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Imperial Oil (IMO)

Filed: 3 Nov 21, 2:28pm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
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)
1-800
-567-3776
(Registrant’s telephone number, including area code)
 
 
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
Indicate 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            
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            
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.  
        
Indicate by check mark whether the registrant is a shell company (
a
s defined in Rule 12b-2 of the Exchange Act of 1934)
.
 
  YES             NO  
    
    
The number of common shares outstanding, as of September 30, 2021 was
 
695,611,336.

IMPERIAL OIL LIMITED
 
 
Table of contents
Page
 
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   19 
   24 
   24 
   25 
   25 
   25 
   26 
   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

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
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 cons
o
lidated financial statements is an integral part of these statements.
 
4

IMPERIAL OIL LIMITED
 
 
 
Consolidated balance sheet (U.S. GAAP, unaudited)
 
 
   
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 $1,064 million (2020 - $384 million).
(b)
Investments and long-term receivables included amounts from related parties of $299 million (2020 - $313 million).
(c)
Notes and loans payable included amounts to related parties of $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 696
 
million, respectively (2020 - 1,100 million and 734 million, respectively).
The information in the notes to consolidated financial statements is an int
e
gral part of these statements.
 
5

IMPERIAL OIL LIMITED
 
 
 
Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)
 
   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

IMPERIAL OIL LIMITED
 
 
 
Consolidated statement of cash flows (U.S. GAAP, unaudited)
 
                  
                  
                  
                  
Inflow (outflow)           Third Quarter  
        Nine Months
        to September 30
 
millions of Canadian dollars  
2021
  2020  
2021
  2020 
Operating activities
     
Net income (loss)
  
 
908
 
   3  
 
1,666
 
  (711
Adjustments for non-cash items:
                  
Depreciation and depletion
  
 
488
 
   409  
 
1,432
 
  1,275 
Impairment of int
a
ngible assets
(note 11)
  
 
0-
 
   0-  
 
0-
 
  20 
(Gain) loss on asset sales
(note 3)
  
 
(12
)
 
   (11 
 
(39
  (28
Deferred income taxes and other
  
 
(120
)   (11 
 
16
 
  (210
Changes in operating assets and liabilities:
                  
Accounts receivable
  
 
(708
)   134  
 
(1,952
)  967 
Inventories, materials, supplies and prepaid expenses
  
 
(199
)   142  
 
(300
)  60 
Income taxes payable
  
 
227
 
   0-  
 
269
 
  (106
Accounts payable and accrued liabilities
  
 
1,123
 
   66  
 
2,362
 
  (1,008
All other items - net
(b)
  
 
240
 
   143  
 
390
 
  223 
Cash flows from (used in) operating activities
  
 
1,947
 
   875  
 
3,844
 
  482 
     
Investing activities
                  
Additions to property, plant and equipment
  
 
(276
)   (142 
 
(684
)  (657
Proceeds from asset sales
(note 3)
  
 
15
 
   19  
 
57
 
  68 
Loans to equity companies - net
  
 
2
 
   (2 
 
14
 
  (16
Cash flows from (used in) investing activities
  
 
(259
)   (125 
 
(613
)  (605
     
Financing activities
                  
Short-term debt - net
  
 
(75
)   0-  
 
(111
)  0- 
Reduction in finance lease obligations
(note 6)
  
 
(6
)   (4 
 
(14
)  (16
Dividends paid
  
 
(195
)   (162 
 
(518
)  (488
Common shares purchased
(note 9)
  
 
(313
)   0-  
 
(1,484
)  (274
Cash flows from (used in) financing activities
  
 
(589
)   (166 
 
(2,127
)  (778
     
Increase (decrease) in cash
  
 
1,099
 
   584  
 
1,104
 
  (901
Cash at beginning of period
  
 
776
 
   233  
 
771
 
  1,718 
Cash at end of period
(a)
  
 
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.
 
(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
The information in the notes to consolidated financial statements is an integral part of these statements.
 
7

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
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 nine months ended September 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

IMPERIAL OIL LIMITED
 
 
 
2.  Business segments
 
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
  
    
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
  
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
  
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
  
 
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)
  
  0-   
  0-   
19
  18 
   
  0-   
(3,594)
  (1,022)  
10,233
  5,955 
Expenses
                  
Exploration
  
0- 
  0-   
0- 
  0-   
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)
  
    
0- 
  0-   
488
  409 
Non-service pension and postretirement benefit
  
11 
  31   
0- 
  0-   
11
  31 
Financing
(note 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
  
Income taxes
  
(10)
  (8)  
0- 
  0-   
281
  0- 
Net income (loss)
(b)
  
(30)
  (27)  
0- 
  0-   
908
  
Cash flows from (used in) operating activities
(b)
  
15 
  (16)  
0- 
  0-   
1,947
  875 
Capital and exploration expenditures
(c)
  
    
0- 
  0-   
277
  141 
 
9

IMPERIAL OIL LIMITED
 
 
 
(a)
Included export sales to the United States of $1,803 million (2020 - $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

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)
  
    
51 
  66   
1
  
   
11,579 
  5,857   
20,333 
  12,523   
1,309
  727 
Expenses
                  
Exploration
  
    
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)
  
  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)
  
  17   
0- 
  0-   
65
  88 
   
  17   
(7,950)
 (2,769) 
25,278
  16,355 
Expenses
                  
Exploration
  
0- 
  0-   
0- 
  0-   
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
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IMPERIAL OIL LIMITED
 
 
 
(a)
Included export sales to the United States of $4,916 million (2020 - $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.
 
1
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IMPERIAL OIL LIMITED
 
 
 
3.  Investment and other income
Investment and other income included gains and losses on asset sales as follows: 
 
             
             
             
             
           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:
 
                                                    
         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 
 
                                                    
         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
 
During the second quarter of 2021, the company extended the maturity dates of two of its short-term lines of credit, totalling $750 million, to May 2023 and extended its $300 million committed short-term line 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.
 
1
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IMPERIAL OIL LIMITED
 
 
 
6.  Long-term debt
 
   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 
 
   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 $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 $1 million (2020 - $27 million).
 
1
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IMPERIAL OIL LIMITED
 
 
 
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 September 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 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 l
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
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: 
 
                        
   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
 
1
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IMPERIAL OIL LIMITED
 
 
 
The estimated fair value of derivative instruments, and the related hierarchy level for the fair value measurement is a
s
 follows:
 
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
 
   Fair value   
Effect of
counterparty
netting
  
Effect of
collateral
netting
  
Net
carrying
value
 
    Level 1   Level 2   Level 3   Total 
Assets
                                 
Derivative assets
(a)
   2    0-    0-    2    (2  0-   0- 
        
Liabilities
                                 
Derivative liabilities
(b)
   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 September 30, 2021 and December 31, 2020, respectively, the company had $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.
 
1
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IMPERIAL OIL LIMITED
 
 
 
9.  Common shares
 
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 
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
 
Balance as at December 31, 2019
   743,902   1,375 
Issued under employee share-based awards
   7   0- 
Purchases at stated value
   (9,832  (18
Balance as at December 31, 2020
   734,077   1,357 
Issued under employee share-based awards
  
 
0-
 
 
 
0-
 
Purchases at stated value
  
 
(38,466
) 
 
(71
)
Balance as at September 30, 2021
  
 
695,611
 
 
 
1,286
 
The following table provides the calculation of b
a
sic 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
 
    
2021
   2020   
2021
   2020 
Net income (loss) per common share - basic
                    
Net income (loss)
(millions of Canadian dollars)
  
 
908
 
   3   
 
1,666
 
   (711
Weighted average number of common shares outstanding
(millions of shares)
  
 
700.0
 
   734.1   
 
719.4
 
   735.7 
Net income (loss) per common share
(dollars)
  
 
1.30
 
   0-   
 
2.32
 
   (0.97
     
Net income (loss) per common share - diluted
                    
Net income (loss)
(millions of Canadian dollars)
  
 
908
 
   3   
 
1,666
 
   (711
Weighted average number of common shares outstanding
(millions of shares)
  
 
700.0
 
   734.1   
 
719.4
 
   735.7 
Effect of employee share-based awards
(millions of shares) (a)
  
 
1.9
 
   2.2   
 
1.7
 
   0- 
Weighted average number of common shares outstanding, assuming dilution
(millions of shares)
  
 
701.9
 
   736.3   
 
721.1
 
   735.7 
Net income (loss) per common share
(dollars)
  
 
1.29
 
   0-   
 
2.31
 
   (0.97
     
Dividends per common share - declared
(dollars)
  
 
0.27
 
   0.22   
 
0.76
 
   0.66 
(a)
For nine months to September 30, 2020, the Net income (loss) per common share – diluted excludes the effect of 2.1 million employee share-based awards. Share-based awards have the potential to dilute basic earnings per share in the future.
 
1
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IMPERIAL OIL LIMITED
 
 
 
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
  
 
99
 
  102 
Balance at September 30
  
 
(1,836
)  (1,923
Amounts reclassified out of accumulated other comprehensive income (loss) - before-tax income (expense):
 
   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):
 
   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 “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.
The company has received subsidies as part of the Government of Canada’s COVID-19 Economic Response Plan. It was recognized as a reduction to expense and was included in the Consolidated statement of income, primarily as part of “Production and manufacturing” (2020 –
 
$
120
million before tax, year-to-date).
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 recogniz
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.
 
1
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IMPERIAL OIL LIMITED
 
 
 
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 recover, with each of the company’s sequential quarterly financial results benefiting from stronger prices when compared to the prior 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.
The 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. third quarter 2020
The company recorded net income of $908 million or $1.29 per share on a diluted basis in the third 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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IMPERIAL OIL LIMITED
 
 
 
Upstream recorded net income of $524 million in the third quarter of 2021, compared to a net loss of $74 million in the same period of 2020. Improved results reflect higher realizations of about $730 million and higher volumes of about $350 million. These items were partially offset by higher operating expenses of about $210 million, higher royalties of about $190 million and unfavourable foreign exchange impacts of about $60 million.
West Texas Intermediate (WTI) averaged US$70.52 per barrel in the third quarter of 2021, up from US$40.93 per barrel in the same quarter of 2020. Western Canada Select (WCS) averaged US$57.08 per barrel and US$31.81 per barrel for the same periods. The WTI / WCS differential averaged approximately US$13 per barrel for the third quarter of 2021, up from around US$9 in the same period of 2020.
The Canadian dollar averaged US$0.79 in the third quarter of 2021, an increase of US$0.04 from the third quarter of 2020.
Imperial’s average Canadian dollar realizations for bitumen increased in the quarter, generally in line with WCS. Bitumen realizations averaged $60.44 per barrel in the third quarter of 2021, up from $35.95 per barrel in the third 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 $85.94 per barrel in the third quarter of 2021, up from $50.79 per barrel in the same period of 2020.
Total gross production of Kearl bitumen averaged 274,000 barrels per day in the third quarter (194,000 barrels Imperial’s share), up from 189,000 barrels per day (134,000 barrels Imperial’s share) in the third quarter of 2020. Higher production was primarily driven by the absence of a prior year third-party pipeline outage, market-demand production balancing, and impacts associated with planned turnaround activities.
Gross production of Cold Lake bitumen averaged 135,000 barrels per day in the third quarter, up from 131,000 barrels per day in the same period of 2020.
The company’s share of gross production from Syncrude averaged 78,000 barrels per day, up from 67,000 barrels per day in the third quarter of 2020. Higher production was primarily driven by the absence of the prior year turnaround.
Downstream recorded net income of $293 million in the third quarter of 2021, compared to net income of $77 million in the same period of 2020. Improved results primarily reflect higher margins of about $280 million.
Refinery throughput averaged 404,000 barrels per day, up from 341,000 barrels per day in the third quarter of 2020. Capacity utilization was 94 percent, up from 81 percent in the third quarter of 2020. Higher throughput was driven by increased demand.
Petroleum product sales were 485,000 barrels per day, up from 449,000 barrels per day in the third quarter of 2020. Improved petroleum product sales were mainly due to increased demand.
Chemical net income was $121 million in the third quarter, up from $27 million in the same quarter of 2020, primarily due to higher polyethylene margins.
Corporate and other expenses were $30 million in the third quarter, up from $27 million in the same period of 2020.
 
20

IMPERIAL OIL LIMITED
 
 
 
Nine months 2021 vs. nine months 2020
Net income in the first nine months of 2021 was $1,666 million, or $2.31 per share on a diluted basis, compared to a net loss of $711 million or $0.97 per share in the first nine months of 2020.
Upstream recorded net income of $850 million for the first nine months of the year, compared to a net loss of $1,126 million in 2020. Improved results reflect higher realizations of about $2,570 million and higher volumes of about $620 million. These items were partially offset by higher royalties of about $490 million, higher operating expenses of about $490 million, and unfavourable foreign exchange impacts of about $180 million.
West Texas Intermediate averaged US$65.04 per barrel in the first nine months of 2021, up from US$38.10 per barrel in 2020. Western Canada Select averaged US$52.45 per barrel and US$24.72 per barrel for the same periods. The WTI / WCS differential of approximately US$13 per barrel in the first nine months of 2021, was generally in line with the same period of 2020.
The Canadian dollar averaged US$0.80 in the first nine months of 2021, an increase of US$0.06 from 2020.
Imperial’s average Canadian dollar realizations for bitumen increased in the first nine months of 2021, generally in line with WCS. Bitumen realizations averaged $55.30 per barrel, up from $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 $77.62 per barrel, up from $49.06 per barrel in the same period of 2020.
Total gross production of Kearl bitumen averaged 260,000 barrels per day in the first nine months of 2021 (185,000 barrels Imperial’s share), up from 202,000 barrels per day (143,000 barrels Imperial’s share) in the same period of 2020. Higher production was primarily driven by the absence of prior year production balancing with market demands and the outage of a third-party pipeline.
Gross production of Cold Lake bitumen averaged 139,000 barrels per day in the first nine months of 2021, up from 131,000 barrels per day in the same period of 2020.
During the first nine months of 2021, the company’s share of gross production from Syncrude averaged 68,000 barrels per day, up from 63,000 barrels per day in the same period of 2020.
Downstream net income was $645 million for the first nine months of the year, up from $447 million in the same period of 2020. Results have improved due to higher margins of about $330 million, partially offset by unfavourable foreign exchange impacts of about $120 million.
Refinery throughput averaged 367,000 barrels per day in the first nine months of 2021, up from 334,000 barrels per day in the same period of 2020. Capacity utilization was 86 percent, up from 79 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 442,000 barrels per day in the first nine months of 2021, up from 423,000 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 $297 million in the first nine months of 2021, up from $55 million in the same period of 2020, primarily due to higher polyethylene margins.
Corporate and other expenses were $126 million in the first nine months of 2021, up from $87 million in the same period of 2020, mainly due to higher share-based compensation costs.
 
21

IMPERIAL OIL LIMITED
 
 
 
Liquidity and capital resources
Cash flow generated from operating activities was $1,947 million in the third quarter, up from $875 million in the corresponding period in 2020, primarily reflecting higher Upstream realizations and Downstream margins.
Investing activities used net cash of $259 million in the third quarter, compared with $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 $589 million in the third quarter, compared with $166 million used in the third quarter of 2020. Dividends paid in the third quarter of 2021 were $195 million. The per share dividend paid in the third quarter was $0.27, an increase of $0.05 from the same period of 2020. During the third quarter, the company, under its share purchase program, purchased about 9.0 million shares for $313 million, including shares purchased from Exxon Mobil Corporation. In the third quarter of 2020, the company did not purchase any shares under its share purchase program.
The company’s cash balance was $1,875 million at September 30, 2021, versus $817 million at the end of third quarter 2020.
During the second quarter of 2021, the company extended the maturity dates of two of its short-term lines of credit, totalling $750 million, to May 2023 and extended its $300 million committed short-term line 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 $3,844 million in the first nine months of 2021, up from $482 million in the same period of 2020, primarily reflecting higher Upstream realizations and Downstream margins.
Investing activities used net cash of $613 million in the first nine months of 2021, up from $605 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 $2,127 million in the first nine months of 2021, up from $778 million used in the same period of 2020. Dividends paid in the first nine months of 2021 were $518 million. The per share dividend paid in the first nine months of 2021 was $0.71, up from $0.66 in the same period of 2020. During the first nine months of 2021, the company, under its share purchase program, purchased about 38.5 million shares for $1,484 million, including shares purchased from Exxon Mobil Corporation. In the first nine months of 2020, the company purchased about 9.8 million shares for $274 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.
 
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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. 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; 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; 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; the receipt, in a timely manner, of regulatory and 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
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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IMPERIAL OIL LIMITED
 
 
 
Item 3.
Quantitative and qualitative disclosures about market risk
Information about market risks for the nine months ended September 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 and on page 24 of the Form
10-Q
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 September 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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IMPERIAL OIL LIMITED
 
 
 
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)
 
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, 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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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).
 
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IMPERIAL OIL LIMITED
 
 
 
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  
Imperial Oil Limited
(Registrant)
Date:    November 3, 2021  
/s/ Daniel E. Lyons
---------------------------------------------------
  (Signature)
  Daniel E. Lyons
  
Senior vice-president, finance and administration, and controller
(Principal accounting officer)
 
Date:    November 3, 2021  
/s/ Cathryn Walker
---------------------------------------------------
  (Signature)
  
Cathryn Walker
Assistant corporate secretary
 
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