What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2020-11-04 · 94 added, 157 removed, 263 unchanged (49% of the section changed)

2 unchanged sentences

GAAP, unaudited)

Third Quarter

to September 30

millions of Canadian dollars

2 unchanged sentences

Total revenues and other income

Purchases of crude oil and products (b)

Purchases of crude oil and products (b) (note 11)

Production and manufacturing (c)

19 unchanged sentences

GAAP, unaudited)

Third Quarter

to September 30

millions of Canadian dollars

11 unchanged sentences

Current assets

Accounts receivable, less estimated doubtful accounts (a) (note 5)

Accounts receivable - net (a)

Inventories of crude oil and products

1 unchanged sentence

Total current assets

Investments and long-term receivables (b) (note 5)

Investments and long-term receivables (b)

Property, plant and equipment,

18 unchanged sentences

Total liabilities and shareholders’ equity

Accounts receivable, less estimated doubtful accounts included net amounts receivable from related parties of $ 240 million (2019 - $ 1,007 million).

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

Notes and loans payable included amounts to related parties of $ 111 million (2019 - $ 111 million).

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

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

Accounts receivable - net included net amounts receivable from related parties of $ 361

million (2020 - $ 384

Investments and long-term receivables included amounts from related parties of $ 300

million (2020 - $ 313

Notes and loans payable included amounts to related parties of $ 75

million (2020 - $ 111

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

million (2020 - $ 4,447

Number of common shares authorized and outstanding were 1,100

million and 734

million, respectively (2020 - 1,100

million and 734

million, respectively).

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

2 unchanged sentences

GAAP, unaudited)

Third Quarter

to September 30

millions of Canadian dollars

8 unchanged sentences

Dividends declared

Cumulative effect of accounting change (note 5)

Cumulative effect of accounting change

At end of period

6 unchanged sentences

IMPERIAL OIL LIMITED

Consolidated statement of cash flows (U.S.

ed statement of cash flows (U.S.

GAAP, unaudited)

Inflow (outflow)

Third Quarter

to September 30

millions of Canadian dollars

5 unchanged sentences

(Gain) loss on asset sales (note 3)

Inventory write-down to current market value (note 11)

Deferred income taxes and other

12 unchanged sentences

Financing activities

Short-term debt - net

Reduction in finance lease obligations (note 6)

5 unchanged sentences

Cash at end of period

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.

restated 2019

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

7 unchanged sentences

The company’s exploration and production activities are accounted for under the “successful efforts” method.

The results for the nine months ended September 30, 2020, are not necessarily indicative of the operations to be expected for the full year.

The results for the three months ended March 31, 2021, are not necessarily indicative of the operations to be expected for the full year.

All amounts are in Canadian dollars unless otherwise indicated.

Accounting changes

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 standard did not have a material impact on the company’s financial statements.

IMPERIAL OIL LIMITED

Business segments

Third Quarter

millions of Canadian dollars

Revenues and other income

Intersegment sales

Investment and other income (note 4)

Purchases of crude oil and products

Production and manufacturing (note 13)

Selling and general

Federal excise tax and fuel charge

Depreciation and depletion (note 13)

Non-service pension and postretirement benefit

Financing (note 7)

Total expenses

Income (loss) before income taxes

Net income (loss)

Cash flows from (used in) operating activities

Capital and exploration expenditures

Third Quarter

Corporate and other

millions of Canadian dollars

Revenues and other income

Intersegment sales

Investment and other income (note 4)

Purchases of crude oil and products

Production and manufacturing (note 13)

Selling and general

Federal excise tax and fuel charge

Depreciation and depletion (note 13)

Non-service pension and postretirement benefit

Financing (note 7)

Total expenses

Income (loss) before income taxes

Net income (loss)

Cash flows from (used in) operating activities

Capital and exploration expenditures

IMPERIAL OIL LIMITED

Included export sales to the United States of $ 1,227 million (2019 - $ 1,807 million).

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

CAPEX excludes the purchase of carbon emission credits.

Table of Content s

IMPERIAL OIL LIMITED

Nine Months to September 30

Three Months to March 31

millions of Canadian dollars

2 unchanged sentences

Investment and other income (note 3)

Purchases of crude oil and products

Production and manufacturing (note 13)

Purchases of crude oil and products (note 11)

Production and manufacturing

Selling and general

9 unchanged sentences

Capital and exploration expenditures

Total assets as at September

Nine Months to September 30

Total assets as at March

Three Months to March 31

Corporate and other

3 unchanged sentences

Investment and other income (note 3)

Purchases of crude oil and products

Production and manufacturing (note 13)

Purchases of crude oil and products (note 11)

Production and manufacturing

Selling and general

9 unchanged sentences

Capital and exploration expenditures

Total assets as at September

Total assets as at March

IMPERIAL OIL LIMITED

Included export sales to the United States of $ 3,339 million (2019 - $ 5,623 million).

Included export sales to the United States of $ 1,569

million (2020 - $ 1,373

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

4 unchanged sentences

Investment and other income included gains and losses on asset sales as follows:

Third Quarter

to September 30

millions of Canadian dollars

1 unchanged sentence

Book value of asset sales

Gain (loss) on asset sales, before tax

Gain (loss) on asset sales, after tax

Allowance for current expected credit loss (CECL)

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 supportable 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.

Each reporting period, the company assesses whether a significant change in credit loss or risk 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.

In 2020, the COVID-19

pandemic spread rapidly through most areas of the world resulting in economic uncertainty, global financial market volatility, and negative effects in the credit markets.

The company has considered these effects, along with the significantly lower balances of trade receivables at the end of the quarter, in its estimate of credit losses and concluded no material adjustment to credit allowances in the quarter was required.

At September 30, 2020, the company’s evaluation of financial assets under Financial Instruments – Credit Losses (Topic 326)

, as amended included $ 1,400 million of accounts receivable, net of allowances of $ 4 million, and investments and long-term receivables of $ 327 million.

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.

IMPERIAL OIL LIMITED

Gain (loss) on asset sales, before

Gain (loss) on asset sales, after

Employee retirement benefits

The components of net benefit cost were as follows:

Third Quarter

to September 30

millions of Canadian dollars

12 unchanged sentences

Financing costs

Third Quarter

to September 30

millions of Canadian dollars

4 unchanged sentences

Total financing

During the second quarter of 2020, in addition to existing credit facilities of $ 500 million, 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.

The company has not drawn on any of its credit facilities.

Long-term debt

4 unchanged sentences

IMPERIAL OIL LIMITED

Other long-term obligation s

Other long-term obligations

millions of Canadian dollars

5 unchanged sentences

Total other long-term obligations

Total recorded employee retirement benefits obligations also included $ 58 million in current liabilities (2019 - $ 58 million).

Total asset retirement obligations and other environmental liabilities also included $ 124 million in current liabilities (2019 - $ 124 million).

Total operating lease liability also included $ 95 million in current liabilities (2019 - $ 115 million).

In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled $ 27 million (2019 - $ 6 million).

Total recorded employee retirement benefits obligations also included $ 58

million in current liabilities (2020 - $ 58

Total asset retirement obligations and other environmental liabilities also included $ 100

million in current liabilities (2020 - $ 100

Total operating lease liability also included $ 82

million in current liabilities (2020 - $ 97

In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled $ 30

million (2020 - $ 27

IMPERIAL OIL LIMITED

Financial and derivative instruments

2 unchanged sentences

There are no material differences between the fair value of the company’s financial instruments and the recorded carrying value.

At September 30, 2020 and December 31, 2019 the fair value of long-term debt ($ 4,447 million, excluding finance lease obligations) was primarily a level 2 measurement.

At March 31, 2021 and December 31, 2020, the fair value of long-term debt ($ 4,447 million, excluding finance lease obligations) was primarily a level 2 measurement.

Derivative instruments

4 unchanged sentences

The company maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity.

At September 30, 2020, the carrying values of derivative instruments on the Consolidated balance sheet were gross assets of $ 2 million, gross liabilities of $ 3 million and collateral receivable of $ 6 million, with the net effects reflected in “Accounts receivable, less estimated doubtful accounts” on the Consolidated balance sheet.

At December 31, 2019 the carrying values of derivative instruments on the Consolidated balance sheet were gross assets of $ 0 million, gross liabilities of $ 2 million and collateral receivable of $ 6 million.

At September 30, 2020, the net notional forward long / (short) position of derivative instruments was 200,000 barrels for crude and (

barrels for products.

At December 31, 2019, the net notional forward long / (short) position of derivative instruments was (

barrels for crude and 0 barrels for products.

Realized and unrealized gain or (loss) on derivative

recognized on the Consolidated statement of income is included in the following lines on a before-tax

Third Quarter

to September 30

The net notional long/(short) position of derivative instruments was:

(thousands of barrels)

Realized and unrealized gain or (loss) on derivative instruments recognized in the Consolidated statement of income is included in the following lines on a before-tax

millions of Canadian dollars

1 unchanged sentence

IMPERIAL OIL LIMITED

The estimated fair value of derivative instruments, and the related hierarchy level for the fair value measurement is as follows:

millions of Canadian dollars

At March 31, 2021

Derivative assets (a)

Derivative liabilities (b)

(a) Included in the Consolidated balance sheet line:

“Materials, supplies and prepaid expenses”.

(b) Included in the Consolidated balance sheet line:

“Accounts payable and accrued liabilities”.

millions of Canadian dollars

At December 31, 2020

Derivative assets (a)

Derivative liabilities (b)

(a) Included in the Consolidated balance sheet line:

“Materials, supplies and prepaid expenses”.

(b) Included in the Consolidated balance sheet line:

“Accounts payable and accrued liabilities”.

At March 31, 2021 and December 31, 2020, respectively, the company had $ 14 million and $ 5 million of collateral under a master netting arrangement not offset against the

on the Consolidated balance sheet in “Accounts receivable - net”, primarily related to initial margin requirements.

IMPERIAL OIL LIMITED

Common shares

1 unchanged sentence

Common shares outstanding

The current 12 -month

limited normal course issuer bid program came into effect on June 29, 2020 and is used primarily to eliminate dilution from shares issued in conjunction with Imperial’s restricted stock unit plan.

The program enables the company to purchase up to a maximum of 50,000 common shares, which includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid.

The 12 -month

limited normal course issuer bid program that was in place throughout the first quarter of 2021 came into effect on June 29, 2020 and was established primarily to eliminate dilution from shares issued in conjunction with Imperial’s restricted stock unit plan.

The program enabled the company to purchase up to a maximum of 50,000 common shares, which includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid.

As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent.

The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.

The company’s common share activities are summarized

On April 30, 2021, the company announced an amendment to its normal course issuer bid to increase the number of common shares that it may purchase.

Under the amendment, the number of common shares that may be purchased will increase to a maximum of 29,363,070

common shares ( 4

percent of the total shares on June 15, 2020) during the period June 29, 2020 to June 28, 2021, which includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid.

No other provisions of the normal course issuer bid have changed.

The company’s common share activities are summarized below:

Balance as at December 31, 2019

4 unchanged sentences

Purchases at stated value

Balance as at September 30, 2020

The following table provides the calculation of basic and diluted earnings

per common share and the dividends declared by the company on its outstanding common shares:

Third Quarter

to September 30

Balance as at March 31, 2021

The following table provides the calculation of basic and diluted earnings per common share and the dividends declared by the company on its outstanding common shares:

Net income (loss) per common share - basic

9 unchanged sentences

Dividends per common share - declared

For Nine Months to September 30, 2020, the Net income (loss) per common share – diluted excludes the effect of 2.1 million employee share-based awards.

For three months to March 31, 2020, the Net income (loss) per common share – diluted e

xcludes the effect of 2.0

million employee share-based awards.

Share-based awards have the potential to dilute basic earnings per share in the future.

IMPERIAL OIL LIMITED

Other comprehensive income (loss) information

Other comprehensive income (loss) in f

Changes in accumulated other comprehensive income (loss):

4 unchanged sentences

Amounts reclassified from accumulated other comprehensive income

Balance at September 30

Amounts reclassified out of accumulated other comprehensive income (loss) - before-tax

income (expense):

Third Quarter

to September 30

Balance at March 31

Amounts reclassified out of accumulated other comprehensive income (loss) - before tax income (expense):

millions of Canadian dollars

Amortization of postretirement benefits liability adjustment included in net periodic benefit cost (a)

(a) This accumulated other comprehensive income component is included in the computation of net periodic benefit cost, (note 6).

This accumulated other comprehensive income component is included in the computation of net periodic benefit cost (note 4).

Income tax expense (credit) for components of other comprehensive income (loss):

Third Quarter

to September 30

millions of Canadian dollars

3 unchanged sentences

Miscellaneous financial information

In the second quarter of 2020, the Government of Canada implemented the Canada Emergency Wage Subsidy (CEWS) as part of its COVID-19 Economic Response Plan.

The program’s intent is to help sustain employment levels by providing expense relief to companies during the pandemic.

The company qualified for these wage subsidies which are recognized throughout the year when received.

The relief provided under this program, about $ 120 million (before tax) year-to-date, including the company’s proportionate share of a joint venture, is recognized as a reduction to expense and is included in the Consolidated statement of income, primarily as part of “Production and manufacturing”.

As disclosed in Imperial’s 2019 Form 10-K,

goodwill is tested for impairment annually or more frequently if events or circumstances indicate it might be impaired.

At March 31, 2021, due to the termination of transportation services agreements related to a third-party pipeline project, the company recognized a liability of $ 62 million, previously reported as a contingent liability in Note 10 of Imperial’s Form 10-K.

In connection with the same project, commitments under “Other long-term purchase agreements” as reported in Imperial’s Form 10-K

decreased by approximately $ 2.9 billion.

The majority of these commitments related to years 2026 and beyond.

In the first quarter of 2020, a non-cash

charge of $ 281 million after tax (Upstream - $ 229 million;

Downstream - $ 52 million) was recorded associated with the carrying value of crude oil inventory exceeding the current market value.

In the first quarter of 2020, with the change in economic conditions and the reduction in the company’s market capitalization, the company assessed its goodwill balances for impairment and recognized a non-cash

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements