CALGARY, Oct. 30 /CNW/ - Imperial Oil today announced net income for the
third quarter of $816 million or $0.88 a share, compared with $822 million or
$0.84 a share for the same period last year. Net income for the first nine
months of 2007 was $2,302 million or $2.45 a share, versus $2,250 million or
$2.28 a share for the first nine months of 2006.
Third quarter earnings were essentially equal to those in the same period
in 2006 and positively impacted by higher crude oil realizations, higher
Syncrude volumes, and favourable refinery operations and inventory effects.
Higher gains from asset divestments also contributed to earnings. Offsetting
these factors were lower natural gas, conventional crude oil and natural gas
liquids volumes, lower Cold Lake heavy oil realizations as well as weaker
industry refining margins. A stronger Canadian dollar also negatively impacted
earnings.
Operating revenues were $6,306 million in the third quarter, compared
with $6,612 million in the corresponding period last year. Capital and
exploration expenditures were $245 million in the third quarter, compared with
$263 million during the same quarter of 2006. For the first nine months of
2007, the amount was $661 million, versus $868 million in the same period a
year ago. During the third quarter of 2007, the company repurchased about
12.8 million shares for $600 million. At September 30, the company's balance
of cash and marketable securities was $2,223 million, compared with
$2,158 million at the end of 2006.
"We had a solid third quarter with record production levels at Syncrude
and Cold Lake. A significant resource recovery technology at Cold Lake was
also advanced. We continue with a strong focus to mitigate costs brought on by
the cumulative impact of global materials cost escalation, a rising Canadian
dollar and various new policies and regulations directed at the oil and gas
industry. The recently announced Alberta royalty plan will add to these costs
and investment pressures," said Tim Hearn, Imperial's chairman, president and
chief executive officer.
Imperial Oil is one of Canada's largest corporations and a leading member
of the country's petroleum industry. It is one of Canada's largest producers
of crude oil and natural gas, is the country's largest petroleum refiner, and
has a leading market share in petroleum products sold through a coast-to-coast
supply network that includes close to 2,000 service stations.
Highlights/Items of interest
Record production at Cold Lake
Production at Cold Lake, the company's wholly-owned in situ oil sands
project, averaged a record 160 thousand barrels a day during the quarter.
Higher production was due to the cyclic nature of production at Cold Lake and
increased volumes from the ongoing development drilling program.
First commercial application of LASER started up at Cold Lake
Commercial application of liquid addition to steam for enhanced recovery
(LASER), commenced at Cold Lake after several years of field testing. The
Imperial-patented technology increases the amount of recoverable resource for
late cycle portions of the field. The application of LASER will follow a
disciplined, phased development, allowing the company to continue to
incorporate learnings and best technologies on a continuous basis.
Record production at Syncrude
Imperial's share of production at Syncrude averaged a record 94 thousand
barrels a day in the month of August, and a record 87 thousand barrels a day
in the third quarter. Higher production was achieved through improved
reliability resulting in higher utilization of expansion capacity. The
Syncrude oil sands joint venture is 25-percent owned by Imperial.
Imperial's Sarnia chemical operations recognized by Responsible Care(R)
A recent assessment by a team of industry and community representatives
shows that Imperial Oil continues to meet and exceed the guiding principles of
Responsible Care(R). An initiative of the Canadian Chemical Producers'
Association (CCPA), Responsible Care requires that its members follow its
ethic and strict codes of practice that govern the safe and environmentally
responsible handling of chemicals throughout their life-cycle. Introduced in
Canada in 1985 and developed with significant input from Imperial, Responsible
Care(R) is now practiced in more than 50 countries around the world.
Responsible Care(R) is a registered trademark of the Canadian Chemical
Producers' Association.
Imperial invests $1 million in the workforce of the future
Continuing the company's long history of supporting education and
community initiatives, the donation will put leading-edge technology in the
hands of NAIT instrumentation students by funding the Imperial Oil Process
Control Laboratory. The lab houses advanced equipment specific to the oil and
gas industry, including a distillation tower that simulates processes found in
petro-chemical refineries. The donation is also aimed at ensuring the success
of Aboriginal students, one of Canada's largest untapped sources of skilled
labour.IMPERIAL OIL LIMITED
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FINANCIAL HIGHLIGHTS (unaudited)
-------------------------------------------------------------------------
Nine months
Third quarter to September 30
2007 2006 2007 2006
----------------- -----------------
Net income (U.S. GAAP,
millions of dollars)
Natural resources 607 617 1,630 1,768
Petroleum products 191 149 703 410
Chemicals 24 38 74 108
Corporate and other (6) 18 (105) (36)
----------------- -----------------
Net income (U.S. GAAP) 816 822 2,302 2,250
----------------- -----------------
Cash flow from operating activities 1,014 1,640 2,414 2,528
Capital and exploration expenditures 245 263 661 868
Per-share information (dollars)
Net income - basic 0.88 0.84 2.46 2.29
Net income - diluted 0.88 0.84 2.45 2.28
Dividends 0.09 0.08 0.26 0.24
Share prices - close at September 30
Toronto Stock Exchange
(Canadian dollars) 49.29 37.47
American Stock Exchange
(U.S. dollars) 49.56 33.55-------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-------------------------------------------------------------------------
OPERATING RESULTS
-----------------
The company's net income for the third quarter of 2007 was $816 million
or $0.88 a share on a diluted basis, compared with $822 million or $0.84 a
share for the same period last year. Net income for the first nine months of
2007 was $2,302 million or $2.45 a share on a diluted basis, versus
$2,250 million or $2.28 a share for the first nine months of 2006.
Earnings in the third quarter were essentially equal to that in the same
period in 2006. Earnings were positively impacted by higher crude oil
realizations of about $60 million and higher Syncrude volumes of about
$50 million. Earnings were also about $60 million higher due to favourable
refinery operations and inventory effects partially offset by weaker industry
refining margins. Higher gains from asset divestments of about $50 million
also contributed to earnings. Offsetting these positive factors were lower
natural gas, conventional crude oil and natural gas liquids (NGL) volumes
totaling about $80 million and lower Cold Lake heavy oil realizations of about
$45 million. A stronger Canadian dollar also negatively impacted earnings by
about $80 million.
For the first nine months, earnings increased primarily due to the
positive impacts of about $160 million from refinery operations, stronger
industry refining and marketing margins of about $130 million and higher
Syncrude volumes of about $125 million. Gains from asset divestments were also
higher in 2007 by about $100 million. Higher earnings were partially offset by
lower conventional resources volumes of about $180 million, higher share-based
compensation and exploration expenses totaling about $110 million and higher
tax expense of about $80 million.
A stronger Canadian dollar also negatively impacted earnings by about
$80 million.
Natural resources
Net income from natural resources in the third quarter was $607 million,
versus $617 million in the same period of 2006. The impact of natural
resources volumes and realizations on earnings were mixed. Higher Syncrude
volumes of about $50 million were more than offset by lower natural gas,
conventional crude oil and NGL volumes totaling about $80 million. Higher
crude oil realizations of about $60 million were partially offset by lower
Cold Lake heavy oil realizations of about $45 million. Earnings were
negatively impacted by a higher Canadian dollar of about $60 million and
higher production, exploration and other operating costs of about $40 million.
These negative factors were essentially offset by gains from asset divestments
of about $50 million and lower tax expense of about $35 million.
Net income for the first nine months was $1,630 million versus
$1,768 million during the same period last year. Earnings decreased primarily
due to lower natural gas, conventional crude oil, and NGL volumes of about
$180 million. Earnings were also lower due to higher tax expense of
$80 million, the negative impact of a higher Canadian dollar of about $60
million and higher exploration expense of about $40 million. These factors
were partially offset by higher Syncrude volumes of about $125 million. Higher
crude oil realizations of about $35 million were more than offset by lower
natural gas and Cold Lake heavy oil realizations totaling $50 million. Gains
from asset divestments were higher in 2007 by about $100 million.
Brent crude oil prices in U.S. dollars averaged eight percent higher in
the third quarter and were at about the same level for the first nine months
compared with the same periods last year. However, mainly because of a
stronger Canadian dollar, the company's realizations for conventional crude
oil were only about two percent higher in the third quarter and about four
percent lower for the first nine months compared with the same periods last
year. Average realizations for Cold Lake heavy oil in the third quarter were
about 15 percent lower than the third quarter of 2006 as the price spread
between light crude oil and Cold Lake heavy oil widened. For the first nine
months in 2007, average realizations for Cold Lake heavy oil were slightly
lower than the same period in 2006. Realizations for natural gas averaged
$5.73 a thousand cubic feet in the third quarter, down from $6.29 in the same
quarter last year. For the first nine-month period, realizations for natural
gas averaged $7.11 a thousand cubic feet in 2007, down from $7.42 in the same
period of 2006.
Total gross production of crude oil and NGLs in the third quarter was
291 thousand barrels a day, versus 281 thousand barrels in the third quarter
of 2006. For the first nine months of the year, total gross production of
crude oil and NGLs averaged 274 thousand barrels a day, compared with 273
thousand barrels in the same period of 2006.
Gross production of Cold Lake heavy oil averaged 160 thousand barrels a
day during the third quarter, versus 158 thousand barrels in the same quarter
last year. For the first nine months, gross production was 152 thousand
barrels a day this year, compared with 155 thousand barrels in the same period
of 2006. Lower production in the first nine months was due to maintenance
activities and the cyclic nature of production at Cold Lake.
The company's share of Syncrude's gross production was 87 thousand
barrels a day in the third quarter compared with 71 thousand barrels during
the same period a year ago. During the nine-month period, the company's share
of gross production from Syncrude averaged 76 thousand barrels a day in 2007,
up from 61 thousand barrels in the same period of 2006. Increased volumes from
the new coker were partially offset by lower production due to planned
maintenance activities.
In the third quarter, gross production of conventional crude oil averaged
28 thousand barrels a day, compared with 31 thousand barrels during the same
period in 2006. For the first nine months, gross production of conventional
crude oil averaged 29 thousand barrels a day, compared with 32 thousand
barrels during the same period in 2006. Natural reservoir decline in the
Western Canadian Basin and the impact of divested producing properties were
the main reasons for the reduced production.
Gross production of NGLs available for sale was 16 thousand barrels a day
in the third quarter, down from 21 thousand barrels in the same quarter last
year. During the first nine months of 2007, gross production of NGLs available
for sale decreased to 17 thousand barrels a day, from 25 thousand barrels in
the same period of 2006, mainly due to declining NGL content of Wizard Lake
gas production.
Gross production of natural gas during the third quarter of 2007
decreased to 430 million cubic feet a day from 560 million cubic feet in the
same period last year. In the first nine months of the year, gross production
was 482 million cubic feet a day, down from 566 million in the first nine
months of 2006. The lower production volume was primarily due to decline in
production from the gas cap at Wizard Lake and natural decline in other
producing properties in the Western Canadian Basin.
In the quarter, the company realized a gain of $51 million from the sale
of its interest in the Willesden Green producing property in Alberta for net
proceeds of about $78 million. Production of the company's share of the
Willesden Green property averaged about one thousand oil-equivalent barrels a
day in 2006.
On October 25, the Alberta government proposed increases to the royalty
rates on oil and gas production beginning in 2009. The company believes that
this proposal could have an adverse effect on future company investments in
Alberta and the company's future financial results. The magnitude of the
potential impact will depend on the final form of enacted legislation and the
future prices of oil and gas and cannot be reasonably estimated at this time.
Petroleum products
Net income from petroleum products was $191 million in the third quarter
of 2007, an increase of $42 million from the same period a year ago. Earnings
were about $60 million higher due mainly to favourable refinery operations and
inventory effects partially offset by weaker industry refining margins. A
stronger Canadian dollar negatively impacted earnings by about $20 million.
Nine-month net income was $703 million, $293 million higher than the same
period of 2006. Increased earnings were primarily due to the positive impacts
of about $160 million from refinery operations including lower refinery
maintenance and project activities, and stronger industry refining and
marketing margins totaling about $130 million.
Chemicals
Net income from chemicals was $24 million in the third quarter, compared
with $38 million in the same period last year. Lower earnings were due
primarily to lower industry margin for polyethylene products. Nine-month net
income was $74 million, compared with $108 million for the same period in
2006. Lower earnings were due primarily to lower industry margin for
polyethylene products partially offset by increased margin and sales volume
for intermediate chemical products. A stronger Canadian dollar also negatively
impacted earnings in the third quarter and the first nine months of 2007.
Corporate and other
Net income from corporate and other was negative $6 million in the third
quarter, compared with $18 million in the same period of 2006. Nine-month net
income was negative $105 million, versus negative $36 million last year.
Unfavourable earnings effects were due mainly to higher share-based
compensation charges.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash flow from operating activities was $1,014 million during the third
quarter of 2007, compared with $1,640 million in the same period last year.
Lower cash flow was driven primarily by higher working capital requirements.
Year-to-date cash flow from operating activities was $2,414 million, a
decrease of $114 million from the first nine months of 2006. Lower cash flow
was due mainly to higher working capital requirements partially offset by
lower funding to employee pension plans.
Capital and exploration expenditures were $245 million in the third
quarter, compared with $263 million during the same quarter of 2006, and
$661 million in the first nine months of 2007, versus $868 million in the same
period a year ago. Lower expenditures were primarily due to the completion of
the Stage 3 upgrader expansion project at Syncrude and also the completion of
the project to produce ultra-low sulphur diesel. In 2007, for the natural
resources segment, capital and exploration expenditures included ongoing
development drilling and programs at Cold Lake to maintain and expand
production capacity, drilling at conventional fields in Western Canada and
advancing the Mackenzie gas and Kearl oil sands projects. The petroleum
products segment's capital expenditures were mainly on projects to improve
operating efficiency and upgrade the network of Esso retail outlets.
In the third quarter of 2007, the company retired its $250-million
variable-rate loan from an affiliated company of Exxon Mobil Corporation on
maturity and replaced it with a $250 million long-term variable-rate loan,
also from an affiliated company of Exxon Mobil Corporation, at interest
equivalent to Canadian market rates.
During the third quarter of 2007, the company repurchased about
12.8 million shares for $600 million. Under the current share-repurchase
program, which began on June 25, 2007, the company has purchased about 14
million shares, and can purchase an additional 32.5 million shares before June
24, 2008 when the current program expires.
Cash dividends of $236 million were paid in the first nine months of
2007. This compared with dividends of $238 million in the same period of 2006.
Increased repurchase of shares reduced the number of shares outstanding and
total dividend payments. Per-share dividends declared in the first three
quarters of 2007 totaled $0.26, up from $0.24 in the same period last year.
The above factors led to an increase in the company's balance of cash and
marketable securities to $2,223 million at September 30, 2007, from
$2,158 million at the end of 2006.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
-----------------------------------------------------------
Information about market risks for the nine months ended September 30,
2007 does not differ materially from that discussed on page 31 in the
company's annual report to shareholders for the year ended December 31, 2006
and interim report to shareholders for the quarter ended March 31, 2007 except
for the following:-------------------------------------------------------------------------
Earnings sensitivity (a)
millions of dollars after tax
-------------------------------------------------------------------------
Ten cents decrease (increase) in the value of the
Canadian dollar versus the U.S. dollar + (-) 400
Eight dollars (U.S.) a barrel change in crude oil price + (-) 320
-------------------------------------------------------------------------The sensitivity of net income to changes in the Canadian dollar versus
the U.S. dollar decreased from the first quarter 2007 by about $13 million
(after tax) for each one-cent difference. This was primarily due to the impact
of lower industry refining margins.
The sensitivity to changes in crude oil prices decreased from 2006
year-end by about $5 million (after tax) for each one U.S.-dollar difference.
An increase in the value of the Canadian dollar has lessened the impact of
U.S. dollar denominated crude oil prices on the company's revenues and
earnings.(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 third quarter 2007. 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
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CONSOLIDATED STATEMENT OF INCOME
(U.S. GAAP, unaudited) Nine months
Third quarter to September 30
millions of Canadian dollars 2007 2006 2007 2006
-------------------------------------------------------------------------
REVENUES AND OTHER INCOME
Operating revenues(a)(b) 6,306 6,612 18,372 19,002
Investment and other income(4) 124 39 331 155
----------------- -----------------
TOTAL REVENUES AND OTHER INCOME 6,430 6,651 18,703 19,157
----------------- -----------------
EXPENSES
Exploration 19 5 90 18
Purchases of crude oil and
products(c) 3,519 3,832 10,142 10,834
Production and manufacturing(5)(d) 846 772 2,580 2,619
Selling and general(5) 298 276 969 891
Federal excise tax(a) 343 336 972 954
Depreciation and depletion 205 197 592 627
Financing costs(6)(e) 10 3 33 10
----------------- -----------------
TOTAL EXPENSES 5,240 5,421 15,378 15,953
----------------- -----------------
INCOME BEFORE INCOME TAXES 1,190 1,230 3,325 3,204
INCOME TAXES 374 408 1,023 954
----------------- -----------------
NET INCOME(3) 816 822 2,302 2,250
----------------- -----------------
NET INCOME PER COMMON SHARE
- BASIC (dollars)(9) 0.88 0.84 2.46 2.29
NET INCOME PER COMMON SHARE
- DILUTED (dollars)(9) 0.88 0.84 2.45 2.28
DIVIDENDS PER COMMON SHARE
(dollars)(9) 0.09 0.08 0.26 0.24
(a) Federal excise tax included in
operating revenues 343 336 972 954
(b) Amounts from related parties
included in operating revenues 431 528 1,277 1,649
(c) Amounts to related parties
included in purchases of crude
oil and products 893 1,088 2,440 3,071
(d) Amounts to related parties
included in production and
manufacturing expenses 62 35 143 104
(e) Amounts to related parties
included in financing costs 9 9 26 24
The notes to the financial statements are an integral part of these
financial statements.
IMPERIAL OIL LIMITED
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CONSOLIDATED STATEMENT OF CASH FLOWS
(U.S. GAAP, unaudited) Nine months
inflow/(outflow) Third quarter to September 30
millions of Canadian dollars 2007 2006 2007 2006
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income 816 822 2,302 2,250
Adjustment for non-cash items:
Depreciation and depletion 205 197 592 627
(Gain)/loss on asset sales,
after income tax(4) (51) (7) (152) (61)
Deferred income taxes and other (12) 60 39 17
Changes in operating assets
and liabilities:
Accounts receivable (23) 272 (255) 292
Inventories and prepaids (51) (54) (249) (263)
Income taxes payable 183 284 (225) (11)
Accounts payable (80) 30 400 (97)
All other items - net(a) 27 36 (38) (226)
----------------- -----------------
CASH FROM (USED IN) OPERATING
ACTIVITIES 1,014 1,640 2,414 2,528
----------------- -----------------
INVESTING ACTIVITIES
Additions to property, plant and
equipment and intangibles (226) (258) (598) (850)
Proceeds from asset sales 82 20 268 154
Loans to equity company 1 2 - -
----------------- -----------------
CASH FROM (USED IN) INVESTING
ACTIVITIES (143) (236) (330) (696)
----------------- -----------------
FINANCING ACTIVITIES
Short-term debt - net (1) - 404 72
Repayment of long-term debt (251) - (906) (72)
Long-term Debt issued 250 - 500 -
Issuance of common shares under
stock option plan 1 3 10 7
Common shares purchased(9) (600) (468) (1,791) (1,405)
Dividends paid (84) (79) (236) (238)
----------------- -----------------
CASH FROM (USED IN) FINANCING
ACTIVITIES (685) (544) (2,019) (1,636)
----------------- -----------------
INCREASE (DECREASE) IN CASH 186 860 65 196
CASH AT BEGINNING OF PERIOD 2,037 997 2,158 1,661
----------------- -----------------
CASH AT END OF PERIOD 2,223 1,857 2,223 1,857
----------------- -----------------
(a) Includes contribution to
registered pension plans (5) (13) (158) (369)
The notes to the financial statements are an integral part of these
financial statements.
IMPERIAL OIL LIMITED
-------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
(U.S. GAAP, unaudited) As at As at
Sept.30 Dec.31
millions of Canadian dollars 2007 2006
-------------------------------------------------------------------------
ASSETS
Current assets
Cash 2,223 2,158
Accounts receivable,
less estimated doubtful accounts 2,126 1,871
Inventories of crude oil and products 790 556
Materials, supplies and prepaid expenses 166 151
Deferred income tax assets 635 573
-----------------
Total current assets 5,940 5,309
Investments and other long-term assets 657 104
Property, plant and equipment, 22,694 22,478
less accumulated depreciation and depletion 12,305 12,021
-----------------
Property, plant and equipment (net) 10,389 10,457
Goodwill 204 204
Other intangible assets, net 63 67
-----------------
TOTAL ASSETS 17,253 16,141
-----------------
LIABILITIES
Current liabilities
Short-term debt 575 171
Accounts payable and accrued liabilities(8)(a) 3,485 3,080
Income taxes payable 1,351 1,190
Current portion of long-term debt(7)(b) 322 907
-----------------
Total current liabilities 5,733 5,348
Long-term debt(7)(c) 538 359
Other long-term obligations(8) 1,775 1,683
Deferred income tax liabilities 1,483 1,345
-----------------
TOTAL LIABILITIES 9,529 8,735
SHAREHOLDERS' EQUITY
Common shares at stated value(9)(d) 1,617 1,677
Earnings reinvested(10) 6,815 6,462
Accumulated other comprehensive income(11) (708) (733)
-----------------
TOTAL SHAREHOLDERS' EQUITY 7,724 7,406
-----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 17,253 16,141
-----------------
(a) Accounts payable and accrued liabilities include
amounts to related parties of $221 million
(2006 - $151 million).
(b) Current portion of long-term debt includes amounts
to related parties of $318 million
(2006 - $500 million).
(c) Long-term debt includes amounts to related parties
of $500 million (2006 - $318 million).
(d) Number of common shares outstanding was 914 million
(2006 - 953 million).
The notes to the financial statements are an integral part of these
financial statements.
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Approved by the directors October 30, 2007
Chairman, president and Controller and
chief executive officer senior vice-president,
finance and administration
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IMPERIAL OIL LIMITED
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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 September 30, 2007, and December 31, 2006,
and the results of operations and changes in cash flows for the nine
months ending September 30, 2007 and 2006. All such adjustments are of a
normal recurring nature. 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 2007 presentation.
The results for the nine months ending September 30, 2007, 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 uncertainty in income taxes
Effective January 1, 2007, the company adopted the Financial Accounting
Standards Board (FASB) Interpretation No. 48 (FIN 48), "Accounting for
Uncertainty in Income Taxes". FIN 48 is an interpretation of FASB
Statement No. 109, "Accounting for Income Taxes" and prescribes a
comprehensive model for recognizing, measuring, presenting and disclosing
in the financial statements uncertain tax positions that the company has
taken or expects to take in its income tax returns. Upon the adoption of
FIN 48, the company recognized a transition gain of $14 million in
shareholders' equity. The gain reflected the recognition of several
refund claims with associated interest, partly offset by increased income
tax reserves.
The total amount of unrecognized income tax benefits at January 1, 2007,
was $142 million. The company's effective tax rate will be reduced if any
of these tax benefits are subsequently recognized. The unrecognized tax
benefits described above will not be included in the company's annual
Form 10-K contractual obligations table because the company does not
expect that there will be any cash impact from the final settlements as
sufficient general funds have been deposited with the Canada Revenue
Agency (CRA).
The company's tax filings from 2003 to 2006 are subject to examination by
the tax authorities. The CRA has proposed certain adjustments to the
company's filings for several years in the period 1987 to 2002.
Management is currently evaluating those proposed adjustments. Management
believes that a number of outstanding matters before 2002 are expected to
be resolved in 2007. The impact on unrecognized tax benefits and
associated earnings effects, if any, from these matters are not expected
to be material.
The company classifies interest on income tax related balances as
interest expense or interest income and classifies tax related penalties
as operating expense.
3. Business Segments
Natural Petroleum
Third quarter Resources Products Chemicals
millions of dollars 2007 2006 2007 2006 2007 2006
-------------------------------------------------------------------------
REVENUES AND OTHER INCOME
External sales(a) 1,028 1,178 4,934 5,086 344 348
Intersegment sales 1,227 1,090 552 570 74 87
Investment and other
income 85 - 14 21 - -
-----------------------------------------------
2,340 2,268 5,500 5,677 418 435
-----------------------------------------------
EXPENSES
Exploration(b) 19 5 - - - -
Purchases of crude oil
and products 817 736 4,243 4,535 312 307
Production and
manufacturing 479 453 321 271 46 49
Selling and general 2 3 251 266 19 19
Federal excise tax - - 343 336 - -
Depreciation and
depletion 141 131 59 61 4 3
Financing costs - - - (2) - -
-----------------------------------------------
TOTAL EXPENSES 1,458 1,328 5,217 5,467 381 378
-----------------------------------------------
INCOME BEFORE INCOME
TAXES 882 940 283 210 37 57
INCOME TAXES 275 323 92 61 13 19
-----------------------------------------------
NET INCOME 607 617 191 149 24 38
-----------------------------------------------
Export sales to the
United States 490 585 268 233 212 193
Cash flows from (used in)
operating activities 760 1,236 184 378 60 33
CAPEX(b) 184 183 50 63 2 5
Corporate
Third quarter and Other Eliminations Consolidated
millions of dollars 2007 2006 2007 2006 2007 2006
-------------------------------------------------------------------------
REVENUES AND OTHER INCOME
External sales(a) - - - - 6,306 6,612
Intersegment sales - - (1,853) (1,747) - -
Investment and other
income 25 18 - - 124 39
-----------------------------------------------
25 18 (1,853) (1,747) 6,430 6,651
-----------------------------------------------
EXPENSES
Exploration(b) - - - - 19 5
Purchases of crude oil
and products - - (1,853) (1,746) 3,519 3,832
Production and
manufacturing - - - (1) 846 772
Selling and general 26 (12) - - 298 276
Federal excise tax - - - - 343 336
Depreciation and
depletion 1 2 - - 205 197
Financing costs 10 5 - - 10 3
-----------------------------------------------
TOTAL EXPENSES 37 (5) (1,853) (1,747) 5,240 5,421
-----------------------------------------------
INCOME BEFORE INCOME
TAXES (12) 23 - - 1,190 1,230
INCOME TAXES (6) 5 - - 374 408
-----------------------------------------------
NET INCOME (6) 18 - - 816 822
-----------------------------------------------
Export sales to the
United States - - - - 970 1,011
Cash flows from (used in)
operating activities 10 (7) - - 1,014 1,640
CAPEX(b) 9 12 - - 245 263
(a) Includes crude oil sales made by Products 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.
Natural Petroleum
Nine months to September 30 Resources Products Chemicals
millions of dollars 2007 2006 2007 2006 2007 2006
-------------------------------------------------------------------------
REVENUES AND OTHER INCOME
External sales(a) 3,377 3,584 14,016 14,367 979 1,051
Intersegment sales 2,977 2,942 1,609 1,776 247 255
Investment and other
income 225 65 38 44 - -
-----------------------------------------------
6,579 6,591 15,663 16,187 1,226 1,306
-----------------------------------------------
EXPENSES
Exploration(b) 90 18 - - - -
Purchases of crude oil
and products 2,241 2,201 11,821 12,678 913 926
Production and
manufacturing 1,515 1,498 925 976 140 147
Selling and general 6 10 728 751 54 58
Federal excise tax - - 972 954 - -
Depreciation and
depletion 399 443 180 172 9 9
Financing costs 3 - 1 (2) - -
-----------------------------------------------
TOTAL EXPENSES 4,254 4,170 14,627 15,529 1,116 1,140
-----------------------------------------------
INCOME BEFORE INCOME
TAXES 2,325 2,421 1,036 658 110 166
INCOME TAXES 695 653 333 248 36 58
-----------------------------------------------
NET INCOME 1,630 1,768 703 410 74 108
-----------------------------------------------
Export sales to the
United States 1,512 1,540 770 725 576 608
Cash flows from (used in)
operating activities 1,702 2,052 656 447 1 100
CAPEX(b) 495 544 133 278 8 9
Total assets as at
September 30 7,923 7,325 6,889 6,429 499 489
Capital employed as at
September 30 4,143 4,135 3,476 3,214 323 286
Corporate
Nine months to September 30 and Other Eliminations Consolidated
millions of dollars 2007 2006 2007 2006 2007 2006
-------------------------------------------------------------------------
REVENUES AND OTHER INCOME
External sales(a) - - - - 18,372 19,002
Intersegment sales - - (4,833) (4,973) - -
Investment and other
income 68 46 - - 331 155
-----------------------------------------------
68 46 (4,833) (4,973) 18,703 19,157
-----------------------------------------------
EXPENSES
Exploration(b) - - - - 90 18
Purchases of crude oil
and products - - (4,833) (4,971) 10,142 10,834
Production and
manufacturing - - - (2) 2,580 2,619
Selling and general 181 72 - - 969 891
Federal excise tax - - - - 972 954
Depreciation and
depletion 4 3 - - 592 627
Financing costs 29 12 - - 33 10
-----------------------------------------------
TOTAL EXPENSES 214 87 (4,833) (4,973) 15,378 15,953
-----------------------------------------------
INCOME BEFORE INCOME
TAXES (146) (41) - - 3,325 3,204
INCOME TAXES (41) (5) - - 1,023 954
-----------------------------------------------
NET INCOME (105) (36) - - 2,302 2,250
-----------------------------------------------
Export sales to the
United States - - - - 2,858 2,873
Cash flows from (used in)
operating activities 55 (71) - - 2,414 2,528
CAPEX(b) 25 37 - - 661 868
Total assets as at
September 30 2,256 2,147 (314) (482) 17,253 15,908
Capital employed as at
September 30 1,273 1,111 - - 9,215 8,746
(a) Includes crude oil sales made by Products 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.
4. Investment and other income
Investment and other income includes gains and losses on asset sales as
follows:
Nine months to
Third quarter September 30
millions of dollars 2007 2006 2007 2006
-------------------------------------------------------------------------
Proceeds from asset sales 82 20 268 154
Book value of assets sold 10 13 57 69
--------------- ---------------
Gain/(loss) on asset sales, before tax(a) 72 7 211 85
--------------- ---------------
Gain/(loss) on asset sales, after tax(a) 51 7 152 61
--------------- ---------------
(a) Third quarter 2007 included a gain of $71 million ($51million after
tax) from the sale of the company's interest in the Willesden Green
producing property.
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:
Nine months to
Third quarter September 30
millions of dollars 2007 2006 2007 2006
-------------------------------------------------------------------------
Pension benefits:
Current service cost 25 25 75 75
Interest cost 62 60 185 179
Expected return on plan assets (83) (75) (247) (225)
Amortization of prior service cost 5 5 15 15
Recognized actuarial loss 19 29 57 86
--------------- ---------------
Net benefit cost 28 44 85 130
--------------- ---------------
Other post-retirement benefits:
Current service cost 1 2 4 6
Interest cost 5 6 17 18
Recognized actuarial loss 2 2 5 6
--------------- ---------------
Net benefit cost 8 10 26 30
--------------- ---------------
6. Financing costs
Nine months to
Third quarter September 30
millions of dollars 2007 2006 2007 2006
-------------------------------------------------------------------------
Debt related interest 18 17 51 46
Capitalized interest (9) (13) (25) (37)
--------------- ---------------
Net interest expense 9 4 26 9
Other interest 1 (1) 7 1
--------------- ---------------
Total financing costs 10 3 33 10
--------------- ---------------
7. Long-term debt
As at As at
Sept.30 Dec.31
2007 2006
-------------------------------------------------------------------------
Issued Maturity date Interest millions
rate of dollars
-------------------------------------------------------------------------
2003 January 19, 2008 Variable - 318
2007 $250 million due May 26, 2009 and
$250 million due August 26, 2009(a) Variable 500 -
---------------
Long-term debt 500 318
Capital leases 38 41
---------------
Total long-term debt(b) 538 359
---------------
(a) On August 26, 2007, the company retired $250 million variable-rate
debt on maturity and replaced it with long-term variable-rate loans
of $250 million from an affiliated company of Exxon Mobil Corporation
at interest equivalent to Canadian market rates.
(b) These amounts exclude that portion of long-term debt totalling
$322 million (December 31, 2006 - $907 million), which matures within
one year and is included in current liabilities.
8. Other long-term obligations
As at As at
Sept.30 Dec.31
millions of dollars 2007 2006
-------------------------------------------------------------------------
Employee retirement benefits(a) 881 1,017
Asset retirement obligations and other
environmental liabilities(b) 441 438
Other obligations 453 228
---------- ----------
Total other long-term obligations 1,775 1,683
---------- ----------
(a) Total recorded employee retirement benefits obligations also include
$55 million in current liabilities (December 31, 2006 - $51 million).
(b) Total asset retirement obligations and other environmental
liabilities also include $97 million in current liabilities
(December 31, 2006 - $97 million).
9. Common shares
As at As at
Sept.30 Dec.31
thousands of shares 2007 2006
-------------------------------------------------------------------------
Authorized 1,100,000 1,100,000
Common shares outstanding 914,216 952,988
From 1995 through 2006, the company purchased shares under twelve
12-month normal course issuer bid share repurchase programs, as well as
an auction tender. On June 25, 2007, another 12-month normal course
issuer bid program was implemented with an allowable purchase of about
46.5 million shares (five percent of the total on June 22, 2007), less
any 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 - 2005 750.1 8,635
2006 - Third quarter 11.5 468
- Full year 45.5 1,818
2007 - Third quarter 12.8 600
- Year-to-date 39.4 1,791
Cumulative purchases to date 835.0 12,244
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:
Nine months to
Third quarter September 30
2007 2006 2007 2006
-------------------------------------------------------------------------
Net income per common share - basic
Net income (millions of dollars) 816 822 2,302 2,250
Weighted average number of common
shares outstanding (millions of shares) 922.0 969.6 935.0 980.7
Net income per common share (dollars) 0.88 0.84 2.46 2.29
Net income per common share - diluted
Net income (millions of dollars) 816 822 2,302 2,250
Weighted average number of common shares
outstanding (millions of shares) 922.0 969.6 935.0 980.7
Effect of employee stock-based awards
(millions of shares) 5.9 4.5 5.7 4.4
--------------- ---------------
Weighted average number of common shares
outstanding, assuming dilution
(millions of shares) 927.9 974.1 940.7 985.1
Net income per common share (dollars) 0.88 0.84 2.45 2.28
10. Earnings reinvested
Nine months to
Third quarter September 30
millions of dollars 2007 2006 2007 2006
-------------------------------------------------------------------------
Earnings reinvested at beginning of period 6,659 5,841 6,462 5,466
Cumulative effect of accounting change(2) - - 14 -
Net income for the period 816 822 2,302 2,250
Share purchases in excess of stated value (577) (448) (1,721) (1,343)
Dividends (83) (77) (242) (235)
--------------- ---------------
Earnings reinvested at end of period 6,815 6,138 6,815 6,138
--------------- ---------------
11. Comprehensive income
Nine months to
Third quarter September 30
millions of dollars 2007 2006 2007 2006
-------------------------------------------------------------------------
Net income 816 822 2,302 2,250
Post-retirement benefit liability
adjustment (excluding amortization) - - (28) -
Amortization of post retirement benefit
liability adjustment included in net
periodic benefit costs 18 - 53 -
--------------- ---------------
Other comprehensive income (net of
income taxes) 18 - 25 -
--------------- ---------------
Total comprehensive income 834 822 2,327 2,250
--------------- ---------------
12. Additional SFAS 158 Adoption Disclosure
In its 2006 Form 10-K financial statements, the company reported the
adjustment related to the adoption of Statement of Financial Accounting
Standards No. 158 (SFAS 158), "Employers' Accounting for Defined Benefit
Pension and Other Post-retirement Plans, an amendment to FASB Statements
No. 87, 88, 106 and 132(R)" as a component of 2006 comprehensive income.
Based on further regulatory guidance, this adjustment should have been
reported as an adjustment to ending 2006 accumulated other comprehensive
income. The amount reported by the company as 2006 comprehensive income
(nonowner changes in equity) was $2,891 million. Excluding the negative
$487 million SFAS 158 adoption adjustment (which was separately disclosed
in the 2006 Form 10-K footnote 6, Employee retirement benefits), the
amount would have been $3,378 million. The company will accordingly
revise the presentation of 2006 comprehensive income (nonowner changes in
equity) in its 2007 Form 10-K financial statements.
IMPERIAL OIL LIMITED
-------------------------------------------------------------------------
OPERATING STATISTICS
(unaudited)
Nine months to
Third quarter September 30
2007 2006 2007 2006
-------------------------------------------------------------------------
GROSS CRUDE OIL AND NGL PRODUCTION
(thousands of barrels a day)
Cold Lake 160 158 152 155
Syncrude 87 71 76 61
Conventional 28 31 29 32
--------------- ---------------
Total crude oil production 275 260 257 248
Natural gas liquids (NGLs)
available for sale 16 21 17 25
--------------- ---------------
Total crude oil and NGL production 291 281 274 273
--------------- ---------------
NET CRUDE OIL AND NGL PRODUCTION
(thousands of barrels a day)
Cold Lake 132 127 127 128
Syncrude 72 60 64 55
Conventional 21 23 22 24
--------------- ---------------
Total crude oil production 225 210 213 207
Natural gas liquids (NGLs)
available for sale 11 17 13 20
--------------- ---------------
Total crude oil and NGL production 236 227 226 227
--------------- ---------------
COLD LAKE BLEND SALES (thousands of
barrels a day) 202 201 197 203
NGL SALES (thousands of barrels a day) 16 19 20 28
NATURAL GAS (millions of cubic feet a day)
Production (gross) 430 560 482 566
Production (net) 379 503 423 505
Sales 378 515 432 519
AVERAGE REALIZATIONS AND PRICES
(Canadian dollars)
Conventional crude oil realizations
(a barrel) 75.73 74.34 68.45 71.10
NGL realizations (a barrel) 45.57 40.87 44.94 40.81
Natural gas realizations (a thousand
cubic feet) 5.73 6.29 7.11 7.42
Par crude oil price at Edmonton
(a barrel) 82.07 80.31 74.50 76.53
Heavy crude oil at Hardisty
(Bow River, a barrel) 56.17 59.03 52.97 53.66
TOTAL REFINERY THROUGHPUT (thousands
of barrels a day) 451 461 435 438
REFINERY CAPACITY UTILIZATION (percent) 90 92 86 87
PETROLEUM PRODUCTS SALES
(millions of litres a day)
Gasolines 33.8 34.1 32.6 32.5
Heating, diesel and jet fuels 25.2 26.0 25.8 26.3
Heavy fuel oils 6.2 5.1 5.0 5.0
Lube oils and other products 7.7 9.0 7.1 7.8
--------------- ---------------
Net petroleum products sales 72.9 74.2 70.5 71.6
--------------- ---------------
PETROCHEMICAL SALES (thousands of
tonnes a day) 3.2 2.9 3.1 3.0
-------------------------------------------------------------------------
IMPERIAL OIL LIMITED
-------------------------------------------------------------------------
SHARE OWNERSHIP, TRADING AND PERFORMANCE
(unaudited)
Nine months to
Third quarter September 30
2007 2006 2007 2006
-------------------------------------------------------------------------
RETURN ON AVERAGE CAPITAL EMPLOYED(a)
(rolling 4 quarters, percent) 34.4 39.1
RETURN ON AVERAGE SHAREHOLDERS' EQUITY
(rolling 4 quarters, percent) 40.9 47.6
INTEREST COVERAGE RATIO - EARNINGS BASIS
(rolling 4 quarters, times covered) 63.1 81.7
SHARE OWNERSHIP
Outstanding shares (thousands)
Monthly weighted average 921,976 969,625 934,950 980,711
At September 30 914,216 962,713
Number of shareholders
At September 30 13,141 13,664
SHARE PRICES
Toronto Stock Exchange
(Canadian dollars)
High 51.90 45.20 54.70 45.20
Low 40.86 35.33 37.40 35.33
Close at September 30 49.29 37.47
American Stock Exchange
(U.S. dollars)(b)
High 50.95 40.38 50.95 40.38
Low 37.99 31.64 31.87 30.54
Close at September 30 49.56 33.55
(a) Return on capital employed is the rolling four quarters' net income
excluding the after-tax net interest expense divided by the average
rolling four quarters' capital employed.
(b) Share price presented is based on consolidated U.S. market data.
-------------------------------------------------------------------------
For further information: Investor relations, Dee Brandes, (403)
237-4537; Media relations, Richard O'Farrell, (403) 237-2710
