Imperial Oil Limited — Q2 2022 Form 10-Q
Business context and reporting period. The filing covers the quarter and six months ended June 30, 2022. Imperial reports in Canadian dollars and operates Upstream, Downstream and Chemical businesses. Results are unaudited and prepared under U.S. GAAP.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $17.285 billion | $8.007 billion | $29.942 billion | $14.999 billion |
| Net income | $2.409 billion | $366 million | $3.582 billion | $758 million |
| Diluted earnings per share | $3.63 | $0.50 | $5.36 | $1.04 |
| Cash from operations | $2.682 billion | $852 million | $4.596 billion | $1.897 billion |
| Capital and exploration expenditures | $314 million | $259 million | $610 million | $422 million |
Margins and segment results. Approximate net margin was 13.9% in Q2 2022 versus 4.6% in Q2 2021, and 12.0% for the first half versus 5.1%. Q2 net income by segment was Upstream $1.346 billion (prior year $247 million), Downstream $1.033 billion ($60 million), and Chemical $53 million ($109 million). For the first half, segment net income was Upstream $2.128 billion ($326 million), Downstream $1.422 billion ($352 million), and Chemical $109 million ($176 million).
Balance sheet and funding. At June 30, cash was $2.867 billion, total assets $44.892 billion, and shareholders’ equity $21.979 billion. Long-term debt, including finance leases, was $5.044 billion; notes and loans payable were $122 million. Cash exceeded these reported borrowings by approximately $2.701 billion. Current assets were $11.889 billion against current liabilities of $10.087 billion. Imperial had $750 million of undrawn credit facilities.
Material changes versus prior periods
- Revenue and earnings rose sharply year over year, primarily reflecting higher Upstream realizations and improved Downstream margins amid higher commodity prices and product demand.
- Q2 production at Kearl was 159 thousand barrels per day, down from 181 thousand, mainly due to downtime; Syncrude production increased to 81 thousand barrels per day from 47 thousand, largely due to turnaround timing. First-half Kearl production was also lower year over year.
- Q2 refinery throughput increased to 412 thousand barrels per day from 332 thousand, and capacity utilization rose to 96% from 78%, mainly due to reduced turnaround activity and higher demand.
- First-half operating cash flow improved, though working capital included a $2.970 billion use of cash from higher accounts receivable. Cash increased by $714 million over the first half.
- Cash used for financing included $2.949 billion of share repurchases in the first half, versus $1.171 billion a year earlier, and $413 million of dividends paid versus $323 million. The substantial issuer bid repurchased 32.47 million shares for $2.5 billion; outstanding shares fell to 636.7 million from 678.1 million at year-end.
Outlook, commentary, risks and unusual items
- Management described oil, natural gas and refining markets as tight, with prices and margins affected by recovering demand, constrained supply and investment, supply-chain constraints, and the Russia-Ukraine conflict and related sanctions. It cautioned that prices and margins may remain volatile amid economic and geopolitical uncertainty; high prices had begun tempering demand for some products.
- No formal earnings or production guidance is provided in the supplied filing text. Imperial said it planned to accelerate its new normal-course issuer bid and anticipated buying all remaining allowable shares by the end of October 2022; the program allows purchases of up to 31.83 million shares and may be modified.
- Imperial and ExxonMobil Canada agreed to sell their XTO Energy Canada interests to Whitecap Resources for approximately $1.9 billion in total, with Imperial’s share about $0.9 billion. Closing was expected before the end of Q3 2022, subject to approvals. Imperial estimated about $0.9 billion in cash proceeds and a gain of about $0.2 billion; both estimates could change with adjustments, taxes, market factors or timing.
- The company reported no identified items for Q2 or the first half of 2022 or 2021. Risks cited include commodity and foreign-exchange movements, demand and supply changes, operational downtime and hazards, regulatory approvals, project execution, environmental and climate-related requirements, and geopolitical and economic conditions.
Important facts for investors to verify
- Whether elevated commodity prices and refining margins, and the resulting earnings and cash generation, persist as demand and market conditions change.
- Progress on Kearl reliability and production, and whether the improved refinery throughput and utilization are sustainable.
- Completion and final proceeds, gain, tax effects and working-capital adjustments for the XTO divestment.
- Execution and funding of the accelerated share-repurchase plan, including its effect on share count and capital available for investment and dividends.
- Working-capital movements, especially receivables, and the continued adequacy of liquidity and undrawn credit facilities.