Imperial Oil Limited — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited U.S. GAAP financial statements. Amounts are in Canadian dollars unless otherwise noted.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $12.657 billion | $6.992 billion |
| Net income | $1.173 billion | $392 million |
| Diluted earnings per share | $1.75 | $0.53 |
| Operating cash flow | $1.914 billion | $1.045 billion |
| Capital and exploration expenditures | $296 million | $163 million |
- Revenue increased about 81% and net income about 199% year over year. Higher commodity realizations and improved Downstream margins were key drivers.
- Segment net income: Upstream $782 million (prior year $79 million); Downstream $389 million ($292 million); Chemicals $56 million ($67 million).
- Operating cash flow benefited from higher Upstream realizations, improved Downstream margins and favorable working-capital effects. Investing activities used $279 million; financing activities used $639 million, including $449 million of share repurchases and $185 million of dividends paid.
- Cash was $3.149 billion at quarter-end, versus $2.153 billion at December 31, 2021. Current assets were $10.718 billion and current liabilities $8.651 billion.
- Long-term debt was $5.049 billion, including $602 million of finance leases; current notes and loans payable were $122 million. Total debt including current borrowings was approximately $5.171 billion.
Material changes and operating context
- Crude and natural gas markets tightened amid recovering demand, restrained prior investment, supply-chain constraints and Russia’s invasion of Ukraine and related sanctions. WTI averaged US$95.01 per barrel versus US$58.14; WCS averaged US$80.46 versus US$45.64.
- Upstream production was lower primarily because of extreme cold and unplanned Kearl downtime. Imperial’s Kearl share averaged 132,000 barrels per day, compared with 178,000; Cold Lake was 140,000 barrels per day in both periods.
- Downstream refinery throughput rose to 399,000 barrels per day from 364,000, and utilization increased to 93% from 85%, reflecting stronger demand and market conditions.
- A $20 million pre-tax gain on asset sales contributed to investment and other income. Management reported no identified items in either comparative quarter.
- The company repurchased 8.9 million shares for $449 million during Q1, completing its normal-course issuer bid on January 31, 2022. On April 29, after quarter-end, it announced plans for a substantial issuer bid of up to $2.5 billion; terms and timing remained to be determined. ExxonMobil indicated it intended to tender proportionately to maintain its approximately 69.6% ownership.
Outlook, risks and contingencies
- The filing provides no specific earnings or production guidance. Management cautions that Q1 results are not necessarily indicative of full-year results.
- Principal uncertainties include commodity prices and differentials, demand and supply, foreign exchange, operational downtime and hazards, project execution, supply-chain constraints, regulation, climate-related requirements, COVID-19 effects, and geopolitical events.
- Updated annual after-tax earnings sensitivities, holding other factors constant: approximately $105 million for a US$1-per-barrel change in crude prices; $35 million for a US$1-per-barrel change in light/heavy crude differentials; and $200 million for a one-cent change in the Canadian dollar versus the U.S. dollar. These sensitivities may not scale proportionately to larger changes.
- Environmental proceedings are disclosed using a $1 million threshold; the supplied filing text does not describe specific proceedings.
Investor verification points
- Confirm how much of the earnings and cash-flow improvement reflects market pricing versus sustainable operating performance, including the impact of Kearl downtime and working-capital movements.
- Review the terms, timing, funding and execution of the announced issuer bid, and its effects on share count and capital returns.
- Assess debt, liquidity and retirement, asset-retirement and environmental obligations against planned capital spending and distributions.
- Verify that commodity and foreign-exchange sensitivities remain applicable as market conditions change, and review the full risk disclosures in the company’s 2021 Form 10-K.