Imperial Oil Limited — Form 10-Q summary
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited consolidated financial statements are prepared under U.S. GAAP; amounts are in Canadian dollars unless noted.
Financial and operating highlights
| Metric | Third quarter 2022 | Third quarter 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $15.071 billion | $10.214 billion | $45.013 billion | $25.213 billion |
| Net income | $2.031 billion | $908 million | $5.613 billion | $1.666 billion |
| Diluted earnings per share | $3.24 | $1.29 | $8.58 | $2.31 |
| Operating cash flow | $3.089 billion | $1.947 billion | $7.685 billion | $3.844 billion |
| Capital and exploration expenditures | $392 million | $277 million | $1.002 billion | $699 million |
- Margins and segments: Q3 net income was $986 million in Upstream, $1.012 billion in Downstream, $54 million in Chemicals, and a $21 million loss in Corporate and other. Downstream earnings benefited from improved market conditions; Chemicals earnings declined with weaker polyethylene margins. The filing does not provide a consolidated profit-margin measure.
- Operations: Q3 production was 193,000 barrels per day at Kearl (Imperial share), 150,000 at Cold Lake, and 62,000 at Syncrude. Refinery throughput was 426,000 barrels per day, at 100% utilization; petroleum product sales were 484,000 barrels per day.
- Cash and liquidity: Cash was $3.576 billion at September 30, up from $2.153 billion at year-end 2021. Current assets were $11.005 billion and current liabilities $8.934 billion. The company reported $750 million of available credit facilities, none drawn.
- Debt: Long-term debt, including finance leases, was $4.038 billion, down from $5.054 billion at year-end; current notes and loans payable were $122 million. Imperial repaid $1 billion of debt owed to an ExxonMobil affiliate during Q3.
- Capital returns: Q3 dividends paid were $227 million ($0.34 per share) and share repurchases were $1.512 billion. For the first nine months, dividends paid were $640 million and repurchases were $4.461 billion. The company had 611.5 million shares outstanding at quarter-end, versus 678.1 million at year-end 2021.
Material changes and unusual items
- Compared with Q3 2021, higher commodity realizations and stronger Downstream margins supported higher earnings and operating cash flow. Management also cited higher operating expenses, partly offset by favorable foreign exchange effects. Q3 Upstream volumes were affected by planned Syncrude turnaround timing; Cold Lake volumes increased.
- Net income includes a favorable $208 million after-tax identified item from the sale of XTO Energy Canada interests. The sale closed August 31, 2022; Imperial received approximately $0.9 billion of the approximately $1.9 billion total transaction consideration and recorded an approximately $0.2 billion gain. Net income excluding the identified item was $1.823 billion for Q3 and $5.405 billion for the nine months.
- Q3 investing cash flow was a $364 million inflow, primarily reflecting asset-sale proceeds, partly offset by property, plant and equipment additions. Financing cash outflow was $2.744 billion, driven mainly by share repurchases, dividends, and debt repayment.
- In June, Imperial completed a $2.5 billion substantial issuer bid, purchasing 32.5 million shares. Its normal-course issuer bid reached its maximum and completed October 21, 2022. On October 28, the company announced its intention to launch another substantial issuer bid of up to $1.5 billion; the filing does not give its final terms or price range.
- A third-party raw-material purchase agreement entered into in Q3, commencing in 2024, includes a take-or-pay commitment of approximately $700 million. Management said it did not expect this obligation, together with prior commitments, to materially adversely affect the company.
Outlook, commentary, and risks
Management described commodity and product prices as volatile amid global economic and geopolitical uncertainty. It noted that crude prices and refining margins softened in Q3 from first-half levels as high prices and economic uncertainty tempered demand for some products. The filing provides no specific earnings, production, or capital-spending guidance. Risks discussed include changes in commodity supply, demand, prices and margins; geopolitical events; operating and project execution risks; regulation, including climate and greenhouse-gas policy; currency and economic conditions; and cybersecurity. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- How much of reported earnings and cash generation reflects commodity prices and refining margins versus the XTO sale and working-capital movements.
- Progress and final terms of the proposed $1.5 billion issuer bid, including required approvals and ExxonMobil’s planned proportionate tender.
- Production recovery and turnaround schedules, particularly at Kearl and Syncrude, and the sustainability of refinery utilization.
- Funding, timing, and materiality of the $700 million take-or-pay commitment and other environmental, retirement-benefit, and asset-retirement obligations.
- Commodity, geopolitical, regulatory, and operating developments that could affect the filing’s expectation of continued market volatility.