What changed in this filing

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Item 1. Business

2021-02-24 compared with 2020-02-26 · 109 added, 54 removed, 332 unchanged (33% of the section changed)

31 unchanged sentences

NGL proved reserves are not material and are therefore included under liquids.

The estimation of proved reserves, which is based on the requirement of reasonable certainty, is an ongoing process based on rigorous technical evaluations, commercial and market assessments, and detailed analysis of well information such as flow rates and reservoir pressures.

The estimation of proved reserve volumes, which is based on the requirement of reasonable certainty, is an ongoing process based on rigorous technical evaluations, commercial and market assessments, detailed analysis of well information such as flow rates and reservoir pressures, and development and production costs, among other factors.

Furthermore, the company only records proved reserves for projects which have received significant funding commitments by management made toward the development of the reserves.

Although the company is reasonably certain that proved reserves will be produced, the timing and amount recovered can be affected by a number of factors, including completion of development projects, reservoir performance, regulatory approvals, government policies, consumer preferences, changes in the amount and timing of capital investments, royalty framework and significant changes in long-term oil and gas price levels.

Although the company is reasonably certain that proved reserves will be produced, the timing and amount recovered can be affected by a number of factors, including completion and optimization of development projects, reservoir performance, regulatory approvals, government policies, consumer preferences, changes in the amount and timing of capital investments, royalty frameworks and significant changes in oil and gas price levels.

In addition, proved reserves could be affected by an extended period of low prices which could reduce the level of the company’s capital spending and also impact its partners’ capacity to fund their share of joint projects.

The company’s operating decisions and its outlook for future production volumes are not impacted by proved reserves as disclosed under the U.S.

As a result of low prices during 2020, under the U.S.

Securities and Exchange Commission definition of proved reserves, certain quantities of bitumen that qualified as proved reserves in prior years did not qualify as proved reserves at year-end

Amounts no longer qualifying as proved reserves include 2.2 billion barrels of bitumen at Kearl and 0.6 billion barrels of bitumen at Cold Lake.

Among the factors that could result in portions of these amounts being recognized again as proved reserves at some point in the future are a recovery in the SEC price basis, a further decline in costs, and / or operating efficiencies.

Under the terms of certain contractual arrangements or government royalty regimes, lower prices can also increase proved reserves attributed to Imperial.

The company does not expect its operations to be affected by the downward revision of reported proved reserves as disclosed under the U.S.

Securities and Exchange Commission (SEC) definition.

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As at December 31, 2020, approximately 25 percent of the company’s proved reserves were proved undeveloped reflecting volumes of 138 million oil-equivalent

Proved undeveloped reserves are associated with Cold Lake and the Montney and Duvernay unconventional assets.

Proved undeveloped reserves are associated with Syncrude and Cold Lake.

This compared to 397 million oil-equivalent

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barrels of proved undeveloped reserves includes a decrease of 335 million oil-equivalent

barrels at the Montney and Duvernay unconventional assets, partially offset by an increase of 26 million oil-equivalent barrels at Cold Lake.

barrels at Cold Lake and a decrease of 57 million oil-equivalent

barrels at the Montney and Duvernay unconventional assets, partially offset by an increase of 133 million oil-equivalent

barrels at Syncrude.

Conversion of proved undeveloped reserves into proved developed was 6 million oil-equivalent

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Proved undeveloped reserves that have remained undeveloped for five years or more represent about 4 percent (5 million oil-equivalent

barrels) of proved undeveloped reserves and are associated with ongoing development programs at the Montney and Duvernay unconventional assets and at Cold Lake.

These undeveloped reserves are planned to be developed in a staged approach to align with operational capacity and efficient capital spending commitment over the life of the assets.

barrels) of proved undeveloped reserves and are associated with ongoing development programs at Cold Lake.

These undeveloped reserves are planned to be developed in a staged approach to align with operational capacity and efficient capital spending commitment over the life of the asset.

The company is reasonably certain that these proved reserves will be produced;

however the timing and amount recovered can be affected by a number of factors including completion of development projects, reservoir performance, regulatory approvals, government policies, consumer preferences, changes in the amount and timing of capital investments, royalty framework and significant changes in long-term oil and gas price levels.

however the timing and amount recovered can be affected by a number of factors including completion and optimization of development projects, reservoir performance, regulatory approvals, government policies, consumer preferences, changes in the amount and timing of capital investments, royalty frameworks and significant changes in oil and gas price levels.

One of the company’s requirements to report resources as proved reserves is that management has made significant funding commitments towards the development of the reserves.

The company has a disciplined investment strategy and many major fields require a long lead-time in order to be developed.

The company made investments of about $328 million during the year to progress the development of proved undeveloped reserves at the Montney and Duvernay unconventional assets and at Cold Lake.

The company made investments of about $209 million during the year to progress the development of proved undeveloped reserves at Cold Lake, the Montney and Duvernay unconventional assets and at Syncrude.

These investments represented about 37 percent of the $561 million in total reported Upstream capital and exploration expenditures.

Investments made by the company to develop quantities which no longer meet the SEC definition of proved reserves as a result of low prices during 2020 are included in these capital and exploration expenditures.

Oil and gas production, production prices and production costs

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Liquids include crude oil, condensate and NGLs.

In 2020, Imperial’s average Canadian dollar realizations for bitumen decreased primarily due to a decrease in Western Canada Select.

The company’s average Canadian dollar realizations for synthetic crude decreased generally in line with West Texas Intermediate, adjusted for changes in exchange rates and transportation costs.

In 2019, Imperial’s average Canadian dollar realizations for bitumen increased, supported primarily by an increase in Western Canada Select and lower diluent costs.

The company’s average Canadian dollar realizations for synthetic crude increased relative to West Texas Intermediate, primarily due to the narrowing of the western Canadian light crude differential.

In 2018, Imperial’s average Canadian dollar realizations for bitumen declined generally in line with Western Canada Select, adjusted for changes in the exchange rate and transportation costs.

The company’s average Canadian dollar realizations for synthetic crude increased, however the widening of the western Canadian light crude differential relative to West Texas Intermediate during the fourth quarter of 2018 negatively impacted synthetic crude realizations.

Average unit production costs

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Includes liquids, bitumen, synthetic oil and natural gas.

In 2020, bitumen unit production costs were lower, primarily driven by higher Kearl production due to improved reliability and reduced downtime related to the addition of supplemental crushing facilities in 2020, and cost saving activities in response to market conditions.

In 2020, synthetic oil unit production costs were lower, primarily driven by cost saving activities in response to market conditions.

In 2019, bitumen unit production costs were higher, primarily driven by Kearl costs associated with improving reliability and mine performance, and increased mine material movement.

In 2019, synthetic oil unit production costs were lower, primarily driven by higher production due to the absence of the site-wide power disruption at Syncrude in 2018 and lower maintenance costs.

In 2018, bitumen unit production costs were higher, primarily driven by Kearl costs associated with improving reliability, partly offset by the impact of higher production.

In 2018, synthetic oil unit production costs were higher, primarily driven by higher maintenance costs, including impacts of the June 20 site-wide power disruption at Syncrude.

Drilling and other exploratory and development activities

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Net dry development

In 2020, wells drilled to add productive capacity include 28 development wells at Cold Lake and 1 well associated with the Montney and Duvernay unconventional assets.

In 2019, wells drilled to add productive capacity include 14 development wells at Cold Lake and 14 wells associated with the Montney and Duvernay unconventional assets.

In 2018, wells drilled to add productive capacity include 10 development wells at Cold Lake and 9 wells associated with the Montney and Duvernay unconventional assets.

In 2017, wells were drilled to add productive capacity, associated primarily with the Montney and Duvernay unconventional assets.

Wells drilling

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To maintain production at Cold Lake, capital expenditures for additional production wells and associated facilities are required periodically.

Additional wells were drilled on existing phases in 2019.

In 2020, additional wells were drilled on existing phases.

In 2021, a development drilling program is planned within the approved development area to add productive capacity.

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In March 2019, the company slowed the pace of development given market uncertainty stemming from the Government of Alberta’s temporary mandatory production curtailment regulations and other industry competitiveness challenges.

Aspen’s project pace will be continuously evaluated, but it remains an important development project for Imperial.

Aspen’s project pace will be continuously evaluated, although major investment remains on hold.

Aspen remains an important development project for Imperial.

In March 2016, Imperial filed a regulatory application for an expansion project at Cold Lake to develop the Grand Rapids interval using SA-SAGD

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In August 2018, regulatory approval for the expansion project at Cold Lake was received from the Alberta Energy Regulator.

The company continues to progress the project.

The company continues to progress the project with a slower pace.

Work progresses on technical evaluations to support potential Clarke Creek, Corner, Clyden and Chard in-situ

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Montney and Duvernay

The company is continuing to evaluate, develop and produce resources in its Montney and Duvernay unconventional assets in the western provinces.

The company has ramped down development drilling in its Montney and Duvernay unconventional assets in the western provinces.

Imperial has re-assessed

the long-term development plans of its unconventional portfolio in Alberta and no longer plans to further develop a significant portion of this portfolio.

The assets that will not be developed are non-core,

non-producing,

undeveloped assets.

This decision is consistent with Imperial’s strategy of focusing its upstream resources and efforts on its key oil sands assets as well as on only the most attractive portions of its unconventional portfolio.

The decision resulted in a non-cash,

impairment charge of $1,171 million in 2020, thereby reducing the carrying value of those assets to fair value.

The company retains its interest in these resources.

Imperial continues to produce from its developed acreage.

In 2007, the company acquired a 50 percent interest in an exploration licence in the Beaufort Sea.

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to address regional social, environmental, economic and spill response impacts of natural resource development in the Arctic.

The company continues to hold the licences while actively focusing on community engagement and participation in the BR-SEA

The company continues to hold the licences while maintaining community engagement and participation in the BR-SEA

Exploratory and development activities regarding oil and gas resources extracted by mining methods

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The company holds a 70.96 percent participating interest in the joint venture and ExxonMobil Canada Properties holds the other 29.04 percent.

The product, a blend of bitumen and diluent, is shipped to the company’s refineries, Exxon Mobil Corporation refineries and to other third parties.

The product, a blend of bitumen and diluent, is typically shipped to the company’s refineries, Exxon Mobil Corporation refineries and to other third parties.

Diluent is natural gas condensate or other light hydrocarbons added to the crude bitumen to facilitate transportation by pipeline and rail.

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of all units through early 2020.

These facilities are expected to further improve reliability, reduce planned downtime, lower unit costs and enable the asset to achieve 240,000 barrels per day of total gross production in 2020 (Imperial’s gross share would be about 170,000 barrels per day).

These facilities have further improved reliability, reduced planned downtime, lowered unit costs and enabled the asset to achieve higher volumes.

As disclosed in the company’s 2019 Form 10-K,

the original production target in 2020 for Kearl was 240,000 barrels per day (about 170,000 barrels Imperial’s share).

As a result of market conditions, the company adjusted planned maintenance and turnaround activity, and revised its full-year guidance for Kearl total gross production to 220,000 barrels per day (about 156,000 barrels Imperial’s share).

In 2020, Kearl achieved record annual total gross production of 222,000 barrels per day (158,000 barrels Imperial’s share).

Imperial continues to progress initiatives to enable the asset to achieve 255,000 barrels per day of total gross production in 2021 (about 181,000 barrels Imperial’s share).

As a result of low prices during 2020, under the SEC definition of proved reserves, certain quantities of bitumen that qualified as proved reserves in prior years did not qualify as proved reserves at year-end

Amounts no longer qualifying as proved reserves include 2.2 billion barrels of bitumen at Kearl.

Under the terms of certain contractual arrangements or government royalty regimes, lower prices can also increase proved reserves attributed to Imperial.

The company does not expect its operations to be affected by the downward revision of reported proved reserves as disclosed under the U.S.

SEC definition.

Cold Lake is an in-situ

heavy oil bitumen operation.

The product, a blend of bitumen and diluent, is shipped to the company’s refineries, Exxon Mobil Corporation refineries and to other third parties.

The product, a blend of bitumen and diluent, is typically shipped to the company’s refineries, Exxon Mobil Corporation refineries and to other third parties.

During 2020, net bitumen production at Cold Lake was about 124,000 barrels per day and gross production was about 132,000 barrels per day.

Amounts no longer qualifying as proved reserves include 0.6 billion barrels of bitumen at Cold Lake.

Under the terms of certain contractual arrangements or government royalty regimes, lower prices can also increase proved reserves attributed to Imperial.

The company does not expect its operations to be affected by the downward revision of reported proved reserves as disclosed under the U.S.

SEC definition.

Syncrude is a joint venture established to recover shallow deposits of oil sands using open-pit

1 unchanged sentence

The company holds a 25 percent participating interest in the joint venture.

The produced synthetic crude oil is shipped to the company’s refineries, Exxon Mobil Corporation refineries and to other third parties.

The produced synthetic crude oil is typically shipped to the company’s refineries, Exxon Mobil Corporation refineries and to other third parties.

In 2020, the company’s share of Syncrude’s net production of synthetic crude oil was about 68,000 barrels per day and gross production was about 69,000 barrels per day.

14 unchanged sentences

2020, the company had an interest in 12 gross wells with multiple completions (2019 - 12 gross wells).

The total number of wells decreased in 2019 primarily due to the divestment of mature conventional properties.

Land holdings

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Net acres exclude the interests of others.

Canada lands include the Arctic Islands, Beaufort Sea / Mackenzie Delta, and other Northwest Territories and Yukon regions.

Canada lands include the Arctic Islands, Beaufort Sea / Mackenzie Delta, and other Northwest Territories and Yukon regions (Yukon - 2019 only).

Certain land holdings are subject to modification under agreements whereby others may earn interests in the company’s holdings by performing certain exploratory work (farm-out)

3 unchanged sentences

The company also has about 68,000 net acres of undeveloped, mineable oil sands acreage in the Athabasca region.

In addition, the company has interests in other bitumen oil sands leases in the Athabasca areas totalling about 177,000 net acres, which include about 62,000 net acres of oil sands leases in the Clyden area, about 34,000 net acres of oil sands leases in the Aspen area, about 30,000 net acres of oil sands leases in the Corner area and about 18,000 net acres in the Chard area.

In August 2019, Imperial acquired a 50 percent ownership in the Clarke Creek area, totalling about 29,000 net acres of additional oil sands leases.

In addition, the company has interests in other bitumen oil sands leases in the Athabasca areas totalling about 174,000 net acres, which include about 62,000 net acres of oil sands leases in the Clyden area, about 34,000 net acres of oil sands leases in the Aspen area, about 30,000 net acres of oil sands leases in the Corner area, about 18,000 net acres in the Chard area and about 29,000 net acres in the Clarke Creek area.

The 174,000 net acres are suitable for in-situ

1 unchanged sentence

The company’s share of Syncrude joint venture leases covering about 55,000 net acres accounts for the entire synthetic oil acreage.

Oil sands leases have an exploration period of 15 years and are continued beyond that point by meeting the minimum level of evaluation, by payment of escalating rentals, or by production.

Oil sands leases have an exploration period of 15 years and are continued beyond that point by payment of escalating rentals or by production.

The majority of the acreage in Cold Lake, Kearl and Syncrude is continued by production.

The company holds interests in an additional 948,000 net acres of developed and undeveloped land in the western provinces related to crude oil and natural gas.

In 2019, the company divested mature conventional properties totalling 214,000 net acres.

The company holds interests in an additional 898,000 net acres of developed and undeveloped land in the western provinces related to crude oil and natural gas, including about 387,000 net acres associated with the company’s unconventional portfolio in Alberta.

Imperial has re-assessed

the long-term development of its unconventional portfolio and no longer plans to further develop a significant portion of this portfolio.

Crude oil and natural gas leases and licences from the western provinces have exploration periods ranging from two to 15 years and are continued beyond that point by proven production capability.

Land holdings in Canada lands primarily include exploration licence (EL) acreage in the Beaufort Sea of about 252,000 net acres and significant discovery licence (SDL) acreage in the Mackenzie Delta and Beaufort Sea areas of about 183,000 net acres.

Beaufort Sea areas of about 183,000 net acres.

Exploration licences on Canada lands have a finite term.

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Exploration licences on Atlantic offshore have a finite term.

The Atlantic offshore acreage is continued by production or held by SDLs.

The Atlantic offshore acreage is continued by production licences or held by SDLs.

The company supplements its own production of crude oil, condensate and petroleum products with substantial purchases from a number of other sources at negotiated market prices.

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The Edmonton rail terminal has total capacity to ship up to 210,000 barrels per day of crude oil.

In 2019, shipments through the Edmonton rail terminal averaged 51,000 barrels per day.

The company owns and operates three refineries, which process predominantly Canadian crude oil.

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Capacity utilization was 80 percent, compared to 83 percent in 2019.

Lower throughput was driven by reduced demand due to the COVID-19

pandemic, partially offset by lower refinery turnaround activity and reliability events, including impacts from the Sarnia fractionation tower incident which occurred in April 2019.

Refinery throughput averaged 353,000 barrels per day in 2019, compared to 392,000 barrels per day in 2018.

Capacity utilization was 83 percent, compared to 93 percent in 2018.

Reduced throughput was mainly due to higher planned turnaround activities and impacts from the Sarnia fractionation tower incident which occurred in April 2019.

Refinery throughput averaged 392,000 barrels per day in 2018, up from 383,000 barrels per day in 2017.

Capacity utilization increased to 93 percent from 91 percent in 2017.

The company maintains a nationwide distribution system, to move petroleum products to market by pipeline, tanker, rail and road transport.

The company owns and operates fuel terminals across the country, as well as natural gas liquids and products pipelines in Alberta, Manitoba and Ontario and has interests in the capital stock of one crude oil and two products pipeline companies.

The company markets petroleum products throughout Canada under well-known brand names, most notably Esso and Mobil, to all types of customers.

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Net petroleum product sales

In 2020, lower sales were primarily driven by reduced demand due to the COVID-19

In 2019, lower sales volumes were mainly due to lower refinery throughput.

In 2018, sales growth continued to be driven by optimization across the full downstream value chain, and the expansion of Imperial’s logistic capabilities.

The company’s Chemical operations manufacture and market benzene, aromatic and aliphatic solvents, plasticizer intermediates and polyethylene resin.

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Total petrochemical sales

In 2020, sales volumes increased primarily due to higher sales of intermediates.

In 2019, sales volumes decreased primarily due to lower aromatics and intermediates sales.

In 2018, sales volumes were higher primarily due to higher production in polymers and basic chemicals, driven by stronger reliability.

Environmental protection

The company regards protecting the environment in connection with its various operations as a priority.

The company works in cooperation with government agencies, industry associations and communities to address existing, and to anticipate potential, environmental protection issues.

In the past five years, the company has made capital and operating expenditures of about $3.9 billion on environmental protection and facilities.

In 2019, the company’s environmental capital and operating expenditures totalled approximately $0.8 billion, which was spent primarily on activities to protect the air, land and water, including remediation projects.

Capital and operating expenditures relating to environmental protection are expected to be about $1.0 billion in 2020.

Human resources

career employees (a)

Career employees are defined as active executive, management, professional, technical, administrative and wage employees who work full time or part time for the company and are covered by the company’s benefit plans.

About 6 percent of the company’s employees are members of unions.

Human capital resources

Imperial operates in a complex, competitive and changing business environment where decisions and risks play out over time horizons that are often decades in length.

This long-term orientation underpins the company’s philosophy on talent development.

Talent development begins with recruiting exceptional candidates and continues with individually planned experiences and training designed to facilitate broad development and a deep understanding of our business across the business cycle.

The company’s compensation is market competitive, long-term oriented, and highly differentiated by individual performance.

In addition, benefits and workplace programs support the company’s talent management approach, and are designed to attract and retain employees for a long-term career.

Overall, this multifaceted approach has resulted in strong employee retention.

Imperial views diversity as an opportunity.

The company encourages and respects diversity of thought, ideas, and perspective in its workforce.

The company considers diversity though all stages of employment including recruitment, training and development of its employees.

Imperial’s goal is to reflect the mix and diversity of the communities where it operates, and it continues to focus on diverse representation at all levels of the organization.

The number of regular employees was about 5,800 at the end of 2020 (2019 - 6,000, 2018 - 5,700).

Regular employees are defined as executive, management, professional, technical and wage employees who work full-time or part-time for the company and are covered by the company’s benefit plans and programs.

The Canadian energy and petrochemical industries are highly competitive.

1 unchanged sentence

The energy and petrochemical industries also compete with other industries in supplying the energy, fuel and chemical needs of both industrial and individual consumers.

Government regulation

Government regulations

Petroleum, natural gas and oil sands rights

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Changes from the previous environmental assessment legislation include broader consideration for social, health, and gender-based impacts, the impact on Canada’s climate change commitments, reliance on strategic and regional assessments and adjusted regulatory review timelines.

Environmental protection

The company regards protecting the environment in connection with its various operations as a priority.

The company is subject to extensive environmental regulations in Canada that apply to all phases of exploration, development, operation, and final closure.

These requirements cover the management and monitoring of potential environmental impacts during active operations, including practices for land disturbance, wildlife protection, specifications for equipment operation and material storage and limitations on discharges to the environment.

It also includes conducting environmental surveys and collecting continuous operational measurements and sampling to confirm that environmental practices are adequately protecting the environment.

These regulations also specify the actions and requirements for final reclamation, abandonment and closure of facilities.

The company works in cooperation with government agencies, industry associations and communities to address existing, and to anticipate potential, environmental protection issues.

The company also maintains extensive operating procedures, processes and emergency response plans to address environmental risks at its operations.

As discussed in Item 1A.

Risk factors in this report, compliance with existing and potential future government regulations, including environmental regulations, may have material effects on the capital expenditures, earnings, and competitive position of the company.

Imperial takes new and ongoing measures throughout its operations each year to prevent and minimize the impact of its operations on air, land and water.

These include significant investments in refining infrastructure and technology to manufacture clean fuels, continued evaluation and implementation of new technologies to reduce greenhouse gas emissions, adherence to federal and provincial greenhouse gas emissions reduction and reporting programs, enhanced water and land management, and expenditures for asset retirement obligations.

In the past five years, the company has made capital and operating expenditures of about $3.3 billion on environmental protection and facilities.

In 2020, the company’s environmental capital and operating expenditures totalled approximately $0.6 billion, which was spent primarily on activities to protect the air, land and water, including remediation projects.

Capital and operating expenditures relating to environmental protection are expected to be about $1.1 billion in 2021.

The maximum allowable gross production of crude oil from wells in Canada is subject to limitations by various regulatory authorities on the basis of engineering and conservation principles.

Additionally, in December 2018, the Government of Alberta introduced temporary mandatory production curtailment regulations, which took effect on January 1, 2019.

These regulations impose production limits on large producers in Alberta.

Mandatory production curtailments decreased as 2019 progressed, but continue to be imposed on larger producers.

These regulations enable the government to impose production limits on large producers in Alberta.

Mandatory production curtailments were eliminated effective December 2020, but the regulatory authority to impose curtailments remains in place.

The duration of these regulations is uncertain.

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These limitations do not impact gas reserves, only the timing of production of the reserves and did not have a significant impact on Imperial’s 2020 gas production rates.

The Government of Canada has the authority to regulate the export price for natural gas and has a gas export pricing policy, which accommodates export prices for natural gas negotiated between Canadian exporters and U.S.

The Government of Canada has the authority to regulate the export price for natural gas.

Exports of natural gas from Canada require approval by the CER and the Government of Canada.

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Competition Act

The Competition Bureau ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

The Competition Bureau seeks to ensure that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

The Competition Bureau is responsible for the administration and enforcement of the Competition Act

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The company’s website www.imperialoil.ca

contains a variety of corporate and investor information which is available free of charge, including the company’s annual report on Form 10-K,

contains a variety of corporate and investor information, including the company’s annual report on Form 10-K,

quarterly reports on Form 10-Q

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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-K

Item 1. Business