EX-99.1 2 dex991.htm PRESS RELEASE OF THE COMPANY ON JULY 30, 2009 Press release of the Company on July 30, 2009

Exhibit 99.1

LOGO

   
 

Imperial Oil Limited

  
 

237 - 4th Avenue S.W.

Calgary, AB T2P 0H6

                   News Release

 

Imperial Oil announces second quarter financial and operating results

Calgary, July 30, 2009 – Imperial Oil today announced that net income for the second quarter of 2009 was $209 million or $0.25 a share, compared with $1,148 million or $1.28 a share for the same period last year. Net income for the first six months of 2009 was $498 million or $0.58 a share, versus $1,829 million or $2.03 a share for the first half of 2008.

Earnings in the second quarter were down from the same quarter in 2008 primarily due to lower Upstream crude oil and natural gas commodity prices as a result of the global economic downturn and from decreased gains from asset sales in the Downstream. In the Upstream, lower crude oil and natural gas commodity prices were partially offset by lower royalty costs due to falling commodity prices and the impact of a weaker Canadian dollar. Earnings were also lower in the quarter due to scheduled maintenance activities at Syncrude and Cold Lake. Downstream earnings in the second quarter of 2008 included a gain of $187 million from the sale of Rainbow pipeline. Downstream earnings in the second quarter of 2009 were also lower due to higher planned refinery maintenance activities.

Operating revenues were $5,261 million in the second quarter, compared with $8,618 million in the corresponding period last year. Capital and exploration expenditures were $535 million in the second quarter, compared with $279 million during the same quarter of 2008. For the first six months of 2009, the amount was $1,029 million, versus $570 million in the same period a year ago. During the first half of 2009, the company repurchased about 12 million shares for $490 million, including shares purchased from ExxonMobil. In the second quarter of 2009, share repurchases were reduced to $61 million as cash flow from operations was used to fund growth projects such as Kearl. The company will continue to evaluate its share-purchase program in the context of its overall capital activities. On June 30, 2009, the company’s balance of cash and marketable securities was $390 million, compared to $1,974 million at the end of 2008.

“Sharply lower oil and natural gas prices continued to create challenging business conditions. Through this global economic downturn, we continue to focus on the business performance elements we can control – our safety, reliability, cost discipline, and growing our resource base,” said Bruce March, Imperial’s chairman, president and chief executive officer. “Imperial has moved ahead on its Kearl oil sands company growth project, consistent with our long-term approach that will serve our shareholders well,” added March.

Imperial Oil is one of Canada’s largest corporations and a leading member of the country’s petroleum industry. It is one of the country’s largest producers of crude oil and natural gas, and is the largest petroleum refiner and marketer with a coast-to-coast supply network that includes about 1,900 retail service stations.

 

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LOGO

   

Highlights/Items of interest

 

Imperial Oil Resources receives award for health and safety performance

Imperial was awarded the Canadian Association of Petroleum Producers’ 2009 Steward of Excellence award for significantly improving the safety performance of its well servicing operations. The company’s safety strategy was effective in improving performance at a time when the well servicing contractor workforce essentially doubled in size.

Kearl oil sands project to proceed

On May 25th, Imperial Oil’s board of directors approved the first phase of the Kearl oil sands project, a surface mining operation located northeast of Fort McMurray, Alberta. The Kearl project is envisioned to be developed in three phases and could ultimately produce more than 300,000 barrels of bitumen a day before royalties. The first phase of the project is expected to start up in late 2012 with total production to average approximately 110,000 barrels a day.

Horn River update

Imperial Oil Resources and ExxonMobil Canada Ltd. acquired (on a 50-50 basis) additional exploration acreage in the Horn River basin, located about 70 kilometres north of Fort Nelson, B.C. This brings the net acreage acquired by the companies since 2007 in the Horn River area to 305,000 acres.

Also, as part of a recently completed winter exploration program, Imperial drilled four single-perforation vertical test wells. The company’s evaluation program of the Horn River basin is in the early stages. No conclusion on potential rates from future horizontal production wells has been made.

 

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IMPERIAL OIL LIMITED

 

 

FINANCIAL HIGHLIGHTS (unaudited)

 

 

     Second quarter    

Six months

to June 30

  
         2009         2008         2009         2008  
            

Net income (U.S. GAAP, millions of dollars)

         

Upstream

    252      938      394      1,588   

Downstream

    (38 )    239      164      269   

Chemical

    8      10      11      34   

Corporate and other

    (13 )    (39 )    (71 )    (62 ) 
            

Net income (U.S. GAAP)

    209      1,148      498      1,829   
            

Cash flow from operating activities

    262      1,427      (34 )    1,716   

Capital and exploration expenditures

    535      279      1,029      570   

Per-share information (dollars)

         

Net income - basic

    0.25      1.29      0.59      2.05   

Net income - diluted

    0.25      1.28      0.58      2.03   

Dividends

    0.10      0.09      0.20      0.18   

Share prices - close at June 30

         

Toronto Stock Exchange (Canadian dollars)

        45.12      56.16   

NYSE Amex (U.S. dollars)

        38.46      55.07   

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

OPERATING RESULTS

The company’s net income for the second quarter of 2009 was $209 million or $0.25 a share on a diluted basis, compared with $1,148 million or $1.28 a share for the same period last year. Net income for the first six months of 2009 was $498 million or $0.58 a share on a diluted basis, versus $1,829 million or $2.03 a share for the first half of 2008.

Earnings in the second quarter were down from the same quarter in 2008 primarily due to lower Upstream crude oil and natural gas commodity prices as a result of the global economic downturn and from decreased gains from asset sales in the Downstream. In the Upstream, lower crude oil and natural gas commodity prices of about $1,110 million were partially offset by lower royalty costs due to falling commodity prices of about $275 million and the impact of a weaker Canadian dollar of about $220 million. Earnings were also lower in the quarter due to scheduled maintenance activities at Syncrude and Cold Lake. Downstream earnings in the second quarter of 2008 included a gain of $187 million from the sale of Rainbow pipeline. Downstream earnings in the second quarter of 2009 were also lower due to higher planned refinery maintenance activities of about $95 million.

For the first six months, earnings decreased primarily due to lower crude oil and natural gas commodity prices as a result of the global economic downturn. Lower upstream realizations were partially offset by lower royalty costs due to lower commodity prices and the impact of a lower Canadian dollar. Earnings in the first half of 2008 included a gain of $187 million from the sale of Rainbow pipeline.

 

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IMPERIAL OIL LIMITED

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued…)

 

Upstream

Net income in the second quarter was $252 million versus $938 million in the same period of 2008. Earnings decreased primarily due to lower crude oil and natural gas commodity prices of about $1,110 million. Earnings were also negatively impacted by lower Syncrude volumes of about $55 million. These factors were partially offset by lower royalty costs due to lower commodity prices of about $275 million and the impact of a lower Canadian dollar of about $220 million.

Net income for the first six months was $394 million versus $1,588 million during the same period last year. Crude oil and natural gas commodity prices were lower by about $2,050 million compared to the first six months of 2008. Earnings were also negatively impacted by lower cyclical Cold Lake heavy oil production of about $55 million, lower Syncrude volumes of about $35 million and lower conventional volumes from expected reservoir decline of about $30 million. These factors were partially offset by lower royalty costs due to lower commodity prices of about $545 million and the impact of a lower Canadian dollar of about $475 million.

The average price of Brent crude oil in U.S. dollars, a common benchmark for world oil markets, was $58.78 a barrel in the second quarter and $51.65 a barrel in the first half of 2009, down about 52 percent and 53 percent from the corresponding periods last year. The company’s realizations on sales of Canadian conventional crude oil mirrored the same trend as world prices, decreasing about 50 percent in the second quarter and the first half of the year, compared to the same periods last year.

The company’s average realizations for Cold Lake heavy oil also declined about 40 percent in the second quarter and first half of 2009 when compared to corresponding periods last year. The decline was less than that of lighter crude oil, due to the narrowing price spread between light crude oil and Cold Lake heavy oil.

The company’s average realizations for natural gas averaged $3.48 a thousand cubic feet in the second quarter, down from $10.35 in the same quarter last year. For the six months of 2009, realizations for natural gas averaged $4.67 a thousand cubic feet, down from $9.15 in 2008.

Gross production of Cold Lake heavy oil averaged 139 thousand barrels a day during the second quarter, versus 144 thousand barrels in the same quarter last year. For the first six months, gross production was 143 thousand barrels a day this year, compared with 149 thousand barrels in the same period of 2008. Lower production in the second quarter was primarily due to scheduled maintenance at the Mahihkan plant and the cyclic nature of production at Cold Lake.

The company’s share of Syncrude’s gross production in the second quarter was 51 thousand barrels a day, versus 66 thousand barrels in the second quarter of 2008. During the first six months of 2009, the company’s share of gross production from Syncrude averaged 60 thousand barrels a day, down from 66 thousand barrels in 2008. Planned maintenance activities were extended on one of the cokers and included design modifications to improve long-term operational performance. This was the main reason for the reduced production in the second quarter and first half of 2009. These maintenance activities were successfully completed, and the units have returned to normal operations.

 

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IMPERIAL OIL LIMITED

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued…)

 

Gross production of conventional crude oil averaged 25 thousand barrels and 26 thousand barrels a day in the second quarter and six months of 2009, respectively and were essentially the same when compared to corresponding periods in 2008.

Gross production of natural gas during the second quarter of 2009 decreased to 286 million cubic feet a day from 310 million cubic feet in the same period last year. In the first half of the year, gross production was 296 million cubic feet a day, down from 318 million cubic feet in the first six months of 2008. The lower production volume was primarily a result of natural reservoir decline.

In May, the company announced its board of directors approved the first phase of the Kearl oil sands project, a surface mining project located northeast of Fort McMurray, Alberta. The first phase of Kearl, expected to start up in late 2012 with total production to average approximately 110,000 barrels of bitumen a day before royalties, is anticipated to cost about $8 billion. Imperial’s share of production from the first phase would be about 78,000 barrels a day.

In June, Imperial and ExxonMobil Canada, each on a 50-percent interest basis, acquired additional exploration acreage in the natural gas prone Horn River area of northeastern British Columbia. This brings the net acreage acquired by the companies since 2007 in the Horn River area to 305,000 acres. A winter drilling program was successfully completed in early 2009. Evaluation of drilling results is currently underway.

Downstream

Net income from Downstream was negative $38 million in the second quarter of 2009, compared with $239 million in the same period a year ago. Second quarter 2008 earnings included a gain of $187 million from the sale of the company’s equity investment in Rainbow Pipe Line Co. Ltd. When compared to the same period in 2008, earnings in the second quarter of 2009 were negatively impacted by higher planned maintenance activities of about $95 million at the Strathcona and Nanticoke refineries. Also impacting second quarter 2009 earnings were lower industry refining margins and lower sales volumes due to the slowdown in the economy.

Six-month net income was $164 million, compared with $269 million in 2008. Earnings in the first half of 2008 included a gain of $187 million from the sale of Rainbow pipeline. Also impacting earnings in 2009 were lower sales volumes of about $45 million due to the slowdown in the economy. These factors were partially offset by higher overall downstream margins of about $65 million and the favourable impact of a weaker Canadian dollar of about $60 million.

Chemical

Net income was $8 million in the second quarter, compared with $10 million in the same quarter last year. Earnings were lower in the quarter primarily due to lower margins for polyethylene products and lower sales volumes for polyethylene and intermediate products, partially offset by higher margins for intermediate products. Six-month net income was $11 million, compared with $34 million in 2008. Earnings were negatively impacted by the slow economy in 2009, with lower margins for polyethylene and aromatic products and lower sales volumes for both polyethylene and intermediate products, partially offset by higher margins for intermediate products.

 

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IMPERIAL OIL LIMITED

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued…)

 

Corporate and other

Net income from Corporate and other was negative $13 million in the second quarter, compared with negative $39 million in the same period of 2008. Favourable earnings effects in the second quarter were primarily due to lower share-based compensation charges, partially offset by lower interest income from lower yields on cash balances. For the six months of 2009, net income was negative $71 million, versus negative $62 million last year. Unfavourable earnings effects in the first six months of 2009 were primarily due to lower interest income from lower yields on cash balances.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operating activities was $262 million during the second quarter of 2009, compared with $1,427 million in the same period last year. Lower cash flow was primarily due to lower net income. The timing of scheduled income tax payments and the net effects of lower commodity prices on receivable and payable balances also contributed to lower cash flow. Year-to-date cash flow used in operating activities was $34 million, compared with cash flow generated from operating activities of $1,716 million in the same period last year. Lower cash flow was primarily due to lower net income and the timing of scheduled income tax payments. The impact of lower seasonal inventory builds was essentially offset by the net effects of lower commodity prices on receivable and payable balances.

Investing activities used net cash of $479 million in the second quarter and $886 million in the first half of 2009, an increase of $443 million and $612 million from the corresponding periods in 2008. Additions to property, plant and equipment were $513 million in the second quarter, compared with $262 million during the same quarter of 2008, and $924 million in the first half of 2009, compared with $513 million in the same period last year. Expenditures were primarily for advancing the Kearl oil sands project. Other investments included development drilling at Cold Lake, facilities improvements at Syncrude, exploration drilling at Horn River and development drilling at conventional fields in Western Canada. Proceeds from asset sales were $35 million in the second quarter and $37 million in the first half of 2009, compared with $228 million and $241 million in the corresponding periods of 2008. The 2008 results included proceeds from the sale of Rainbow pipeline.

In June, the company received approval from the Toronto Stock Exchange for a new normal course issuer bid to replace its existing share-purchase program that expired on June 24, 2009. The new share-purchase program enables the company to repurchase up to about 42 million shares during the period from June 25, 2009, to June 24, 2010. During the first half of 2009, the company repurchased about 12 million shares for $490 million, including shares purchased from ExxonMobil. In the second quarter of 2009, share repurchases were reduced to $61 million, as cash flow from operations was used to fund growth projects such as Kearl. The company will continue to evaluate its share-purchase program in the context of its overall capital activities.

Cash dividends of $172 million were paid in the first six months of 2009, compared with dividends of $163 million in the same period of 2008. Per-share dividends declared in the first two quarters of 2009 totaled $0.20, up from $0.18 in the same period of 2008.

The above factors led to a decrease in the company’s balance of cash and marketable securities to $390 million at June 30, 2009, from $1,974 million at the end of 2008.

 

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IMPERIAL OIL LIMITED

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued…)

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Information about market risks for the six months ended June 30, 2009 does not differ materially from that discussed on page 33 in the company’s annual report to shareholders for the year ended December 31, 2008 and interim report to shareholders for the quarter ended March 31, 2009 except for the following:

 

   

Earnings sensitivity (a)

millions of dollars after tax

         
   

Nine cents decrease (increase) in the value of the Canadian dollar

        versus the U.S. dollar

    + (-) 495    

The sensitivity of net income to changes in the Canadian dollar versus the U.S. dollar increased from the first quarter 2009 by about $5 million (after tax) for each one-cent difference. This was primarily due to the narrowing price spread between light crude oil and Cold Lake heavy oil partially offset by a decrease in industry refining margins.

(a) The amount quoted to illustrate the impact of the sensitivity represents a change of about 10 percent in the value of the commodity at the end of the second quarter 2009. The sensitivity calculation shows the impact on annual net income that results from a change in one factor, after tax and royalties and holding all other factors constant. While the sensitivity is applicable under current conditions, it may not apply proportionately to larger fluctuations.

 

 

 

 

This report may contain forward-looking information. Actual results could differ materially due to market conditions, changes in law or government policy, changes in operating conditions and costs, changes in project schedules, operating performance, demand for oil and gas, commercial negotiations or other technical and economic factors.

 

 

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IMPERIAL OIL LIMITED

 

 

CONSOLIDATED STATEMENT OF INCOME

(U.S. GAAP, unaudited)

 

     Second Quarter        

Six Months

to June 30

  
millions of Canadian dollars    2009    2008          2009    2008  

REVENUES AND OTHER INCOME

               

Operating revenues (a)(b)

    5,261    8,618       9,914    15,849   

Investment and other income (4)

    42    241       59    273   
              

TOTAL REVENUES AND OTHER INCOME

    5,303    8,859       9,973    16,122   
              

EXPENSES

               

Exploration

    22    17       105    57   

Purchases of crude oil and products (c)

    3,131    5,312       5,451    9,808   

Production and manufacturing (d)(5)

    1,077    1,114       2,107    2,091   

Selling and general (5)

    271    324       601    619   

Federal excise tax (a)

    314    328       620    640   

Depreciation and depletion

    193    181       390    362   

Financing costs

    1    –       3    (3 ) 
              

TOTAL EXPENSES

    5,009    7,276       9,277    13,574   
              

INCOME BEFORE INCOME TAXES

    294    1,583       696    2,548   

INCOME TAXES

    85    435       198    719   
              

NET INCOME (3)

    209    1,148       498    1,829   
              

NET INCOME PER COMMON SHARE - BASIC (dollars) (7)

    0.25    1.29       0.59    2.05   

NET INCOME PER COMMON SHARE - DILUTED (dollars) (7)

    0.25    1.28       0.58    2.03   

DIVIDENDS PER COMMON SHARE (dollars)

    0.10    0.09       0.20    0.18   

(a)  Federal excise tax included in operating revenues

    314    328       620    640   

(b)  Amounts from related parties included in operating revenues

    452    628       766    1,219   

(c)  Amounts to related parties included in purchases of crude oil and products

    651    1,250       1,348    2,509   

(d)  Amounts to related parties included in production and manufacturing expenses

    52    40       111    81   

The notes to the financial statements are an integral part of these financial statements.

 

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IMPERIAL OIL LIMITED

 

 

CONSOLIDATED BALANCE SHEET

(U.S. GAAP, unaudited)

 

millions of Canadian dollars   

As at

June 30

2009

    

As at

Dec. 31

2008

  

ASSETS

     

Current assets

     

Cash

    390      1,974   

Accounts receivable,
    less estimated doubtful accounts

    1,823      1,455   

Inventories of crude oil and products

    725      673   

Materials, supplies and prepaid expenses

    317      180   

Deferred income tax assets

    450      361   
      

Total current assets

    3,705      4,643   

Long-term receivables, investments and other long-term assets

    917      881   

Property, plant and equipment,

    25,020      24,165   

less accumulated depreciation and depletion

    13,241      12,917   
      

Property, plant and equipment, net

    11,779      11,248   

Goodwill

    204      204   

Other intangible assets, net

    58      59   
      

TOTAL ASSETS

    16,663      17,035   
      

LIABILITIES

     

Current liabilities

     

Notes and loans payable

    109      109   

Accounts payable and accrued liabilities (a)(6)

    2,909      2,542   

Income taxes payable

    913      1,498   
      

Total current liabilities

    3,931      4,149   

Capitalized lease obligations

    32      34   

Other long-term obligations (6)

    2,232      2,298   

Deferred income tax liabilities

    1,544      1,489   
      

TOTAL LIABILITIES

    7,739      7,970   

SHAREHOLDERS’ EQUITY

     

Common shares at stated value (b)(7)

    1,507      1,528   

Earnings reinvested

    8,343      8,484   

Accumulated other comprehensive income (8)

    (926 )    (947 ) 
      

TOTAL SHAREHOLDERS’ EQUITY

    8,924      9,065   
      

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

    16,663      17,035   
      

(a)  Accounts payable and accrued liabilities include amounts to related parties of $179 million (2008 - $127 million).

(b)  Number of common shares outstanding was 848 million (2008 - 859 million).

The notes to the financial statements are an integral part of these financial statements.

 

 

Approved by the directors July 30, 2009

 

/s/ B.H March     /s/ P.A. Smith

Chairman, president and

chief executive officer

    

Senior vice-president,

finance and administration, and treasurer

 

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IMPERIAL OIL LIMITED

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

(U.S. GAAP, unaudited)

inflow/(outflow)

millions of Canadian dollars

                              
   Second Quarter         Six Months

to June 30

   

  

       2009          2008               2009          2008   

OPERATING ACTIVITIES

            

Net income

    209      1,148         498      1,829   

Adjustment for non-cash items:

            

Depreciation and depletion

    193      181         390      362   

(Gain)/loss on asset sales (4)

    (31 )    (221 )       (32 )    (232 ) 

Deferred income taxes and other

    (71 )    (177 )       (43 )    (242 ) 

Changes in operating assets and liabilities:

            

Accounts receivable

    (244 )    (366 )       (369 )    (764 ) 

Inventories and prepaids

    107      103         (190 )    (469 ) 

Income taxes payable

    (25 )    370         (585 )    359   

Accounts payable

    81      479         369      1,063   

All other items - net (a)

    43      (90 )       (72 )    (190 ) 
               

CASH FROM (USED IN) OPERATING ACTIVITIES

    262      1,427         (34 )    1,716   
               

INVESTING ACTIVITIES

            

Additions to property, plant and

equipment and intangibles

    (513 )    (262 )       (924 )    (513 ) 

Proceeds from asset sales

    35      228         37      241   

Loans to equity company

    (1 )    (2 )       1      (2 ) 
               

CASH FROM (USED IN) INVESTING ACTIVITIES

    (479 )    (36 )       (886 )    (274 ) 
               

FINANCING ACTIVITIES

            

Reduction in capitalized lease obligations

    (1 )    (1 )       (2 )    (2 ) 

Issuance of common shares under stock option plan

    –      2         –      6   

Common shares purchased (7)

    (61 )    (606 )       (490 )    (1,196 ) 

Dividends paid

    (86 )    (81 )       (172 )    (163 ) 
               

CASH FROM (USED IN) FINANCING ACTIVITIES

    (148 )    (686 )       (664 )    (1,355 ) 
               

INCREASE (DECREASE) IN CASH

    (365 )    705         (1,584 )    87   

CASH AT BEGINNING OF PERIOD

    755      590         1,974      1,208   
               

CASH AT END OF PERIOD

    390      1,295         390      1,295   
               

(a)  Includes contribution to registered pension plans

    (6 )    (6 )       (167 )    (153 ) 

The notes to the financial statements are an integral part of these financial statements.

 

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IMPERIAL OIL LIMITED

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

 

1. Basis of financial statement presentation

These unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the United States of America and follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements. In the opinion of the management, the information furnished herein reflects all known accruals and adjustments necessary for a fair presentation of the financial position of the company as at June 30, 2009, and December 31, 2008, and the results of operations and changes in cash flows for the six months ended June 30, 2009 and 2008. All such adjustments are of a normal recurring nature. Subsequent events have been evaluated through the date the financial statements were issued. The company’s exploration and production activities are accounted for under the “successful efforts” method. Certain reclassifications to the prior year have been made to conform to the 2009 presentation.

The results for the six months ended June 30, 2009, are not necessarily indicative of the operations to be expected for the full year.

All amounts are in Canadian dollars unless otherwise indicated.

 

2. Accounting change for fair value measurements

Effective January 1, 2009, the company adopted the Financial Accounting Standards Board’s (FASB) Statement No. 157 (SFAS 157), “Fair Value Measurements” for nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis. SFAS 157 defines fair value, establishes a framework for measuring fair value when an entity is required to use a fair value measure for recognition or disclosure purposes and expands the disclosures about fair value measures. The adoption did not have a material impact on the company’s financial statements. The company previously adopted SFAS 157 for financial assets and liabilities that are measured at fair value and for nonfinancial assets and liabilities that are measured at fair value on a recurring basis.

 

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IMPERIAL OIL LIMITED

 

 

 

3. Business Segments

 

Second Quarter    Upstream          Downstream          Chemical
millions of dollars    2009     2008           2009     2008           2009    2008

REVENUES AND OTHER INCOME

                    

External sales (a)

    879      1,836         4,152      6,401         230    381

Intersegment sales

    698      1,554         355      892         83    141

Investment and other income

    19      5         23      228         –    –
    
   1,596      3,395         4,530      7,521         313    522
    

EXPENSES

                    

Exploration (b)

    22      17         –      –         –    –

Purchases of crude oil and products

    468      1,261         3,566      6,209         233    429

Production and manufacturing

    630      675         400      382         47    57

Selling and general

    1      1         234      243         19    19

Federal excise tax

    –      –         314      328         –    –

Depreciation and depletion

    129      118         59      59         3    3

Financing costs

    1      –         –      (1 )       –    –
    

TOTAL EXPENSES

    1,251      2,072         4,573      7,220         302    508
    

INCOME BEFORE INCOME TAXES

    345      1,323         (43 )    301         11    14

INCOME TAXES

    93      385         (5 )    62         3    4
    

NET INCOME

    252      938         (38 )    239         8    10
    

Export sales to the United States

    422      915         322      368         111    230

Cash flows from (used in) operating activities

    38      1,025         240      417         11    18

CAPEX (b)

    471      212         61      63         2    2
Second Quarter   

Corporate

and Other

          Eliminations          Consolidated
millions of dollars    2009     2008           2009     2008           2009    2008

REVENUES AND OTHER INCOME

                    

External sales (a)

    –      –         –      –         5,261    8,618

Intersegment sales

    –      –         (1,136 )    (2,587 )       –    –

Investment and other income

    –      8         –      –         42    241
    
   –      8         (1,136 )    (2,587 )       5,303    8,859
    

EXPENSES

                    

Exploration (b)

    –      –         –      –         22    17

Purchases of crude oil and products

    –      –         (1,136 )    (2,587 )       3,131    5,312

Production and manufacturing

    –      –         –      –         1,077    1,114

Selling and general

    17      61         –      –         271    324

Federal excise tax

    –      –         –      –         314    328

Depreciation and depletion

    2      1         –      –         193    181

Financing costs

    –      1         –      –         1    –
    

TOTAL EXPENSES

    19      63         (1,136 )    (2,587 )       5,009    7,276
    

INCOME BEFORE INCOME TAXES

    (19 )    (55 )       –      –         294    1,583

INCOME TAXES

    (6 )    (16 )       –      –         85    435
    

NET INCOME

    (13 )    (39 )       –      –         209    1,148
    

Export sales to the United States

    –      –         –      –         855    1,513

Cash flows from (used in) operating activities

    (27 )    (33 )       –      –         262    1,427

CAPEX (b)

    1      2         –      –         535    279

 

(a) Includes crude oil sales made by Downstream in order to optimize refining operations.
(b) Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant, equipment and intangibles and additions to capital leases.

 

12

IMPERIAL OIL LIMITED

 

 

 

Six Months to June 30    Upstream          Downstream          Chemical  
millions of dollars    2009     2008           2009     2008           2009     2008  

REVENUES AND OTHER INCOME

                   

External sales (a)

    1,639      3,285         7,837      11,830         438      734   

Intersegment sales

    1,354      2,846         745      1,671         147      242   

Investment and other income

    23      9         31      242         –      1   
      
   3,016      6,140         8,613      13,743         585      977   
      

EXPENSES

                   

Exploration (b)

    105      57         –      –         –      –   

Purchases of crude oil and products

    832      2,346         6,433      11,443         432      778   

Production and manufacturing

    1,276      1,256         736      728         95      107   

Selling and general

    2      3         467      476         38      37   

Federal excise tax

    –      –         620      640         –      –   

Depreciation and depletion

    265      235         115      118         6      6   

Financing costs

    1      –         1      (5 )       –      –   
      

TOTAL EXPENSES

    2,481      3,897         8,372      13,400         571      928   
      

INCOME BEFORE INCOME TAXES

    535      2,243         241      343         14      49   

INCOME TAXES

    141      655         77      74         3      15   
      

NET INCOME

    394      1,588         164      269         11      34   
      

Export sales to the United States

    827      1,651         559      593         220      451   

Cash flows from (used in) operating activities

    (192 )    1,503         194      243         (3 )    10   

CAPEX (b)

    918      467         103      95         6      4   

Total assets as at June 30

    9,583      9,018         6,524      7,909         433      535   

Capital employed as at June 30

    5,972      4,924         3,771      3,121         196      236   
Six Months to June 30   

Corporate

and Other

          Eliminations          Consolidated  
millions of dollars    2009     2008           2009     2008           2009     2008  

REVENUES AND OTHER INCOME

                   

External sales (a)

    –      –         –      –         9,914      15,849   

Intersegment sales

    –      –         (2,246 )    (4,759 )       –      –   

Investment and other income

    5      21         –      –         59      273   
      
   5      21         (2,246 )    (4,759 )       9,973      16,122   
      

EXPENSES

                   

Exploration (b)

    –      –         –      –         105      57   

Purchases of crude oil and products

    –      –         (2,246 )    (4,759 )       5,451      9,808   

Production and manufacturing

    –      –         –      –         2,107      2,091   

Selling and general

    94      103         –      –         601      619   

Federal excise tax

    –      –         –      –         620      640   

Depreciation and depletion

    4      3         –      –         390      362   

Financing costs

    1      2         –      –         3      (3 ) 
      

TOTAL EXPENSES

    99      108         (2,246 )    (4,759 )       9,277      13,574   
      

INCOME BEFORE INCOME TAXES

    (94 )    (87 )       –      –         696      2,548   

INCOME TAXES

    (23 )    (25 )       –      –         198      719   
      

NET INCOME

    (71 )    (62 )       –      –         498      1,829   
      

Export sales to the United States

    –      –         –      –         1,606      2,695   

Cash flows from (used in) operating activities

    (33 )    (40 )       –      –         (34 )    1,716   

CAPEX (b)

    2      4         –      –         1,029      570   

Total assets as at June 30

    412      1,335         (289 )    (626 )       16,663      18,171   

Capital employed as at June 30

    (835 )    243         –      –         9,104      8,524   

 

(a) Includes crude oil sales made by Downstream in order to optimize refining operations.
(b) Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant, equipment and intangibles and additions to capital leases.

 

13

IMPERIAL OIL LIMITED

 

 

 

4. Investment and other income

Investment and other income includes gains and losses on asset sales as follows:

 

     Second Quarter        

Six Months

to June 30

millions of dollars        2009        2008              2009        2008

Proceeds from asset sales

    35    228       37    241

Book value of assets sold

    4    7       5    9
            

Gain/(loss) on asset sales, before tax (a)

    31    221       32    232
            

Gain/(loss) on asset sales, after tax (a)

    25    192       26    201
            

(a)  The second quarter of 2008 included a gain of $219 million ($187 million, after tax) from the sale of Rainbow Pipe Line Co. Ltd., an equity company.

 

5. Employee retirement benefits

The components of net benefit cost included in production and manufacturing and selling and general expenses in the consolidated statement of income are as follows:

 

     Second Quarter         

Six Months

to June 30

  
millions of dollars        2009         2008               2009         2008  

Pension benefits:

            

Current service cost

    14      23         40      47   

Interest cost

    79      70         152      136   

Expected return on plan assets

    (66 )    (83 )       (134 )    (165 ) 

Amortization of prior service cost

    5      4         9      9   

Recognized actuarial loss

    28      26         56      46   
               

Net benefit cost

    60      40         123      73   
               

Other post-retirement benefits:

            

Current service cost

    1      2         2      3   

Interest cost

    6      6         13      12   

Recognized actuarial loss/(gain)

    (1 )    2         (1 )    3   
               

Net benefit cost

    6      10         14      18   
               

 

6. Other long-term obligations

 

millions of dollars   

As at

    June 30

2009

   

As at

    Dec. 31

2008

Employee retirement benefits (a)

    1,051    1,151

Asset retirement obligations and other environmental liabilities (b)

    712    728

Share-based incentive compensation liabilities

    260    203

Other obligations

    209    216
    

Total other long-term obligations

    2,232    2,298
    

(a)  Total recorded employee retirement benefits obligations also include $45 million in current liabilities (December 31, 2008 - $45 million).

(b)  Total asset retirement obligations and other environmental liabilities also include $84 million in current liabilities (December 31, 2008 - $83 million).

 

14

IMPERIAL OIL LIMITED

 

 

 

7. Common shares

 

thousands of shares   

As at

June 30

2009

     

As at
Dec. 31

2008

Authorized

    1,100,000      1,100,000

Common shares outstanding

    847,599      859,402

From 1995 through 2008, the company purchased shares under fourteen 12-month normal course issuer bid share repurchase programs, as well as an auction tender. On June 25, 2009, another 12-month normal course issuer bid program was implemented with an allowable purchase of 42.4 million shares (five percent of the total on June 15, 2009), less shares purchased from Exxon Mobil Corporation and shares purchased by the employee savings plan and company pension fund. The results of these activities are as shown below:

 

     millions of
   

Year

    Shares           Dollars
 

1995 - 2007

    846.1         12,811
 

2008 - Second Quarter

    10.6         606
 

- Full year

    44.3         2,210
 

2009 - Second Quarter

    1.3         61
 

- Year-to-date

    11.8         490

Cumulative purchases to date

    902.2         15,511

Exxon Mobil Corporation’s participation in the above share repurchase maintained its ownership interest in Imperial at 69.6 percent.

The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.

The following table provides the calculation of net income per common share:

 

     Second
Quarter		        

Six Months

to June 30

     2009    2008         2009    2008

Net income per common share - basic

               

Net income (millions of dollars)

    209    1,148       498    1,829

Weighted average number of common

        shares outstanding (millions of shares)

    847.8    888.1       851.9    893.9

Net income per common share (dollars)

    0.25    1.29       0.59    2.05

Net income per common share - diluted

               

Net income (millions of dollars)

    209    1,148       498    1,829
              

Weighted average number of common shares

        outstanding (millions of shares)

    847.8    888.1       851.9    893.9

Effect of employee share-based awards (millions of shares)

    7.1    6.5       6.9    6.4
            

Weighted average number of common shares

        outstanding, assuming dilution (millions of shares)

    854.9    894.6       858.8    900.3

Net income per common share (dollars)

    0.25    1.28       0.58    2.03

 

15

IMPERIAL OIL LIMITED

 

 

 

8. Comprehensive income

 

         Second Quarter         

    Six Months

    to June 30

  

millions of dollars

        2009          2008               2009          2008   

Net income

    209      1,148         498      1,829   

Post-retirement benefit liability adjustment (excluding amortization)

    (25 )    (105 )       (25 )    (105 ) 

Amortization of post retirement benefit liability adjustment included in net periodic benefit costs

    24      23         47      42   
                           

Other comprehensive income (net of income taxes)

    (1 )    (82 )       22      (63 ) 

Total comprehensive income

    208      1,066         520      1,766   
                           

 

16

IMPERIAL OIL LIMITED

 

 

OPERATING STATISTICS

(unaudited)    Second Quarter        

Six Months

to June 30

      2009    2008          2009    2008

Gross crude oil and NGL production

               

(thousands of barrels a day)

               

Cold Lake

    139    144       143    149

Syncrude

    51    66       60    66

Conventional

    25    26       26    27
            

Total crude oil production

    215    236       229    242

Natural gas liquids (NGLs) available for sale

    8    10       8    11
            

Total crude oil and NGL production

    223    246       237    253
            

Net crude oil and NGL production

               

(thousands of barrels a day)

               

Cold Lake

    116    118       128    125

Syncrude

    49    56       60    57

Conventional

    19    19       21    19
            

Total crude oil production

    184    193       209    201

Natural gas liquids (NGLs) available for sale

    6    10       6    9
            

Total crude oil and NGL production

    190    203       215    210
            

COLD LAKE BLEND SALES (thousands of barrels a day)

    180    191       189    197

NGL SALES (thousands of barrels a day)

    6    7       9    12

NATURAL GAS (millions of cubic feet a day)

               

Production (gross)

    286    310       296    318

Production (net)

    276    251       269    256

Sales

    265    279       271    287

AVERAGE REALIZATIONS AND PRICES (Canadian dollars)

               

Conventional crude oil realizations (a barrel)

    60.08    118.88       53.37    106.01

NGL realizations (a barrel)

    35.11    69.26       39.06    61.79

Natural gas realizations (a thousand cubic feet)

    3.48    10.35       4.67    9.15

Par crude oil price at Edmonton (a barrel)

    66.87    127.07       59.05    112.94

Heavy crude oil at Hardisty (Bow River, a barrel)

    61.82    104.15       52.81    90.90

TOTAL REFINERY THROUGHPUT (thousands of barrels a day)

   365    451       412    438

REFINERY CAPACITY UTILIZATION (percent)

   73    90       82    87

PETROLEUM PRODUCTS SALES (thousands of barrels a day)

               

Gasolines

    205    205       198    201

Heating, diesel and jet fuels

    135    144       146    155

Heavy fuel oils

    24    28       28    28

Lube oils and other products

    36    47       36    42
            

Net petroleum products sales

    400    424       408    426
            

PETROCHEMICAL SALES (thousands of tonnes a day)

    2.9    3.1       2.8    3.1

 

 

 

17

IMPERIAL OIL LIMITED

 

 

SHARE OWNERSHIP, TRADING AND PERFORMANCE

(unaudited)    Second Quarter        

Six Months

to June 30

      2009    2008          2009    2008

RETURN ON AVERAGE CAPITAL EMPLOYED (a)

               

(rolling 4 quarters, percent)

             27.8    41.6

RETURN ON AVERAGE SHAREHOLDERS’ EQUITY

               

(rolling 4 quarters, percent)

             28.4    44.2

INTEREST COVERAGE RATIO - EARNINGS BASIS

               

(rolling 4 quarters, times covered)

             571.7    146.2

SHARE OWNERSHIP

               

Outstanding shares (thousands)

               

Monthly weighted average

    847,816    888,116       851,920    893,926

At June 30

             847,599    882,073

Number of shareholders

               

At June 30

             13,257    13,182

SHARE PRICES

               

Toronto Stock Exchange (Canadian dollars)

               

High

    49.11    62.54       49.11    62.54

Low

    40.35    52.41       35.95    45.80

Close at June 30

             45.12    56.16

NYSE Amex (U.S. dollars) (b)

               

High

    42.98    63.08       42.98    63.08

Low

    33.61    51.24       28.44    44.30

Close at June 30

             38.46    55.07

 

(a) Return on capital employed is net income excluding after-tax cost of financing divided by the average rolling four quarters’ capital employed.
(b) Share price presented is based on consolidated U.S. market data.

 

 

 

18