Imperial Oil(US:IMO)2023-10-31 15:20PART I. FINANCIAL INFORMATION Item 1. Financial statements This section presents Imperial Oil Limited's unaudited consolidated financial statements as of September 30, 2023, prepared under U.S. GAAP, including income, balance sheet, equity, and cash flow statements Consolidated statement of income Net income and total revenues declined in Q3 and the first nine months of 2023 compared to 2022, driven by lower overall revenues Consolidated Statement of Income (CAD millions) | Indicator | Q3 2023 (million CAD) | Q3 2022 (million CAD) | Nine Months 2023 (million CAD) | Nine Months 2022 (million CAD) | | :--- | :--- | :--- | :--- | :--- | | Total revenues and other income | 13,920 | 15,224 | 37,860 | 45,217 | | Net income (loss) | 1,601 | 2,031 | 3,524 | 5,613 | | Diluted EPS (CAD) | 2.76 | 3.24 | 6.04 | 8.58 | Consolidated balance sheet As of September 30, 2023, total assets slightly increased to $43.59 billion, while total liabilities decreased and shareholders' equity rose due to reinvested earnings Consolidated Balance Sheet (CAD millions) | Account | Sep 30, 2023 (million CAD) | Dec 31, 2022 (million CAD) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 2,716 | 3,749 | | Total current assets | 10,760 | 10,736 | | Total assets | 43,586 | 43,524 | | Liabilities & Equity | | | | Total current liabilities | 7,773 | 8,898 | | Total liabilities | 19,778 | 21,111 | | Total shareholders' equity | 23,808 | 22,413 | Consolidated statement of cash flows Operating cash flow significantly decreased to $2.42 billion for the nine months ended September 30, 2023, leading to a $1.03 billion net decrease in cash Consolidated Statement of Cash Flows (CAD millions) | Cash Flow Activity | Nine Months 2023 (million CAD) | Nine Months 2022 (million CAD) | | :--- | :--- | :--- | | From Operating Activities | 2,423 | 7,685 | | From (Used in) Investing Activities | (1,283) | (145) | | From (Used in) Financing Activities | (2,173) | (6,117) | | Net Change in Cash | (1,033) | 1,423 | Notes to consolidated financial statements Detailed disclosures cover accounting policies, segment performance, financial instruments, and share capital, including segment earnings and share repurchase programs Net Income by Segment (CAD millions) | Segment | Q3 2023 Net Income (million CAD) | Q3 2022 Net Income (million CAD) | Nine Months 2023 Net Income (million CAD) | Nine Months 2022 Net Income (million CAD) | | :--- | :--- | :--- | :--- | :--- | | Upstream | 1,028 | 986 | 1,742 | 3,114 | | Downstream | 586 | 1,012 | 1,706 | 2,434 | | Chemical | 23 | 54 | 147 | 163 | - The company uses commodity-based derivative contracts to manage price risk and for trading purposes, but does not designate them for hedge accounting49 - The company completed its normal course issuer bid on October 19, 2023, after purchasing the maximum allowable shares. A new substantial issuer bid to purchase up to $1.5 billion of its common shares was announced on October 27, 20235658 Item 2. Management's discussion and analysis of financial condition and results of operations Management analyzes Q3 and nine-month 2023 financial performance, covering business environment impacts, operating results, production volumes, liquidity, and capital return activities Recent business environment Q3 2023 saw crude oil price increases due to OPEC+ cuts, a narrower WTI/WCS spread, and refining margins below 2022 levels - Crude oil prices rose in Q3 2023 due to OPEC+ output reductions causing demand to exceed supply. The WTI/WCS spread narrowed but remained weaker than in 202268 Operating results Q3 2023 net income was $1.6 billion, down from $2.0 billion in Q3 2022, with Upstream volumes up and Downstream earnings down due to market conditions and turnarounds Net Income and EPS (CAD millions) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Net Income (U.S. GAAP, million CAD) | 1,601 | 2,031 | | Diluted EPS (CAD) | 2.76 | 3.24 | Production Volumes (thousands of barrels per day) | Production (thousands of barrels per day) | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Kearl (Imperial's share) | 209 | 193 | | Cold Lake | 128 | 150 | | Syncrude | 75 | 62 | - Higher production at Kearl was driven by increased plant capacity utilization and mine equipment productivity, while higher Syncrude production was due to turnaround timing. Cold Lake production was lower due to steam cycle timing and planned turnarounds757677 - Downstream earnings were negatively impacted by weaker market conditions and planned turnaround activities at the Sarnia refinery7880 Liquidity and capital resources Operating cash flow for the first nine months of 2023 significantly decreased to $2.4 billion, with $2.7 billion in cash and equivalents at quarter-end after substantial capital returns Cash Flow Activities (CAD millions) | Cash Flow Activity (Nine Months) | 2023 (million CAD) | 2022 (million CAD) | | :--- | :--- | :--- | | Operating activities | 2,423 | 7,685 | | Investing activities | (1,283) | (145) | | Financing activities | (2,173) | (6,117) | | Cash at period end | 2,716 | 3,576 | - The company accelerated its share repurchase program in Q3 and completed it on October 19, 2023. A new substantial issuer bid for up to $1.5 billion was announced on October 27, 2023106107 Item 3. Quantitative and qualitative disclosures about market risk No material changes occurred in market risk disclosures for the nine months ended September 30, 2023, compared to the 2022 Form 10-K - Market risk disclosures for the nine months ended September 30, 2023, have not materially changed from those in the 2022 Form 10-K115 Item 4. Controls and procedures Disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during Q3 - The company's disclosure controls and procedures were deemed effective as of September 30, 2023, with no material changes to internal controls in the last fiscal quarter116 PART II. OTHER INFORMATION Item 1. Legal proceedings Imperial Oil Limited applies a $1 million (USD) threshold for disclosing environmental legal proceedings - The company uses a $1 million (USD) threshold for disclosing environmental proceedings119 Item 2. Unregistered sales of equity securities and use of proceeds Imperial significantly accelerated Q3 2023 share repurchases, completing its normal course issuer bid and announcing a new $1.5 billion substantial issuer bid Share Repurchase Activity (Q3 2023) | Month (2023) | Total Shares Purchased | Average Price Paid (CAD) | | :--- | :--- | :--- | | July | 2,283,731 | 66.72 | | August | 5,923,101 | 74.12 | | September | 9,278,768 | 80.91 | - The normal course issuer bid, which allowed for the purchase of up to 29.2 million shares, was completed on October 19, 2023. A new substantial issuer bid to purchase up to $1.5 billion in shares was announced on October 27, 2023120121 Item 5. Other information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 2023 - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q3 2023123 Item 6. Exhibits Exhibits filed with the Form 10-Q include officer certifications required by Sarbanes-Oxley and Interactive Data Files (Inline XBRL) - Exhibits filed include officer certifications pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350, as well as Interactive Data Files124125 SIGNATURES