Imperial Oil Limited — FY 2022 Form 10-K
Reporting period: Year ended December 31, 2022. Amounts are in Canadian dollars unless stated otherwise. Imperial is an integrated Canadian oil, refining, marketing and chemicals company; ExxonMobil owned approximately 69.6% of its shares. The consolidated financial statements are prepared under U.S. GAAP and were audited by PwC, which issued unqualified opinions on the financial statements and internal controls.
Financial and operating results
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $59.413 billion | $37.508 billion |
| Net income | $7.340 billion | $2.479 billion |
| Diluted earnings per share | $11.44 | $3.48 |
| Cash from operating activities | $10.482 billion | $5.476 billion |
| Capital and exploration expenditures | $1.490 billion | $1.140 billion |
| Cash and cash equivalents, year-end | $3.749 billion | $2.153 billion |
| Total debt, year-end | $4.155 billion | $5.176 billion |
| Debt to capital | 16% | 19% |
Management-reported free cash flow, a non-GAAP measure, was $9.864 billion. Net income by segment was $3.645 billion Upstream, $3.622 billion Downstream, $204 million Chemical and a $131 million loss in Corporate and other. Total ROCE, also non-GAAP, was 27.6%, versus 9.4% in 2021. The filing does not provide a single consolidated gross or operating margin figure.
Results improved substantially as higher oil and gas realizations and stronger refining margins accompanied recovering demand. Upstream net income also reflected a $208 million after-tax identified gain related to the XTO Energy Canada sale. Chemical earnings declined as industry polyethylene margins weakened.
Operations and changes versus 2021
- Gross oil-equivalent production averaged 416,000 barrels per day, down from 428,000; net production was 349,000 barrels per day, down from 383,000. Kearl downtime from extreme cold in early 2022 weighed on volumes; Syncrude and Cold Lake production improved.
- Average refinery throughput rose to 418,000 barrels per day from 379,000, and utilization increased to 98% from 89%, supported by higher demand and less turnaround activity. Petroleum product sales rose to 475,000 barrels per day from 456,000.
- Average unit realizations rose year over year: bitumen to $84.67 per barrel from $57.91 and synthetic crude to $125.46 from $81.61. Total oil-equivalent unit production cost increased to $44.02 per barrel from $34.32, mainly reflecting higher energy costs.
- Imperial and ExxonMobil Canada completed the sale of their XTO Energy Canada interests to Whitecap Resources on August 31, 2022. Imperial’s share of cash consideration was about $0.9 billion. The divested assets included Montney and Duvernay holdings.
- Imperial repurchased $6.395 billion of shares and paid $851 million in dividends. Declared dividends were $1.46 per share, compared with $1.03 in 2021. The share count fell to approximately 584 million at year-end from 678 million.
- Proved reserves were 2.193 billion oil-equivalent barrels at year-end. Proved undeveloped reserves decreased to 240 million barrels from 386 million, including changes to Cold Lake development plans and the XTO divestment.
Liquidity, debt and commitments
Operating cash generation was the primary funding source. Imperial ended the year with $3.749 billion cash and $4.155 billion total debt; it repaid $1 billion of long-term debt during 2022. The company reported $500 million of available credit facilities, none drawn. Long-term debt includes a variable-rate loan from an ExxonMobil affiliate; $3.447 billion was outstanding at year-end, under an agreement effective through June 30, 2025, subject to specified cancellation rights.
Other long-term purchase agreements totaled $8.8 billion, including $783 million due in 2023 and $670 million due in 2024. These are primarily transportation, raw material supply and community-benefit commitments. Asset retirement obligations were $2.178 billion at year-end; estimated payments were $82 million in 2023 and $64 million in 2024.
Outlook, management commentary and risks
- Management expects 2023 capital and exploration expenditures of approximately $1.7 billion; $407 million of firm commitments relate to 2023. Actual spending may vary with project progress.
- Environmental capital and operating expenditures were approximately $1.4 billion in 2022. The company expects approximately $1.8 billion in 2023 and $2.2 billion in 2024; these estimates include both operating and capital spending.
- In January 2023, Imperial made a final investment decision on the Strathcona renewable diesel facility, designed to produce more than one billion litres annually. Execution, feedstock availability and cost, approvals, policy support and market development remain relevant uncertainties.
- Cold Lake Grand Rapids Phase 1 was approved with forecast average production of 15,000 barrels per day before royalties; development was planned for completion by year-end 2023. Leming development activities were planned to begin in 2023, with startup planned for 2024. Aspen remains on hold pending continued evaluation.
- Imperial’s stated goals include company-wide net-zero Scope 1 and 2 emissions at operated assets by 2050 and a 30% reduction in operated oil sands emissions intensity by 2030 versus 2016. Achievement depends on technology, policy and industry collaboration.
- Key exposures include volatile commodity prices and refining margins, Western Canadian crude differentials and transportation constraints, inflation and operating costs, foreign exchange, regulatory and climate-policy changes, environmental and reclamation obligations, project execution, severe weather, cybersecurity and reliance on third-party infrastructure and counterparties. Management cautions that forward-looking statements are not guarantees.
- Management said pending lawsuits and guarantees were not expected to have a material adverse effect. The filing describes tax disputes and unrecognized tax benefits of $60 million; management did not expect the related matters to materially affect earnings or cash flow.
Investor verification priorities
- Review the audited statements and cash-flow detail, including working-capital movements and the distinction between GAAP operating cash flow and non-GAAP free cash flow.
- Assess how much 2022 earnings and cash generation depended on commodity prices, refining margins, the XTO gain and share-count reductions, and how results may change if market conditions weaken.
- Verify 2023 capital spending, environmental expenditure forecasts, and the timing, cost and expected returns of the renewable diesel, Grand Rapids and Leming projects.
- Examine debt terms and related-party exposures, including the ExxonMobil loan and the company’s purchases, sales and services involving its controlling shareholder.
- Track reserve revisions, production reliability, transportation access, carbon-policy costs, and the assumptions and progress underlying emissions targets and asset-retirement estimates.