IMPERIAL OIL LTD 10-Q

Item 1. Financial statements Consolidated statement of income (U.S. GAAP, unaudited) Three Months to March 31 millions of Canadian dollars 2024 2023 Revenues and other income Revenues (a) 12,249 12,057 Investment and other income (note 3) 34 64 Total revenues and other income 12,283 12,121 Expenses Exploration 1 1 Purchases of crude oil and products (b) 7,706 7,478 Production and manufacturing (c) 1,664 1,756 Selling and general (c) 246 186 Federal excise tax and fuel charge 591 529 Depreciation and depletion 490 490 Non-service pension and postretirement benefit 1 20 Financing (d) (note 5) 12 16 Total expenses 10,711 10,476 Income (loss) before income taxes 1,572 1,645 Income taxes 377 397 Net income (loss) 1,195 1,248 Per share information (Canadian dollars) Net income (loss) per common share - basic (note 9) 2.23 2.14 Net income (loss) per common share - diluted (note 9) 2.23 2.13 (a) Amounts from related parties included in revenues. 2,729 3,136 (b) Amounts to related parties included in purchases of crude oil and products. 985 1,078 (c) Amounts to related parties included in production and manufacturing, and selling and general expenses. 150 135 (d) Amounts to related parties included in financing. 44 39 The information in the notes to consolidated financial statements is an integral part of these statements. 3 IMPERIAL OIL LIMITED Consolidated statement of comprehensive income (U.S. GAAP, unaudited) Three Months to March 31 millions of Canadian dollars 2024 2023 Net income (loss) 1,195 1,248 Other comprehensive income (loss), net of income taxes Postretirement benefits liability adjustment (excluding amortization) 4 21 Amortization of postretirement benefits liability adjustment included in net benefit costs 12 10 Total other comprehensive income (loss) 16 31 Comprehensive income (loss) 1,211 1,279 The information in the notes to consolidated financial statements is an integral part of these statements. 4 IMPERIAL OIL LIMITED Consolidated balance sheet (U.S. GAAP, unaudited) As at Mar 31 As at Dec 31 millions of Canadian dollars 2024 2023 Assets Current assets Cash and cash equivalents 1,176 864 Accounts receivable - net (a) 5,204 4,482 Inventories of crude oil and products 2,106 1,944 Materials, supplies and prepaid expenses 1,043 1,008 Total current assets 9,529 8,298 Investments and long-term receivables (b) 1,082 1,062 Property, plant and equipment, 56,680 56,200 less accumulated depreciation and depletion ( 25,841 ) ( 25,365 ) Property, plant and equipment, net 30,839 30,835 Goodwill 166 166 Other assets, including intangibles - net 897 838 Total assets 42,513 41,199 Liabilities Current liabilities Notes and loans payable 121 121 Accounts payable and accrued liabilities (a) (note 7) 6,968 6,231 Income taxes payable 17 251 Total current liabilities 7,106 6,603 Long-term debt (c) (note 6) 4,006 4,011 Other long-term obligations (note 7) 3,860 3,851 Deferred income tax liabilities 4,429 4,512 Total liabilities 19,401 18,977 Shareholders’ equity Common shares at stated value (d) (note 9) 992 992 Earnings reinvested 22,781 21,907 Accumulated other comprehensive income (loss) (note 10) ( 661 ) ( 677 ) Total shareholders’ equity 23,112 22,222 Total liabilities and shareholders’ equity 42,513 41,199 (a) Accounts receivable - net included net amounts receivable from related parties. 696 1,048 (b) Investments and long-term receivables included amounts from related parties. 271 283 (c) Long-term debt included amounts to related parties. 3,447 3,447 (d) Number of common shares authorized (millions). 1,100 1,100 Number of common shares outstanding (millions). 536 536 The information in the notes to consolidated financial statements is an integral part of these statements. 5 IMPERIAL OIL LIMITED Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited) Three Months to March 31 millions of Canadian dollars 2024 2023 Common shares at stated value (note 9) At beginning of period 992 1,079 Share purchases at stated value — — At end of period 992 1,079 Earnings reinvested At beginning of period 21,907 21,846 Net income (loss) for the period 1,195 1,248 Share purchases in excess of stated value — — Dividends declared ( 321 ) ( 257 ) At end of period 22,781 22,837 Accumulated other comprehensive income (loss) (note 10) At beginning of period ( 677 ) ( 512 ) Other comprehensive income (loss) 16 31 At end of period ( 661 ) ( 481 ) Shareholders’ equity at end of period 23,112 23,435 The information in the notes to consolidated financial statements is an integral part of these statements. 6 IMPERIAL OIL LIMITED Consolidated statement of cash flows (U.S. GAAP, unaudited) Three Months to March 31 millions of Canadian dollars 2024 2023 Operating activities Net income (loss) 1,195 1,248 Adjustments for non-cash items: Depreciation and depletion 490 490 (Gain) loss on asset sales (note 3) ( 2 ) ( 9 ) Deferred income taxes and other ( 164 ) ( 56 ) Changes in operating assets and liabilities: Accounts receivable ( 722 ) 436 Inventories, materials, supplies and prepaid expenses ( 196 ) ( 479 ) Income taxes payable ( 234 ) ( 2,077 ) Accounts payable and accrued liabilities 707 ( 255 ) All other items - net (b) 2 ( 119 ) Cash flows from (used in) operating activities 1,076 ( 821 ) Investing activities Additions to property, plant and equipment ( 497 ) ( 429 ) Proceeds from asset sales (note 3) 4 14 Loans to equity companies - net 12 1 Cash flows from (used in) investing activities ( 481 ) ( 414 ) Financing activities Finance lease obligations - reduction (note 6) ( 5 ) ( 5 ) Dividends paid ( 278 ) ( 266 ) Common shares purchased (note 9) — — Cash flows from (used in) financing activities ( 283 ) ( 271 ) Increase (decrease) in cash and cash equivalents 312 ( 1,506 ) Cash and cash equivalents at beginning of period 864 3,749 Cash and cash equivalents at end of period (a) 1,176 2,243 (a) Cash equivalents are all highly liquid securities with maturity of three months or less. (b) Included contributions to registered pension plans. ( 37 ) ( 42 ) Income taxes (paid) refunded. ( 700 ) ( 2,632 ) Interest (paid), net of capitalization. ( 11 ) ( 21 ) The information in the notes to consolidated financial statements is an integral part of these statements. 7 IMPERIAL OIL LIMITED Notes to consolidated financial statements (unaudited) 1. Basis of financial statement preparation These unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) and follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC) in the company’s 2023 annual report on Form 10-K. In the opinion of the company, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature. The company’s exploration and production activities are accounted for under the “successful efforts” method. The results for the three months ended March 31, 2024, are not necessarily indicative of the operations to be expected for the full year. All amounts are in Canadian dollars unless otherwise indicated. 8 IMPERIAL OIL LIMITED 2. Business segments Three Months to March 31 Upstream Downstream Chemical millions of Canadian dollars 2024 2023 2024 2023 2024 2023 Revenues and other income Revenues (a) (b) 42 76 11,879 11,639 328 342 Intersegment sales 4,122 3,622 1,748 1,823 90 91 Investment and other income (note 3) 4 2 12 20 1 — 4,168 3,700 13,639 13,482 419 433 Expenses Exploration 1 1 — — — — Purchases of crude oil and products 1,813 1,543 11,591 11,196 260 274 Production and manufacturing 1,188 1,287 421 411 53 58 Selling and general — — 162 157 26 26 Federal excise tax and fuel charge — — 590 528 1 1 Depreciation and depletion 432 434 45 45 4 4 Non-service pension and postretirement benefit — — — — — — Financing (note 5) 1 — — — — — Total expenses 3,435 3,265 12,809 12,337 344 363 Income (loss) before income taxes 733 435 830 1,145 75 70 Income tax expense (benefit) 175 105 199 275 18 17 Net income (loss) 558 330 631 870 57 53 Cash flows from (used in) operating activities 891 ( 398 ) 7 ( 419 ) ( 3 ) ( 32 ) Capital and exploration expenditures (c) 290 321 153 74 5 4 Total assets as at March 31 28,661 29,059 11,126 9,535 517 477 Three Months to March 31 Corporate and other Eliminations Consolidated millions of Canadian dollars 2024 2023 2024 2023 2024 2023 Revenues and other income Revenues (a) (b) — — — — 12,249 12,057 Intersegment sales — — ( 5,960 ) ( 5,536 ) — — Investment and other income (note 3) 17 42 — — 34 64 17 42 ( 5,960 ) ( 5,536 ) 12,283 12,121 Expenses Exploration — — — — 1 1 Purchases of crude oil and products — — ( 5,958 ) ( 5,535 ) 7,706 7,478 Production and manufacturing 2 — — — 1,664 1,756 Selling and general 60 4 ( 2 ) ( 1 ) 246 186 Federal excise tax and fuel charge — — — — 591 529 Depreciation and depletion 9 7 — — 490 490 Non-service pension and postretirement benefit 1 20 — — 1 20 Financing (note 5) 11 16 — — 12 16 Total expenses 83 47 ( 5,960 ) ( 5,536 ) 10,711 10,476 Income (loss) before income taxes ( 66 ) ( 5 ) — — 1,572 1,645 Income tax expense (benefit) ( 15 ) — — — 377 397 Net income (loss) ( 51 ) ( 5 ) — — 1,195 1,248 Cash flows from (used in) operating activities 181 28 — — 1,076 ( 821 ) Capital and exploration expenditures (c) 48 30 — — 496 429 Total assets as at March 31 2,699 3,815 ( 490 ) ( 771 ) 42,513 42,115 9 IMPERIAL OIL LIMITED (a) Includes export sales to the United States of $ 2,378 million (2023 - $ 2,375 million). (b) Revenues include both revenue within the scope of ASC 606 and outside the scope of ASC 606 . Trade receivables in "Accounts receivable – net" reported on the Consolidated balance sheet include both receivables within the scope of ASC 606 and outside the scope of ASC 606 . Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives. Contractual terms, credit quality and type of customer are generally similar between contracts within the scope of ASC 606 and those outside it. Revenues Three Months to March 31 millions of Canadian dollars 2024 2023 Revenue from contracts with customers 9,729 10,520 Revenue outside the scope of ASC 606 2,520 1,537 Total 12,249 12,057 (c) Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions and the company’s share of similar costs for equity companies. CAPEX excludes the purchase of carbon emission credits. 10 IMPERIAL OIL LIMITED 3. Investment and other income Investment and other income included gains and losses on asset sales as follows: Three Months to March 31 millions of Canadian dollars 2024 2023 Proceeds from asset sales 4 14 Book value of asset sales 2 5 Gain (loss) on asset sales, before tax 2 9 Gain (loss) on asset sales, after tax 2 8 4. Employee retirement benefits The components of net benefit cost were as follows: Three Months to March 31 millions of Canadian dollars 2024 2023 Pension benefits: Service cost 46 41 Interest cost 91 93 Expected return on plan assets ( 113 ) ( 93 ) Amortization of prior service cost 7 4 Amortization of actuarial loss (gain) 12 11 Net benefit cost 43 56 Other postretirement benefits: Service cost 4 3 Interest cost 6 7 Amortization of actuarial loss (gain) ( 2 ) ( 2 ) Net benefit cost 8 8 5. Financing costs Three Months to March 31 millions of Canadian dollars 2024 2023 Debt-related interest 52 46 Capitalized interest ( 41 ) ( 30 ) Net interest expense 11 16 Other interest 1 — Total financing 12 16 11 IMPERIAL OIL LIMITED 6. Long-term debt As at Mar 31 As at Dec 31 millions of Canadian dollars 2024 2023 Long-term debt 3,447 3,447 Finance leases 559 564 Total long-term debt 4,006 4,011 7. Other long-term obligations As at Mar 31 As at Dec 31 millions of Canadian dollars 2024 2023 Employee retirement benefits (a) 932 954 Asset retirement obligations and other environmental liabilities (b) 2,575 2,564 Share-based incentive compensation liabilities 128 90 Operating lease liability (c) 107 111 Other obligations 118 132 Total other long-term obligations 3,860 3,851 (a) Total recorded employee retirement benefits obligations also included $ 62 million in current liabilities (2023 - $ 62 million). (b) Total asset retirement obligations and other environmental liabilities also included $ 235 million in current liabilities (2023 - $ 235 million). (c) Total operating lease liability also included $ 77 million in current liabilities (2023 - $ 87 million). In addition to the total operating lease liability, undiscounted commitments for leases not yet commenced totalled $ 56 million (2023 - $ 54 million). 12 IMPERIAL OIL LIMITED 8. Financial and derivative instruments Financial instruments The fair value of the company’s financial instruments is determined by reference to various market data and other appropriate valuation techniques. There are no material differences between the fair value of the company’s financial instruments and the recorded carrying value. At March 31, 2024 and December 31, 2023, the fair value of long-term debt ($ 3,447 million, excluding finance lease obligations) was primarily a level 2 measurement. Derivative instruments The company’s size, strong capital structure and the complementary nature of its business segments reduce the company’s enterprise-wide risk from changes in commodity prices, currency rates and interest rates. In addition, the company uses commodity-based contracts, including derivatives, to manage commodity price risk and to generate returns from trading. Commodity contracts held for trading purposes are presented in the Consolidated statement of income on a net basis in the line "Revenues" and in the Consolidated statement of cash flows in "Cash flows from (used in) operating activities". The company’s commodity derivatives are not accounted for under hedge accounting. Credit risk associated with the company’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial limits placed on derivative counterparties. The company maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity. The net notional long/(short) position of derivative instruments was: As at Mar 31 As at Dec 31 thousands of barrels 2024 2023 Crude ( 3,950 ) ( 4,450 ) Products ( 2,060 ) ( 490 ) Realized and unrealized gain/(loss) on derivative instruments recognized in the Consolidated statement of income is included in the following lines on a before-tax basis: Three Months to March 31 millions of Canadian dollars 2024 2023 Revenues ( 24 ) ( 23 ) 13 IMPERIAL OIL LIMITED The estimated fair value of derivative instruments, and the related hierarchy level for the fair value measurement were as follows: At March 31, 2024 millions of Canadian dollars Fair value Effect of counterparty netting Effect of collateral netting Net carrying value Level 1 Level 2 Level 3 Total Assets Derivative assets (a) 50 27 — 77 ( 50 ) — 27 Liabilities Derivative liabilities (b) 54 60 — 114 ( 50 ) ( 4 ) 60 (a) Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”, “Accounts receivable - net” and “Other assets, including intangibles - net”. (b) Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities” and “Other long-term obligations”. At December 31, 2023 millions of Canadian dollars Fair value Effect of counterparty netting Effect of collateral netting Net carrying value Level 1 Level 2 Level 3 Total Assets Derivative assets (a) 28 18 — 46 ( 16 ) ( 12 ) 18 Liabilities Derivative liabilities (b) 16 31 — 47 ( 16 ) — 31 (a) Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”, “Accounts receivable - net” and “Other assets, including intangibles - net”. (b) Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities” and “Other long-term obligations”. At March 31, 2024 and December 31, 2023, the company had $ 33 million and $ 24 million, respectively, of collateral under a master netting arrangement not offset against the derivatives on the Consolidated balance sheet in “Accounts receivable - net”, primarily related to initial margin requirements. 14 IMPERIAL OIL LIMITED 9. Common shares As at Mar 31 As at Dec 31 thousands of shares 2024 2023 Authorized 1,100,000 1,100,000 Outstanding 535,837 535,837 The company’s common share activities are summarized below: Thousands of shares Millions of dollars Balance as at December 31, 2022 584,153 1,079 Purchases at stated value ( 48,316 ) ( 87 ) Balance as at December 31, 2023 535,837 992 Purchases at stated value — — Balance as at March 31, 2024 535,837 992 The following table provides the calculation of basic and diluted earnings per common share and the dividends declared by the company on its outstanding common shares: Three Months to March 31 2024 2023 Net income (loss) per common share – basic Net income (loss) (millions of Canadian dollars) 1,195 1,248 Weighted-average number of common shares outstanding (millions of shares) 535.8 584.2 Net income (loss) per common share (dollars) 2.23 2.14 Net income (loss) per common share – diluted Net income (loss) (millions of Canadian dollars) 1,195 1,248 Weighted-average number of common shares outstanding (millions of shares) 535.8 584.2 Effect of employee share-based awards (millions of shares) 1.1 1.2 Weighted-average number of common shares outstanding, assuming dilution (millions of shares) 536.9 585.4 Net income (loss) per common share (dollars) 2.23 2.13 Dividends per common share – declared (dollars) 0.60 0.44 15 IMPERIAL OIL LIMITED 10. Other comprehensive income (loss) information Changes in accumulated other comprehensive income (loss): millions of Canadian dollars 2024 2023 Balance at January 1 ( 677 ) ( 512 ) Postretirement benefits liability adjustment: Current period change excluding amounts reclassified from accumulated other comprehensive income 4 21 Amounts reclassified from accumulated other comprehensive income 12 10 Balance at March 31 ( 661 ) ( 481 ) Amounts reclassified out of accumulated other comprehensive income (loss) - before-tax income (expense): Three Months to March 31 millions of Canadian dollars 2024 2023 Amortization of postretirement benefits liability adjustment included in net benefit cost (a) ( 17 ) ( 13 ) (a) This accumulated other comprehensive income component is included in the computation of net benefit cost (note 4). Income tax expense (credit) for components of other comprehensive income (loss): Three Months to March 31 millions of Canadian dollars 2024 2023 Postretirement benefits liability adjustments: Postretirement benefits liability adjustment (excluding amortization) 1 7 Amortization of postretirement benefits liability adjustment included in net benefit cost 5 3 Total 6 10 16 IMPERIAL OIL LIMITED