, the company’s share of gross production from Syncrude averaged 63,00068,000 barrels per day, up from 61,00063,000 barrels per day in the same period of 2020. Higher production was primarily associated with the absence of prior year production balancing with market demands and unplanned downtime, partially offset by planned turnaround activities.
Downstream net income was $352$645 million for the first sixnine months of the year, compared to $370up from $447 million in the same period of 2020. Results were negatively impactedhave improved due to higher margins of about $330 million, partially offset by unfavourable foreign exchange impacts of about $120 million, partially offset by higher margins of about $50 million and lower operating expenses of about $50 million.
Refinery throughput averaged 348,000367,000 barrels per day in the first sixnine months of 2021, up from 330,000334,000 barrels per day in the same period of 2020. Capacity utilization was 8186 percent, up from 7879 percent in the same period of 2020. Higher throughput was driven by reduced impacts associated with the
COVID-19
pandemic, partially offset by a planned turnaround at Strathcona.
Petroleum product sales were 421,000442,000 barrels per day in the first sixnine months of 2021, up from 409,000423,000 barrels per day in the same period of 2020. Improved petroleum product sales were mainly due to reduced impacts associated with the
COVID-19
pandemic.
Chemical net income was $176$297 million in the first sixnine months of 2021, up from $28$55 million in the same period of 2020, primarily due to higher polyethylene margins.
Corporate and other expenses were $96$126 million in the first sixnine months of 2021, up from $60$87 million in the same period of 2020, mainly due to higher share-based compensation costs.
 
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Liquidity and capital resources
Cash flow generated from operating activities was $852$1,947 million in the secondthird quarter, compared with cash flow used in operating activities of $816up from $875 million in the corresponding period in 2020, primarily reflecting higher Upstream realizations and favourable working capital impacts.Downstream margins.
Investing activities used net cash of $207$259 million in the secondthird quarter, compared with $172$125 million used in the same period of 2020. Full-year 2021 capital and exploration expenditures are now expected to be around $1.1 billion, down from previous guidance of $1.2 billion.
Cash used in financing activities was $1,336$589 million in the secondthird quarter, compared with $167$166 million used in the secondthird quarter of 2020. Dividends paid in the secondthird quarter of 2021 were $161$195 million. The per share dividend paid in the secondthird quarter was $0.22, consistent with$0.27, an increase of $0.05 from the same period of 2020. During the secondthird quarter, the company, under its share purchase program, purchased about 29.59.0 million shares for $1,171$313 million, including shares purchased from ExxonMobilExxon Mobil Corporation. In the secondthird quarter of 2020, the company did not purchase any shares under its share purchase program.
The company’s cash balance was $776$1,875 million at JuneSeptember 30, 2021, versus $233$817 million at the end of secondthird quarter 2020.
In MayDuring the second quarter of 2021, the company extended the maturity datedates of two of its existing committed short-term lines of credit, totalling $750 million, to May 2023 totalling $750 million. In June 2021, the companyand extended the maturity date of one of its existing $300 million committed short-term linesline of credit to June 2022. The company has not drawn on any of its $1,300 million of available credit facilities.
Cash flow generated from operating activities was $1,897$3,844 million in the first sixnine months of 2021, compared to cash flow used in operating activities of $393up from $482 million in the same period of 2020, primarily reflecting higher Upstream realizations and favourable working capital impacts.Downstream margins.
Investing activities used net cash of $354$613 million in the first sixnine months of 2021, compared to $480up from $605 million used in the same period of 2020, primarily reflecting lower additions2020. Full-year 2021 capital and exploration expenditures are now expected to property, plant and equipment.be around $1.1 billion, down from previous guidance of $1.2 billion.
Cash used in financing activities was $1,538$2,127 million in the first sixnine months of 2021, up from $612$778 million used in the same period of 2020. Dividends paid in the first sixnine months of 2021 were $323$518 million. The per share dividend paid in the first sixnine months of 2021 was $0.44, consistent with$0.71, up from $0.66 in the same period of 2020. During the first sixnine months of 2021, the company, under its share purchase program, purchased about 29.538.5 million shares for $1,171 million.$1,484 million, including shares purchased from Exxon Mobil Corporation. In the first sixnine months of 2020, the company purchased about 9.8 million shares for $274 million.million, including shares purchased from Exxon Mobil Corporation.
At March 31, 2021, due to the termination of transportation services agreements related to a third-party pipeline project, the company recognized a liability of $62 million, previously reported as a contingent liability in Note 10 of Imperial’s Form
10-K.
In connection with the same project, commitments under “Other long-term purchase agreements” as reported in Imperial’s Form
10-K
decreased by approximately $2.9 billion. The majority of these commitments related to years 2026 and beyond.
On April 30, 2021, the company announced an amendment to its normal course issuer bid to increase the number of common shares that were available to be purchased. Under the amendment, the number of common shares available for purchase increased to a maximum of 29,363,070 common shares during the period June 29, 2020 to June 28, 2021.
On June 23, 2021, 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 35,583,671 common shares during the period June 29, 2021 to June 28, 2022. This maximum includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent. The program will end should the company purchase the maximum allowable number of shares, or on June 28, 2022.
 
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Forward-looking statements
Statements of future events or conditions in this report, including projections, targets, expectations, estimates, and business plans are forward-looking statements. Forward-looking statements can be identified by words such as believe, anticipate, intend, propose, plan, goal, seek, project, predict, target, estimate, expect, strategy, outlook, schedule, future, continue, likely, may, should, will and similar references to future periods. Forward-looking statements in this release include, but are not limited to, references to the use of derivative instruments and effectiveness of risk mitigation; earnings sensitivities;the variety of potential transition pathways for society to a lower-carbon future indicating a wide range of uncertainty for types and demand levels of energy; the company’s efforts with respect to climate risk, including the evaluation of climate risk in the context of overall enterprise risk and the ability to pursue a strategy resilient to a wide range of pathways for society’s energy transition while growing shareholder value; progress on greenhouse gas emission reduction plans and efforts to position the company for success in a lower-carbon energy future; and the company’s role in providing products critical to economic growth, minimizing environmental impacts and supporting society’s ambition to achieve a lower-carbon energy future; plans for purchases under the amended share purchase program.program; and full-year capital and exploration expenditures of $1.1 billion for 2021.
Forward-looking statements are based on the company’s current expectations, estimates, projections and assumptions at the time the statements are made. Actual future financial and operating results, including expectations and assumptions concerning demand growth and energy source, supply and mix; commodity prices, foreign exchange rates and general market conditions; production rates, growth and mix; project plans, timing, costs, technical evaluations and capacities and the company’s ability to effectively execute on these plans and operate its assets; the adoption and impact of new facilities, technologies or products, including on reductions to greenhouse gases; plans to mitigate climate risk and the resilience of company strategy to a range of pathways for society’s energy transition; applicable laws and government policies, including restrictions in response to
COVID-19
and environmental regulation; 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; and capital and environmental expenditures could differ materially depending on a number of factors.
These factors include global, regional or local changes in supply and demand for oil, natural gas, and petroleum and petrochemical products and resulting price, differential and margin impacts, including foreign government action with respect to supply levels and prices and the impact of
COVID-19
on demand; availability and allocation of capital; political or regulatory events, including changes in law or government policy such as tax laws, production curtailment and actions in response to
COVID-19;
environmental regulation, including climate change and greenhouse gas regulation and changes to such regulation; environmental risks inherent in oil and gas exploration and production activities; management effectiveness and disaster response preparedness, including business continuity plans in response to
COVID-19;
unanticipated technical or operational difficulties; project management and schedules and timely completion of projects; the results of research programs and new technologies, and ability to bring new technologies to commercial scale on a cost-competitive basis; operational hazards and risks; availabilitythe receipt, in a timely manner, of regulatory and allocation of capital;third-party approvals; currency exchange rates; general economic conditions; and other factors discussed in Item 1A risk factors and Item 7 management’s discussion and analysis of financial condition and results of operations of Imperial Oil Limited’s most recent annual report on Form
10-K.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.
 
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Item 3.
Quantitative and qualitative disclosures about market risk
Information about market risks for the sixnine months ended JuneSeptember 30, 2021, does not differ materially from that discussed on page 32 of the company’s annual report on Form
10-K
for the year ended December 31, 2020. The following table details those earnings sensitivities that have been updated from2020 and on page 24 of the fiscalForm
year-end10-Q
to reflect current market conditions.
Earnings Sensitivities
(a)
millions of Canadian dollars after tax
One dollar (U.S.) per barrel increase (decrease) in crude oil prices
+ (-)100
One cent decrease (increase) in the value of the Canadian dollar versus the U.S. dollar
+ (-)100
(a)
Each sensitivity calculation shows the impact on net income resulting from a change in one factor, after tax and royalties and holding all other factors constant. These sensitivities have been updated to reflect current conditions. They may not apply proportionately to larger fluctuations.
for the quarter ended June 30, 2021.
 
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 JuneSeptember 30, 2021. Based on that evaluation, these officers have concluded that the company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to them in a manner that allows for timely decisions regarding required disclosures and are effective in ensuring that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There has not been any change in the company’s internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.
 
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PART II. OTHER INFORMATION
 
Item 1.
Legal proceedings
Imperial has elected to use a $1 million threshold for disclosing environmental proceedings.
 
Item 2.
Unregistered sales of equity securities and use of proceeds
Issuer purchases of equity securities
 
   Total number of
shares purchased		   
Average price paid
per share
(Canadian dollars)
   Total number of
shares purchased
as part of publicly
announced plans
or programs		   Maximum number
of shares that may
yet be purchased
under the plans or
programs
(a) (b)
 
 
 
April 2021
                    
(April 1 - April 30)
  
 
-
 
  
 
-
 
  
 
-
 
  
 
29,356,095
 
May 2021
                    
(May 1 - May 31)
  
 
13,905,500
 
  
 
38.75
 
  
 
13,905,500
 
  
 
15,450,595
 
June 2021
                    
(June 1 - June 28)
  
 
15,450,595
 
  
 
40.58
 
  
 
15,450,595
 
  
 
-
 
(June 29 - June 30)
  
 
142,332
 
  
 
37.77
 
  
 
142,332
 
  
 
35,441,339
 
 
 
    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 2021
        
(July 1 - July 31)
  
 
2,988,970
 
  
 
35.22
 
  
 
2,988,970
 
  
 
32,452,369
 
August 2021
        
(August 1 - August 31)
  
 
2,988,983
 
  
 
33.38
 
  
 
2,988,983
 
  
 
29,463,386
 
September 2021
        
(September 1 - September 30)
  
 
2,989,039
 
  
 
35.94
 
  
 
2,989,039
 
  
 
26,474,347
 
 
 
(a)
On June 23, 2020, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a limited normal course issuer bid. The program was initially used primarily to eliminate dilution from shares issued in conjunction with Imperial’s restricted stock unit plan, and enabled the company to purchase up to a maximum of 50,000 common shares during the period June 29, 2020 to June 28, 2021. This maximum included shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. Exxon Mobil Corporation participated to maintain its ownership percentage at approximately 69.6 percent.
On April 30, 2021, the company announced an amendment to its normal course issuer bid to increase the number of common shares that were available to be purchased. Under the amendment, the number of common shares available to be purchased increased to a maximum of 29,363,070 common shares during the period June 29, 2020 to June 28, 2021, which included shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. No other provisions of the normal course issuer bid have changed.
The program ended on June 28, 2021. Upon expiration, the company had purchased the maximum 29,363,070 shares allowed under the program.
(b)
On June 23, 2021, 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 35,583,671 common shares during the period June 29, 2021 to June 28, 2022. This maximum includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent. The program will end should the company purchase the maximum allowable number of shares, or on June 28, 2022.
The company will continue to evaluate its share purchase program in the context of its overall capital activities. Purchase plans may be modified at any time without prior notice.
 
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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).
 
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SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  
Imperial Oil Limited
(Registrant)
Date:    August 4,November 3, 2021  
/s/ Daniel E. Lyons
---------------------------------------------------
  (Signature)
  Daniel E. Lyons
  
Senior vice-president, finance and
administration, and controller
(Principal accounting officer)
 
Date:    August 4,November 3, 2021  
/s/ Cathryn Walker
---------------------------------------------------
  (Signature)
  
Cathryn Walker
Assistant corporate secretary
 
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