What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-05 compared with 2024-04-29 · 108 added, 27 removed, 100 unchanged (57% 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 2024 and 2023.

There were no identified items in the second quarter or year-to-date 2024 and 2023 periods.

IMPERIAL OIL LIMITED

Recent business environment

During the first quarter of 2024, the price of crude oil remained relatively flat with the fourth quarter of 2023, as markets continued to be reasonably balanced on higher inventory levels.

The Canadian WTI/WCS spread began to narrow in the first quarter, but remained in line with the 2023 full year average.

Refining margins improved in the first quarter of 2024 primarily driven by industry downtime and supply disruptions.

In the first half of 2024, the price of crude oil remained relatively flat compared to the fourth quarter of 2023.

The Canadian WTI/WCS spread continued to narrow in the second quarter, primarily due to additional pipeline capacity coming online.

Refining margins fell as increasing supply more than met growing demand and geopolitical trade-flow disruptions lessened.

Operating results

First quarter 2024 vs.

first quarter 2023

First Quarter

Second quarter 2024 vs.

second quarter 2023

Second Quarter

millions of Canadian dollars, unless noted 2024 2023

4 unchanged sentences

Price – Average bitumen realizations increased by $14.38 per barrel, primarily driven by higher marker prices and the narrowing of the WTI/WCS spread.

Synthetic crude oil realizations decreased by $8.94 per barrel, due to a weaker Synthetic/WTI spread.

Volumes – Higher volumes were primarily driven by strong mine and plant performance at Kearl.

Synthetic crude oil realizations increased by $10.64 per barrel, generally in line with WTI.

Volumes – Higher volumes were primarily driven by higher mine fleet productivity and optimized turnaround at Kearl, production and steam cycle timing and GRP1 production at Cold Lake.

Royalty – Higher royalties were primarily driven by improved commodity prices.

Marker prices and average realizations

First Quarter

Second Quarter

Canadian dollars, unless noted 2024 2023

4 unchanged sentences

Synthetic crude oil (per barrel)

111.56 100.92

Average foreign exchange rate (US$)

IMPERIAL OIL LIMITED

First Quarter

Second Quarter

thousands of barrels per day 2024 2023

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 that were exported to the operator's facilities using an existing interconnect pipeline.

Higher production at Kearl was primarily driven by strong mine and plant performance.

(a) In the second quarter of 2024, Syncrude gross production included about 2 thousand barrels per day of bitumen and other products (2023 - 0 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 higher mine fleet productivity and optimized turnaround.

Higher production at Cold Lake was primarily driven by production and steam cycle timing, and GRP1 production.

Net income (loss) factor analysis

1 unchanged sentence

Margins – Lower margins primarily reflect weaker market conditions.

Other – Primarily due to lower turnaround impacts of about $140 million.

Refinery utilization and petroleum product sales

First Quarter

Second Quarter

thousands of barrels per day, unless noted 2024 2023

2 unchanged sentences

Petroleum product sales 470 475

Lower refinery throughput was primarily driven by minor maintenance activities.

Refinery throughput in the second quarter of 2024 reflects the impact of turnaround activities at the Sarnia and Strathcona refineries.

Refinery throughput in the second quarter of 2023 reflected the impact of 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 2024 2023

1 unchanged sentence

Liquidity and capital resources

First Quarter

Second Quarter

millions of Canadian dollars 2024 2023

5 unchanged sentences

Cash and cash equivalents at period end 2,020 2,376

Cash flows from operating activities primarily reflect the absence of unfavourable working capital impacts related to an income tax catch-up payment of $2.1 billion in the prior year.

Cash flows from operating activities primarily reflect higher Upstream realizations and volumes, and favourable working capital impacts.

Cash flows used in investing activities primarily reflect lower additions to property, plant and equipment.

Cash flows used in financing activities primarily reflect:

Second Quarter

millions of Canadian dollars, unless noted 2024 2023

Dividends paid

Per share dividend paid (dollars)

Share repurchases (a)

Number of shares purchased (millions) (a)

(a) The company did not purchase any shares during the second quarter of 2024 and 2023.

On June 24, 2024, 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.

Shareholders may obtain a copy of the Notice of Intention to Make a Normal Course Issuer Bid approved by the TSX without charge by contacting the company.

The program enables the company to purchase up to a maximum of 26,791,840 common shares during the period June 29, 2024 to June 28, 2025.

This maximum includes shares purchased under the normal course issuer bid from Exxon Mobil Corporation.

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 otherwise on June 28, 2025.

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.

In June 2024, the company extended the maturity date of its existing long-term, variable-rate, Canadian dollar loan from ExxonMobil to June 30, 2035.

All other terms and conditions remain unchanged.

IMPERIAL OIL LIMITED

Six months 2024 vs.

six months 2023

millions of Canadian dollars, unless noted 2024 2023

Net income (loss) (U.S.

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

Net income (loss) factor analysis

millions of Canadian dollars

Price – Average bitumen realizations increased by $15.76 per barrel, primarily driven by higher marker prices and the narrowing WTI/WCS spread.

Synthetic crude oil realizations increased by $0.37 per barrel, primarily driven by higher WTI, partly offset by a weaker Synthetic/WTI spread.

Volumes – Higher volumes were primarily driven by higher mine fleet productivity and optimized turnaround at Kearl, production and steam cycle timing and GRP1 production at Cold Lake.

Royalty – Higher royalties were primarily driven by improved commodity prices.

Other – Includes lower operating expenses of about $120 million, primarily from lower energy prices, partially offset by lower electricity sales at Cold Lake due to lower prices.

Marker prices and average realizations

Canadian dollars, unless noted 2024 2023

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)

102.10 101.73

Average foreign exchange rate (US$)

IMPERIAL OIL LIMITED

thousands of barrels per day 2024 2023

Kearl (Imperial's share)

Kearl total gross production (thousands of barrels per day)

(a) In 2024, Syncrude gross production included about 1 thousand barrels per day of bitumen and other products (2023 - 1 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 higher mine fleet productivity and optimized turnaround.

Net income (loss) factor analysis

millions of Canadian dollars

Margins – Lower margins primarily reflect weaker market conditions.

Other – Primarily due to lower turnaround impacts of about $150 million.

Refinery utilization and petroleum product sales

thousands of barrels per day, unless noted 2024 2023

Refinery throughput 397 403

Refinery capacity utilization (percent)

Petroleum product sales 460 465

Refinery throughput in 2024 reflects the impact of turnaround activities at the Sarnia and Strathcona refineries.

Refinery throughput in 2023 reflected the impact of 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 2024 2023

Net income (loss) (U.S.

Liquidity and capital resources

millions of Canadian dollars 2024 2023

Cash flows from (used in):

Operating activities 2,705 64

Investing activities (937) (903)

Financing activities (612) (534)

Increase (decrease) in cash and cash equivalents 1,156 (1,373)

Cash flows from operating activities primarily reflect the absence of unfavourable working capital impacts mainly related to an income tax catch-up payment of $2.1 billion in the prior year.

Cash flows used in investing activities primarily reflect higher additions to property, plant and equipment.

Cash flows used in financing activities primarily reflect:

First Quarter

millions of Canadian dollars, unless noted 2024 2023

3 unchanged sentences

Number of shares purchased (millions) (a)

(a) The company did not purchase any shares in the first quarter of 2024 and 2023.

(a) The company did not purchase any shares during the six months ended June 30, 2024 and 2023.

Contractual obligations

In the first quarter of 2024, the company entered into a long-term purchase agreement with a third party for about $2 billion.

As previously communicated, in the first quarter of 2024, the company entered into a long-term purchase agreement with a third party for about $2 billion.

It has no material impact on the 2024 and 2025 obligations disclosed in Imperial's 2023 annual report on Form 10-K.

The company does not believe that the increased obligation will have a material effect on Imperial's operations, financial condition or financial statements.

The company does not believe that the additional obligation will have a material effect on Imperial's operations, financial condition or financial statements.

IMPERIAL OIL LIMITED

2 unchanged sentences

Forward-looking statements can be identified by words such as believe, anticipate, intend, propose, plan, goal, seek, project, predict, target, estimate, expect, strategy, outlook, schedule, future, continue, likely, may, should, will and similar references to future periods.

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

Forward-looking statements in this release include, but are not limited to, references to the company’s purchases under the normal course issuer bid and plans to accelerate completion prior to year end;

the use of derivative instruments and effectiveness of risk mitigation;

and the company’s belief that the commitment related to the long-term purchase agreement will not have a material effect on the company’s operations, financial condition or financial statements.

2 unchanged sentences

production rates, growth and mix across various assets;

project plans, timing, costs, technical evaluations and capacities and the company’s ability to effectively execute on these plans and operate its assets, including the Cold Lake Grand Rapids Phase 1 project and the Strathcona renewable diesel project;

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;

capital and environmental expenditures;

the ability to offset any ongoing inflationary pressures;

applicable laws and government policies, including with respect to climate change, greenhouse gas emissions reductions and low carbon fuels;

cash generation, financing sources and capital structure, such as dividends and shareholder returns, including the timing and amounts of share repurchases;

and commodity prices, foreign exchange rates and general market conditions, could differ materially depending on a number of factors.

These factors include global, regional or local changes in supply and demand for oil, natural gas, and petroleum and petrochemical products and resulting price, differential and margin impacts, including foreign government action with respect to supply levels and prices, and the occurrence of wars;

political or regulatory events, including changes in law or government policy, applicable royalty rates, and tax laws;

third-party opposition to company and service provider operations, projects and infrastructure;

failure, delay or uncertainty regarding supportive policy and market development for the adoption of emerging lower emission energy technologies and other technologies that support emissions reductions;

the receipt, in a timely manner, of regulatory and third-party approvals, including for new technologies that will help the company meet its lower emissions goals;

5 unchanged sentences

environmental regulation, including climate change and greenhouse gas regulation and changes to such regulation;

political or regulatory events, including changes in law or government policy, applicable royalty rates, and tax laws including taxes on share repurchases;

management effectiveness and disaster response preparedness;

3 unchanged sentences

general economic conditions, including inflation and the occurrence and duration of economic recessions or downturns;

and other factors discussed in Item 1A risk factors and Item 7 management’s discussion and analysis of financial condition and results of operations of Imperial Oil Limited’s most recent annual report on Form 10-K.

and other factors discussed in Item 1A risk factors and Item 7 management’s discussion and analysis of financial condition and results of operations of Imperial’s most recent annual report on Form 10-K.

Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to Imperial.

4 unchanged sentences

Quantitative and qualitative disclosures about market risk

Information about market risks for the three months ended March 31, 2024, does not differ materially from that discussed on page 34 of the company’s annual report on Form 10-K for the year ended December 31, 2023.

Information about market risks for the six months ended June 30, 2024, does not differ materially from that discussed on page 34 of the company’s annual report on Form 10-K for the year ended December 31, 2023.

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