Imperial Oil(IMO) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Imperial Oil Limited's unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2021 Item 1. Financial statements This section presents Imperial Oil Limited's unaudited consolidated financial statements and detailed notes for Q1 2021 Consolidated statement of income This statement presents the company's revenues, expenses, and net income or loss for the reporting period | millions of Canadian dollars | 2021 | 2020 | | :--------------------------- | :--- | :--- | | Revenues and other income | 6,998 | 6,690 | | Total expenses | 6,486 | 6,945 | | Income (loss) before income taxes | 512 | (255) | | Net income (loss) | 392 | (188) | | Net income (loss) per common share - basic | 0.53 | (0.25) | | Net income (loss) per common share - diluted | 0.53 | (0.25) | Consolidated statement of comprehensive income This statement details net income and other comprehensive income components, leading to total comprehensive income or loss | millions of Canadian dollars | 2021 | 2020 | | :--------------------------- | :--- | :--- | | Net income (loss) | 392 | (188) | | Other comprehensive income (loss), net of income taxes | 87 | (80) | | Comprehensive income (loss) | 479 | (268) | Consolidated balance sheet This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity | millions of Canadian dollars | Mar 31, 2021 | Dec 31, 2020 | | :--------------------------- | :----------- | :----------- | | Total current assets | 5,848 | 4,524 | | Property, plant and equipment, net | 31,700 | 32,034 | | Total assets | 39,007 | 38,031 | | Total current liabilities | 3,933 | 3,380 | | Total liabilities | 17,271 | 16,613 | | Total shareholders' equity | 21,736 | 21,418 | - Cash increased significantly from $771 million at December 31, 2020, to $1,467 million at March 31, 2021[18] Consolidated statement of shareholders' equity This statement outlines changes in shareholders' equity over the reporting period, including net income and dividends | millions of Canadian dollars | 2021 | 2020 | | :--------------------------- | :--- | :--- | | Shareholders' equity at end of period | 21,736 | 23,570 | | Net income (loss) for the period | 392 | (188) | | Dividends declared | (161) | (162) | - Common shares at stated value remained constant at $1,357 million for both periods, with no share purchases in Q1 2021[22] Consolidated statement of cash flows This statement summarizes the cash inflows and outflows from the company's operating, investing, and financing activities | millions of Canadian dollars | 2021 | 2020 | | :--------------------------- | :--- | :--- | | Cash flows from (used in) operating activities | 1,045 | 423 | | Cash flows from (used in) investing activities | (147) | (308) | | Cash flows from (used in) financing activities | (202) | (445) | | Increase (decrease) in cash | 696 | (330) | | Cash at end of period | 1,467 | 1,388 | - Operating cash flows significantly increased in Q1 2021, while cash used in investing and financing activities decreased compared to Q1 2020[24] Notes to the consolidated financial statements These notes provide detailed explanations and additional information for the consolidated financial statements 1. Basis of financial statement preparation This section describes the accounting principles, policies, and methods used for financial statement preparation - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP and follow the same accounting policies as the 2020 annual report on Form 10-K[26] - Exploration and production activities are accounted for under the 'successful efforts' method[27] 2. Business segments This section provides a breakdown of financial performance and capital expenditures by business segments | millions of Canadian dollars | Upstream (2021) | Upstream (2020) | Downstream (2021) | Downstream (2020) | Chemical (2021) | Chemical (2020) | | :--------------------------- | :-------------- | :-------------- | :---------------- | :---------------- | :-------------- | :-------------- | | Net income (loss) | 79 | (608) | 292 | 402 | 67 | 21 | | Cash flows from (used in) operating activities | 531 | 464 | 462 | 22 | 62 | (3) | | Capital and exploration expenditures | 85 | 231 | 68 | 76 | 2 | 9 | - Upstream segment significantly improved from a net loss to net income, while Downstream net income decreased; Chemical segment saw a substantial increase in net income[29] - Export sales to the United States totaled $1,569 million in 2021, primarily from the Upstream segment[30] 3. Investment and other income This section details the company's income derived from investments and other non-core operational activities | millions of Canadian dollars | 2021 | 2020 | | :--------------------------- | :--- | :--- | | Proceeds from asset sales | 7 | 9 | | Gain (loss) on asset sales, before tax | 3 | 7 | 4. Employee retirement benefits This section outlines net periodic benefit costs for pension and other postretirement benefit plans | millions of Canadian dollars | 2021 | 2020 | | :--------------------------- | :--- | :--- | | Pension benefits: Net periodic benefit cost | 82 | 97 | | Other postretirement benefits: Net periodic benefit cost | 17 | 15 | 5. Financing costs This section presents the company's net interest expense and total financing costs incurred during the period | millions of Canadian dollars | 2021 | 2020 | | :--------------------------- | :--- | :--- | | Net interest expense | 13 | 19 | | Total financing | 14 | 19 | 6. Long-term debt This section details the company's long-term debt obligations, including finance leases, at the balance sheet dates | millions of Canadian dollars | Mar 31, 2021 | Dec 31, 2020 | | :--------------------------- | :----------- | :----------- | | Long-term debt | 4,447 | 4,447 | | Finance leases | 506 | 510 | | Total long-term debt | 4,953 | 4,957 | 7. Other long-term obligations This section lists other long-term liabilities, such as employee retirement benefits and environmental obligations | millions of Canadian dollars | Mar 31, 2021 | Dec 31, 2020 | | :--------------------------- | :----------- | :----------- | | Employee retirement benefits | 2,036 | 2,105 | | Asset retirement obligations and other environmental liabilities | 1,680 | 1,676 | | Total other long-term obligations | 4,094 | 4,100 | 8. Financial and derivative instruments This section describes the company's use of financial and derivative instruments to manage commodity price risk - The company uses commodity-based contracts, including derivative instruments, to manage commodity price risk but does not designate them for hedge accounting purposes[42] | thousands of barrels | Mar 31, 2021 | Dec 31, 2020 | | :------------------- | :----------- | :----------- | | Crude (net notional long/(short) position) | 220 | (800) | | Products (net notional long/(short) position) | (560) | (390) | | millions of Canadian dollars | 2021 | 2020 | | :--------------------------- | :--- | :--- | | Realized and unrealized gain or (loss) on derivative instruments | (14) | 35 | 9. Common shares This section provides information on common shares outstanding, repurchase programs, and dividends declared | thousands of shares | Mar 31, 2021 | Dec 31, 2020 | | :------------------ | :----------- | :----------- | | Common shares outstanding | 734,077 | 734,077 | - The company announced an amendment to its normal course issuer bid on April 30, 2021, to increase the maximum number of common shares that may be purchased to 29,363,070 (4% of total shares on June 15, 2020) for the period June 29, 2020 to June 28, 2021[51] - Dividends declared per common share remained consistent at $0.22 for both Q1 2021 and Q1 2020[52] 10. Other comprehensive income (loss) information This section details the components and changes in the company's accumulated other comprehensive income or loss | millions of Canadian dollars | 2021 | 2020 | | :--------------------------- | :--- | :--- | | Balance of accumulated other comprehensive income (loss) at March 31 | (1,902) | (1,991) | | Current period change excluding reclassified amounts | 54 | (114) | 11. Miscellaneous financial information This section covers various other financial disclosures, including significant liabilities and non-cash charges - A $62 million liability was recognized in Q1 2021 due to the termination of transportation services agreements for a third-party pipeline project, leading to a decrease of approximately $2.9 billion in long-term purchase commitments[56] - In Q1 2020, the company recorded a non-cash charge of $281 million after tax for crude oil inventory write-down and a $20 million goodwill impairment charge in the Upstream segment[57][58] Item 2. Management's discussion and analysis of financial condition and results of operations This section provides an in-depth analysis of Imperial Oil Limited's financial performance and operational results for the first quarter of 2021 compared to 2020, highlighting the impact of market conditions, segment-specific contributions, liquidity, and capital resources - Net income for Q1 2021 was $392 million ($0.53 per share diluted), a significant improvement from a net loss of $188 million ($0.25 per share) in Q1 2020, partly due to the absence of a $281 million non-cash inventory revaluation charge in the prior year[62] - Upstream net income improved to $79 million from a $608 million net loss in Q1 2020, driven by higher realizations (+$700 million) and the absence of the prior year's inventory revaluation charge (+$229 million), partially offset by higher royalties, unfavorable foreign exchange, and increased operating expenses[63] - Downstream net income decreased to $292 million from $402 million, primarily due to lower margins (approx. $150 million) and sales volumes (approx. $60 million), partially offset by the absence of the prior year's $52 million inventory charge and lower operating expenses[69] - Chemical net income increased to $67 million in Q1 2021 from $21 million in Q1 2020[73] - Cash flow from operating activities increased to $1,045 million in Q1 2021 from $423 million in Q1 2020, mainly reflecting higher Upstream realizations[74] - The company's cash balance at March 31, 2021, was $1,467 million, up from $1,388 million at the end of Q1 2020[76] - An amendment to the normal course issuer bid was announced on April 30, 2021, increasing the maximum number of common shares that may be purchased to 29,363,070, and the company anticipates maximizing these purchases[78] Item 3. Quantitative and qualitative disclosures about market risk This section states that the company's market risk disclosures for Q1 2021 do not materially differ from those in its 2020 annual report on Form 10-K - Information about market risks for Q1 2021 does not materially differ from the disclosures in the company's 2020 annual report on Form 10-K[85] Item 4. Controls and procedures This section confirms effective disclosure controls and no material changes to internal control over financial reporting as of March 31, 2021 - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2021[86] - No material changes in the company's internal control over financial reporting occurred during the last fiscal quarter[86] PART II. OTHER INFORMATION This section provides additional disclosures, including legal proceedings, equity security sales, and exhibits Item 1. Legal proceedings This section outlines Imperial Oil Limited's policy for disclosing environmental legal proceedings, setting a $1 million threshold for reporting - Imperial has elected to use a $1 million threshold for disclosing environmental proceedings[89] Item 2. Unregistered sales of equity securities and use of proceeds This section details the company's issuer purchases of equity securities under its normal course issuer bid, including an amendment to increase share repurchase limits - No shares were purchased under the issuer bid program in January, February, or March 2021[90] - On April 30, 2021, the company amended its normal course issuer bid to increase the maximum number of common shares that may be purchased to 29,363,070 (4% of total shares on June 15, 2020) for the period June 29, 2020 to June 28, 2021[91] - Exxon Mobil Corporation intends to participate in the share purchase program to maintain its ownership percentage at approximately 69.6 percent[90] Item 6. Exhibits This section lists all exhibits filed as part of the 10-Q report, including various certifications by the company's principal officers and interactive data files - Exhibits include certifications by the principal executive officer (31.1, 32.1) and principal financial officer (31.2, 32.2) of the company[94][95][96] - Interactive Data Files (101) and the Cover Page Interactive Data File (104) are included in Inline XBRL format[96] SIGNATURES This section contains the official signatures of the authorized representatives, confirming the due submission of the quarterly report Signatures This section contains the official signatures of the authorized representatives of Imperial Oil Limited, confirming the due submission of the quarterly report - The report was signed on May 5, 2021, by Daniel E. Lyons, Senior Vice-President, Finance and Administration, and Controller, and Cathryn Walker, Assistant Corporate Secretary[98]