Imperial Oil(IMO)2023-02-22 21:16Reserves and Production - As of December 31, 2022, Imperial Oil reported total net proved reserves of 2,193 million barrels of oil equivalent, with 1,824 million barrels classified as developed and 240 million barrels as undeveloped [26][34]. - The company's average daily oil production in 2022 was 402 thousand barrels gross, a slight decrease from 408 thousand barrels in 2021 [39][47]. - Average daily natural gas production in 2022 was 85 million cubic feet gross, down from 120 million cubic feet in 2021 [43]. - Approximately 11% of the company's proved reserves were classified as proved undeveloped, reflecting a decrease of 146 million oil-equivalent barrels from the previous year [34]. - The company invested about CAD 167 million in 2022 to develop proved undeveloped reserves, representing approximately 15% of total upstream capital expenditures of CAD 1,128 million [36]. - Total average daily production on an oil-equivalent basis was 349 thousand barrels net in 2022, down from 383 thousand barrels in 2021 [47]. - The company's share of Kearl's net bitumen production was approximately 157,000 barrels per day in 2022, with total gross production at about 242,000 barrels per day, down 21,000 barrels per day compared to 2021 [73]. - Cold Lake's net bitumen production was about 106,000 barrels per day in 2022, with gross production increasing by 4,000 barrels per day compared to 2021 due to improved reliability and production optimizations [76]. Financial Performance - The average unit sales price for bitumen in 2022 was CAD 84.67 per barrel, significantly up from CAD 57.91 in 2021 [50]. - Average unit production costs for bitumen increased to CAD 39.05 per barrel in 2022, compared to CAD 29.06 in 2021, primarily due to higher energy costs [53][54]. - The average unit sales price for synthetic crude oil rose to CAD 125.46 per barrel in 2022, up from CAD 81.61 in 2021 [50]. - The company's total refinery throughput in 2022 was 418,000 barrels per day, an increase from 379,000 barrels per day in 2021, reflecting a utilization rate of 98% [99][101]. - In 2022, net petroleum product sales reached 475,000 barrels per day, up from 456,000 barrels per day in 2021, driven by increased demand [108]. - Total petrochemical sales volumes in 2022 were 842,000 tonnes, an increase from 831,000 tonnes in 2021, primarily due to higher sales of propylene and polyethylene [111]. Environmental and Regulatory Compliance - The company's environmental capital and operating expenditures totaled approximately $1.4 billion in 2022, with expectations to increase to about $1.8 billion in 2023 [123]. - The company aims to achieve net-zero emissions from its operated assets, but the transition to lower-emission sources carries risks related to technology and market development [159]. - Compliance with environmental legislation may require significant expenditures, and failure to comply could result in operational cessation and financial penalties [155]. - The Government of Canada aims to reduce greenhouse gas emissions economy-wide by 40 to 45 percent below 2005 levels by 2030, with a carbon pricing plan starting at $50 per tonne CO2 equivalent emissions in 2022, increasing to $170 per tonne by 2030 [160]. - Alberta's Technology Innovation and Emissions Reduction Regulation (TIER) applies to facilities with CO2 emissions over 100,000 tonnes per year, with a pricing increase from 10% of emissions in 2020 to 12% in 2022, and anticipated increases of 2% per year starting in 2023 [161]. - British Columbia's Low Carbon Fuel Standard requires a 30% carbon intensity reduction by 2030 compared to the 2010 baseline, with compliance achievable through blending renewable fuels or purchasing credits [163]. Operational Risks and Challenges - The company's operations and earnings are significantly affected by commodity price volatility, particularly crude oil and natural gas prices, which can impact both Upstream and Downstream operations [137]. - Economic downturns or recessions directly adversely impact the company's results, with various factors such as trade tariffs and public health issues posing additional risks [138]. - Demand for the company's products may be influenced by technological improvements in energy efficiency and changes in consumer preferences towards alternative energy sources [139]. - Increased supply from new oil and gas sources can lead to reduced commodity prices if not matched by demand growth, impacting the company's margins [141]. - The market price for western Canadian heavy crude oil is typically lower than lighter grades, which can adversely affect the company's business due to higher transportation and refining costs [142]. - The company faces risks from potential increases in carbon pricing, which could adversely impact operations and financial results unless mitigated through technological innovation [161]. - The company is exposed to commodity price volatility and inflationary pressures due to potential restrictions on hydrocarbon products without a corresponding reduction in demand [167]. - The company relies on third-party service providers for transportation and utilities, and disruptions could negatively impact production capacity and financial performance [170]. - The company’s operations are subject to significant hazards, including environmental risks, and effective management systems are crucial to minimize these risks [178]. - Cybersecurity threats pose risks to the company’s operations, and the effectiveness of its defensive measures is critical to protect proprietary data and maintain business continuity [179]. Shareholder Information and Capital Management - The company completed a substantial issuer bid, purchasing 20,689,655 common shares at a price of $72.50 per share, totaling $1.5 billion, representing 3.4% of its issued and outstanding shares as of October 31, 2022 [199]. - The company has a maximum of 31,833,809 common shares authorized for purchase under its normal course issuer bid program, which runs from June 29, 2022, to June 28, 2023 [198]. - As of February 8, 2023, there were 9,342 holders of record of the company's common shares [192]. - The company is subject to a Canadian non-resident withholding tax of 15% on cash dividends paid to shareholders in countries with which Canada has an income tax convention [193]. - The company will evaluate the renewal of its normal course issuer bid share purchase program in June 2023 [200]. Exploration and Development - The company has a disciplined investment strategy, with significant funding commitments required to report resources as proved reserves [36]. - In 2022, the company drilled a total of 24 productive development wells, an increase from 13 in 2021 and a decrease from 29 in 2020 [59]. - The Grand Rapids Phase 1 project was approved in April 2022, with a forecasted average production of 15,000 barrels per day before royalties, and development activities are planned to be completed by year-end 2023 [66]. - The company holds a 25 percent interest in two exploration licenses in the Beaufort Sea, with existing licenses not impacted by the Federal Government's prohibition on new offshore oil and gas licenses [70]. - The company has approximately 161,000 net acres of oil sands leases near Cold Lake and about 34,000 net acres at Kearl, with additional interests in other bitumen oil sands leases totaling about 173,000 net acres [88].