What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-24 compared with 2020-02-26 · 804 added, 897 removed, 2518 unchanged (40% of the section changed)

12 unchanged sentences

Each of the seven individuals listed in the section entitled “Nominees for director” on pages 114 to 117 of this report have been nominated for election at the annual meeting of shareholders to be held May 4, 2021.

All of the nominees are directors and have been since the dates indicated.

Whittaker retired from the board on April 26, 2019 as she reached the company’s mandatory retirement age for directors in 2019.

In September 2019, R.M.

Kruger, then chairman, president and chief executive officer, announced his intention to retire from the company at the end of 2019.

Corson was appointed to the board and as president of the company on September 17, 2019.

Corson assumed the additional roles of chairman and chief executive officer on January 1, 2020, following Mr.

Kruger’s retirement from the company and resignation from the board on December 31, 2019.

All of the nominees, with the exception of M.R.

Crocker, are now directors and have been since the dates indicated.

Brownell is a current director and has chosen not to stand for re-election.

Reference is made to the section under “Nominees for director”:

1 unchanged sentence

Reference is made to the sections under “Corporate governance disclosure”:

“Skills and experience of our board members”, on page 109 of this report.

“Other public company directorships of our board members”, on page 113 of this report.

“Skills and experience of our board members and nominees”, on page 121 of this report.

“Other public company directorships of our board members and nominees”, on page 125 of this report.

The table entitled “Audit committee” under “Board and committee structure”, on page 132 of this report;

32 unchanged sentences

Restricted stock units do not carry voting rights prior to the issuance of shares on settlement of the awards.

Kruger was the company’s chairman, president and chief executive officer until September 16, 2019, and continued as chairman and chief executive officer until his retirement on December 31, 2019.

Certain relationships and related transactions, and director independence

1 unchanged sentence

The company’s management proxy circular is prepared in accordance with Canadian securities regulations.

Reference is made to the section under “Corporate governance disclosure” entitled “Independence of our board members”, on page 110 of this report.

Reference is made to the section under “Corporate governance disclosure” entitled “Independence of our board members and nominees”, on page 122 of this report.

Reference is made to the section under “Corporate governance disclosure” entitled “Transactions with Exxon Mobil Corporation”, on page 148 of this report.

28 unchanged sentences

are filed as part of this report:

Restated certificate and articles of incorporation of the company (Incorporated herein by reference to Exhibit (3.1) to the company’s Form 8-K

filed on May 3, 2006 (File No.

of the company (Incorporated herein by reference to Exhibit (3)(ii) to the company’s Quarterly Report on Form 10-Q

for the quarter ended March 31, 2003 (File No.

Restated certificate and articles of incorporation of the company (Incorporated herein by reference to Exhibit (3.1) to the company’s Form 8-K filed on May 3, 2006 (File No.

By-laws of the company (Incorporated herein by reference to Exhibit (3)(ii) to the company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No.

Description of capital stock.

(1) Syncrude Ownership and Management Agreement, dated February 4, 1975 (Incorporated herein by reference to Exhibit 13(b) of the company’s Registration Statement on Form S-1,

as filed with the Securities and Exchange Commission on August 21, 1979 (File No.

(2) Letter Agreement, dated February 8, 1982, between the Government of Canada and Esso Resources Canada Limited, amending Schedule “C” to the Syncrude Ownership and Management Agreement filed as Exhibit (10)(ii)(2) (Incorporated herein by reference to Exhibit (20) of the company’s Annual Report on Form 10-K

(Incorporated herein by reference to Exhibit (4)(vi) of the company’s Annual Report on Form 10-K

for the year ended December 31, 2019 (File No.

(3) Amendment to Syncrude Ownership and Management Agreement, dated March 10, 1982 (Incorporated herein by reference to Exhibit (10)(ii)(14) of the company’s Annual Report on Form 10-K

(1) Syncrude Ownership and Management Agreement, dated February 4, 1975 (Incorporated herein by reference to Exhibit 13(b) of the company’s Registration Statement on Form S-1, as filed with the Securities and Exchange Commission on August 21, 1979 (File No.

for the year ended December 31, 1981 (File No.

(3) Amendment to Syncrude Ownership and Management Agreement, dated March 10, 1982 (Incorporated herein by reference to Exhibit (10)(ii)(14) of the company’s Annual Report on Form 10-K for the year ended December 31, 1989 (File No.

(4) Alberta Cold Lake Transition Agreement, effective January 1, 2000, relating to the royalties payable in respect of the Cold Lake production project and terminating the Alberta Cold Lake Crown Agreement dated June 25, 1984.

1 unchanged sentence

for the year ended December 31, 2001 (File No.

(5) Amendment to Syncrude Ownership and Management Agreement effective January 1, 2001 (Incorporated herein by reference to Exhibit (10)(ii)(22) of the company’s Quarterly Report on Form 10-Q

for the quarter ended June 30, 2002 (File No.

(6) Amendment to Syncrude Ownership and Management Agreement effective September 16, 1994 (Incorporated herein by reference to Exhibit (10)(ii)(23) of the company’s Quarterly Report on Form 10-Q

for the quarter ended June 30, 2002 (File No.

(5) Amendment to Syncrude Ownership and Management Agreement effective January 1, 2001 (Incorporated herein by reference to Exhibit (10)(ii)(22) of the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No.

(6) Amendment to Syncrude Ownership and Management Agreement effective September 16, 1994 (Incorporated herein by reference to Exhibit (10)(ii)(23) of the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No.

(7) Syncrude Bitumen Royalty Option Agreement, dated November 18, 2008, setting out the terms of the exercise by the Syncrude Joint Venture owners of the option contained in the existing Crown Agreement to convert to a royalty payable on the value of bitumen, effective January 1, 2009 (Incorporated herein by reference to Exhibit 1.01(10)(ii)(2) of the company’s Form 8-K

6 unchanged sentences

(3) Amended Restricted Stock Unit Plan with respect to Restricted Stock Units granted in 2011 and subsequent years, as amended effective November 14, 2011 (Incorporated herein by reference to Exhibit 9.01(c)[10(iii)(A)(1)] of the company’s Form 8-K

filed on November 25, 2008 (File No.

(4) Short Term Incentive Program for selected executives effective February 2, 2012 (Incorporated herein by reference to Exhibit 9.01(c)[10(iii)(A)(1)] of the company’s Form 8-K

filed on February 23, 2012 (File No.

(5) Amended Restricted Stock Unit Plan with respect to Restricted Stock Units granted in 2011 and subsequent years, as amended effective November 14, 2011 (Incorporated herein by reference to Exhibit 9.01(c)[10(iii)(A)(1)] of the company’s Form 8-K

filed on February 23, 2012 (File No.

(4) Amended Restricted Stock Unit Plan with respect to Restricted Stock Units granted in 2016 and subsequent years, as amended effective October 26, 2016 (Incorporated herein by reference to Exhibit 9.01(c)[10(iii)(A)(1)] of the company’s Form 8-K

2 unchanged sentences

filed on October 31, 2016 (File No.

(6) Amended Restricted Stock Unit Plan with respect to Restricted Stock Units granted in 2020 and subsequent years, as amended effective November 24, 2020.

Imperial Oil Resources Limited is incorporated in Canada, and is a wholly-owned subsidiary of the company.

14 unchanged sentences

Imperial Oil Limited

/s/ Bradley W.

by /s/ Bradley W.

Chairman, president and chief executive officer

7 unchanged sentences

finance and administration, and controller

(Principal financial officer and principal accounting officer)

(Principal financial officer and principal

accounting officer)

/s/ Krystyna T.

10 unchanged sentences

Critical accounting estimates

Recently issued accounting standards

Management’s report on internal control over financial reporting

68 unchanged sentences

cost of financing divided by total average capital employed.

The company has consistently applied its ROCE definition for many years and views it as the best measure of historical capital productivity in a capital-intensive, long-term industry to demonstrate to shareholders that capital has been used wisely over the long term.

The company has consistently applied its ROCE definition for many years and views it as the best measure of historical capital productivity in a capital-intensive, long-term industry.

Additional measures, which are more cash flow based, are used to make investment decisions.

millions of Canadian dollars

Net income (loss)

Financing (after-tax),

including Imperial’s share of equity companies

Net income excluding financing

Net income (loss) excluding financing

Average capital employed

3 unchanged sentences

This cash flow reflects the total sources of cash both from operating the company’s assets and from the divesting of assets.

The company employs a long-standing and regular disciplined review process to ensure that all assets are contributing to the company’s strategic objectives.

The company employs a long-standing and regular disciplined review process to ensure that assets are contributing to the company’s strategic objectives.

Assets are divested when they no longer meet these objectives or are worth considerably more to others.

21 unchanged sentences

Selling and general

Depreciation and depletion

Depreciation and depletion (includes impairments)

pension and postretirement benefit

5 unchanged sentences

Imperial, with its resource base, financial strength, disciplined investment approach and technology portfolio, is well-positioned to participate in substantial investments to develop new Canadian energy supplies.

The company’s integrated business model, with significant investments in Upstream, Downstream and Chemical segments, reduces the company’s risk from changes in commodity prices.

The company’s integrated business model, with significant investments in Upstream, Downstream and Chemical segments, generally reduces the company’s risk from changes in commodity prices.

While commodity prices depend on supply and demand and may be volatile on a short-term basis, Imperial’s investment decisions are grounded on fundamentals reflected in its long-term business outlook, and use a disciplined approach in selecting and pursuing the most attractive investment opportunities.

The corporate plan is a fundamental annual management process that is the basis for setting near-term operating and capital objectives, in addition to providing the longer-term economic assumptions used for investment evaluation purposes.

Volumes are based on individual field production profiles, which are also updated annually.

The corporate plan is a fundamental annual management process that is the basis for setting operating and capital objectives, in addition to providing the economic assumptions used for investment evaluation purposes.

Volume projections are based on individual field production profiles, which are also updated annually.

Price ranges for crude oil, natural gas, refined products and chemical products are based on corporate plan assumptions developed annually and are utilized for investment evaluation purposes.

4 unchanged sentences

Long-term business outlook

Given the uncertainty around the near-term impacts of COVID-19

on economic growth, energy demand and energy supply, and lack of precedent, the company is considering a range of recovery pathways to guide near-term plans.

These pathways expect that energy demand will grow beyond 2019 levels as early as 2022 reflecting the phase out of COVID-19

impacts and re-establishment of long-term supply / demand fundamentals.

The “Long-term business outlook” is based on Exxon Mobil Corporation’s Outlook for Energy

, which is used to help inform the company’s long-term business strategies and investment plans.

, which combined with the near-term pathways is used to help inform the company’s long-term business strategies and investment plans.

By 2040, the world’s population is projected at around 9.1 billion people, or about 1.6 billion more than in 2018.

Coincident with this population increase, the company expects worldwide economic growth to average close to 3 percent per year, with economic output nearly doubling by 2040.

Coincident with this population increase, the company expects worldwide economic growth to average close to 2.5 percent per year, with economic output growing by around 75 percent by 2040.

As economies and populations grow, and as living standards improve for billions of people, the need for energy is expected to continue to rise.

Even with significant efficiency gains, global energy demand is projected to rise by about 20 percent from 2017 to 2040.

Even with significant efficiency gains, global energy demand is projected to rise by more than 10 percent from 2018 to 2040.

This increase in energy demand is expected to be driven by developing countries (i.e., those that are not member nations of the Organization for Economic Co-operation

6 unchanged sentences

The share of coal fired generation is likely to decline substantially and approach 20 percent of the world’s electricity in 2040, versus nearly 40 percent in 2018, in part as a result of policies to improve air quality as well as reduce greenhouse gas emissions to address the risks related to climate change.

From 2017 to 2040, the amount of electricity supplied using natural gas, nuclear power, and renewables is likely to grow by two-thirds,

accounting for the entire growth in electricity supplies and offsetting the reduction of coal.

From 2018 to 2040, the amount of electricity supplied using natural gas, nuclear power, and renewables is likely to nearly double, accounting for the entire growth in electricity supplies and offsetting the reduction of coal.

Electricity from wind and solar is likely to increase about 400 percent, helping total renewables (including other sources, i.e., hydropower) to account for about 80 percent of the increase in electricity supplies worldwide through 2040.

Total renewables will likely reach nearly 40 percent of global electricity supplies by 2040.

Natural gas and nuclear are also expected to increase shares over the period to 2040, reaching almost 30 percent and about 15 percent of global electricity supplies respectively by 2040.

Total renewables will likely reach about 50 percent of global electricity supplies by 2040.

Natural gas and nuclear are also expected to increase shares over the period to 2040, reaching more than 25 percent and about 10 percent of global electricity supplies respectively by 2040.

Supplies of electricity by energy type will reflect significant differences across regions reflecting a wide range of factors including the cost and availability of various energy supplies and policy developments.

Energy for transportation – including cars, trucks, ships, trains and airplanes – is expected to increase by more than 25 percent from 2017 to 2040.

Transportation energy demand is likely to account for approximately 60 percent of the growth in liquid fuels demand worldwide over this period.

Energy for transportation – including cars, trucks, ships, trains and airplanes – is expected to increase by about 20 percent from 2018 to 2040.

Transportation energy demand is likely to account for over 60 percent of the growth in liquid fuels demand worldwide over this period.

Light-duty vehicle demand for liquid fuels is projected to peak prior to 2025 and then decline to levels seen in the early-2010s by 2040 as the impact of better fuel economy and significant growth in electric cars, led by China, Europe, and the United States, work to offset growth in the worldwide car fleet of about 60 percent.

By 2040, light-duty vehicles are expected to account for about 20 percent of global liquid fuels demand.

During the same time period, nearly all the world’s transportation fleets are likely to continue to run on liquid fuels, which are widely available and offer practical advantages in providing a large quantity of energy in small volumes.

During the same time period, nearly all the world’s commercial transportation fleets are likely to continue to run on liquid fuels, which are widely available and offer practical advantages in providing a large quantity of energy in small volumes.

Liquid fuels provide the largest share of global energy supplies today reflecting broad-based availability, affordability, ease of transportation, and fitness as a practical solution to meet a wide variety of needs.

7 unchanged sentences

However, timely investments will remain critical to meeting global needs with reliable and affordable supplies.

Natural gas is a low-emission,

versatile and practical fuel for a wide variety of applications, and it is expected to grow the most of any primary energy type from 2017 to 2040, meeting more than 40 percent of global energy demand growth.

Natural gas is a lower-emission,

versatile and practical fuel for a wide variety of applications, and it is expected to grow the most of any primary energy type from 2018 to 2040, meeting about 50 percent of global energy demand growth.

Global natural gas demand is expected to rise about 25 percent from 2018 to 2040, with about half of that increase coming from the Asia Pacific region.

6 unchanged sentences

Oil is expected to remain the largest source of energy with its share remaining close to 30 percent in 2040.

Coal is currently the second largest source of energy, but it is likely to lose that position to natural gas in the 2020 to 2025 timeframe.

The share of natural gas is expected to reach about 25 percent by 2040, while the share of coal falls to about 20 percent.

Coal is currently the second largest source of energy, but it is likely to lose that position to natural gas in the next few years.

The share of natural gas is expected to reach more than 25 percent by 2040, while the share of coal falls to about two thirds of the natural gas share.

Nuclear power is projected to grow significantly, as many nations are likely to expand nuclear capacity to address rising electricity needs as well as energy security and environmental issues.

Total renewable energy is likely to exceed 15 percent of global energy by 2040, with biomass, hydro and geothermal contributing a combined share of more than 10 percent.

Total energy supplied from wind, solar and biofuels is expected to increase rapidly, growing nearly 250 percent from 2017 to 2040, when they will likely be just over 5 percent of the world energy mix.

Total energy supplied from wind, solar and biofuels is expected to increase rapidly, growing over 350 percent from 2018 to 2040, when they will likely be just over 6 percent of the world energy mix.

The company anticipates that the world’s available oil and gas resource base will grow not only from new discoveries, but also from increases in previously discovered fields.

11 unchanged sentences

The Outlook for Energy

reflects an environment with increasingly stringent climate policies and is consistent with the aggregation of Nationally Determined Contributions, which were submitted by signatories to the United Nations Framework Convention on Climate Change (UNFCCC) 2015 Paris Agreement.

reflects an environment with increasingly stringent climate policies and is consistent with the aggregation of Nationally Determined Contributions (NDCs), which were submitted by signatories to the United Nations Framework Convention on Climate Change (UNFCCC) 2015 Paris Agreement.

The Outlook for Energy

2 unchanged sentences

As people and nations look for ways to reduce risks of global climate change, they will continue to need practical solutions that do not jeopardize the affordability or reliability of the energy they need.

The company continues to monitor the updates to the NDCs that nations are expected to provide in preparation for COP 26 in Glasgow in November 2021 as well as other policy developments in light of net zero ambitions recently formulated by some nations, including Canada.

Practical solutions to the world’s energy and climate challenges will benefit from market competition in addition to well-informed, well-designed and transparent policy approaches that carefully weigh costs and benefits.

Such policies are likely to help manage the risks of climate change while also enabling societies to pursue other high priority goals around the world – including clean air and water, access to reliable, affordable energy, and economic progress for all people.

All practical and economically viable energy sources, both conventional and unconventional, will need to be pursued to continue meeting global energy demand, recognizing the scale and variety of worldwide energy needs, as well as the importance of expanding access to modern energy to promote better standards of living for billions of people.

The information provided in the “Long-term

business outlook” includes internal estimates and forecasts based upon ExxonMobil’s internal data and analyses, as well as publicly available information from external sources including the International Energy Agency.

Such policies are likely to help manage the risks of climate change while also enabling societies to pursue other high priority goals around the world – including clean air and water, access to reliable and affordable energy, and economic progress for all people.

The company encourages sound policy solutions that reduce climate-related risks across the economy at the lowest societal cost.

All practical and economically viable energy sources will need to be pursued to continue meeting global energy demand, recognizing the scale and variety of worldwide energy needs, as well as the importance of expanding access to modern energy to promote better standards of living for billions of people.

The information provided in the “Long-term business outlook” includes internal estimates and projections based upon ExxonMobil’s internal data and analyses, as well as publicly available information from external sources including the International Energy Agency.

Imperial produces crude oil and natural gas for sale predominantly into North American markets.

8 unchanged sentences

“Risk factors”.

Kearl’s supplemental crushing facilities started operations in late 2019, with ramp-up

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.

Gross bitumen production at Cold Lake was impacted by reservoir performance at Nabiye in 2019.

The company anticipates this will continue to impact the asset’s near-term performance and, similar to 2019, expects gross bitumen production at Cold Lake to average 140,000 barrels per day in 2020.

In 2019, the company slowed the pace of development of its $2.6 billion Aspen in-situ

oil sands project given market uncertainty stemming from the Government of Alberta’s temporary mandatory production curtailment regulations and other industry competitiveness challenges.

The decision to return to planned project activity levels will depend on several factors such as any subsequent government actions related to production curtailment and general market conditions.

The upstream industry environment continued to recover in 2019 as crude price differentials in the western Canadian market narrowed since the end of 2018.

The upstream industry environment has a history of significant price volatility.

Market demand and prices experienced a sharp decline in the first half of 2020 largely driven by the COVID-19

Following this decline, prices improved in the second half of the year as supply and demand began to rebalance.

Prices for most of the company’s crude oil sold are referenced to Western Canada Select (WCS) and West Texas Intermediate (WTI) oil markets.

On January 1, 2019, the Government of Alberta’s temporary mandatory production curtailment regulations came into effect.

Consequently, the WTI / WCS differential narrowed from an average of approximately US$40 per barrel in the fourth quarter of 2018, to an average of about US$12 per barrel in the first quarter of 2019.

Throughout 2019, the Government of Alberta continually eased the mandatory production limit, increased the base limit for production curtailment, and introduced several exemptions including a special production allowance providing temporary curtailment relief equivalent to incremental increases in shipments by rail.

In January 2019, the Government of Alberta’s temporary mandatory production curtailment regulations came into effect.

Although the mandatory production curtailment decreased throughout 2019 and 2020, and was eliminated in December 2020, the regulatory authority to impose curtailment remains in place and there is the potential for curtailment to be re-imposed

and increased.

The duration of these regulations is uncertain.

1 unchanged sentence

oil sands project, as economically justified.

As described in more detail in Item 1A.

“Risk factors”, environmental risks and climate related regulations could have negative impacts on the upstream business.

On January 1, 2020, the International Maritime Organization’s mandate of a global 0.5 percent cap on the maximum level of sulphur in marine fuel came into effect.

This new cap represents a significant reduction from the previous limit, and may adversely impact heavy crude price differentials in western Canada.

Imperial believes prices over the long term will be driven by market supply and demand, with the demand side largely being a function of general economic activities, levels of prosperity, technology advances, consumer preference and government policies.

1 unchanged sentence

To manage the risks associated with price, Imperial evaluates annual plans and all major investments across a range of price scenarios.

In 2020, Imperial 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 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.

These non-core

assets are non-producing,

undeveloped assets and the company does not expect any material future cash expenditures related to this impairment.

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.

Imperial continues to produce from its developed acreage.

Kearl’s supplemental crushing facilities started operations in late 2019, with ramp-up

of all units through early 2020.

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).

In 2020, gross bitumen production at Cold Lake was impacted by ongoing steam management.

The company plans to focus on base performance in the near-term and expects gross bitumen production at Cold Lake to average approximately 130,000 barrels per day in 2021.

As described in more detail in Item 1A.

“Risk factors”, environmental risks and climate related regulations, and COVID-19

could have negative impacts on the upstream business.

Imperial’s Downstream serves predominantly Canadian markets with refining, logistics and marketing assets.

6 unchanged sentences

Imperial’s integration across the value chain, from refining to marketing, enhances overall value across the fuels business.

In 2019, Imperial’s margins were negatively impacted by narrowing crude price differentials that resulted, in part, from the Government of Alberta’s temporary mandatory curtailment regulations on crude oil production.

In 2020, demand for petroleum products was significantly impacted by the COVID-19

pandemic, starting in the first half of the year.

While there was some demand improvement in the second half of 2020, demand remained below 2019 levels.

This unprecedented demand impact also adversely affected Imperial’s margins.

As described in more detail in Item 1A.

3 unchanged sentences

North America continued to benefit from abundant supplies of natural gas and gas liquids, providing both low cost energy and feedstock for steam crackers.

In 2019, margins were adversely impacted by continued industry capacity additions outpacing demand growth.

Imperial maintains a competitive advantage through continued operational excellence, investment and cost discipline, and integration of its chemical plant in Sarnia with the refinery.

In 2020, margins were adversely impacted by continued industry capacity additions and effects related to COVID-19.

Imperial maintains a competitive advantage through continued operational excellence, consistent product quality, investment and cost discipline, and integration of its chemical plant in Sarnia with the refinery.

The company also benefits from its relationship with ExxonMobil’s North American chemical businesses, enabling Imperial to maintain a leadership position in its key market segments.

Results of operations

In 2020, the balance of supply and demand for petroleum and petrochemical products experienced two significant disruptive effects.

On the demand side, the COVID-19

pandemic spread rapidly across Canada and the world resulting in substantial reductions in consumer and business activity and significantly reduced local and global demand for crude oil, natural gas, and petroleum products.

This reduction in demand coincided with announcements of increased production in certain key oil-producing

countries which led to increases in inventory levels and sharp declines in prices for crude oil, natural gas, and petroleum products.

Market conditions continued to reflect considerable uncertainty throughout 2020 as consumer and business activity has exhibited some degree of recovery, but remained lower when compared to prior periods as a result of the pandemic.

Despite actions taken by key oil-producing

countries to reduce oversupply, and improved credit market conditions providing sufficient liquidity to credit-worthy companies, the unfavourable economic impacts appear increasingly likely to persist to some extent well into 2021.

In late March, the company announced significant reductions in 2020 capital and operating expense spending plans.

Capital and exploration expenditures for 2020 were $874 million, in line with the company’s most recent guidance of $900 million, and less than half of 2019 expenditures.

Capital expenditures in 2021 are expected to be approximately $1.2 billion.

In addition, full-year production and manufacturing expenses were $985 million lower than the prior year.

This decrease enabled the company to surpass its $500 million expense reduction commitment made in 2020 by nearly double.

The effect of COVID-19

and the current business environment on supply and demand patterns negatively impacted Imperial’s financial and operating results in 2020.

Industry conditions seen in 2020 have led to lower realized prices for the company’s products and have resulted in substantially lower earnings and operating cash flow throughout 2020 in comparison to 2019.

In response to these conditions, the company operated certain assets at reduced rates and adjusted planned maintenance and turnaround activities throughout the second and third quarters in an effort to reduce on-site

staffing levels and to better balance production with demand.

Refinery utilization rates and petroleum product sales were reduced through the second quarter of 2020, but saw some improvement in product demands in the second half of the year.

The length and severity of COVID-19

impacts to demand and the current business environment are highly uncertain, with the future supply and demand patterns inherently difficult to predict.

In the second quarter of 2020, Canadian federal and provincial governments introduced plans and programs to support business and economic activities in response to the disruptive impacts from the COVID-19

The Government of Canada implemented the Canada Emergency Wage Subsidy (CEWS) as part of its COVID-19

Economic Response Plan, and has extended the CEWS until June 2021.

The company received wage subsidies under this program and, if eligible, intends to continue to apply for these wage subsidies.

Additionally, in the fourth quarter, the Alberta government enacted an accelerated reduction in the corporate income tax rate to eight percent beginning July 1, 2020, compared with a previously legislated reduction to eight percent beginning January 1, 2022.

The corporate income tax rate change did not have a significant impact on the company’s financial statements.

The company has taken steps, in line with federal and provincial guidelines and restrictions, to limit the spread of COVID-19

among employees, contractors and the broader community, while also maintaining operations to ensure reliable supply of products to customers as a provider of essential services.

The company maintains robust business continuity plans, which have been activated to minimize the impact of COVID-19

on workforce productivity.

millions of Canadian dollars

Net income (loss)

Net loss in 2020 was $1,857 million, or $2.53 per share on a diluted basis, compared to net income of $2,200 million or $2.88 per share in 2019.

Current year results reflect a non-cash

impairment charge of $1,171 million after-tax,

related to the company’s decision to no longer develop a significant portion of its unconventional portfolio, and a favourable impact of about $115 million after-tax,

associated with the Canada Emergency Wage Subsidy (CEWS), which includes Imperial’s proportionate share of a joint venture.

Full-year 2019 results included a favourable impact of $662 million associated with the Alberta corporate income tax rate decrease.

Net income in 2019 was $2,200 million, or $2.88 per share on a diluted basis, compared to net income of $2,314 million or $2.86 per share in 2018.

2 unchanged sentences

On June 28, 2019, the Alberta government enacted a 4 percent decrease in the provincial tax rate, from 12 percent to 8 percent by 2022.

Net income in 2018 was $2,314 million, or $2.86 per share on a diluted basis, an increase of $1,824 million compared to net income of $490 million or $0.58 per share in 2017.

The prior year results included upstream non-cash

impairment charges of $566 million.

millions of Canadian dollars

Net income (loss)

Upstream recorded a net loss of $2,318 million for the year, compared to net income of $1,348 million in 2019.

Results were negatively impacted by lower realizations of about $2,620 million, a non-cash

impairment charge of $1,171 million, related to the company’s decision to no longer develop a significant portion of its unconventional portfolio, absence of a favourable impact of $689 million associated with the Alberta corporate income tax rate decrease in 2019, and lower volumes of about $130 million.

These items were partially offset by lower royalties of about $540 million, lower operating expenses of about $250 million, favourable foreign exchange impacts of about $100 million, and about $70 million associated with the CEWS received by the company which includes Imperial’s proportionate share of a joint venture.

Upstream net income was $1,348 million for the year, reflecting the favourable impact associated with the decreased Alberta corporate income tax rate of $689 million.

2 unchanged sentences

Results were negatively impacted by higher royalties of about $230 million, higher operating expenses of about $190 million and lower Cold Lake volumes of about $120 million.

Upstream recorded a net loss of $138 million in 2018, compared to a net loss of $706 million in 2017.

Improved results reflect the absence of impairment charges of $566 million, higher Kearl volumes of about $210 million, lower royalties of about $80 million and favourable foreign exchange effects of about $50 million.

These items were partially offset by higher operating costs of about $200 million, lower Cold Lake volumes of about $170 million and lower Canadian crude oil realizations of about $60 million.

Average realizations

7 unchanged sentences

WCS averaged US$26.87 per barrel and US$44.29 per barrel for the same periods.

The WTI / WCS differential narrowed to approximately US$12 per barrel in 2020, from around US$13 per barrel in 2019.

The Canadian dollar averaged US$0.75 in 2020, essentially unchanged from 2019.

Imperial’s average Canadian dollar realizations for bitumen decreased in 2020 primarily due to a decrease in WCS.

Bitumen realizations averaged $25.69 per barrel, compared to $50.02 per barrel in 2019.

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

Synthetic crude realizations averaged $49.76 per barrel, compared to $74.47 per barrel in 2019.

WTI averaged US$57.03 per barrel in 2019, down from US$65.03 per barrel in 2018.

WCS averaged US$44.29 per barrel and US$38.71 per barrel for the same periods.

The WTI / WCS differential narrowed to average approximately US$13 per barrel in 2019, from around US$26 per barrel in 2018.

4 unchanged sentences

Synthetic crude realizations averaged $74.47 per barrel, up from $70.66 per barrel in 2018.

WTI averaged US$65.03 per barrel in 2018, up from US$50.85 per barrel in 2017.

WCS averaged US$38.71 per barrel and US$38.95 per barrel for the same periods.

The WTI / WCS differential widened to average approximately US$26 per barrel in 2018, from around US$12 per barrel in 2017.

The Canadian dollar averaged US$0.77 in 2018, unchanged from 2017.

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

Bitumen realizations averaged $37.56 per barrel in 2018, a decrease of $1.57 per barrel from 2017.

The company’s average Canadian dollar realizations for synthetic crude increased by $3.08 per barrel to average $70.66 per barrel in 2018, however the widening of the western Canadian light crude differential relative to WTI during the fourth quarter of 2018 negatively impacted synthetic crude realizations.

Crude oil and natural gas liquids (NGL) - production and sales

19 unchanged sentences

Includes sales of the company’s share of net production and excludes amounts used for internal consumption.

Total gross production of Kearl bitumen averaged 222,000 barrels per day in 2020 (158,000 barrels Imperial’s share), the highest annual production in the asset’s history, up from 205,000 barrels per day (145,000 barrels Imperial’s share) in 2019.

Improved production was mainly due to the addition of supplemental crushing facilities in 2020, partially offset by the balancing of near term production with demand through the advancement and extension of planned turnaround activities.

Gross production of Cold Lake bitumen averaged 132,000 barrels per day in 2020, compared to 140,000 barrels per day in 2019.

During 2020, the company’s share of gross production from Syncrude averaged 69,000 barrels per day, compared to 73,000 barrels per day in 2019.

Total gross production of Kearl bitumen averaged 205,000 barrels per day in 2019 (145,000 barrels Imperial’s share), compared to 206,000 barrels per day (146,000 barrels Imperial’s share) in 2018.

2 unchanged sentences

Higher production was mainly due to the absence of production impacts from the 2018 power disruption.

Gross production of Kearl bitumen averaged 206,000 barrels per day in 2018 (146,000 barrels Imperial’s share) up from 178,000 barrels per day (126,000 barrels Imperial’s share) in 2017.

Increased 2018 production reflects improved operational reliability associated with ore preparation, enhanced piping durability and feed management.

Gross production of Cold Lake bitumen averaged 147,000 barrels per day in 2018, compared to 162,000 barrels per day in 2017.

Lower volumes were primarily due to production timing associated with steam management and planned maintenance.

During 2018, the company’s share of gross production from Syncrude averaged 62,000 barrels per day, unchanged from 2017.

millions of Canadian dollars

1 unchanged sentence

Downstream net income was $553 million, compared to $961 million in 2019.

Results were negatively impacted by lower margins of about $710 million, and lower sales volumes of about $290 million.

These items were offset by lower operating expenses of about $190 million, lower turnaround impacts of about $190 million primarily related to reduced turnaround activity in the current year and improved reliability of about $180 million, primarily due to the absence of the Sarnia fractionation tower incident which occurred in April 2019.

Downstream net income was $961 million, compared to $2,366 million in 2018.

Earnings were negatively impacted by lower margins of about $1,130 million, reliability events of about $150 million, including the fractionation tower incident at Sarnia, higher net planned turnaround impacts of about $140 million, and lower sales volumes of about $130 million.

These factors were partially offset by favourable foreign exchange impacts of about $90 million.

Downstream net income was $2,366 million, an increase of $1,326 million versus the prior year.

Higher earnings primarily reflect stronger margins of about $1,530 million, partially offset by the absence of a $151 million gain on the sale of a surplus property in 2017.

Refinery utilization

12 unchanged sentences

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.

Petroleum product sales were 421,000 barrels per day in 2020, compared to 475,000 barrels per day in 2019.

Lower petroleum product sales were primarily driven by reduced demand due to the COVID-19

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.

1 unchanged sentence

Lower petroleum product sales were mainly due to lower refinery throughput.

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.

Petroleum product sales were 504,000 barrels per day in 2018, up from 492,000 barrels per day in 2017.

Sales growth continues to be driven by optimization across the full downstream value chain, and the expansion of Imperial’s logistics capabilities.

millions of Canadian dollars

4 unchanged sentences

Total petrochemical sales

Chemical net income was $78 million in 2020, compared to $108 million in 2019, primarily reflecting lower margins.

Chemical net income was $108 million in 2019, compared to $275 million in 2018, primarily due to lower margins.

Chemical net income was $275 million, an increase of $40 million versus the prior year, reflecting higher margins and volumes.

Corporate and other

2 unchanged sentences

Corporate and other expenses were $170 million in 2020, compared to $217 million in 2019.

For 2018, Corporate and other expenses were $189 million, compared to $79 million in 2017.

As part of the implementation of the Financial Accounting Standards Board’s update, Compensation – Retirement Benefits (Topic 715):

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

, beginning January 1, 2018, Corporate and other includes all non-service

pension and postretirement benefit expenses.

Prior to 2018, the majority of these costs were allocated to the operating segments.

Corporate and other expenses were $217 million in 2019, compared to $189 million in 2018.

Liquidity and capital resources

17 unchanged sentences

The most recent valuation of the company’s registered retirement plans was completed as at December 31, 2019.

A valuation of the company’s registered retirement plans as at December 31, 2019 is expected to be completed in 2020.

The company contributed $195 million to the registered retirement plans in 2020.

1 unchanged sentence

Cash flow from operating activities

Cash flow generated from operating activities was $798 million in 2020, compared to $4,429 million in 2019, primarily reflecting lower realizations in the Upstream and unfavourable working capital impacts.

Cash flow generated from operating activities was $4,429 million in 2019, up from $3,922 million in 2018, primarily reflecting favourable working capital effects, partially offset by lower earnings excluding the impact associated with the Alberta corporate income tax rate decrease.

Cash flow generated from operating activities was $3,922 million in 2018, up from $2,763 million in 2017, primarily reflecting higher earnings, partially offset by unfavourable working capital effects.

Cash flow from investing activities

Investing activities used net cash of $802 million in 2020, compared to $1,704 million used in 2019, primarily reflecting lower additions to property, plant and equipment.

Investing activities used net cash of $1,704 million in 2019, compared with $1,559 million used in 2018, primarily reflecting higher additions to property, plant and equipment.

Investing activities used net cash of $1,559 million in 2018, compared with $781 million used in 2017, reflecting higher additions to property, plant and equipment, and lower proceeds from asset sales.

Cash flow from financing activities

Cash used in financing activities was $943 million in 2020, compared to $1,995 million used in 2019.

At the end of 2020, total debt outstanding was $5,184 million, compared with $5,190 million at the end of 2019.

In response to market conditions, during the second quarter of 2020, the company entered into a $500 million committed short-term line of credit to May 2021, and a $300 million committed short-term line of credit to June 2021.

These facilities were in addition to existing credit facilities of $500 million.

The company has not drawn on these facilities.

In November 2020, the company extended the maturity date of one of its existing $250 million committed short-term line of credit to November 2021.

The company has not drawn on the facility.

The maturity date of the other existing $250 million credit facility remains unchanged at November 2021.

The company has not drawn on the facility.

During 2020, the company, under its share purchase program, purchased about 9.8 million shares for $274 million.

In response to market conditions, substantial purchases under the share purchase program were suspended on April 1, 2020.

Dividends paid in 2020 were $649 million.

The per share dividend paid in 2020 was $0.88, up from $0.82 in 2019.

Cash used in financing activities was $1,995 million in 2019, compared with $2,570 million used in 2018.

13 unchanged sentences

The per share dividend paid in 2019 was $0.82, up from $0.70 in 2018.

Cash used in financing activities was $2,570 million in 2018, compared with $1,178 million used in 2017.

At the end of 2018, total debt outstanding was $5,180 million, compared with $5,207 million at the end of 2017.

In November 2018, the company extended the maturity date of its existing $250 million committed long-term line of credit to November 2020.

The company has not drawn on the facility.

In December 2018, the company extended the maturity date of its existing $250 million committed short-term line of credit to December 2019.

The company has not drawn on the facility.

During 2018, the company, under its share purchase program, purchased about 48.7 million shares for $1,971 million, including shares purchased from Exxon Mobil Corporation.

Dividends paid in 2018 were $572 million.

The per share dividend paid in 2018 was $0.70, up from $0.62 in 2017.

Financial strength

48 unchanged sentences

Corporate and other

Exploration expenses included.

Total capital and exploration expenditures were $1,814 million in 2019, an increase of $387 million from 2018.

(a) Exploration expenses included.

Total capital and exploration expenditures were $874 million in 2020, a decrease of $940 million from 2019.

In response to the challenges presented by the COVID-19

pandemic and decreases in commodity prices, in the first quarter of 2020 the company provided an updated capital outlook of $1.1 billion to $1.2 billion (from original guidance of $1.6 billion to $1.7 billion).

In the third quarter of 2020, the company further updated this capital outlook to about $900 million.

For the Upstream segment, capital and exploration expenditures were $561 million in 2020, compared with $1,248 million in 2019.

Investments were primarily related to growth activities including investment in supplemental crushing capacity at Kearl, further development of unconventional assets, and expenditures on the Aspen in-situ

Investments were primarily related to sustaining activity in support of the company’s in-situ

and oil sands assets.

For the Downstream segment, capital expenditures were $251 million in 2020, compared with $484 million in 2019.

Investments were primarily in support of enhancing the company’s distribution network as well as refinery projects to improve reliability, feedstock flexibility, energy efficiency and environmental performance.

Total capital and exploration expenditures are expected to range between $1.6 billion to $1.7 billion in 2020.

Investments were primarily for enhancing the company’s distribution network as well as refinery projects to improve reliability, feedstock flexibility, energy efficiency and environmental performance.

Total capital and exploration expenditures are expected to be approximately $1.2 billion in 2021.

Actual spending could vary depending on the progress of individual projects.

17 unchanged sentences

Imperial is exposed to changes in interest rates, primarily on its debt which carries floating interest rates.

The impact of a quarter percent change in interest rates affecting Imperial’s debt would not be material to earnings, cash flow or fair value.

The impact of a quarter percent change in interest rates affecting Imperial’s debt would not be material to earnings or cash flow.

Imperial has access to significant sources of long-term and short-term liquidity.

12 unchanged sentences

One cent decrease (increase) in the value of the Canadian dollar versus the U.S.

Each sensitivity calculation shows the impact on net income resulting from a change in one factor, after tax and royalties and holding all other factors constant.

Each sensitivity calculation shows the impact on net income resulting from a change in one factor, after-tax

and royalties and holding all other factors constant.

These sensitivities have been updated to reflect current market conditions.

3 unchanged sentences

The demand for crude oil, natural gas, petroleum products and petrochemical products are generally linked closely with economic growth.

The occurrence of recessions or other periods of low or negative economic growth will typically have a direct adverse impact on the company’s financial results.

The occurrence of recessions or other periods of low or negative economic growth, such as impacts due to the COVID-19

pandemic, will typically have a direct adverse impact on the company’s financial results.

Although price levels of crude oil and natural gas may rise and fall significantly over the short to medium-term due to global economic conditions, political events, decisions by OPEC, governments and other factors, industry economics over the long-term will continue to be driven by market supply and demand.

9 unchanged sentences

The company has an active asset management program in which underperforming assets are either improved to acceptable levels or considered for divestment.

The asset management program includes a disciplined, regular review to ensure that all assets are contributing to the company’s strategic objectives.

The asset management program includes a disciplined, regular review to ensure that assets are contributing to the company’s strategic objectives.

Risk management

14 unchanged sentences

They are an integral part of investment decisions about oil and gas properties such as whether development should proceed.

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.

The estimation of proved reserves is controlled by the company through long-standing approval guidelines.

13 unchanged sentences

The percentage of proved developed reserves was 75 percent of total proved reserves at year-end

2019, unchanged from 2018.

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 policy, consumer preferences and significant changes in long-term oil and natural gas prices.

2020, a reduction from 89 percent in 2019.

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, royalty frameworks and significant changes in oil and gas price levels.

Unproved reserves are quantities of oil and natural gas with less than reasonable certainty of recoverability and include probable reserves.

4 unchanged sentences

or changes in the average of first-day-of-the-month

prices and year-end

costs that are used in the estimation of reserves.

oil and natural gas prices and / or costs that are used in the estimation of reserves.

Revisions can also result from significant changes in either development strategy or production equipment / facility capacity.

7 unchanged sentences

Changes to liquids and natural gas proved reserves were the result of updated development plans at the Montney and Duvernay unconventional assets and the divestment of conventional properties.

In 2020, downward revisions of proved bitumen reserves were a result of low prices.

The 2.2 billion barrels of bitumen at Kearl and 0.6 billion barrels of bitumen at Cold Lake no longer qualified as proved reserves under the U.S.

Securities and Exchange Commission definition of proved reserves.

Downward revisions to proved synthetic oil reserves were a result of lower prices, offset by the addition of proved undeveloped reserves associated with future development at Syncrude.

Changes to the liquids and natural gas proved reserves were the result of updated development plans at the Montney and Duvernay unconventional assets and the divestment of conventional properties.

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

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

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.

2 unchanged sentences

depreciation is a critical accounting estimate that measures the depreciation of upstream assets.

Oil and natural gas reserve quantities are used as the basis to calculate unit-of-production

Oil and natural gas reserve volumes are used as the basis to calculate unit-of-production

depreciation rates for most upstream assets.

9 unchanged sentences

This approach was applied in 2017 and 2018, with the corresponding effect on depreciation expense being immaterial when compared to prior periods.

In 2019 and 2020, all properties have sufficient reserves at current SEC prices which will enable equitable allocation of cost over the economic lives of the Upstream assets.

The effect of this approach compared to prior periods is immaterial.

This approach will also be applied in 2021 and the effect of this approach is anticipated to be immaterial compared to 2020.

For 2019 and 2020, all properties had sufficient reserves at their relevant SEC prices which enabled equitable allocation of cost over the economic lives of the Upstream assets.

Impact of oil and gas reserves and prices and margins on testing for impairment

17 unchanged sentences

During the lifespan of these major assets, the company expects that oil and gas prices will experience significant volatility, and consequently these assets will experience periods of higher earnings and periods of lower earnings, or even losses.

In assessing whether the events or changes in circumstances indicate the carrying value of an asset may not be recoverable, the company considers recent periods of operating losses in the context of its longer-term view of prices.

In assessing whether events or changes in circumstances indicate the carrying value of an asset may not be recoverable, the company considers recent periods of operating losses in the context of its longer-term view of prices.

While near-term prices are subject to wide fluctuations, longer-term price views are more stable and meaningful for purposes of assessing future cash flows.

When the industry experiences a prolonged and deep reduction in commodity prices, the market supply and demand conditions may result in changes to the company’s long-term price or margin assumptions it uses for its capital investment decisions.

To the extent those changes result in a significant reduction to its long-term oil prices or natural gas prices or margin ranges, the company may consider that situation, in conjunction with other events or changes in circumstances such as a history of operating losses, as an indicator of potential impairment for certain assets.

When the industry experiences a prolonged and deep reduction in commodity prices, the market supply and demand conditions may result in changes to the company’s price or margin assumptions it uses for its capital investment decisions.

To the extent those changes result in a significant reduction to its oil prices or natural gas prices or margin ranges, the company may consider that situation, in conjunction with other events or changes in circumstances such as a history of operating losses, as an indicator of potential impairment for certain assets.

In the upstream, the standardized measure of discounted cash flows included in the “Supplemental information on oil and gas exploration and production activities” is required to use prices based on the yearly average of first-day-of-the-month

These prices represent discrete points in time and could be higher or lower than the company’s long-term price assumptions which are used for impairment assessments.

These prices represent discrete points in time and could be higher or lower than the company’s price assumptions which are used for impairment assessments.

The company believes the standardized measure does not provide a reliable estimate of the expected future cash flows to be obtained from the development and production of its oil and gas properties or of the value of its oil and gas reserves and therefore does not consider it relevant in determining whether events or changes in circumstances indicate the need for an impairment assessment.

The company has a robust process to monitor for indicators of potential impairment across its asset groups throughout the year.

This process is aligned with the requirements of ASC 360

This process is aligned with the requirements of ASC 360 and ASC 932

, and relies on the company’s planning and budgeting cycle.

1 unchanged sentence

In performing this assessment, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets.

Cash flows used in recoverability assessments are based on the company’s

assumptions which are developed in the annual planning and budgeting process, and are consistent with the criteria management uses to evaluate investment opportunities.

Cash flows used in recoverability assessments are based on the company’s assumptions which are developed in the annual planning and budgeting process, and are consistent with the criteria management uses to evaluate investment opportunities.

These evaluations make use of the company’s assumptions of future capital allocations, crude oil and natural gas commodity prices, including price differentials, refining and chemical margins, volumes, development and operating costs, foreign currency exchange rates and inflation rates.

4 unchanged sentences

Impairments are measured by the amount by which the carrying value exceeds fair value.

Fair value is based on market prices if an active market exists for the asset group or discounted cash flows using a discount rate commensurate with the risk.

Significant unproved properties are assessed for impairment individually, and valuation allowances against the capitalized costs would be recorded based on the estimated economic chance of success and the length of time that the company expects to hold the properties.

The assessment of fair value may be based on market prices if an active market exists for the asset group or may require the use of Level 3 inputs and assumptions that are based upon the views of a likely market participant.

The principal parameters used to establish fair value can include estimates of acreage values and flowing production metrics from comparable market transactions, market-based estimates of historical cash flow multiples, and discounted cash flows.

Inputs and assumptions used in discounted cash flow models include estimates of future production volumes, commodity prices which are consistent with the average of third-party industry experts and government agencies, drilling and development costs, and discount rates.

Significant unproved properties are assessed for impairment individually, and valuation allowances against the capitalized costs would be recorded based on the company’s future development plans, the estimated economic chance of success and the length of time that the company expects to hold the properties.

Properties that are not individually significant are aggregated by groups and amortized based on development risk and average holding period.

In 2020, events or changes in circumstances indicated that the carrying amount of certain of the company’s long-lived assets may not be recoverable.

Those situations primarily related to the annual review and approval of the company’s business and strategic plan.

As part of this process the company assessed its full portfolio of assets which included its unconventional assets.

Subsequently the company announced its decision to not further develop a significant portion of its unconventional portfolio in Alberta which resulted in a non-cash, after-tax impairment charge of $1,171 million in the company’s 2020 Upstream results, thereby reducing the carrying value of those assets to fair value.

For certain other upstream properties, the undiscounted cash flows were compared to the carrying values and no other adjustments were necessary.

Factors which could put further assets at risk of impairment in the future include reductions in the company’s price outlooks, changes in the allocation of capital, and operating cost increases which exceed the pace of efficiencies or the pace of oil and natural gas price increases.

However, due to the inherent difficulty in predicting future commodity prices, and the relationship between industry prices and costs, it is not practicable to reasonably estimate the existence or range of any potential future impairment charges related to the company’s long-lived assets.

Supplemental information regarding oil and gas results of operations, capitalized costs and reserves is provided following the notes to consolidated financial statements.

7 unchanged sentences

If different assumptions are used, the obligation and expense could increase or decrease as a result.

As an indication of the company’s potential exposure to changes in the critical assumptions such as the expected rate of return on plan assets and the discount rate for measuring the benefits obligation, a reduction of 1 percent in the discount rate would increase the plan benefits obligation by approximately $1,820 million.

Similarly, a reduction of 1 percent in the long-term rate of return on plan assets would increase the annual pension expense by approximately $85 million before tax.

7 unchanged sentences

As payments to settle the obligations occur on an ongoing basis and will continue over the lives of the operating assets, which can exceed 25 years, the discount rate will be adjusted only as appropriate to reflect long-term changes in market rates and outlook.

For 2019, the obligations were discounted at 6 percent and the accretion expense was $80 million, before tax, which was significantly less than 1 percent of total expenses in the year.

For 2020, the obligations were discounted at 6 percent and the accretion expense was $82 million, before-tax,

which was significantly less than 1 percent of total expenses in the year.

There would be no material impact on the company’s reported financial results if a different discount rate had been used.

20 unchanged sentences

The company’s unrecognized tax benefits and a description of open tax years are summarized in note 4 to the consolidated financial statements starting on page 88.

Recently issued accounting standards

Effective January 1, 2020, Imperial adopted the Financial Accounting Standards Board’s update, Financial Instruments - Credit Losses (Topic 326)

, as amended.

The standard requires a valuation allowance for credit losses be recognized for certain financial assets that reflects the current expected credit loss over the asset’s contractual life.

The valuation allowance considers the risk of loss, even if remote and considers past events, current conditions and expectations of the future.

The January 1, 2020 estimated cumulative effect adjustment to “Earnings reinvested” related to implementation of the Credit Losses standard is expected to be de minimis.

Management’s report on internal control over financial reporting

42 unchanged sentences

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The impact of proved oil and natural gas reserves on upstream property, plant and equipment, net

As described in Notes 1 and 3 to the consolidated financial statements, the Company’s upstream property, plant and equipment (PP&E) balance, net was $31.2 billion as of December 31, 2019, and the related depreciation, depletion and amortization (DD&A) expense for the year ended December 31, 2019 was $1.4 billion.

As described in Notes 1 and 3 to the consolidated financial statements, the Company’s upstream property, plant and equipment (PP&E), net balance was $28,907 million as of December 31, 2020, and the related depreciation and depletion expense for the year ended December 31, 2020 was $3,084 million.

Management uses the successful efforts method to account for its exploration and production activities.

Costs incurred to purchase, lease, or otherwise acquire a property (whether unproved or proved) are capitalized when incurred.

As disclosed by management, proved oil and natural gas reserves quantities are used as the basis to calculate unit-of-production depreciation rates for most upstream assets.

The estimation of proved oil and natural gas reserves is an ongoing process based on technical evaluations, commercial and market assessments, and detailed analysis of well information such as flow rates and reservoir pressures, and development and production costs, among other factors.

As management has disclosed, reserves changes are made within a well-established, disciplined process driven by qualified geoscience and engineering professionals, assisted by the Reserves Management Group (together, management’s specialists).

The principal consideration for our determination that performing procedures relating to the impact of proved oil and natural gas reserves on upstream PP&E, net is a critical audit matter is that there was significant judgment by management, including the use of management’s specialists, when developing the estimates of proved oil and natural gas reserves.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating evidence obtained related to the significant assumptions used by management, including development costs and production volumes.

As disclosed by management, proved oil and natural gas reserve volumes are used as the basis to calculate unit-of-production depreciation rates for most upstream assets.

The estimation of proved oil and natural gas reserve volumes is an ongoing process based on 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.

As further disclosed by management, reserves changes are made within a well-established, disciplined process driven by qualified geoscience and engineering professionals, assisted by the reserves management group (together management’s specialists).

The principal considerations for our determination that performing procedures relating to the impact of proved oil and natural gas reserves on upstream PP&E, net is a critical audit matter are (i) the significant judgment by management, including the use of management’s specialists, when developing the estimates of proved oil and natural gas reserve volumes, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the audit evidence related to the data, methods, and assumptions used by management and its specialists in developing the estimates of proved oil and natural gas reserve volumes, and the assumptions related to development and production costs, as applicable.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s estimates of proved oil and natural gas reserves and the calculation of DD&A expense.

These procedures also included, among others (i) testing the completeness, accuracy, and relevance of underlying data used in developing management’s estimates, (ii) evaluating the significant assumptions used by management in developing these estimates, including development costs and production volumes, and (iii) testing the unit-of-production rates used to calculate DD&A expense.

The work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the estimates of proved oil and natural gas reserves.

As a basis for using this work, the specialists’ qualifications and objectivity were understood, as well as the methods and assumptions used by the specialists.

The procedures performed also included tests of data used by management’s specialists and an evaluation of the specialists’ findings.

Evaluating the significant assumptions relating to the estimates of proved oil and natural gas reserves also involved obtaining evidence to support the reasonableness of the assumptions, including whether the assumptions used were reasonable considering the past performance of the Company, and whether they were consistent with evidence obtained in other areas of the audit.

/s/ PricewaterhouseCoopers LLP

These procedures included testing the effectiveness of controls relating to management’s estimates of proved oil and natural gas reserve volumes.

The work of management’s specialists was used in performing the procedures to evaluate the reasonableness of estimates of proved oil and natural gas reserve volumes.

As a basis for using this work, management’s specialists’ qualifications were understood and the Company’s relationship with management’s specialists was assessed.

The procedures performed also included evaluation of the methods and assumptions used by management’s specialists, tests of the data used by management’s specialists, and an evaluation of management’s specialists’ findings.

These procedures also included, among others, testing the completeness and accuracy of the data related to future development and production costs.

Additionally, these procedures included evaluating whether the assumptions related to development and production costs were reasonable considering the past performance of the Company and its business and strategic plan, as applicable.

Impairment assessment of certain upstream property, plant and equipment, net

As described in Notes 1 and 3 to the consolidated financial statements, the Company’s upstream property, plant and equipment (PP&E), net balance was $28,907 million as of December 31, 2020.

If events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, management estimates the future undiscounted cash flows of the affected properties to judge the recoverability of carrying amounts.

In performing this assessment, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of cash flows of other groups of assets.

These estimates of the future undiscounted cash flows make use of management’s assumptions of future capital allocations, crude oil and natural gas commodity prices including price differentials, upstream production volumes, development and operating costs, foreign currency exchange rates and inflation rates.

Management’s estimate of upstream production volumes used for undiscounted cash flows makes use of proved reserve quantities and may include risk-adjusted unproved reserve quantities.

As further disclosed by management, estimates of upstream production volumes are made within a well-established, disciplined process driven by qualified geoscience and engineering professionals, assisted by the reserves management group (together management’s specialists).

An asset group is impaired if its estimated undiscounted cash flows are less than the asset group’s carrying value.

Impairments are measured by the amount by which the carrying value exceeds fair value.

The principal considerations for our determination that performing procedures relating to the impairment assessment of certain upstream PP&E, net is a critical audit matter are (i) the significant judgment by management, including the use of management’s specialists, when developing the estimates of future undiscounted cash flows, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to crude oil and natural gas commodity prices including price differentials, upstream production volumes, and development costs, as applicable.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s upstream PP&E, net impairment assessment over proved properties.

These procedures also included, among others (i) testing management’s process for assessing the recoverability of carrying amounts of upstream PP&E, net;

(ii) evaluating the appropriateness of the undiscounted cash flow models;

(iii) testing the completeness and accuracy of underlying data used in the models;

and (iv) evaluating the reasonableness of significant assumptions used by management related to crude oil and natural gas commodity prices including price differentials, upstream production volumes, and development costs.

Evaluating the reasonableness of management’s assumptions related to future crude oil and natural gas commodity prices including price differentials involved comparing the assumption against observable market data.

Evaluating development costs involved evaluating the reasonableness of the assumptions as compared to the past performance of the Company and its business and strategic plan.

The work of management’s specialists was used in performing the procedures to evaluate the reasonableness of upstream production volumes.

As a basis for using this work, management’s specialists’ qualifications were understood and the Company’s relationship with management’s specialists was assessed.

PricewaterhouseCoopers LLP

Chartered Professional Accountants

8 unchanged sentences

Total revenues and other income

Purchases of crude oil and products

Production and manufacturing

Selling and general

Exploration (note 16)

Purchases of crude oil and products (b)

Production and manufacturing (c) (note 12)

Selling and general (c)

Federal excise tax and fuel charge

Depreciation and depletion

Non-service pension and postretirement benefit

Depreciation and depletion (includes impairments) (note 3, 12)

pension and postretirement benefit

Financing (d) (note 13)

Total expenses

15 unchanged sentences

Other comprehensive income (loss), net of income taxes

Postretirement benefits liability adjustment

(excluding amortization)

Amortization of postretirement benefits liability adjustment

included in net periodic benefit costs

Postretirement benefits liability adjustment (excluding amortization)

Amortization of postretirement benefits liability adjustment included in net periodic benefit costs

Total other comprehensive income (loss)

5 unchanged sentences

Current assets

Accounts receivable, less estimated doubtful accounts

Inventories of crude oil and products

Accounts receivable - net (a) (note 2)

Inventories of crude oil and products (note 12)

Materials, supplies and prepaid expenses

Total current assets

Investments and long-term receivables

Investments and long-term receivables (b) (note 2)

Property, plant and equipment,

less accumulated depreciation and depletion

Goodwill (note 12)

Other assets, including intangibles - net

5 unchanged sentences

Long-term debt (d) (note 15)

Other long-term obligations (e) (note 6)

Other long-term obligations (note 6)

Deferred income tax liabilities (note 4)

2 unchanged sentences

Shareholders’ equity

Common shares at stated value

(f) (note 11)

Common shares at stated value (e) (note 11)

Earnings reinvested

2 unchanged sentences

Total liabilities and shareholders’ equity

Accounts receivable, less estimated doubtful accounts included net amounts receivable from related parties of $ 1,007

million (2018 – $ 666

million), (note 17).

Investments and long-term receivables included amounts from related parties of $ 296

million (2018 – $ 146

million), (note 17).

Notes and loans payable included amounts to related parties of $ 111

million (2018 – $ 75

million), (note 17).

Long-term debt included amounts to related parties of $ 4,447

million (2018 – $ 4,447

million), (note 17).

Other long-term obligations included amounts to related parties of $ 0

million (2018 – $ 15

million), (note 17).

Number of common shares authorized and outstanding were 1,100

million and 744

million, respectively (2018 – 1,100

million and 783

million, respectively), (note 11).

Accounts receivable - net included net amounts receivable from related parties of $ 384 million (2019 – $ 1,007 million), (note 17).

Investments and long-term receivables included amounts from related parties of $ 313 million (2019 – $ 296 million), (note 17).

Notes and loans payable included amounts to related parties of $ 111 million (2019 – $ 111 million), (note 17).

Long-term debt included amounts to related parties of $ 4,447 million (2019 – $ 4,447 million), (note 17).

Number of common shares authorized and outstanding were 1,100 million and 734 million, respectively (2019 – 1,100 million and 744 million, respectively), (note 11).

The information in the notes to consolidated financial statements is an integral part of these statements.

11 unchanged sentences

At beginning of year

Issued under the stock option plan

Share purchases at stated value

5 unchanged sentences

Dividends declared

Cumulative effect of accounting change (note 2)

At end of year

12 unchanged sentences

Adjustments for non-cash

Depreciation and depletion

Impairment of intangible assets

Depreciation and depletion (includes impairments) (note 3)

Impairment of intangible assets (note 12)

(Gain) loss on asset sales (note 9)

5 unchanged sentences

Accounts payable and accrued liabilities

All other items - net (a)

All other items - net (b)

Cash flows from (used in) operating activities

Investing activities

Additions to property, plant and equipment

Additions to property, plant and equipmen t

Proceeds from asset sales (note 9)

Additional investments

Loan to equity company

Loans to equity companies - net

Cash flows from (used in) investing activities

Financing activities

Short-term debt - net

Reduction in finance lease obligations

Short-term debt - net (note 13)

Reduction in finance lease obligations (note 15)

Dividends paid

Common shares purchased

Common shares purchased (note 11)

Cash flows from (used in) financing activities

2 unchanged sentences

Cash at end of year

The impact of carbon emission programs are included in A

dditions to property, plant and equipment, and A

ll other items - net.

Cash is composed of cash in bank and cash equivalents at cost.

(a) Cash is composed of cash in bank and cash equivalents at cost.

Cash equivalents are all highly liquid securities with maturity of three months or less when purchased.

Included contributions to registered pension plans.

(b) Included contributions to registered pension plans.

Income taxes (paid) refunded.

Interest (paid), net of capitalization.

In 2019, the company removed $ 570

million of assets and corresponding liabilities associated with the Government of Ontario’s revocation of its cap and trade legislation.

In 2019, the company removed $ 570 million of assets and corresponding liabilities associated with the Government of Ontario’s revocation of its cap and trade legislation.

The impact of this removal was not reflected in “Accounts payable and accrued liabilities” and “All other items - net” lines on the Consolidated statement of cash flows as it was not a cash transaction.

1 unchanged sentence

Notes to consolidated financial statements

The accompanying consolidated financial statements and the supporting and supplemental material are the responsibility of the management of Imperial Oil Limited.

The accompanying consolidated financial statements and the supporting a

nd supplemental material are the responsibility of the management of Imperial Oil Limited.

The company’s principal business is energy, involving the exploration for, and production of, crude oil and natural gas and manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals and a variety of specialty products.

10 unchanged sentences

Imperial Oil Resources Limited is the only significant subsidiary included in the consolidated financial statements and is wholly owned by Imperial Oil Limited.

The consolidated financial statements also include the company’s share of the undivided interest in certain upstream assets, liabilities, revenues and expenses, including its 25

percent interest in the Syncrude joint venture and its 70.96

percent interest in the Kearl joint venture.

The consolidated financial statements also include the company’s share of the undivided interest in certain upstream assets, liabilities, revenues and expenses, including its 70.96 percent interest in the Kearl joint venture and its 25 percent interest in the Syncrude joint venture.

Imperial generally sells crude oil, natural gas and petroleum and chemical products under short-term agreements at prevailing market prices.

12 unchanged sentences

Purchases and sales of inventory with the same counterparty that are entered into in contemplation of one another are combined and recorded as exchanges measured at the book value of the item sold.

“Revenues” and “Accounts receivable, less estimated doubtful accounts” primarily arise from contracts with customers.

“Revenues” and “Accounts receivable - net” primarily arise from contracts with customers.

Long-term receivables are primarily from non-customers.

5 unchanged sentences

Derivative instruments

use derivative instruments for trading purposes and

to offset exposures associated with commodity

currency exchange rates and inter est rates

that arise from existing assets, liabilities , firm commitments

and forecasted transactions.

Imperial may use derivative instruments for trading purposes and to offset exposures associated with commodity prices, currency exchange rates and interest rates that arise from existing assets, liabilities, firm commitments and forecasted transactions.

All derivative instruments, except those designated as normal purchase and normal sale, are recorded at fair value.

2 unchanged sentences

Recognition and classification of the gain or loss that results from adjusting a derivative to fair value depends on the purpose for the derivative.

The gains and losses resulting from changes in the fair value of derivatives are recorded under “Revenues” or “Purchases of crude oil and products” on the Consolidated statement of income.

The gains and losses resulting from changes in the fair value of derivatives are recorded under “Revenues” or “Purchases of crude oil and products” in the Consolidated statement of income.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

30 unchanged sentences

Other exploratory expenditures, including geophysical costs and annual lease rentals, are expensed as incurred.

Development costs, including costs of productive wells and development dry

holes, are capitalized.

Maintenance and repair costs, including planned major maintenance, are expensed as incurred.

Development costs, including costs of productive wells and development dry holes, are capitalized.

Maintenance and repair costs, including planned major maintenance, are expensed as i n

Improvements that increase or prolong the service life or capacity of an asset are capitalized.

5 unchanged sentences

Assets under construction are not depreciated or depleted.

Acquisition costs of proved properties are amortized using a unit-of-production

method, computed on the basis of total proved oil and gas reserves.

Capitalized exploratory drilling and development costs associated with productive depletable extractive properties are amortized using the unit-of-production

Acquisition costs of proved properties are amortized using a unit-of-production method, computed on the basis of total proved oil and natural gas reserve volumes.

exploratory drilling and development costs associated with productive depletable extractive properties are amortized using the unit-of-production

rates based on the amount of proved developed reserves of oil and gas that are estimated to be recoverable from existing facilities using current operating methods.

Under the unit-of-production

method, oil and gas volumes are considered produced once they have been measured through meters at custody transfer or sales transaction points at the outlet valve on the lease or field storage tank.

method, oil and natural gas volumes are considered produced once they have been measured through meters at custody transfer or sales transaction points at the outlet valve on the lease or field storage tank.

In the event that the unit-of-production

2 unchanged sentences

For example, certain assets used in the production of oil and natural gas have a shorter life than the reserves, and as such, the company uses straight-line depreciation to ensure the asset is fully depreciated by the end of its useful life.

Investments in mining heavy equipment and certain ore processing plant assets at oil sands mining properties are depreciated on a straight-line basis over a maximum of 15

years respectively.

Investments in mining heavy equipment and certain ore processing plant assets at oil sands mining properties are depreciated on a straight-line basis over a maximum of 15 years and 50 years respectively.

Depreciation of other plant and equipment is calculated using the straight-line method, based on the estimated service life of the asset.

2 unchanged sentences

method based on reserves determined at the most recent SEC price which results in a more meaningful quantity of proved reserves, appropriately adjusted for production and technical changes.

This approach was applied in 2017 and 2018, with the corresponding effect on depreciation expense immaterial when compared to the prior periods.

In 2019 and 2020, all properties have sufficient reserves at current SEC prices which will enable equitable allocation of cost over the economic lives of the Upstream assets.

The effect of this approach compared to prior periods is anticipated to be immaterial.

Investments in refinery

chemical process manufacturing equipment are generally depreciated on a straight-line basis over a 25

This approach was applied in 2017 and 2018, with the corresponding effect on depreciation expense being immaterial when compared to prior periods.

This approach will also be applied in 2021 and the effect of this approach is anticipated to be immaterial compared to 2020.

For 2019 and 2020, all properties had sufficient reserves at their relevant SEC prices which enabled equitable allocation of cost over the economic lives of the Upstream assets.

Investments in refinery and chemical process manufacturing equipment are generally depreciated on a straight-line basis over a 25 -year

Maintenance and repairs, including planned major maintenance, are expensed as incurred.

19 unchanged sentences

While near-term prices are subject to wide fluctuations, longer-term price views are more stable and meaningful for purposes of assessing future cash flows.

These prices represent discrete points in time and could be higher or lower than the company’s long-term price assumptions which are used for impairment assessments.

These prices represent discrete points in time and could be higher or lower than the company’s price assumptions which are used for impairment assessments.

2 unchanged sentences

, and relies on the company’s planning and budgeting cycle.

If events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, the company estimates the future undiscounted cash flows of the affected properties to judge the recoverability of carrying amounts.

events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, the company estimates the future undiscounted cash flows of the affected properties to judge the recoverability of carrying amounts.

In performing this assessment, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets.

Cash flows used in recoverability assessments are based on the company’s assumptions which are developed in the annual planning and budgeting

process, and are consistent with the criteria management uses to evaluate investment opportunities.

Volumes are based on projected field and facility production profiles, throughput, or sales.

Volumes are based on projected field and facility production profiles, thr o

ughput, or sales.

Management’s estimate of upstream production volumes used for projected cash flows makes use of proved reserve quantities and may include risk-adjusted unproved reserve quantities.

2 unchanged sentences

Impairments are measured by the amount by which the carrying value exceeds fair value.

Fair value is based on market prices if an active market exists for the asset group or discounted cash flows using a discount rate commensurate with the risk.

Properties that are not individually significant are aggregated by groups and amortized based on development risk and average holding period.

9 unchanged sentences

In general, leases are capitalized using the company’s incremental borrowing rate.

See note 14 to the consolidated financial statements on page 90 for further details.

See note 14 to the consolidated financial statements on page 102

for further details.

Goodwill and other intangible assets

13 unchanged sentences

Over time, the discounted asset retirement obligation amount will be accreted for the change in its present value, and the initial capitalized costs will be depreciated over the useful lives of the related assets.

No asset retirement obligations are set up for those manufacturing, distribution, marketing and office facilities with an indeterminate useful life.

No asset retirement obligations are set up for those manufacturing, distribution

, marketing and office facilities with an indeterminate useful life.

Asset retirement obligations for these facilities generally become firm at the time the facilities are permanently shut down and dismantled.

11 unchanged sentences

See note 8 to the consolidated financial statements on page 97 for further details.

Recently issued accounting standards

Effective January 1, 2020, Imperial adopted the Financial Accounting Standards Board’s update, Financial Instruments - Credit Losses

, as amended.

The standard requires a valuation allowance for credit losses be recognized for certain financial assets that reflects the current expected credit loss over the asset’s contractual life.

The valuation allowance considers the risk of loss, even if remote and considers past events, current conditions and expectations of the future.

The January 1, 2020 estimated cumulative effect adjustment to “Earnings reinvested” related to implementation of the Credit Losses standard is expected to be de minimis.

Accounting changes

Effective January 1, 2019, Imperial adopted the Financial Accounting Standards Board’s standard, Leases (Topic 842)

The standard requires all leases to be recorded on the balance sheet as a right of use asset and a lease liability.

The company used a transition method that applies the new lease standard at January 1, 2019.

Imperial applied a policy election to exclude short-term leases from balance sheet recognition and also elected certain practical expedients at adoption.

As permitted, the company did not reassess whether existing contracts are or contain leases, the lease classification for any existing leases, initial direct costs for any existing lease and whether existing land easements and rights of way, which were not previously accounted for as leases, are or contain a lease.

At adoption on January 1, 2019, an operating lease liability of $ 298 million was recorded and the operating lease right of use asset was $ 298 million.

There was no cumulative earnings effect adjustment.

Effective January 1, 2020, the company adopted the Financial Accounting Standards Board’s update, Financial Instruments – Credit Losses (Topic 326),

The standard requires a valuation allowance for credit losses be recognized for certain financial assets that reflects the current expected credit loss over the asset’s contractual life.

The valuation allowance considers the risk of loss, even if remote, and considers past events, current conditions and reasonable and suppo r

table forecasts.

The standard requires this expected loss methodology for trade receivables, certain other financial assets and off-balance-sheet

credit exposures.

The cumulative effect adjustment related to the adoption of this standard reduced “Earnings reinvested” in Shareholders’ equity by $ 2 million.

The company is exposed to credit losses primarily through sales of petroleum products, crude oil, natural gas liquids and natural gas, as well as loans to equity companies and joint venture receivables.

A counterparty’s ability to pay is assessed through a credit review process that considers payment terms, the counterparty’s established credit rating or the company’s assessment of the counterparty’s credit worthiness, contract terms, and other risks.

The company can require prepayment or collateral to mitigate certain credit risks.

The company groups financial assets into portfolios that share similar risk characteristics for purposes of determining the allowance for credit losses and assesses if a significant change in the risk of credit loss has occurred.

Among the quantitative and qualitative factors considered are historical financial data, current conditions, industry and country risk, current credit ratings and the quality of third-party guarantees secured from the counterparty.

Financial assets are written off in whole, or in part, when practical recovery efforts have been exhausted and no reasonable expectation of recovery exists.

Subsequent recoveries of amounts previously written off are recognized in earnings.

The company manages receivable portfolios using past due balances as a key credit quality indicator.

The company recognizes a credit allowance for off-balance-sheet

credit exposures as a liability on the balance sheet, separate from the allowance for credit losses related to recognized financial assets.

These exposures could include unfunded loans to equity companies and financial guarantees that cannot be cancelled unilaterally by the company.

At December 31, 2020, the company’s evaluation of financial assets under Financial Instruments – Credit Losses (Topic 326)

, as amended, included

1,437 million of accounts receivable, net of allowances of $

4 million, and investments and long-term receivables of $

The company has determined that, at this time,

no credit allowance is required for investments and long-term receivables, and for

off-balance-sheet

credit exposures.

Business segments

22 unchanged sentences

Investment and other income

(b) (note 16)

Purchases of crude oil and products

3 unchanged sentences

Depreciation and depletion

(b) (note 12)

pension and postretirement benefit

1 unchanged sentence

Income (loss) before income taxes

Income tax expense

Income tax expense (benefit)

Net income (loss)

9 unchanged sentences

Investment and other income

(b) (note 16)

Exploration (note 16)

Purchases of crude oil and products

3 unchanged sentences

Depreciation and depletion

(b) (note 12)

pension and postretirement benefit

10 unchanged sentences

Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.

The Upstream segment in 2017 includes non-cash

impairment charges of $ 396 million, before tax, associated with the Horn River development and $ 379 million, before tax, associated with the Mackenzie gas project.

The impairment charges are recognized in the lines “Exploration” and “Depreciation and depletion” on the Consolidated statement of income, and the “Accumulated depreciation and depletion” line of the Consolidated balance sheet.

As part of the implementation of Accounting Standard Update, Compensation – Retirement Benefits (Topic 715), beginning January 1, 2018, Corporate and other includes all non-service

pension and postretirement benefit expense.

Prior to 2018, the majority of these costs were allocated to the operating segments.

In 2020, the Upstream segment included a non-cash

impairment charge of $ 1,531 million, before-tax, related to the company’s decision not to further develop a significant portion of its unconventional portfolio.

In 2018, the Downstream segment included a non-cash

impairment charge of $ 46 million, before tax, associated with the Government of Ontario’s revocation of its cap and trade legislation.

Segment results in 2019 include a largely non-

impairment charge of $ 46 million, before-tax,

associated with the Government of Ontario’s revocation of its cap and trade legislation.

Segment results in 2019 include a largely non-cash

favourable impact of $ 662 million associated with the Alberta corporate income tax rate decrease, with the largest impact in the Upstream segment.

Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance

leases, additional investments and acquisitions.

Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions.

CAPEX excludes the purchase of carbon emission credits.

2 unchanged sentences

, as amended.

As at December 31, 2019, Total assets include operating lease right of use assets of $ 260 million.

As at December 31, 2020, Total assets include operating lease right of use assets of $ 188 million (2019 - $ 260 million).

An election was made not to restate prior periods.

2 unchanged sentences

millions of Canadian dollars

Current income tax expense

Deferred income tax expense

Total income tax expense

Statutory corporate tax rate

Current income tax expense (benefit) (a)

Deferred income tax expense (benefit) (a)

Total income tax expense (benefit) (a)

Statutory corporate tax rate (percent)

Increase (decrease) resulting from:

Enacted tax rate change

Enacted tax rate change (a)

Effective income tax rate

On June 28, 2019 the Alberta government enacted a 4 percent decrease in the provincial tax rate, from 12 percent to 8 percent by 2022.

On November 2, 2017 the British Columbia government enacted a 1 percent increase in the provincial tax rate from 11 percent to 12 percent.

2017 disposals we

re primarily associated with the sale of surplus property in Ontario.

Other decreases in 2017 and 2018 were primarily related to prior year adjustments and re-assessments.

On December 9, 2020 the Alberta government enacted an accelerated decrease in the province’s general corporate income tax rate from 10 percent to 8 percent, effective July 1, 2020.

The cumulative effect of the 2020 legislative tax changes on the company’s financial statements were immaterial.

Other decreases primarily relate to prior year adjustments, re-assessments and disposals.

Deferred income taxes are based on differences between the accounting and tax values of assets and liabilities.

These differences in value are

These differences in value are re-measured

at each year-end

using the tax rates and tax laws expected to apply when those differences are realized or settled in the future.

Components of deferred income tax liabilities and asset s

as at December 31 were:

Components of deferred income tax liabilities and assets as at December 31 were:

millions of Canadian dollars

12 unchanged sentences

Balance as of January 1

Additions based on current year’s tax position

Additions for prior years’ tax positions

Reductions for prior years’ tax positions

Reductions due to lapse of the statute of limitations

Settlements with tax authorities

32 unchanged sentences

Interest cost

Actuarial loss (gain)

Benefits paid (a)

Actuarial loss (gain) (a)

Benefits paid (b)

Projected benefit obligation at December 31

Accumulated benefit obligation at December 31

Actuarial loss primarily driven by a decrease in the year-end

discount rate from 3.10 percent to 2.50 percent, partially offset by the impact of a reduction in the long-term rate of compensation increase assumption from 4.50 percent to 4.00 percent.

Benefit payments for funded and unfunded plans.

The discount rate for the purpose of calculating year-end

postretirement benefits plan liabilities is determined by using the Canadian Institute of Actuaries recommended spot curve for high-quality, long-term Canadian corporate bonds with an average maturity (or duration) approximating that of the liabilities.

For the measurement of the accumulated postretirement benefit obligation, the assumed health care cost trend rates start with 5.66

percent in 2020 and gradually decline to 3.57 percent by 20 40

A 1.0 percent increase in the health care cost trend rate would increase service and interest cost by $ 5 million and the accumulated postretirement benefit obligation by $ 75 million.

A 1.0 percent decrease in the health care cost trend rate would decrease service and interest cost by $ 4 million and the accumulated postretirement benefit obligation by $ 60 million.

For the measurement of the accumulated postretirement benefit obligation, the assumed health care cost trend rates start with 5.66 percent in 2021 and gradually decline to 3.57 percent by 2040 and beyond.

Pension benefits

5 unchanged sentences

Company contributions

Benefits paid (b)

Benefits paid (a)

Fair value at December 31

1 unchanged sentence

Unfunded plans

Benefit payments for funded and unfunded plans.

Benefit payments for funded plans only.

15 unchanged sentences

A single, long-term rate of return is then calculated as the weighted average of the target asset allocation percentages and the long-term return assumption for each asset class.

The 2019 long-term expected return of

4.5 percent used in the calculations of pension expense compares to an actual rate of return of

8.1 percent and

6.6 percent over the last

The 2020 long-term expected return of 4.5 percent used in the calculations of pension expense compares to an actual rate of return of 8.4 percent and 6.9 percent over the last 10-

periods respectively, ending December 31, 2020.

1 unchanged sentence

What changed 10-K

Item 9A. Controls and Procedures