What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-01 compared with 2023-05-02 · 99 added, 30 removed, 101 unchanged (56% of the section changed)

16 unchanged sentences

Reconciliation of net income (loss) excluding identified items

There were no identified items in the first quarter of 2023 and 2022.

There were no identified items in the second quarter or year-to-date 2023 and 2022.

IMPERIAL OIL LIMITED

Recent business environment

During the first quarter of 2023, the price of crude oil decreased as the global oil market saw higher inventory levels.

The increase in inventory levels was followed by announcements early in the second quarter of decreased production in certain key oil-producing countries.

In addition, the Canadian WTI/WCS spread continued to widen in January and February before beginning to recover in March.

Refining margins remained high due to low inventory levels of petroleum products.

During the first half of 2023, the price of crude oil decreased as the global oil market saw higher inventory levels.

In addition, the Canadian WTI/WCS spread continued to recover in the second quarter, but remains weaker than the first half of 2022.

Refining margins declined on steady supply of diesel.

Operating results

First quarter 2023 vs.

first quarter 2022

First Quarter

Second quarter 2023 vs.

second quarter 2022

Second Quarter

millions of Canadian dollars, unless noted 2023 2022

Net income (loss) (U.S.

GAAP) 1,248 1,173

Net income (loss) per common share, assuming dilution (dollars)

3 unchanged sentences

Average bitumen realizations decreased by $43.63 per barrel, generally in line with WCS, and synthetic crude oil realizations decreased by $43.75 per barrel, generally in line with WTI.

Volumes – Higher volumes were primarily driven by the absence of extreme cold weather, and reduced unplanned downtime at Kearl as a result of the successful rollout of the winterization strategy.

Royalty – Lower royalties primarily driven by weakened commodity prices.

Other – Includes favourable foreign exchange impacts of about $150 million, partly offset by higher operating expenses of about $80 million.

Volumes – Lower volumes were primarily driven by the timing of planned turnaround activities at Syncrude, and production and steam cycle timing at Cold Lake.

Royalty – Lower royalties were primarily driven by weakened commodity prices.

Other – Includes favourable foreign exchange impacts of about $180 million, and lower operating expenses of about $130 million, resulting primarily from lower energy prices.

Marker prices and average realizations

First Quarter

Second Quarter

Canadian dollars, unless noted 2023 2022

7 unchanged sentences

IMPERIAL OIL LIMITED

First Quarter

Second Quarter

thousands of barrels per day 2023 2022

1 unchanged sentence

Kearl total gross production (thousands of barrels per day)

(a) In the first quarter of 2023, Syncrude gross production included about 2 thousand barrels per day of bitumen and other products (2022 - 2 thousand barrels per day) that were exported to the operator's facilities using an existing interconnect pipeline.

Higher production at Kearl was primarily driven by the absence of extreme cold weather, and reduced unplanned downtime as a result of the successful rollout of the winterization strategy.

(a) In the second quarter of 2023, Syncrude gross production included about 0 thousand barrels per day of bitumen and other products (2022 - 2 thousand barrels per day) that were exported to the operator's facilities using an existing interconnect pipeline.

Lower production at Cold Lake was primarily driven by timing of production and steam cycles.

Lower production at Syncrude was primarily driven by the timing of the annual coker turnaround.

Net income (loss) factor analysis

millions of Canadian dollars

Margins – Higher margins primarily reflect improved market conditions.

Other – Improved volumes of about $90 million and favourable foreign exchange impacts of about $80 million.

Margins – Lower margins primarily reflect weaker market conditions.

Other – Includes higher turnaround impacts of about $230 million, reflecting the planned turnaround activities at Strathcona refinery, partially offset by favourable foreign exchange impacts of about $110 million.

Refinery utilization and petroleum product sales

First Quarter

Second Quarter

thousands of barrels per day, unless noted 2023 2022

2 unchanged sentences

Petroleum product sales 475 480

Improved refinery throughput in the first quarter of 2023 was primarily driven by lower planned maintenance.

Lower refinery throughput in the second quarter of 2023 reflects the impact of planned turnaround activities at the Strathcona refinery.

Net income (loss) factor analysis

2 unchanged sentences

Corporate and other

First Quarter

Second Quarter

millions of Canadian dollars 2023 2022

1 unchanged sentence

Liquidity and capital resources

First Quarter

Second Quarter

millions of Canadian dollars 2023 2022

5 unchanged sentences

Cash and cash equivalents at period end 2,376 2,867

Cash flow used in operating activities primarily reflects unfavourable working capital impacts including, an income tax catch-up payment of $2.1 billion and lower Upstream realizations, partly offset by improved Downstream margins.

Cash flow used in investing activities primarily reflects higher additions to property, plant and equipment.

Cash flow generated from operating activities primarily reflects lower Upstream realizations and Downstream margins.

Cash flow used in investing activities primarily reflects higher additions to property, plant and equipment, and lower proceeds from asset sales.

Cash flow used in financing activities primarily reflects:

First Quarter

Second Quarter

millions of Canadian dollars, unless noted 2023 2022

3 unchanged sentences

Number of shares purchased (millions) (a)

(a) The company did not purchase shares during the first quarter of 2023.

In the first quarter of 2022, share repurchases were made under the company's normal course issuer bid program, and included shares purchased from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid.

(a) The company did not purchase shares during the second quarter of 2023.

In the second quarter of 2022, share repurchases were made under the company's substantial issuer bid that commenced on May 6, 2022 and expired on June 10, 2022, and included shares purchased from Exxon Mobil Corporation by way of a proportionate tender to maintain its ownership percentage at approximately 69.6 percent.

On June 27, 2023, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid and will continue its existing share purchase program.

The program enables the company to purchase up to a maximum of 29,207,635 common shares during the period June 29, 2023 to June 28, 2024.

This maximum includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid.

As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent.

The program will end should the company purchase the maximum allowable number of shares or on June 28, 2024.

Imperial plans to accelerate its share purchases under the normal course issuer bid program, and anticipates repurchasing all remaining allowable shares prior to year end.

Purchase plans may be modified at any time without prior notice.

Contractual obligations

3 unchanged sentences

IMPERIAL OIL LIMITED

Six months 2023 vs.

six months 2022

millions of Canadian dollars, unless noted 2023 2022

Net income (loss) (U.S.

Net income (loss) per common share, assuming dilution (dollars)

Net income (loss) factor analysis

millions of Canadian dollars

Price – Lower bitumen realizations were primarily driven by lower marker prices and the widening WTI/WCS spread.

Average bitumen realizations decreased by $42.59 per barrel, generally in line with WCS, and synthetic crude oil realizations decreased by $29.68 per barrel, generally in line with WTI.

Volumes – Lower volumes were primarily driven by the timing of planned turnaround activities at Syncrude, and production and steam cycle timing at Cold Lake, partially offset by the absence of extreme cold weather and reduced unplanned downtime at Kearl.

Royalty – Lower royalties were primarily driven by weakened commodity prices.

Other – Includes favourable foreign exchange impacts of about $330 million, and lower operating expenses of about $50 million.

Marker prices and average realizations

Canadian dollars, unless noted 2023 2022

West Texas Intermediate (US$ per barrel)

Western Canada Select (US$ per barrel)

WTI/WCS Spread (US$ per barrel)

Bitumen (per barrel)

Synthetic crude oil (per barrel)

101.73 131.41

Average foreign exchange rate (US$)

IMPERIAL OIL LIMITED

thousands of barrels per day 2023 2022

Kearl (Imperial's share)

Kearl total gross production (thousands of barrels per day)

(a) In 2023, Syncrude gross production included about 1 thousand barrels per day of bitumen and other products (2022 - 2 thousand barrels per day) that were exported to the operator's facilities using an existing interconnect pipeline.

Higher production at Kearl was primarily driven by the absence of extreme cold weather, and reduced unplanned downtime as a result of the successful rollout of the winterization strategy.

Net income (loss) factor analysis

millions of Canadian dollars

Margins – Lower margins primarily reflect weaker market conditions.

Other – Favourable foreign exchange impacts of about $190 million and improved volumes of about $110 million, partially offset by higher turnaround impacts of about $250 million, reflecting the planned turnaround activities at Strathcona refinery.

Refinery utilization and petroleum product sales

thousands of barrels per day, unless noted 2023 2022

Refinery throughput 403 406

Refinery capacity utilization (percent)

Petroleum product sales 465 464

Lower refinery throughput in 2023 reflects the impact of planned turnaround activities at the Strathcona refinery.

Net income (loss) factor analysis

millions of Canadian dollars

IMPERIAL OIL LIMITED

Corporate and other

millions of Canadian dollars 2023 2022

Net income (loss) (U.S.

Liquidity and capital resources

millions of Canadian dollars 2023 2022

Cash flow generated from (used in):

Operating activities 64 4,596

Investing activities (903) (509)

Financing activities (534) (3,373)

Increase (decrease) in cash and cash equivalents (1,373) 714

Cash flow generated from operating activities primarily reflects unfavourable working capital impacts, including an income tax catch-up payment of $2.1 billion, as well as lower Upstream realizations and Downstream margins.

Cash flow used in investing activities primarily reflects higher additions to property, plant and equipment, and lower proceeds from asset sales.

Cash flow used in financing activities primarily reflects:

millions of Canadian dollars, unless noted 2023 2022

Dividends paid

Per share dividend paid (dollars)

Share repurchases (a)

Number of shares purchased (millions) (a)

(a) The company did not purchase shares during the six months ended June 30, 2023.

In the six months ended June 30, 2022, share repurchases were made under the company's normal course issuer bid program and substantial issuer bid that commenced on May 6, 2022 and expired on June 10, 2022.

Includes shares purchased from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid, and by way of a proportionate tender under the company's substantial issuer bid.

IMPERIAL OIL LIMITED

Forward-looking statements

2 unchanged sentences

Forward-looking statements in this release include, but are not limited to, references to the use of derivative instruments and effectiveness of risk mitigation;

the company’s belief that the commitment related to long-term purchase agreement will not have a material adverse effect on the company.

The company’s purchases under the normal course issuer bid and plans to accelerate completion prior to year end;

and the company’s belief that the commitment related to long-term purchase agreement will not have a material adverse effect on the company.

Forward-looking statements are based on the company's current expectations, estimates, projections and assumptions at the time the statements are made.

1 unchanged sentence

production rates, growth and mix;

for shareholder returns, assumptions such as cash flow forecasts, financing sources and capital structure;

for shareholder returns, assumptions such as cash flow forecasts, financing sources and capital structure, participation of the company’s majority shareholder and the results of periodic and ongoing evaluation of alternate uses of capital;

project plans, timing, costs, technical evaluations and capacities and the company’s ability to effectively execute on these plans and operate its assets;

20 unchanged sentences

Quantitative and qualitative disclosures about market risk

Information about market risks for the three months ended March 31, 2023, does not differ materially from that discussed on page 32 of the company’s annual report on Form 10-K for the year ended December 31, 2022.

Information about market risks for the six months ended June 30, 2023, does not differ materially from that discussed on page 32 of the company’s annual report on Form 10-K for the year ended December 31, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis