Item 1. Financial Statements
Item 1.
Financial statements
Consolidated statement of income (U.S. GAAP, unaudited)
Three Months
to March 31
millions of Canadian dollars
2021
2020
Revenues and other income
Revenues (a)
6,992
6,664
Investment and other income (note 3)
6
26
Total revenues and other income
6,998
6,690
Expenses
Exploration
2
1
Purchases of crude oil and products (b) (note 11)
3,887
4,226
Production and manufacturing (c)
1,485
1,579
Selling and general (c)
189
166
Federal excise tax and fuel charge
404
451
Depreciation and depletion (note 11)
494
473
Non-service
pension and postretirement benefit
11
30
Financing (d) (note 5)
14
19
Total expenses
6,486
6,945
Income (loss) before income taxes
512
( 255
)
Income taxes
120
( 67
)
Net income (loss)
392
( 188
)
Per share information
(Canadian dollars)
Net income (loss) per common share - basic (note 9)
0.53
( 0.25
)
Net income (loss) per common share - diluted (note 9)
0.53
( 0.25
)
(a) Amounts from related parties included in revenues.
1,508
1,736
(b) Amounts to related parties included in purchases of crude oil and products.
515
739
(c) Amounts to related parties included in production and manufacturing, and selling and general expenses.
116
183
(d) Amounts to related parties included in financing, (note 5).
11
24
The information in the notes to consolidated financial statements is an integral part of these statements.
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IMPERIAL OIL LIMITED
Consolidated statement of comprehensive income (U.S. GAAP, unaudited)
Three Months
to March 31
millions of Canadian dollars
2021
2020
Net income (loss)
392
( 188
)
Other comprehensive income (loss), net of income taxes
Postretirement benefits liability adjustment (excluding amortization)
54
( 114
)
Amortization of postretirement benefits liability adjustment included in net periodic benefit costs
33
34
Total other comprehensive income (loss)
87
( 80
)
Comprehensive income (loss)
479
( 268
)
The information in the notes to consolidated financial statements is an integral part of these statements.
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IMPERIAL OIL LIMITED
Consolidated balance sheet (U.S. GAAP, unaudited)
As at
Mar 31
As at
Dec 31
millions of Canadian dollars
2021
2020
Assets
Current assets
Cash
1,467
771
Accounts receivable - net (a)
2,388
1,919
Inventories of crude oil and products
1,256
1,161
Materials, supplies and prepaid expenses
737
673
Total current assets
5,848
4,524
Investments and long-term receivables (b)
765
781
Property, plant and equipment,
55,911
55,771
less accumulated depreciation and depletion
( 24,211
)
( 23,737
)
Property, plant and equipment, net
31,700
32,034
Goodwill (note 11)
166
166
Other assets, including intangibles - net
528
526
Total assets
39,007
38,031
Liabilities
Current liabilities
Notes and loans payable (c)
191
227
Accounts payable and accrued liabilities (a) (note 7)
3,721
3,153
Income taxes payable
21
-
Total current liabilities
3,933
3,380
Long-term debt (d) (note 6)
4,953
4,957
Other long-term obligations (note 7)
4,094
4,100
Deferred income tax liabilities
4,291
4,176
Total liabilities
17,271
16,613
Shareholders’ equity
Common shares at stated value (e) (note 9)
1,357
1,357
Earnings reinvested
22,281
22,050
Accumulated other comprehensive income (loss) (note 10)
( 1,902
)
( 1,989
)
Total shareholders’ equity
21,736
21,418
Total liabilities and shareholders’ equity
39,007
38,031
(a)
Accounts receivable - net included net amounts receivable from related parties of $ 361
million (2020 - $ 384
million).
(b)
Investments and long-term receivables included amounts from related parties of $ 300
million (2020 - $ 313
million).
(c)
Notes and loans payable included amounts to related parties of $ 75
million (2020 - $ 111
million).
(d)
Long-term debt included amounts to related parties of $ 4,447
million (2020 - $ 4,447
million).
(e)
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.
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Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)
Three Months
to March 31
millions of Canadian dollars
2021
2020
Common shares at stated value
(note 9)
At beginning of period
1,357
1,375
Share purchases at stated value
-
( 18
)
At end of period
1,357
1,357
Earnings reinvested
At beginning of period
22,050
24,812
Net income (loss) for the period
392
( 188
)
Share purchases in excess of stated value
-
( 256
)
Dividends declared
( 161
)
( 162
)
Cumulative effect of accounting change
-
( 2
)
At end of period
22,281
24,204
Accumulated other comprehensive income (loss)
(note 10)
At beginning of period
( 1,989
)
( 1,911
)
Other comprehensive income (loss)
87
( 80
)
At end of period
( 1,902
)
( 1,991
)
Shareholders’ equity at end of period
21,736
23,570
The information in the notes to consolidated financial statements is an integral part of these statements.
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Consolida t
ed statement of cash flows (U.S. GAAP, unaudited)
Inflow (outflow)
Three Months
to March 31
millions of Canadian dollars
2021
2020
Operating activities
Net income (loss)
392
( 188
)
Adjustments for non-cash
items:
Depreciation and depletion
494
453
Impairment of intangible assets (note 11)
-
20
(Gain) loss on asset sales (note 3)
( 3
)
( 7
)
Inventory write-down to current market value (note 11)
-
281
Deferred income taxes and other
60
43
Changes in operating assets and liabilities:
Accounts receivable
( 469
)
1,143
Inventories, materials, supplies and prepaid expenses
( 159
)
( 199
)
Income taxes payable
21
( 104
)
Accounts payable and accrued liabilities
584
( 1,028
)
All other items - net (b)
125
9
Cash flows from (used in) operating activities
1,045
423
Investing activities
Additions to property, plant and equipment
( 167
)
( 310
)
Proceeds from asset sales (note 3)
7
9
Loans to equity companies - net
13
( 7
)
Cash flows from (used in) investing activities
( 147
)
( 308
)
Financing activities
Short-term debt - net
( 36
)
-
Reduction in finance lease obligations (note 6)
( 4
)
( 7
)
Dividends paid
( 162
)
( 164
)
Common shares purchased (note 9)
-
( 274
)
Cash flows from (used in) financing activities
( 202
)
( 445
)
Increase (decrease) in cash
696
( 330
)
Cash at beginning of period
771
1,718
Cash at end of period
(a)
1,467
1,388
(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.
(b) Included contributions to registered pension plans.
( 28
)
( 59
)
Income taxes (paid) refunded.
1
( 153
)
Interest (paid), net of capitalization.
( 13
)
( 19
)
The information in the notes to consolidated financial statements is an integral part of these statements.
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IMPERIAL OIL LIMITED
Notes to consolidated financial statements (unaudited)
1. Basis of financial statement preparation
These unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) and follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC) in the company’s 2020 annual report on Form 10-K.
In the opinion of the company, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature.
The company’s exploration and production activities are accounted for under the “successful efforts” method.
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.
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IMPERIAL OIL LIMITED
2. Business segments
Three Months to March 31
Upstream
Downstream
Chemical
millions of Canadian dollars
2021
2020
2021
2020
2021
2020
Revenues and other income
Revenues (a)
2,142
1,652
4,527
4,796
323
216
Intersegment sales
1,351
722
773
568
53
44
Investment and other income (note 3)
-
-
5
15
-
-
3,493
2,374
5,305
5,379
376
260
Expenses
Exploration
2
1
-
-
-
-
Purchases of crude oil and products (note 11)
1,834
1,650
4,020
3,769
209
140
Production and manufacturing
1,109
1,108
326
408
50
63
Selling and general
-
-
133
181
25
25
Federal excise tax and fuel charge
-
-
404
451
-
-
Depreciation and depletion (note 11)
445
417
39
46
4
4
Non-service
pension and postretirement benefit
-
-
-
-
-
-
Financing (note 5)
1
-
-
-
-
-
Total expenses
3,391
3,176
4,922
4,855
288
232
Income (loss) before income taxes
102
( 802 )
383
524
88
28
Income tax expense (benefit)
23
( 194 )
91
122
21
7
Net income (loss)
79
( 608 )
292
402
67
21
Cash flows from (used in) operating activities
531
464
462
22
62
( 3 )
Capital and exploration expenditures
(b)
85
231
68
76
2
9
Total assets as at March
31
(note 11)
31,754
33,367
4,909
4,580
462
438
Three Months to March 31
Corporate and other
Eliminations
Consolidated
millions of Canadian dollars
2021
2020
2021
2020
2021
2020
Revenues and other income
Revenues (a)
-
-
-
-
6,992
6,664
Intersegment sales
-
-
( 2,177 )
( 1,334 )
-
-
Investment and other income (note 3)
1
11
-
-
6
26
1
11
( 2,177 )
( 1,334 )
6,998
6,690
Expenses
Exploration
-
-
-
-
2
1
Purchases of crude oil and products (note 11)
-
-
( 2,176 )
( 1,333 )
3,887
4,226
Production and manufacturing
-
-
-
-
1,485
1,579
Selling and general
32
( 39 )
( 1 )
( 1 )
189
166
Federal excise tax and fuel charge
-
-
-
-
404
451
Depreciation and depletion (note 11)
6
6
-
-
494
473
Non-service
pension and postretirement benefit
11
30
-
-
11
30
Financing (note 5)
13
19
-
-
14
19
Total expenses
62
16
( 2,177 )
( 1,334 )
6,486
6,945
Income (loss) before income taxes
( 61 )
( 5 )
-
-
512
( 255 )
Income tax expense (benefit)
( 15 )
( 2 )
-
-
120
( 67 )
Net income (loss)
( 46 )
( 3 )
-
-
392
( 188 )
Cash flows from (used in) operating activities
( 10 )
( 43 )
-
( 17 )
1,045
423
Capital and exploration expenditures
(b)
8
15
-
-
163
331
Total assets as at March
31
(note 11)
2,346
2,242
( 464 )
( 214 )
39,007
40,413
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(a)
Included export sales to the United States of $ 1,569
million (2020 - $ 1,373
million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b)
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.
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IMPERIAL OIL LIMITED
3. Investment and other income
Investment and other income included gains and losses on asset sales as follows:
Three Months
to March 31
millions of Canadian dollars
2021
2020
Proceeds from asset sales
7
9
Book value of asset sales
4
2
Gain (loss) on asset sales, before
tax
3
7
Gain (loss) on asset sales, after
tax
2
6
4. Employee retirement benefits
The components of net benefit cost were as follows:
Three Months
to March 31
millions of Canadian dollars
2021
2020
Pension benefits:
Current service cost
81
76
Interest cost
68
77
Expected return on plan assets
( 107
)
( 98
)
Amortization of prior service cost
4
4
Amortization of actuarial loss (gain)
36
38
Net periodic benefit cost
82
97
Other postretirement benefits:
Current service cost
7
6
Interest cost
6
6
Amortization of actuarial loss (gain)
4
3
Net periodic benefit cost
17
15
5. Financing costs
Three Months
to March 31
millions of Canadian dollars
2021
2020
Debt-related interest
21
34
Capitalized interest
( 8
)
( 15
)
Net interest expense
13
19
Other interest
1
-
Total financing
14
19
6. Long-term debt
As at
Mar 31
As at
Dec 31
millions of Canadian dollars
2021
2020
Long-term debt
4,447
4,447
Finance leases
506
510
Total long-term debt
4,953
4,957
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7. Other long-term obligations
As at
Mar 31
As at
Dec 31
millions of Canadian dollars
2021
2020
Employee retirement benefits (a)
2,036
2,105
Asset retirement obligations and other environmental liabilities (b)
1,680
1,676
Share-based incentive compensation liabilities
68
45
Operating lease liability (c)
92
95
Other obligations
218
179
Total other long-term obligations
4,094
4,100
(a)
Total recorded employee retirement benefits obligations also included $ 58
million in current liabilities (2020 - $ 58
million).
(b)
Total asset retirement obligations and other environmental liabilities also included $ 100
million in current liabilities (2020 - $ 100
million).
(c)
Total operating lease liability also included $ 82
million in current liabilities (2020 - $ 97
million). In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled $ 30
million (2020 - $ 27
million).
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8. Financial and derivative instruments
Financial instruments
The fair value of the company’s financial instruments is determined by reference to various market data and other appropriate valuation techniques. There are no material differences between the fair value of the company’s financial instruments and the recorded carrying value. 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
The company’s size, strong capital structure and the complementary nature of the Upstream, Downstream and Chemical businesses reduce the company’s enterprise-wide risk from changes in commodity prices and currency exchange rates. In addition, the company uses commodity-based contracts, including derivative instruments to manage commodity price risk. The company does not designate derivative instruments as a hedge for hedge accounting purposes.
Credit risk associated with the company’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial limits placed on derivative counterparties. The company maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity.
The net notional long/(short) position of derivative instruments was:
(thousands of barrels)
As at
March 31
2021
As at
Dec 31
2020
Crude
220
( 800
)
Products
( 560
)
( 390
)
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
basis:
Three Months
to March 31
millions of Canadian dollars
2021
2020
Revenues
-
1
Purchases of crude oil and products
( 14
)
34
Total
( 14
)
35
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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
Fair value
Effect of
counterparty
netting
Effect of
collateral
netting
Net
carrying
value
Level 1
Level 2
Level 3
Total
Assets
Derivative assets (a)
7
-
-
7
( 2
)
( 5
)
-
Liabilities
Derivative liabilities (b)
2
-
-
2
( 2
)
-
-
(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
Fair value
Effect of
counterparty
netting
Effect of
collateral
netting
Net
carrying
value
Level 1
Level 2
Level 3
Total
Assets
Derivative assets (a)
2
-
-
2
( 2
)
-
-
Liabilities
Derivative liabilities (b)
12
-
-
12
( 2
)
( 10
)
-
(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
derivatives
on the Consolidated balance sheet in “Accounts receivable - net”, primarily related to initial margin requirements.
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9. Common shares
thousands of shares
As of
Mar 31
2021
As of
Dec 31
2020
Authorized
1,100,000
1,100,000
Common shares outstanding
734,077
734,077
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.
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:
Thousands
of shares
Millions
of dollars
Balance as at December 31, 2019
743,902
1,375
Issued under employee share-based awards
7
-
Purchases at stated value
( 9,832
)
( 18
)
Balance as at December 31, 2020
734,077
1,357
Issued under employee share-based awards
-
-
Purchases at stated value
-
-
Balance as at March 31, 2021
734,077
1,357
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:
Three Months
to March 31
2021
2020
Net income (loss) per common share - basic
Net income (loss) (millions of Canadian dollars)
392
( 188
)
Weighted average number of common shares outstanding (millions of shares)
734.1
738.9
Net income (loss) per common share (dollars)
0.53
( 0.25
)
Net income (loss) per common share - diluted
Net income (loss) (millions of Canadian dollars)
392
( 188
)
Weighted average number of common shares outstanding (millions of shares)
734.1
738.9
Effect of employee share-based awards (millions of shares) (a)
1.6
-
Weighted average number of common shares outstanding, assuming dilution (millions of shares)
735.7
738.9
Net income (loss) per common share (dollars)
0.53
( 0.25
)
Dividends per common share - declared
(dollars)
0.22
0.22
(a)
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.
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10. Other comprehensive income (loss) in f
ormation
Changes in accumulated other comprehensive income (loss):
millions of Canadian dollars
2021
2020
Balance at January 1
( 1,989
)
( 1,911
)
Postretirement benefits liability adjustment:
Current period change excluding amounts reclassified from accumulated other comprehensive income
54
( 114
)
Amounts reclassified from accumulated other comprehensive income
33
34
Balance at March 31
( 1,902
)
( 1,991
)
Amounts reclassified out of accumulated other comprehensive income (loss) - before tax income (expense):
Three Months
to March 31
millions of Canadian dollars
2021
2020
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost (a)
( 44 )
( 45 )
(a)
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):
Three Months
to March 31
millions of Canadian dollars
2021
2020
Postretirement benefits liability adjustments:
Postretirement benefits liability adjustment (excluding amortization)
17
( 37
)
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost
11
11
Total
28
( 26
)
11. Miscellaneous financial information
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
goodwill impairment charge of $ 20 million in the company’s Upstream segment. The goodwill impairment is reflected in “Depreciation and depletion” on the Consolidated statement of income and “Goodwill” on the Consolidated balance sheet. The remaining balance of goodwill is associated with the Downstream segment.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.