Imperial Oil(IMO) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company reported significant growth in net income and cash flow from operations for Q3 and the first nine months of 2022, alongside increased assets and reduced long-term debt Consolidated Statement of Income Net income for Q3 2022 increased by 123.7% to $2,031 million, and for the first nine months, it surged to $5,613 million, driven by strong revenue growth and commodity prices Consolidated Income Statement Highlights (CAD millions) | Metric | Q3 2022 (CAD millions) | Q3 2021 (CAD millions) | 9 Months 2022 (CAD millions) | 9 Months 2021 (CAD millions) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 15,071 | 10,214 | 45,013 | 25,213 | | Total revenues and other income | 15,224 | 10,233 | 45,217 | 25,278 | | Income before income taxes | 2,505 | 1,189 | 7,205 | 2,172 | | Net income (loss) | 2,031 | 908 | 5,613 | 1,666 | | Diluted EPS (CAD) | 3.24 | 1.29 | 8.58 | 2.31 | Consolidated Balance Sheet Total assets increased to $42,986 million as of September 30, 2022, driven by higher cash, while total liabilities rose, and long-term debt decreased Consolidated Balance Sheet Highlights (CAD millions) | Metric | Sept 30, 2022 (CAD millions) | Dec 31, 2021 (CAD millions) | | :--- | :--- | :--- | | Total current assets | 11,005 | 7,813 | | Property, plant and equipment, net | 30,013 | 31,240 | | Total assets | 42,986 | 40,782 | | Total current liabilities | 8,934 | 5,554 | | Long-term debt | 4,038 | 5,054 | | Total liabilities | 20,678 | 19,047 | | Total shareholders' equity | 22,308 | 21,735 | Consolidated Statement of Cash Flows Cash flow from operating activities more than doubled to $7,685 million for the first nine months of 2022, primarily funding significant share repurchases and long-term debt reduction Cash Flow Summary (CAD millions) | Activity | 9 Months 2022 (CAD millions) | 9 Months 2021 (CAD millions) | | :--- | :--- | :--- | | Operating activities | 7,685 | 3,844 | | Investing activities | (145) | (613) | | Financing activities | (6,117) | (2,127) | | Increase in cash | 1,423 | 1,104 | | Cash at end of period | 3,576 | 1,875 | - Key financing activities in the first nine months of 2022 included $4,461 million in common share purchases and a $1,000 million long-term debt reduction[16] Notes to the Consolidated Financial Statements Notes detail segment performance, including a near quadrupling of Upstream net income, the $0.9 billion sale of XTO Energy Canada interests, and significant shareholder capital returns Segment Net Income (CAD millions) | Segment | Q3 2022 (CAD millions) | Q3 2021 (CAD millions) | 9 Months 2022 (CAD millions) | 9 Months 2021 (CAD millions) | | :--- | :--- | :--- | :--- | :--- | | Upstream | 986 | 524 | 3,114 | 850 | | Downstream | 1,012 | 293 | 2,434 | 645 | | Chemical | 54 | 121 | 163 | 297 | - In Q2 2022, the company signed an agreement to sell its interests in XTO Energy Canada for approximately $1.9 billion ($0.9 billion Imperial's share), closing on August 31, 2022, and resulting in a gain of about $0.2 billion[53] - The company completed a $2.5 billion substantial issuer bid on June 15, 2022, repurchasing 32.5 million shares, and announced its intention for another substantial issuer bid of up to $1.5 billion after the quarter end[45][47] - During Q3 2022, the company repaid $1 billion of long-term debt owed to an affiliate of ExxonMobil, reducing total long-term debt to $4,038 million[32] Management's Discussion and Analysis (MD&A) Management attributes strong Q3 and nine-month 2022 results to favorable commodity prices and refining margins, driving earnings growth across segments and enabling significant shareholder returns and debt reduction Current Business Environment The 2022 business environment saw supply tightness and high commodity prices due to demand recovery and geopolitical events, though Q3 experienced some softening in prices and margins due to tempered demand - Industry underinvestment during the pandemic led to supply tightness as demand recovered in late 2021 and early 2022[59] - Russia's invasion of Ukraine and subsequent sanctions further tightened oil and gas markets, pushing prices to multi-year highs in the first half of 2022[59] - In Q3 2022, high prices and economic uncertainty led to tempered demand, causing crude oil prices and refining margins to soften from first-half levels[59] Operating Results (Q3 2022 vs Q3 2021) Q3 2022 net income reached $2,031 million, boosted by higher Upstream commodity prices and 100% Downstream refinery utilization, despite lower Chemical earnings Q3 Upstream Marker Prices (CAD per barrel) | Marker | Q3 2022 (CAD) | Q3 2021 (CAD) | | :--- | :--- | :--- | | Bitumen (per barrel) | 81.58 | 60.44 | | Synthetic crude oil (per barrel) | 124.80 | 85.94 | Q3 Production (thousand barrels per day) | Asset | Q3 2022 (kb/d) | Q3 2021 (kb/d) | | :--- | :--- | :--- | | Kearl (Imperial's share) | 193 | 194 | | Cold Lake | 150 | 135 | | Syncrude | 62 | 78 | Q3 Downstream Performance | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Refinery throughput (kb/d) | 426 | 404 | | Refinery capacity utilization | 100% | 94% | - Chemicals segment net income fell due to lower margins, primarily reflecting weaker industry polyethylene margins[71] Operating Results (Nine Months 2022 vs Nine Months 2021) Nine-month 2022 net income significantly increased to $5,613 million, driven by higher Upstream price realizations and improved Downstream margins and refinery utilization Nine-Month Upstream Marker Prices (CAD per barrel) | Marker | 9M 2022 (CAD) | 9M 2021 (CAD) | | :--- | :--- | :--- | | Bitumen (per barrel) | 94.01 | 55.30 | | Synthetic crude oil (per barrel) | 129.52 | 77.62 | Nine-Month Production (thousand barrels per day) | Asset | 9M 2022 (kb/d) | 9M 2021 (kb/d) | | :--- | :--- | :--- | | Kearl (Imperial's share) | 162 | 185 | | Cold Lake | 145 | 139 | | Syncrude | 74 | 68 | Nine-Month Downstream Performance | Metric | 9M 2022 | 9M 2021 | | :--- | :--- | :--- | | Refinery throughput (kb/d) | 413 | 367 | | Refinery capacity utilization | 96% | 86% | | Petroleum product sales (kb/d) | 471 | 442 | Liquidity and Capital Resources Strong liquidity was demonstrated by doubled cash flow from operations to $7,685 million, primarily used for significant shareholder returns and a $1 billion long-term debt reduction Nine-Month Financing Activities (CAD millions) | Activity | 9M 2022 (CAD millions) | 9M 2021 (CAD millions) | | :--- | :--- | :--- | | Dividends paid | 640 | 518 | | Share repurchases | 4,461 | 1,484 | | Number of shares purchased (millions) | 66.6 | 38.5 | - Cash flow from operating activities for the first nine months of 2022 was $7,685 million, up from $3,844 million in the same period of 2021, reflecting higher realizations and margins[91] - In Q3 2022, the company reduced its long-term debt by $1 billion by repaying a facility with an ExxonMobil affiliate[76][93] - The company completed a $2.5 billion substantial issuer bid in June 2022 and announced its intention to launch another $1.5 billion substantial issuer bid after the quarter[94][96] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures were reported for the nine months ended September 30, 2022, compared to prior filings - Information about market risks for the nine months ended September 30, 2022, does not differ materially from previous disclosures[105] Controls and Procedures Disclosure controls and procedures were deemed effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - The company's principal officers evaluated disclosure controls and procedures as of September 30, 2022, and concluded they are effective[106] - No changes in internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls[106] PART II. OTHER INFORMATION Legal Proceedings The company established a $1 million disclosure threshold for environmental legal proceedings - Imperial has elected to use a $1 million threshold for disclosing environmental proceedings[108] Issuer Purchases of Equity Securities In Q3 2022, the company repurchased 25.2 million shares for $1.5 billion, completed its NCIB, and announced a new $1.5 billion substantial issuer bid Q3 2022 Share Purchases | Month | Total Shares Purchased | Average Price Paid (CAD) | | :--- | :--- | :--- | | July 2022 | 5,082,675 | $56.85 | | August 2022 | 10,068,144 | $60.53 | | September 2022 | 10,009,792 | $61.22 | - The normal course issuer bid program, which allowed for the purchase of up to 31,833,809 shares, was completed on October 21, 2022, after the quarter end[109] - On October 28, 2022, the company announced its intention to launch a substantial issuer bid to purchase up to $1.5 billion of its common shares[109] Exhibits This section lists filed exhibits, including certifications from principal officers and Interactive Data Files (Inline XBRL) - Filed exhibits include certifications from the principal executive officer and principal financial officer as required by SEC rules[113] - Interactive Data Files (Inline XBRL) were also submitted as part of the filing[113]