IMPERIAL OIL LTD 10-Q

Item 2. Management’s discussion and analysis of financial condition and results of operations Recent business environment During the second quarter of 2026, the price of crude oil increased relative to the first quarter of 2026, while the Canadian WTI/WCS spread widened slightly. Geopolitical events in the Middle East and increasing supply uncertainty continued to drive volatility in crude oil prices and heavy crude differentials. Industry refining margins improved in the second quarter of 2026, impacted by global product supply disruptions. Starting in 2025, the United States implemented and adjusted a variety of trade-related measures, including tariffs on certain imports from Canada and several other countries. In response, Canada announced its own retaliatory tariffs. Based on Imperial's assessment of these actions and their effects to date, the company does not expect them to have a material impact on its consolidated financial position, results of operations, or cash flows. Operating results Second quarter 2026 vs. second quarter 2025 Second Quarter millions of Canadian dollars, unless noted 2026 2025 Net income (loss) (U.S. GAAP) 2,190 949 Net income (loss) per common share, assuming dilution (dollars) 4.52 1.86 Upstream Net income (loss) factor analysis millions of Canadian dollars Price – Average bitumen realizations increased by $29.97 per barrel, primarily driven by higher marker prices, partially offset by a weaker WTI/WCS spread and higher diluent costs. Synthetic crude oil realizations increased by $53.25 per barrel, primarily driven by higher marker prices and an improved Synthetic/WTI spread. Volume – Lower volumes were primarily driven by lower production at Kearl and Syncrude. Royalty – Higher royalties were primarily driven by higher commodity prices. Marker prices and average realizations Second Quarter Canadian dollars, unless noted 2026 2025 West Texas Intermediate (US$ per barrel) 92.69 63.69 Western Canada Select (US$ per barrel) 77.90 53.66 WTI/WCS Spread (US$ per barrel) 14.79 10.03 Bitumen (per barrel) 95.79 65.82 Synthetic crude oil (per barrel) 141.10 87.85 Average foreign exchange rate (US$) 0.72 0.72 20 IMPERIAL OIL LIMITED Production Second Quarter thousands of barrels per day 2026 2025 Kearl (Imperial's share) 182 195 Cold Lake 149 145 Syncrude (a) 73 77 Kearl total gross production (thousands of barrels per day) 257 275 (a) In the second quarter of 2026, Syncrude gross production included about 0 thousand barrels per day of bitumen and other products (2025 - 4 thousand barrels per day) that were exported to the operator's facilities using an existing interconnect pipeline. Lower production at Kearl was driven by the absence of exceptional high-quality ore grade versus the second quarter of 2025. Lower production at Syncrude was driven by extreme rainfall, partially offset by lower unplanned downtime. Downstream Net income (loss) factor analysis millions of Canadian dollars Margins – Higher margins primarily reflect improved market conditions. Other – Primarily due to turnaround impacts of about $190 million partially offset by favourable product mix effects of about $140 million. Refinery utilization and petroleum product sales Second Quarter thousands of barrels per day, unless noted 2026 2025 Refinery throughput 331 376 Refinery capacity utilization (percent) 76 87 Petroleum product sales 446 480 Lower refinery throughput and capacity utilization were primarily due to planned turnaround impacts. Lower petroleum product sales were aligned with lower throughput related to planned turnaround work at the Strathcona refinery. Imperial has updated its refinery throughput and refinery utilization guidance ranges for 2026 from 395,000 - 405,000 barrels per day and 91% - 93% utilization to 370,000 - 380,000 barrels per day and 85% - 88% utilization, to reflect unplanned downtime, and a short-term rail logistic challenge at Strathcona which is targeted to be resolved by year end. 21 IMPERIAL OIL LIMITED Chemicals Net income (loss) factor analysis millions of Canadian dollars Margins – Higher margins primarily reflect improved industry polyethylene margins. Corporate and other Second Quarter millions of Canadian dollars 2026 2025 Net income (loss) (U.S. GAAP) 39 (58) Current quarter results reflect lower incentive compensation. Liquidity and capital resources Second Quarter millions of Canadian dollars 2026 2025 Cash flows from (used in): Operating activities 2,704 1,465 Investing activities (470) (472) Financing activities (424) (371) Increase (decrease) in cash and cash equivalents 1,810 622 Cash and cash equivalents at period end 2,839 2,386 Cash flows from operating activities primarily reflect higher earnings. Cash flows used in investing activities primarily reflect additions to property, plant, and equipment offset by proceeds from the sale of surplus property in Montreal. Cash flows used in financing activities primarily reflect: Second Quarter millions of Canadian dollars, unless noted 2026 2025 Dividends paid 421 367 Per share dividend paid (dollars) 0.87 0.72 Share repurchases (a) — — Number of shares purchased (millions) (a) — — (a) The company did not purchase any shares in the second quarter of 2026 and 2025. On June 23, 2026, 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 24,179,635 common shares during the period June 29, 2026 to June 28, 2027. This maximum includes shares purchased under the normal course issuer bid from ExxonMobil Holdings Corporation. As in the past, ExxonMobil Holdings 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, 2027. 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. 22 IMPERIAL OIL LIMITED Six months 2026 vs. six months 2025 Six Months millions of Canadian dollars, unless noted 2026 2025 Net income (loss) (U.S. GAAP) 3,130 2,237 Net income (loss) per common share, assuming dilution (dollars) 6.46 4.38 Upstream Net income (loss) factor analysis millions of Canadian dollars Price – Average bitumen realizations increased by $11.41 per barrel, primarily driven by higher marker prices, partially offset by a weaker WTI/WCS spread and higher diluent costs. Synthetic crude oil realizations increased by $25.72 per barrel, primarily driven by higher marker prices and an improved Synthetic/WTI spread. Volume – Lower volumes were primarily driven by lower production at Kearl and Syncrude. Royalty – Higher royalties were primarily driven by higher commodity prices. Other – Primarily due to unfavourable foreign exchange impacts of about $100 million and higher operating costs of about $100 million, primarily related to Syncrude. Marker prices and average realizations Six Months Canadian dollars, unless noted 2026 2025 West Texas Intermediate (US$ per barrel) 82.77 67.52 Western Canada Select (US$ per barrel) 68.19 56.25 WTI/WCS Spread (US$ per barrel) 14.58 11.27 Bitumen (per barrel) 81.91 70.50 Synthetic crude oil (per barrel) 118.86 93.14 Average foreign exchange rate (US$) 0.73 0.71 Production Six Months thousands of barrels per day 2026 2025 Kearl (Imperial's share) 183 189 Cold Lake 152 150 Syncrude (a) 73 75 Kearl total gross production (thousands of barrels per day) 258 266 (a) In 2026, Syncrude gross production included about 4 thousand barrels per day of bitumen and other products (2025 - 3 thousand barrels per day) that were exported to the operator's facilities using an existing interconnect pipeline. 23 IMPERIAL OIL LIMITED Downstream Net income (loss) factor analysis millions of Canadian dollars Margins – Higher margins primarily reflect improved market conditions. Other – Primarily due to favourable product mix effects of about $230 million partially offset by turnaround impacts of about $190 million. Refinery utilization and petroleum product sales Six Months thousands of barrels per day, unless noted 2026 2025 Refinery throughput 358 387 Refinery capacity utilization (percent) 82 89 Petroleum product sales 444 468 Lower refinery throughput and capacity utilization were primarily due to planned turnaround impacts. Lower petroleum product sales were aligned with lower throughput related to planned turnaround work at the Strathcona refinery. Imperial has updated its refinery throughput and refinery utilization guidance ranges for 2026 from 395,000 - 405,000 barrels per day and 91% - 93% utilization to 370,000 - 380,000 barrels per day and 85% - 88% utilization, to reflect unplanned downtime, and a short-term rail logistic challenge at Strathcona which is targeted to be resolved by year end. Chemicals Net income (loss) factor analysis millions of Canadian dollars Margins – Higher margins primarily reflect improved industry polyethylene margins. 24 IMPERIAL OIL LIMITED Corporate and other Six Months millions of Canadian dollars 2026 2025 Net income (loss) (U.S. GAAP) (126) (116) Liquidity and capital resources Six Months millions of Canadian dollars 2026 2025 Cash flows from (used in): Operating activities 3,460 2,992 Investing activities (920) (849) Financing activities (843) (736) Increase (decrease) in cash and cash equivalents 1,697 1,407 Cash flows from operating activities primarily reflect higher earnings partially offset by unfavourable working capital impacts. Cash flows used in investing activities primarily reflect additions to property, plant, and equipment partially offset by proceeds from the sale of surplus property in Montreal. Cash flows used in financing activities primarily reflect: Six Months millions of Canadian dollars, unless noted 2026 2025 Dividends paid 771 674 Per share dividend paid (dollars) 1.59 1.32 Share repurchases (a) — — Number of shares purchased (millions) (a) — — (a) The company did not purchase any shares during the six months ended June 30, 2026 and 2025. 25 IMPERIAL OIL LIMITED Forward-looking statements Statements of future events or conditions in this report, including projections, targets, expectations, estimates, and business plans are forward-looking statements. 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 company’s purchases under the normal course issuer bid and plans to accelerate completion prior to year end; the continued evaluation of the company’s share purchase program in the context of overall capital activities; the company’s updated Downstream refinery throughput and capacity utilization guidance for 2026; company performance in the second half of the year; the target date to resolve short-term rail logistic challenges at Strathcona by year end; the use of derivative instruments and effectiveness of risk mitigation; the company’s workforce transformation and restructuring plans to centralize activities in global business and technology centres, including timing and impacts; and the impact on the company of trade-related actions. Forward-looking statements are based on the company's current expectations, estimates, projections and assumptions at the time the statements are made. Actual future financial and operating results, including expectations and assumptions concerning future energy demand, supply and mix; production rates, growth and mix across various assets; for shareholder returns, assumptions such as cash flow forecasts, financing sources and capital structure, participation of the company’s majority shareholder in the normal course issuer bid, 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; availability and performance of third-party service providers, including ExxonMobil global capability centres and other service providers located outside of Canada; Strathcona rail logistics challenges; maintenance and turnaround activity and cost; capital and environmental expenditures; the ability to offset any ongoing or renewed 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, petroleum and petrochemical products, feedstocks and other market factors, economic conditions and seasonal fluctuations and resulting demand, price, differential and margin impacts, including Canadian and foreign government action with respect to supply levels, prices, trade tariffs, trade sanctions or trade controls, disruptions, realignment or breaking of trade alliances or agreements or a broader breakdown in global trade, and disruptions in military alliances or 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, reduction, revocation 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 relating to the company’s lower emissions business activities; competition from alternative energy sources, other emission reduction technologies, and established competitors in such markets; availability and allocation of capital; project management and schedules and timely completion of projects; unanticipated technical or operational disruptions or difficulties; availability and performance of third-party service providers, including ExxonMobil global capability centres and other service providers located outside of Canada; environmental risks inherent in oil and gas exploration and production activities; environmental regulation, including climate change and greenhouse gas regulation and changes to such regulation; effectiveness of company risk management programs and emergency response preparedness; operational hazards and risks; cybersecurity incidents including incidents caused by actors employing emerging technologies such as artificial intelligence; currency exchange rates; general economic conditions, including continued or renewed 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’s most recent annual report on Form 10-K. 26 IMPERIAL OIL LIMITED 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. Imperial’s actual results may differ materially from those expressed or implied by its forward-looking statements and readers are cautioned not to place undue reliance on them. Imperial undertakes no obligation to update any forward-looking statements contained herein, except as required by applicable law. 27 IMPERIAL OIL LIMITED Item 3. Quantitative and qualitative disclosures about market risk Information about market risks for the six months ended June 30, 2026, does not differ materially from that discussed on page 35 of the company’s annual report on Form 10-K for the year ended December 31, 2025.