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| | | | | | |
(a) Amounts from related parties included in revenues. | 2,946 | | 3,556 | | 5,675 | | 6,692 | | | |
| | | | | | | | | | | | | | | | |
| | | | | | |
(b) Amounts to related parties included in purchases of crude oil and products. | 838 | | 964 | | 1,823 | | 2,042 | | | |
| | | | | | | | | | | | | | | | |
| | | | | | |
(c) Amounts to related parties included in production and manufacturing, and selling and general expenses. | 135 | | 125 | | 285 | | 260 | | | |
| | | | | | | | | | | | | | | | |
| | | | | | |
(d) Amounts to related parties included in financing. | 43 | | 41 | | 87 | | 80 | | | |
| | | | | | | | |
| | |
Accounts receivable - net included net amounts receivable from related parties. | 1,344 | 1,048 |
| | | | | | | | |
| | |
Investments and long-term receivables included amounts from related parties. | 269 | 283 |
| | | | | | | | | | |
| | | | |
Long-term debt included amounts to related parties. | 3,447 | 3,447 | | |
| | | | | | | | |
| | |
Number of common shares authorized (millions). | 1,100 | 1,100 |
| | |
Number of common shares outstanding (millions). | 536 | 536 |
| | |
| | |
| | |
| | |
| | |
| | | | | | | | | | | | | | | | |
| | | | | | |
(b) Includes contributions to registered pension plans. | (38) | | (44) | | (75) | | (86) | | | |
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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 June 30, 2024
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 | | (I.R.S. Employer |
of incorporation or organization) | | Identification No.) |
| |
505 Quarry Park Boulevard S.E. Calgary, Alberta, Canada | | T2C 5N1 |
(Address of principal executive offices) | | (Postal Code) |
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 | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
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 (as defined in Rule 12b-2 of the Exchange Act of 1934). Yes ☐ No ☑
The number of common shares outstanding, as of June 30, 2024 was 535,836,803.
Table of contents
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| Page |
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PART I. FINANCIAL INFORMATION | |
Item 1. Financial statements | |
Consolidated statement of income | |
Consolidated statement of comprehensive income | |
Consolidated balance sheet | |
Consolidated statement of shareholders’ equity | |
Consolidated statement of cash flows | |
Notes to consolidated financial statements | |
Item 2. Management’s discussion and analysis of financial condition and results of operations | |
Item 3. Quantitative and qualitative disclosures about market risk | |
Item 4. Controls and procedures | |
| |
PART II. OTHER INFORMATION | |
Item 1. Legal proceedings | |
Item 2. Unregistered sales of equity securities and use of proceeds | |
Item 5. Other information | |
Item 6. Exhibits | |
| |
SIGNATURES | |
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, 2023. 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.
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
| | | | | | | | | | | | | | |
Consolidated statement of income (U.S. GAAP, unaudited) |
| | | | | | | | | | | | | | |
| Second Quarter | Six Months to June 30 |
millions of Canadian dollars | 2024 | | 2023 | | 2024 | | 2023 | |
Revenues and other income | | | | |
Revenues (a) | 13,348 | | 11,764 | | 25,597 | | 23,821 | |
Investment and other income (note 3) | 35 | | 55 | | 69 | | 119 | |
Total revenues and other income | 13,383 | | 11,819 | | 25,666 | | 23,940 | |
| | | | |
Expenses | | | | |
Exploration | 1 | | 1 | | 2 | | 2 | |
Purchases of crude oil and products (b) | 8,856 | | 7,856 | | 16,562 | | 15,334 | |
Production and manufacturing (c) | 1,689 | | 1,785 | | 3,353 | | 3,541 | |
Selling and general (c) | 221 | | 206 | | 467 | | 392 | |
Federal excise tax and fuel charge | 656 | | 598 | | 1,247 | | 1,127 | |
Depreciation and depletion | 456 | | 453 | | 946 | | 943 | |
Non-service pension and postretirement benefit | 1 | | 20 | | 2 | | 40 | |
Financing (d) (note 5) | 14 | | 16 | | 26 | | 32 | |
Total expenses | 11,894 | | 10,935 | | 22,605 | | 21,411 | |
| | | | |
Income (loss) before income taxes | 1,489 | | 884 | | 3,061 | | 2,529 | |
| | | | |
Income taxes | 356 | | 209 | | 733 | | 606 | |
| | | | |
Net income (loss) | 1,133 | | 675 | | 2,328 | | 1,923 | |
| | | | |
Per share information (Canadian dollars) | | | | |
Net income (loss) per common share - basic (note 9) | 2.11 | | 1.16 | | 4.34 | | 3.29 | |
Net income (loss) per common share - diluted (note 9) | 2.11 | | 1.15 | | 4.34 | | 3.29 | |
(a) Amounts from related parties included in revenues. | 2,946 | | 3,556 | | 5,675 | | 6,692 | |
(b) Amounts to related parties included in purchases of crude oil and products. | 838 | | 964 | | 1,823 | | 2,042 | |
(c) Amounts to related parties included in production and manufacturing, and selling and general expenses. | 135 | | 125 | | 285 | | 260 | |
(d) Amounts to related parties included in financing. | 43 | | 41 | | 87 | | 80 | |
| | | | |
The information in the notes to consolidated financial statements is an integral part of these statements. |
Consolidated statement of comprehensive income (U.S. GAAP, unaudited)
| | | | | | | | | | | | | | |
| Second Quarter | Six Months to June 30 |
millions of Canadian dollars | 2024 | | 2023 | | 2024 | | 2023 | |
Net income (loss) | 1,133 | | 675 | | 2,328 | | 1,923 | |
| | | | |
Other comprehensive income (loss), net of income taxes | | | | |
Postretirement benefits liability adjustment (excluding amortization) | — | | — | | 4 | | 21 | |
| | | | |
Amortization of postretirement benefits liability adjustment included in net benefit costs | 13 | | 10 | | 25 | | 20 | |
Total other comprehensive income (loss) | 13 | | 10 | | 29 | | 41 | |
| | | | |
Comprehensive income (loss) | 1,146 | | 685 | | 2,357 | | 1,964 | |
| | | | |
The information in the notes to consolidated financial statements is an integral part of these statements. |
| | | | | | | | | | | | | | |
Consolidated balance sheet (U.S. GAAP, unaudited) |
| | | | | | | | | | | | | | |
| As at Jun 30 | As at Dec 31 | | | |
millions of Canadian dollars | 2024 | 2023 | | | |
Assets | | | | | |
Current assets | | | | | |
Cash and cash equivalents | 2,020 | | 864 | | | | |
Accounts receivable - net (a) | 6,070 | | 4,482 | | | | |
Inventories of crude oil and products | 1,889 | | 1,944 | | | | |
Materials, supplies and prepaid expenses | 1,017 | | 1,008 | | | | |
Total current assets | 10,996 | | 8,298 | | | | |
Investments and long-term receivables (b) | 1,076 | | 1,062 | | | | |
Property, plant and equipment, | 57,134 | | 56,200 | | | | |
less accumulated depreciation and depletion | (26,291) | | (25,365) | | | | |
Property, plant and equipment, net | 30,843 | | 30,835 | | | | |
Goodwill | 166 | | 166 | | | | |
Other assets, including intangibles - net | 1,054 | | 838 | | | | |
Total assets | 44,135 | | 41,199 | | | | |
| | | |
Liabilities | | | | | |
Current liabilities | | | | | |
Notes and loans payable | 118 | | 121 | | | | |
Accounts payable and accrued liabilities (a) (note 7) | 7,665 | | 6,231 | | | | |
Income taxes payable | 90 | | 251 | | | | |
Total current liabilities | 7,873 | | 6,603 | | | | |
Long-term debt (c) (note 6) | 4,001 | | 4,011 | | | | |
Other long-term obligations (note 7) | 3,943 | | 3,851 | | | | |
Deferred income tax liabilities | 4,382 | | 4,512 | | | | |
Total liabilities | 20,199 | | 18,977 | | | | |
| | | |
Shareholders’ equity | | | | | |
Common shares at stated value (d) (note 9) | 992 | | 992 | | | | |
Earnings reinvested | 23,592 | | 21,907 | | | | |
Accumulated other comprehensive income (loss) (note 10) | (648) | | (677) | | | | |
Total shareholders’ equity | 23,936 | | 22,222 | | | | |
| | | | | |
Total liabilities and shareholders’ equity | 44,135 | | 41,199 | | | | |
(a) | Accounts receivable - net included net amounts receivable from related parties. | 1,344 | 1,048 | | | |
(b) | Investments and long-term receivables included amounts from related parties. | 269 | 283 | | | |
(c) | Long-term debt included amounts to related parties. | 3,447 | 3,447 | | | |
(d) | Number of common shares authorized (millions). | 1,100 | 1,100 | | | |
| Number of common shares outstanding (millions). | 536 | 536 | | | |
| | | | | | |
The information in the notes to consolidated financial statements is an integral part of these statements. | | | |
| | | | | | | | | | | | | | |
Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited) |
| | | | | | | | | | | | | | |
| Second Quarter | Six Months to June 30 |
millions of Canadian dollars | 2024 | | 2023 | | 2024 | | 2023 | |
Common shares at stated value (note 9) | | | | |
At beginning of period | 992 | | 1,079 | | 992 | | 1,079 | |
Share purchases at stated value | — | | — | | — | | — | |
At end of period | 992 | | 1,079 | | 992 | | 1,079 | |
| | | | |
Earnings reinvested | | | | |
At beginning of period | 22,781 | | 22,837 | | 21,907 | | 21,846 | |
Net income (loss) for the period | 1,133 | | 675 | | 2,328 | | 1,923 | |
Share purchases in excess of stated value | — | | — | | — | | — | |
Dividends declared | (322) | | (292) | | (643) | | (549) | |
At end of period | 23,592 | | 23,220 | | 23,592 | | 23,220 | |
| | | | |
Accumulated other comprehensive income (loss) (note 10) | | | | |
At beginning of period | (661) | | (481) | | (677) | | (512) | |
Other comprehensive income (loss) | 13 | | 10 | | 29 | | 41 | |
At end of period | (648) | | (471) | | (648) | | (471) | |
| | | | |
Shareholders’ equity at end of period | 23,936 | | 23,828 | | 23,936 | | 23,828 | |
| | | | |
The information in the notes to consolidated financial statements is an integral part of these statements. |
| | | | | | | | | | | | | | |
Consolidated statement of cash flows (U.S. GAAP, unaudited) |
| | | | | | | | | | | | | | |
| Second Quarter | Six Months to June 30 |
millions of Canadian dollars | 2024 | | 2023 | | 2024 | | 2023 | |
Operating activities | | | | |
Net income (loss) | 1,133 | | 675 | | 2,328 | | 1,923 | |
Adjustments for non-cash items: | | | | |
Depreciation and depletion | 456 | | 453 | | 946 | | 943 | |
(Gain) loss on asset sales (note 3) | (1) | | (13) | | (3) | | (22) | |
Deferred income taxes and other | (75) | | (15) | | (239) | | (71) | |
Changes in operating assets and liabilities: | | | | |
Accounts receivable | (866) | | (302) | | (1,588) | | 134 | |
Inventories, materials, supplies and prepaid expenses | 246 | | 420 | | 50 | | (59) | |
Income taxes payable | 73 | | (321) | | (161) | | (2,398) | |
Accounts payable and accrued liabilities | 668 | | (48) | | 1,375 | | (303) | |
All other items - net (b) | (5) | | 36 | | (3) | | (83) | |
Cash flows from (used in) operating activities | 1,629 | | 885 | | 2,705 | | 64 | |
| | | | |
Investing activities | | | | |
Additions to property, plant and equipment | (461) | | (499) | | (958) | | (928) | |
Proceeds from asset sales (note 3) | 3 | | 9 | | 7 | | 23 | |
| | | | |
Loans to equity companies - net | 2 | | 1 | | 14 | | 2 | |
Cash flows from (used in) investing activities | (456) | | (489) | | (937) | | (903) | |
| | | | |
Financing activities | | | | |
| | | | |
| | | | |
Finance lease obligations - reduction (note 6) | (8) | | (6) | | (13) | | (11) | |
Dividends paid | (321) | | (257) | | (599) | | (523) | |
Common shares purchased (note 9) | — | | — | | — | | — | |
Cash flows from (used in) financing activities | (329) | | (263) | | (612) | | (534) | |
| | | | |
Increase (decrease) in cash and cash equivalents | 844 | | 133 | | 1,156 | | (1,373) | |
Cash and cash equivalents at beginning of period | 1,176 | | 2,243 | | 864 | | 3,749 | |
Cash and cash equivalents at end of period (a) | 2,020 | | 2,376 | | 2,020 | | 2,376 | |
(a) Cash equivalents are all highly liquid securities with maturity of three months or less. |
(b) Includes contributions to registered pension plans. | (38) | | (44) | | (75) | | (86) | |
| | | | |
Income taxes (paid) refunded. | (434) | | (557) | | (1,134) | | (3,189) | |
Interest (paid), net of capitalization. | (15) | | (16) | | (26) | | (37) | |
| | | | |
The information in the notes to consolidated financial statements is an integral part of these statements. |
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 2023 annual report on Form 10-K. In the opinion of the company, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature.
The company’s exploration and production activities are accounted for under the “successful efforts” method.
The results for the six months ended June 30, 2024, are not necessarily indicative of the operations to be expected for the full year.
All amounts are in Canadian dollars unless otherwise indicated.
2. Business segments
| | | | | | | | | | | | | | | | | | | | | |
Second Quarter | Upstream | Downstream | Chemical | |
millions of Canadian dollars | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
Revenues and other income | | | | | | | |
Revenues (a) (b) | 29 | | 61 | | 12,986 | | 11,355 | | 333 | | 348 | | |
Intersegment sales | 4,522 | | 3,519 | | 1,639 | | 1,365 | | 85 | | 89 | | |
Investment and other income (note 3) | 1 | | 10 | | 9 | | 15 | | — | | — | | |
| 4,552 | | 3,590 | | 14,634 | | 12,735 | | 418 | | 437 | | |
Expenses | | | | | | | |
Exploration | 1 | | 1 | | — | | — | | — | | — | | |
Purchases of crude oil and products | 1,900 | | 1,432 | | 12,944 | | 11,133 | | 256 | | 263 | | |
Production and manufacturing | 1,203 | | 1,256 | | 435 | | 475 | | 48 | | 54 | | |
Selling and general | — | | — | | 171 | | 160 | | 23 | | 22 | | |
Federal excise tax and fuel charge | — | | — | | 655 | | 597 | | 1 | | 1 | | |
Depreciation and depletion | 396 | | 398 | | 46 | | 44 | | 4 | | 4 | | |
Non-service pension and postretirement benefit | — | | — | | — | | — | | — | | — | | |
Financing (note 5) | 1 | | — | | — | | — | | — | | — | | |
Total expenses | 3,501 | | 3,087 | | 14,251 | | 12,409 | | 332 | | 344 | | |
Income (loss) before income taxes | 1,051 | | 503 | | 383 | | 326 | | 86 | | 93 | | |
Income tax expense (benefit) | 252 | | 119 | | 89 | | 76 | | 21 | | 22 | | |
Net income (loss) | 799 | | 384 | | 294 | | 250 | | 65 | | 71 | | |
Cash flows from (used in) operating activities | 1,162 | | 573 | | 384 | | 228 | | 74 | | 55 | | |
Capital and exploration expenditures (c) | 267 | | 303 | | 149 | | 152 | | 3 | | 5 | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Second Quarter | Corporate and other | Eliminations | | | | Consolidated |
millions of Canadian dollars | 2024 | 2023 | 2024 | 2023 | | | | 2024 | 2023 |
Revenues and other income | | | | | | | | | |
Revenues (a) (b) | — | | — | | — | | — | | | | | 13,348 | | 11,764 | |
Intersegment sales | — | | — | | (6,246) | | (4,973) | | | | | — | | — | |
Investment and other income (note 3) | 25 | | 30 | | — | | — | | | | | 35 | | 55 | |
| 25 | | 30 | | (6,246) | | (4,973) | | | | | 13,383 | | 11,819 | |
Expenses | | | | | | | | | |
Exploration | — | | — | | — | | — | | | | | 1 | | 1 | |
Purchases of crude oil and products | — | | — | | (6,244) | | (4,972) | | | | | 8,856 | | 7,856 | |
Production and manufacturing | 3 | | — | | — | | — | | | | | 1,689 | | 1,785 | |
Selling and general | 29 | | 25 | | (2) | | (1) | | | | | 221 | | 206 | |
Federal excise tax and fuel charge | — | | — | | — | | — | | | | | 656 | | 598 | |
Depreciation and depletion | 10 | | 7 | | — | | — | | | | | 456 | | 453 | |
Non-service pension and postretirement benefit | 1 | | 20 | | — | | — | | | | | 1 | | 20 | |
Financing (note 5) | 13 | | 16 | | — | | — | | | | | 14 | | 16 | |
Total expenses | 56 | | 68 | | (6,246) | | (4,973) | | | | | 11,894 | | 10,935 | |
Income (loss) before income taxes | (31) | | (38) | | — | | — | | | | | 1,489 | | 884 | |
Income tax expense (benefit) | (6) | | (8) | | — | | — | | | | | 356 | | 209 | |
Net income (loss) | (25) | | (30) | | — | | — | | | | | 1,133 | | 675 | |
Cash flows from (used in) operating activities | 9 | | 29 | | — | | — | | | | | 1,629 | | 885 | |
Capital and exploration expenditures (c) | 43 | | 33 | | — | | — | | | | | 462 | | 493 | |
(a)Includes export sales to the United States of $2,632 million (2023 - $2,034 million).
(b)Revenues include both revenue within the scope of ASC 606 and outside the scope of ASC 606. Trade receivables in "Accounts receivable – net" reported on the Consolidated balance sheet include both receivables within the scope of ASC 606 and outside the scope of ASC 606. Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives. Contractual terms, credit quality and type of customer are generally similar between contracts within the scope of ASC 606 and those outside it.
| | | | | | | | |
Revenues | Second Quarter |
millions of Canadian dollars | 2024 | | 2023 | |
Revenue from contracts with customers | 10,782 | | 10,922 | |
Revenue outside the scope of ASC 606 | 2,566 | | 842 | |
Total | 13,348 | | 11,764 | |
(c)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions and the company’s share of similar costs for equity companies. CAPEX excludes the purchase of carbon emission credits.
| | | | | | | | | | | | | | | | | | | | | |
Six Months to June 30 | Upstream | Downstream | Chemical | |
millions of Canadian dollars | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
Revenues and other income | | | | | | | |
Revenues (a) (b) | 71 | | 137 | | 24,865 | | 22,994 | | 661 | | 690 | | |
Intersegment sales | 8,644 | | 7,141 | | 3,387 | | 3,188 | | 175 | | 180 | | |
Investment and other income (note 3) | 5 | | 12 | | 21 | | 35 | | 1 | | — | | |
| 8,720 | | 7,290 | | 28,273 | | 26,217 | | 837 | | 870 | | |
Expenses | | | | | | | |
Exploration | 2 | | 2 | | — | | — | | — | | — | | |
Purchases of crude oil and products | 3,713 | | 2,975 | | 24,535 | | 22,329 | | 516 | | 537 | | |
Production and manufacturing | 2,391 | | 2,543 | | 856 | | 886 | | 101 | | 112 | | |
Selling and general | — | | — | | 333 | | 317 | | 49 | | 48 | | |
Federal excise tax and fuel charge | — | | — | | 1,245 | | 1,125 | | 2 | | 2 | | |
Depreciation and depletion | 828 | | 832 | | 91 | | 89 | | 8 | | 8 | | |
Non-service pension and postretirement benefit | — | | — | | — | | — | | — | | — | | |
Financing (note 5) | 2 | | — | | — | | — | | — | | — | | |
Total expenses | 6,936 | | 6,352 | | 27,060 | | 24,746 | | 676 | | 707 | | |
Income (loss) before income taxes | 1,784 | | 938 | | 1,213 | | 1,471 | | 161 | | 163 | | |
Income tax expense (benefit) | 427 | | 224 | | 288 | | 351 | | 39 | | 39 | | |
Net income (loss) | 1,357 | | 714 | | 925 | | 1,120 | | 122 | | 124 | | |
Cash flows from (used in) operating activities | 2,053 | | 175 | | 391 | | (191) | | 71 | | 23 | | |
Capital and exploration expenditures (c) | 557 | | 624 | | 302 | | 226 | | 8 | | 9 | | |
Total assets as at June 30 | 28,505 | | 28,603 | | 12,016 | | 9,629 | | 503 | | 482 | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Six Months to June 30 | Corporate and other | Eliminations | | | | Consolidated |
millions of Canadian dollars | 2024 | 2023 | 2024 | 2023 | | | | 2024 | 2023 |
Revenues and other income | | | | | | | | | |
Revenues (a) (b) | — | | — | | — | | — | | | | | 25,597 | | 23,821 | |
Intersegment sales | — | | — | | (12,206) | | (10,509) | | | | | — | | — | |
Investment and other income (note 3) | 42 | | 72 | | — | | — | | | | | 69 | | 119 | |
| 42 | | 72 | | (12,206) | | (10,509) | | | | | 25,666 | | 23,940 | |
Expenses | | | | | | | | | |
Exploration | — | | — | | — | | — | | | | | 2 | | 2 | |
Purchases of crude oil and products | — | | — | | (12,202) | | (10,507) | | | | | 16,562 | | 15,334 | |
Production and manufacturing | 5 | | — | | — | | — | | | | | 3,353 | | 3,541 | |
Selling and general | 89 | | 29 | | (4) | | (2) | | | | | 467 | | 392 | |
Federal excise tax and fuel charge | — | | — | | — | | — | | | | | 1,247 | | 1,127 | |
Depreciation and depletion | 19 | | 14 | | — | | — | | | | | 946 | | 943 | |
Non-service pension and postretirement benefit | 2 | | 40 | | — | | — | | | | | 2 | | 40 | |
Financing (note 5) | 24 | | 32 | | — | | — | | | | | 26 | | 32 | |
Total expenses | 139 | | 115 | | (12,206) | | (10,509) | | | | | 22,605 | | 21,411 | |
Income (loss) before income taxes | (97) | | (43) | | — | | — | | | | | 3,061 | | 2,529 | |
Income tax expense (benefit) | (21) | | (8) | | — | | — | | | | | 733 | | 606 | |
Net income (loss) | (76) | | (35) | | — | | — | | | | | 2,328 | | 1,923 | |
Cash flows from (used in) operating activities | 190 | | 57 | | — | | — | | | | | 2,705 | | 64 | |
Capital and exploration expenditures (c) | 91 | | 63 | | — | | — | | | | | 958 | | 922 | |
Total assets as at June 30 | 3,528 | | 3,915 | | (417) | | (503) | | | | | 44,135 | | 42,126 | |
(a)Includes export sales to the United States of $5,010 million (2023 - $4,409 million).
(b)Revenues include both revenue within the scope of ASC 606 and outside the scope of ASC 606. Trade receivables in "Accounts receivable – net" reported on the Consolidated balance sheet include both receivables within the scope of ASC 606 and outside the scope of ASC 606. Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives. Contractual terms, credit quality and type of customer are generally similar between contracts within the scope of ASC 606 and those outside it.
| | | | | | | | |
Revenues | Six Months to June 30 |
millions of Canadian dollars | 2024 | | 2023 | |
Revenue from contracts with customers | 20,511 | | 21,442 | |
Revenue outside the scope of ASC 606 | 5,086 | | 2,379 | |
Total | 25,597 | | 23,821 | |
(c)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions and the company’s share of similar costs for equity companies. CAPEX excludes the purchase of carbon emission credits.
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 | 2024 | | 2023 | | 2024 | | 2023 | | | | |
Proceeds from asset sales | 3 | | 9 | | 7 | | 23 | | | | |
Book value of asset sales | 2 | | (4) | | 4 | | 1 | | | | |
Gain (loss) on asset sales, before tax | 1 | | 13 | | 3 | | 22 | | | | |
Gain (loss) on asset sales, after tax | 1 | | 10 | | 3 | | 18 | | | | |
| | | |
4. Employee retirement benefits
The components of net benefit cost were as follows:
| | | | | | | | | | | | | | |
| Second Quarter | Six Months to June 30 |
millions of Canadian dollars | 2024 | | 2023 | | 2024 | | 2023 | |
Pension benefits: | | | | |
Service cost | 46 | | 40 | | 92 | | 81 | |
Interest cost | 92 | | 93 | | 183 | | 186 | |
Expected return on plan assets | (114) | | (93) | | (227) | | (186) | |
Amortization of prior service cost | 7 | | 4 | | 14 | | 8 | |
Amortization of actuarial loss (gain) | 12 | | 11 | | 24 | | 22 | |
Net benefit cost | 43 | | 55 | | 86 | | 111 | |
| | | | |
Other postretirement benefits: | | | | |
Service cost | 3 | | 3 | | 7 | | 6 | |
Interest cost | 6 | | 7 | | 12 | | 14 | |
Amortization of actuarial loss (gain) | (2) | | (2) | | (4) | | (4) | |
Net benefit cost | 7 | | 8 | | 15 | | 16 | |
5. Financing costs
| | | | | | | | | | | | | | |
| Second Quarter | Six Months to June 30 |
millions of Canadian dollars | 2024 | | 2023 | | 2024 | | 2023 | |
Debt-related interest | 52 | | 49 | | 104 | | 95 | |
Capitalized interest | (39) | | (33) | | (80) | | (63) | |
Net interest expense | 13 | | 16 | | 24 | | 32 | |
Other interest | 1 | | — | | 2 | | — | |
Total financing | 14 | | 16 | | 26 | | 32 | |
6. Long-term debt
| | | | | | | | |
| As at Jun 30 | As at Dec 31 |
millions of Canadian dollars | 2024 | | 2023 | |
Long-term debt | 3,447 | | 3,447 | |
Finance leases | 554 | | 564 | |
Total long-term debt | 4,001 | | 4,011 | |
|
In June 2024, the company extended the maturity date of its existing long-term, variable-rate, Canadian dollar loan from ExxonMobil to June 30, 2035. All other terms and conditions remain unchanged.
7. Other long-term obligations
| | | | | | | | |
| As at Jun 30 | As at Dec 31 |
millions of Canadian dollars | 2024 | | 2023 | |
Employee retirement benefits (a) | 932 | | 954 | |
Asset retirement obligations and other environmental liabilities (b) | 2,590 | | 2,564 | |
Share-based incentive compensation liabilities | 144 | | 90 | |
Operating lease liability (c) | 153 | | 111 | |
Other obligations | 124 | | 132 | |
Total other long-term obligations | 3,943 | | 3,851 | |
(a)Total recorded employee retirement benefits obligations also included $62 million in current liabilities (2023 - $62 million). (b)Total asset retirement obligations and other environmental liabilities also included $221 million in current liabilities (2023 - $235 million). (c)Total operating lease liability also included $102 million in current liabilities (2023 - $87 million). In addition to the total operating lease liability, undiscounted commitments for leases not yet commenced totalled $62 million (2023 - $54 million).
|
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 June 30, 2024 and December 31, 2023, the fair value of long-term debt ($3,447 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 its business segments reduce the company’s enterprise-wide risk from changes in commodity prices, currency rates and interest rates. In addition, the company uses commodity-based contracts, including derivatives, to manage commodity price risk and to generate returns from trading. Commodity contracts held for trading purposes are presented in the Consolidated statement of income on a net basis in the line "Revenues" and in the Consolidated statement of cash flows in "Cash flows from (used in) operating activities". The company’s commodity derivatives are not accounted for under hedge accounting.
Credit risk associated with the company’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial limits placed on derivative counterparties. The company maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity.
The net notional long/(short) position of derivative instruments was:
| | | | | | | | |
| As at Jun 30 | As at Dec 31 |
thousands of barrels | 2024 | 2023 |
Crude | 10,620 | | (4,450) | |
Products | (1,880) | | (490) | |
Realized and unrealized gain/(loss) on derivative instruments recognized in the Consolidated statement of income is included in the following lines on a before-tax basis:
| | | | | | | | | | | | | | |
| Second Quarter | Six Months to June 30 |
millions of Canadian dollars | 2024 | | 2023 | | 2024 | | 2023 | |
Revenues | 11 | | 10 | | (13) | | (13) | |
| | | | |
| | | | |
The estimated fair value of derivative instruments, and the related hierarchy level for the fair value measurement were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
At June 30, 2024 |
millions of Canadian dollars |
| Fair value | Effect of counterparty netting | Effect of collateral netting | Net carrying value |
| Level 1 | Level 2 | Level 3 | Total |
Assets | | | | | | | |
Derivative assets (a) | 58 | | 41 | | — | | 99 | | (58) | | — | | 41 | |
| | | | | | | |
Liabilities | | | | | | | |
Derivative liabilities (b) | 58 | | 33 | | — | | 91 | | (58) | | — | | 33 | |
(a)Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”, “Accounts receivable - net” and “Other assets, including intangibles - net”. (b)Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities” and “Other long-term obligations”. |
| | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2023 |
millions of Canadian dollars |
| Fair value | Effect of counterparty netting | Effect of collateral netting | Net carrying value |
| Level 1 | Level 2 | Level 3 | Total |
Assets | | | | | | | |
Derivative assets (a) | 28 | | 18 | | — | | 46 | | (16) | | (12) | | 18 | |
| | | | | | | |
Liabilities | | | | | | | |
Derivative liabilities (b) | 16 | | 31 | | — | | 47 | | (16) | | — | | 31 | |
(a)Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”, “Accounts receivable - net” and “Other assets, including intangibles - net”. (b)Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities” and “Other long-term obligations”. |
At June 30, 2024 and December 31, 2023, the company had $17 million and $24 million, respectively, 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.
9. Common shares
| | | | | | | | |
| As at Jun 30 | As at Dec 31 |
thousands of shares | 2024 | 2023 |
Authorized | 1,100,000 | | 1,100,000 | |
Outstanding | 535,837 | | 535,837 | |
The current 12-month normal course issuer bid program came into effect June 29, 2024 under which Imperial will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 26,791,840 common shares (5 percent of the total shares on June 15, 2024) which includes shares purchased under the normal course issuer bid from Exxon Mobil Corporation. 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. Imperial plans to accelerate its share purchases under the normal course issuer bid program, and anticipates repurchasing all remaining allowable shares prior to year end. Purchase plans may be modified at any time without prior notice.
The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.
The company’s common share activities are summarized below:
| | | | | | | | |
| Thousands of shares | Millions of dollars |
Balance as at December 31, 2022 | 584,153 | | 1,079 | |
| | |
Purchases at stated value | (48,316) | | (87) | |
Balance as at December 31, 2023 | 535,837 | | 992 | |
| | |
Purchases at stated value | — | | — | |
Balance as at June 30, 2024 | 535,837 | | 992 | |
The following table provides the calculation of basic and diluted earnings per common share and the dividends declared by the company on its outstanding common shares:
| | | | | | | | | | | | | | |
| Second Quarter | Six Months to June 30 |
| 2024 | 2023 | 2024 | 2023 |
Net income (loss) per common share – basic | | | | |
Net income (loss) (millions of Canadian dollars) | 1,133 | 675 | 2,328 | 1,923 |
Weighted-average number of common shares outstanding (millions of shares) | 535.8 | 584.2 | 535.8 | 584.2 |
Net income (loss) per common share (dollars) | 2.11 | 1.16 | 4.34 | 3.29 |
Net income (loss) per common share – diluted | | | | |
Net income (loss) (millions of Canadian dollars) | 1,133 | 675 | 2,328 | 1,923 |
Weighted-average number of common shares outstanding (millions of shares) | 535.8 | 584.2 | 535.8 | 584.2 |
Effect of employee share-based awards (millions of shares) | 1.2 | 1.1 | 1.2 | 1.1 |
Weighted-average number of common shares outstanding, assuming dilution (millions of shares) | 537.0 | 585.3 | 537.0 | 585.3 |
Net income (loss) per common share (dollars) | 2.11 | 1.15 | 4.34 | 3.29 |
Dividends per common share – declared (dollars) | 0.60 | 0.50 | 1.20 | 0.94 |
10. Other comprehensive income (loss) information
Changes in accumulated other comprehensive income (loss):
| | | | | | | | |
millions of Canadian dollars | 2024 | | 2023 | |
Balance at January 1 | (677) | | (512) | |
Postretirement benefits liability adjustment: | | |
Current period change excluding amounts reclassified from accumulated other comprehensive income | 4 | | 21 | |
Amounts reclassified from accumulated other comprehensive income | 25 | | 20 | |
Balance at June 30 | (648) | | (471) | |
| | | | | | | | | | | | | | |
Amounts reclassified out of accumulated other comprehensive income (loss) - before-tax income (expense): |
| | | | | | | | | | | | | | |
| Second Quarter | Six Months to June 30 |
millions of Canadian dollars | 2024 | | 2023 | | 2024 | | 2023 | |
Amortization of postretirement benefits liability adjustment included in net benefit cost (a) | (17) | | (13) | | (34) | | (26) | |
(a) This accumulated other comprehensive income component is included in the computation of net 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 | 2024 | | 2023 | | 2024 | | 2023 | |
Postretirement benefits liability adjustments: | | | | |
Postretirement benefits liability adjustment (excluding amortization) | (1) | | — | | — | | 7 | |
Amortization of postretirement benefits liability adjustment included in net benefit cost | 4 | | 3 | | 9 | | 6 | |
Total | 3 | | 3 | | 9 | | 13 | |
Item 2. Management’s discussion and analysis of financial condition and results of operations
Non-GAAP financial measures and other specified financial measures
Certain measures included in this document are not prescribed by U.S. Generally Accepted Accounting Principles (GAAP). These measures constitute "non-GAAP financial measures" under Securities and Exchange Commission Regulation G and Item 10(e) of Regulation S-K, and "specified financial measures" under National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure of the Canadian Securities Administrators.
Reconciliation of these non-GAAP financial measures to the most comparable GAAP measure, and other information required by these regulations, have been provided. Non-GAAP financial measures and specified financial measures are not standardized financial measures under GAAP and do not have a standardized definition. As such, these measures may not be directly comparable to measures presented by other companies, and should not be considered a substitute for GAAP financial measures.
Net income (loss) excluding identified items
Net income (loss) excluding identified items is a non-GAAP financial measure that is total net income (loss) excluding individually significant non-operational events with an absolute corporate total earnings impact of at least $100 million in a given quarter. The net income (loss) impact of an identified item for an individual segment in a given quarter may be less than $100 million when the item impacts several segments or several periods. The most directly comparable financial measure that is disclosed in the financial statements is "Net income (loss)" within the company’s Consolidated statement of income. Management uses these figures to improve comparability of the underlying business across multiple periods by isolating and removing significant non-operational events from business results. The company believes this view provides investors increased transparency into business results and trends, and provides investors with a view of the business as seen through the eyes of management. Net income (loss) excluding identified items is not meant to be viewed in isolation or as a substitute for net income (loss) as prepared in accordance with U.S. GAAP. All identified items are presented on an after-tax basis.
Reconciliation of net income (loss) excluding identified items
There were no identified items in the second quarter or year-to-date 2024 and 2023 periods.
Recent business environment
In the first half of 2024, the price of crude oil remained relatively flat compared to the fourth quarter of 2023. The Canadian WTI/WCS spread continued to narrow in the second quarter, primarily due to additional pipeline capacity coming online. Refining margins fell as increasing supply more than met growing demand and geopolitical trade-flow disruptions lessened.
Operating results
Second quarter 2024 vs. second quarter 2023
| | | | | | | | |
| Second Quarter |
millions of Canadian dollars, unless noted | 2024 | 2023 |
Net income (loss) (U.S. GAAP) | 1,133 | 675 |
Net income (loss) per common share, assuming dilution (dollars) | 2.11 | 1.15 |
| | |
Upstream
Net income (loss) factor analysis
millions of Canadian dollars
Price – Average bitumen realizations increased by $14.38 per barrel, primarily driven by higher marker prices and the narrowing of the WTI/WCS spread. Synthetic crude oil realizations increased by $10.64 per barrel, generally in line with WTI.
Volumes – Higher volumes were primarily driven by higher mine fleet productivity and optimized turnaround at Kearl, production and steam cycle timing and GRP1 production at Cold Lake.
Royalty – Higher royalties were primarily driven by improved commodity prices.
Marker prices and average realizations
| | | | | | | | |
| Second Quarter |
Canadian dollars, unless noted | 2024 | | 2023 | |
West Texas Intermediate (US$ per barrel) | 80.63 | | 73.56 | |
Western Canada Select (US$ per barrel) | 67.03 | | 58.49 | |
WTI/WCS Spread (US$ per barrel) | 13.60 | | 15.07 | |
Bitumen (per barrel) | 83.02 | | 68.64 | |
Synthetic crude oil (per barrel) | 111.56 | | 100.92 | |
Average foreign exchange rate (US$) | 0.73 | | 0.74 | |
Production
| | | | | | | | |
| Second Quarter |
thousands of barrels per day | 2024 | | 2023 | |
Kearl (Imperial's share) | 181 | | 154 | |
Cold Lake | 147 | | 132 | |
Syncrude (a) | 66 | | 66 | |
| | |
Kearl total gross production (thousands of barrels per day) | 255 | | 217 | |
(a)In the second quarter of 2024, Syncrude gross production included about 2 thousand barrels per day of bitumen and other products (2023 - 0 thousand barrels per day) that were exported to the operator's facilities using an existing interconnect pipeline.
Higher production at Kearl was primarily driven by higher mine fleet productivity and optimized turnaround.
Higher production at Cold Lake was primarily driven by production and steam cycle timing, and GRP1 production.
Downstream
Net income (loss) factor analysis
millions of Canadian dollars
Margins – Lower margins primarily reflect weaker market conditions.
Other – Primarily due to lower turnaround impacts of about $140 million.
Refinery utilization and petroleum product sales
| | | | | | | | |
| Second Quarter |
thousands of barrels per day, unless noted | 2024 | | 2023 | |
Refinery throughput | 387 | | 388 | |
Refinery capacity utilization (percent) | 89 | | 90 | |
Petroleum product sales | 470 | | 475 | |
Refinery throughput in the second quarter of 2024 reflects the impact of turnaround activities at the Sarnia and Strathcona refineries. Refinery throughput in the second quarter of 2023 reflected the impact of turnaround activities at the Strathcona refinery.
Chemicals
Net income (loss) factor analysis
millions of Canadian dollars
Corporate and other
| | | | | | | | |
| Second Quarter |
millions of Canadian dollars | 2024 | | 2023 | |
Net income (loss) (U.S. GAAP) | (25) | | (30) | |
Liquidity and capital resources
| | | | | | | | |
| Second Quarter |
millions of Canadian dollars | 2024 | | 2023 | |
Cash flows from (used in): | | |
Operating activities | 1,629 | | 885 | |
Investing activities | (456) | | (489) | |
Financing activities | (329) | | (263) | |
Increase (decrease) in cash and cash equivalents | 844 | | 133 | |
| | |
Cash and cash equivalents at period end | 2,020 | | 2,376 | |
Cash flows from operating activities primarily reflect higher Upstream realizations and volumes, and favourable working capital impacts.
Cash flows used in investing activities primarily reflect lower additions to property, plant and equipment.
Cash flows used in financing activities primarily reflect:
| | | | | | | | |
| Second Quarter |
millions of Canadian dollars, unless noted | 2024 | | 2023 | |
Dividends paid | 321 | | 257 | |
Per share dividend paid (dollars) | 0.60 | | 0.44 | |
Share repurchases (a) | — | | — | |
Number of shares purchased (millions) (a) | — | | — | |
(a)The company did not purchase any shares during the second quarter of 2024 and 2023.
On June 24, 2024, 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. Shareholders may obtain a copy of the Notice of Intention to Make a Normal Course Issuer Bid approved by the TSX without charge by contacting the company. The program enables the company to purchase up to a maximum of 26,791,840 common shares during the period June 29, 2024 to June 28, 2025. This maximum includes shares purchased under the normal course issuer bid from Exxon Mobil Corporation. 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 otherwise on June 28, 2025. Imperial plans to accelerate its share purchases under the normal course issuer bid program, and anticipates repurchasing all remaining allowable shares prior to year end. Purchase plans may be modified at any time without prior notice.
In June 2024, the company extended the maturity date of its existing long-term, variable-rate, Canadian dollar loan from ExxonMobil to June 30, 2035. All other terms and conditions remain unchanged.
Six months 2024 vs. six months 2023
| | | | | | | | |
| Six Months |
millions of Canadian dollars, unless noted | 2024 | 2023 |
Net income (loss) (U.S. GAAP) | |