Imperial Oil Limited — Form 10-Q Summary
Reporting period: Third quarter and nine months ended September 30, 2009. Unaudited consolidated financial statements use U.S. GAAP; amounts are in Canadian dollars unless noted.
Financial performance
| Metric | Q3 2009 | Q3 2008 | Nine months 2009 | Nine months 2008 |
|---|---|---|---|---|
| Revenue and other income | $5,561 million | $9,515 million | $15,534 million | $25,637 million |
| Income before taxes | $759 million | $1,957 million | $1,455 million | $4,505 million |
| Net income | $547 million | $1,389 million | $1,045 million | $3,218 million |
| Diluted earnings per share | $0.64 | $1.57 | $1.22 | $3.60 |
| Cash from operating activities | $698 million | $1,635 million | $664 million | $3,351 million |
- Revenue fell about 42% in the quarter and 39% year to date; net income fell about 61% and 68%, respectively.
- At September 30, cash was $458 million, down from $1,974 million at December 31, 2008. Current assets were $3,527 million and current liabilities $3,614 million.
- Total liabilities were $7,412 million, including $108 million of notes and loans payable and $32 million of capitalized lease obligations. Other long-term obligations were $2,219 million. An affiliated ExxonMobil entity provided an undrawn credit facility of up to $5 billion at variable rates.
- Capital additions to property, plant, equipment and intangibles were $1,478 million for nine months, versus $839 million a year earlier; total reported capital and exploration expenditures were $1,604 million versus $930 million.
- Cash dividends paid were $257 million for nine months; declared dividends were $0.30 per share versus $0.28. The company repurchased 11.8 million shares for $490 million year to date, with essentially no repurchases during Q3.
Material changes and business drivers
- Lower oil and natural gas prices amid the global economic downturn drove the earnings decline. Management estimated Q3 upstream price impacts of about $950 million, partly offset by lower royalties of about $200 million, a weaker Canadian dollar of about $115 million, and lower energy costs of about $95 million.
- Downstream Q3 earnings were $62 million versus $270 million, as reduced product demand and lower margins reduced earnings by an estimated $160 million. Nine-month earnings were $226 million versus $539 million; 2008 included a $187 million gain on the Rainbow pipeline sale.
- Upstream Q3 earnings were $439 million versus $999 million; nine-month earnings were $833 million versus $2,587 million. Nine-month upstream production and maintenance effects included lower Syncrude and Cold Lake volumes. Natural gas production also declined, primarily due to reservoir decline.
- Chemical earnings were $19 million for Q3 and $30 million for nine months, down from $38 million and $72 million, respectively, reflecting weaker margins, sales volumes, and economic conditions.
- Brent averaged $68.29 per barrel in Q3 and $57.26 for nine months, down about 41% and 48% year over year. Natural gas realizations averaged $2.90 per thousand cubic feet in Q3 and $4.07 year to date, versus $9.20 and $9.16.
- Operating cash flow declined chiefly due to lower earnings; year-to-date cash flow was also affected by timing of income-tax payments. Investment cash outflow was $1,431 million for nine months, with spending focused especially on the Kearl oil sands project.
Outlook, risks, and other disclosures
- The filing provides no quantified earnings or production guidance. Management says nine-month results are not necessarily indicative of full-year results and describes forward-looking statements as subject to market, regulatory, operating, cost, project-schedule, demand, negotiation, technical, and economic risks.
- Annual after-tax earnings sensitivities disclosed were approximately $380 million for a nine-cent change in the Canadian dollar versus the U.S. dollar and $280 million for a $7-per-barrel crude-price change, with other factors held constant. The filing cautions that sensitivity may not scale proportionately.
- Management reported disclosure controls as effective and no material change in internal control over financial reporting during the quarter. Adoption of fair-value measurement guidance had no material financial-statement impact.
Key facts for investors to verify
- Whether oil and gas prices, product demand, and refining margins recover, and the resulting effect on segment earnings.
- Kearl project spending, schedule, and funding needs, given the decline in cash and increased capital investment.
- Production trends at Syncrude, Cold Lake, and conventional and natural-gas operations, including the effects of maintenance and natural decline.
- Use and terms of the undrawn ExxonMobil credit facility, and future share repurchases relative to capital requirements.
- The impact of the prior-year Rainbow pipeline gain when comparing nine-month earnings.