Imperial Oil(IMO) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the period Item 1. Financial Statements The company reported a net income of $366 million for Q2 2021, a significant turnaround from a $526 million loss in Q2 2020, driven by higher revenues and commodity prices Consolidated Statement of Income The income statement highlights a substantial increase in revenues and a return to profitability in Q2 and H1 2021 compared to the prior year Q2 & H1 2021 vs 2020 Income Statement Highlights | Metric (millions of CAD) | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | 8,007 | 3,666 | 14,999 | 10,330 | | Total Expenses | 7,576 | 4,403 | 14,062 | 11,348 | | Net Income (Loss) | 366 | (526) | 758 | (714) | | Diluted EPS (CAD) | 0.50 | (0.72) | 1.04 | (0.97) | - Revenues more than doubled in Q2 2021 compared to Q2 2020, increasing from $3.7 billion to $8.0 billion, leading to a significant profit recovery[12] Consolidated Balance Sheet The balance sheet shows an increase in total assets and current assets, alongside a rise in total liabilities, while shareholders' equity slightly decreased Balance Sheet Summary | Metric (millions of CAD) | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | 5,874 | 4,524 | | Total Assets | 38,939 | 38,031 | | Total Current Liabilities | 4,650 | 3,380 | | Total Liabilities | 18,170 | 16,613 | | Total Shareholders' Equity | 20,769 | 21,418 | Consolidated Statement of Cash Flows Cash flow from operating activities turned positive in H1 2021, significantly improving from a negative flow in H1 2020, despite increased cash used in financing activities H1 2021 vs 2020 Cash Flow Summary | Metric (millions of CAD) | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Cash from Operating Activities | 1,897 | (393) | | Cash used in Investing Activities | (354) | (480) | | Cash used in Financing Activities | (1,538) | (612) | | Increase (Decrease) in Cash | 5 | (1,485) | | Cash at End of Period | 776 | 233 | - Financing activities in H1 2021 included $1,171 million for common share purchases, a significant increase from $274 million in H1 2020[23] Notes to the Consolidated Financial Statements Notes detail segment performance, share repurchase programs, and significant liability changes from a terminated pipeline project Net Income (Loss) by Business Segment (millions of CAD) | Segment | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Upstream | 247 | (444) | 326 | (1,052) | | Downstream | 60 | (32) | 352 | 370 | | Chemical | 109 | 7 | 176 | 28 | - The company initiated a new normal course issuer bid effective June 29, 2021, to purchase up to 35.6 million common shares (5% of total shares); Exxon Mobil intends to participate to maintain its ~69.6% ownership[55] - Due to the termination of a third-party pipeline project's transportation services agreements, the company recognized a $62 million liability and decreased its long-term purchase agreement commitments by approximately $2.9 billion[62] Item 2. Management's Discussion and Analysis (MD&A) Management attributes the strong financial turnaround to recovering demand and stronger commodity prices, with all segments showing improved performance and robust liquidity Operating Results Operating results show a strong recovery driven by improved demand, higher commodity prices, and increased volumes across Upstream, Downstream, and Chemical segments - The recovery from the COVID-19 pandemic continued through 2021, improving demand and leading to stronger prices and margins across all business segments[67] Key Commodity Price Averages (USD per barrel) | Commodity | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | WTI | $66.17 | $27.83 | $62.22 | $36.66 | | WCS | $54.64 | $16.73 | $50.14 | $21.20 | Gross Production Volumes (thousands of barrels per day) | Asset | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Kearl (Imperial's Share) | 181 | 135 | 180 | 147 | | Cold Lake | 142 | 123 | 141 | 131 | | Syncrude (Imperial's Share) | 47 | 50 | 63 | 61 | - The Upstream segment's Q2 2021 net income of $247 million was a major reversal from a $444 million loss in Q2 2020, driven by higher realizations of about $1.1 billion and higher volumes of about $280 million[69] - The Chemical segment's net income surged to $109 million in Q2 2021 from $7 million in Q2 2020, primarily due to higher polyethylene margins[79] Liquidity and Capital Resources The company demonstrated strong liquidity with positive cash flow from operations, significant share repurchases, and ample available credit facilities - Cash flow from operations was $852 million in Q2 2021, a strong recovery from a use of cash of $816 million in Q2 2020, reflecting higher realizations and favorable working capital[96] - The company purchased approximately 29.5 million shares for $1,171 million in Q2 2021 under its share purchase program; no shares were purchased in Q2 2020[98] - The company's cash balance stood at $776 million at June 30, 2021, compared to $233 million at the end of Q2 2020[99] - Imperial extended maturity dates on committed short-term credit lines totaling $1.05 billion and has not drawn on any of its $1.3 billion of available credit facilities[99] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures were reported, with updated sensitivities showing a $100 million CAD impact on net income for a $1 USD crude oil price or one-cent CAD/USD exchange rate change Updated Earnings Sensitivities (After-Tax) | Sensitivity Factor | Impact on Net Income (millions of CAD) | | :--- | :--- | | One dollar (U.S.) per barrel change in crude oil prices | +/- 100 | | One cent change in CAD vs. U.S. dollar value | +/- 100 | Item 4. Controls and Procedures The company's disclosure controls and procedures were deemed effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2021[114] - 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[114] PART II. OTHER INFORMATION This section covers legal proceedings, issuer purchases of equity securities, and a list of exhibits filed with the report Item 1. Legal Proceedings The company has established a $1 million threshold for disclosing environmental legal proceedings - Imperial has elected to use a $1 million threshold for disclosing environmental proceedings[117] Item 2. Issuer Purchases of Equity Securities The company completed its prior share repurchase program and initiated a new, larger one to buy back up to 35.6 million common shares through June 2022 Share Purchases in Q2 2021 | Period | Total Shares Purchased | Average Price Paid (CAD) | | :--- | :--- | :--- | | April 2021 | - | - | | May 2021 | 13,905,500 | $38.75 | | June 2021 (1-28) | 15,450,595 | $40.58 | | June 2021 (29-30) | 142,332 | $37.77 | - The normal course issuer bid program was amended on April 30, 2021, to increase the maximum purchasable shares to 29,363,070, which was fully utilized by its expiration on June 28, 2021[119][120] - A new normal course issuer bid was approved to purchase up to 35,583,671 common shares for the period of June 29, 2021, to June 28, 2022[121] Item 6. Exhibits This section lists the exhibits filed, including required certifications by executive officers and Interactive Data Files (Inline XBRL) - Exhibits filed include certifications by the principal executive officer and principal financial officer pursuant to SEC rules, and Interactive Data Files (Inline XBRL)[125]