Imperial Oil announces 2007 financial and operating results



    CALGARY, Jan. 31 /CNW/ - Imperial Oil today announced net income for 2007
of $3,188 million (or $3.41 per share). This was the highest net income in the
company's history, surpassing the previous record of $3,044 million (or $3.11
a share) in 2006. Fourth quarter earnings were $886 million, (or $0.96 a
share) in 2007, compared with $794 million (or $0.83 a share) in the fourth
quarter of 2006.
    For the full year 2007, earnings increased primarily due to higher crude
oil commodity prices, stronger industry refining and marketing margins,
favourable refinery operations and higher Syncrude volumes. Gains from asset
divestments were also higher in 2007. These factors were partially offset by
lower expected conventional resources volumes; the negative impact of a
stronger Canadian dollar; higher exploration and share-based compensation
expenses; and higher tax expense.
    Total operating revenues were $6,697 million in the fourth quarter of
2007 and $25,069 million for the year, versus $5,503 million and
$24,505 million in the corresponding periods of 2006. Capital and exploration
expenditures were $317 million in the fourth quarter and $978 million for the
year, compared with $341 million and $1,209 million respectively in 2006. In
2007, Imperial repurchased more than 50.5 million shares for $2,358 million.
The company's balance of cash and marketable securities at the end of 2007 was
$1,208 million, versus $2,158 million at the end of 2006.
    "Overall, improving operations, a strong price environment and record
production at both Cold Lake and Syncrude contributed to record earnings and
shareholder returns that well exceeded the energy equity index" said Tim
Hearn, the company's chairman and chief executive officer. "Furthermore,
progress was made on a number of fronts during the year: the balance sheet was
strengthened, and long-term investment opportunities were advanced, including
regulatory approval for the proposed Kearl Oil Sands project and the addition
of major acreage positions" Hearn added.

    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.

    2007 Highlights/Items of interest

    Improved safety performance

    Contractor safety performance improved during the year, resulting in near
best-ever levels, and employee safety was solid.

    Record production at Cold Lake

    Production at Cold Lake, the company's wholly-owned in situ oil sands
project, averaged a record 154 thousand barrels a day during the year, and set
new daily, weekly and monthly production records in October. Higher production
was due to the cyclic nature of production at Cold Lake and increased volumes
from the ongoing development drilling program.

    Record production at Syncrude

    Imperial's share of production at Syncrude averaged a record 76 thousand
barrels a day in 2007. Higher production was achieved through higher
utilization of expansion capacity. The Syncrude oil sands joint venture is 25-
percent owned by Imperial.

    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 extensive 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.

    Kearl oil sands project

    In February, a joint review panel of the Alberta Energy and Utilities
Board and the federal government granted conditional approval of the Kearl oil
sands project. Imperial would hold about a 70-percent interest in the proposed
project and would act as operator in a joint venture with ExxonMobil Canada.

    Exploration parcel acquired in Beaufort Sea

    In July, Imperial, along with co-venturer ExxonMobil Canada, successfully
acquired exploration rights for a more than 500 thousand acre parcel in the
Beaufort Sea. The company's 50-percent share of the proposed exploration
spending would be about $293 million, with a minimum commitment of about
$73 million. This parcel is a major addition to Imperial's undeveloped acreage
position. Although the Arctic remains a high-potential, technology-intensive
frontier area, this presents a potential opportunity to add to the company's
resource base in the Beaufort Sea and is consistent with its continued
interest in energy development for Canada.

    
                            IMPERIAL OIL LIMITED

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    FINANCIAL HIGHLIGHTS (unaudited)
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                                                               Twelve months
                                          Fourth quarter      to December 31
                                          2007      2006      2007      2006
                                       ------------------  ------------------
    Net income (U.S. GAAP, millions
     of dollars)
      Natural resources                    739       608     2,369     2,376
      Petroleum products                   218       214       921       624
      Chemicals                             23        35        97       143
      Corporate and other                  (94)      (63)     (199)      (99)
                                       ------------------  ------------------
    Net income (U.S. GAAP)                 886       794     3,188     3,044
                                       ------------------  ------------------

    Cash flow from operating
     activities                          1,212     1,059     3,626     3,587
    Capital and exploration
     expenditures                          317       341       978     1,209

    Per-share information (dollars)
      Net income - basic                  0.97      0.83      3.43      3.12
      Net income - diluted                0.96      0.83      3.41      3.11
      Dividends                           0.09      0.08      0.35      0.32

      Share prices - close at December 31
      Toronto Stock Exchange
       (Canadian dollars)                                    54.62     42.93
      American Stock Exchange
       (U.S. dollars)                                        54.78     36.83
    



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    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND RESULTS OF OPERATIONS
    -------------------------------------------------------------------------

    OPERATING RESULTS
    -----------------
    The company's net income for the fourth quarter of 2007 was $886 million
or $0.96 a share on a diluted basis, compared with $794 million or $0.83 a
share for the same period last year. Net income for the full year 2007 at
$3,188 million or $3.41 a share on a diluted basis was the best on record,
exceeding the previous record achieved in 2006 of $3,044 million or $3.11 a
share.
    Earnings in the fourth quarter were higher than the same period in 2006
primarily due to higher crude oil commodity prices. Earnings were also higher
due to the combined impacts of stronger industry refining and marketing
margins and favourable refinery operations and inventory effects. Partially
offsetting these positive factors were the negative impacts of a stronger
Canadian dollar, lower natural gas, conventional crude oil and natural gas
liquids (NGL) volumes, higher tax expense, higher upstream operating expenses
and lower gains from asset divestments.
    For the full year 2007, earnings increased primarily due to higher crude
oil commodity prices, stronger industry refining and marketing margins,
favourable refinery operations and higher Syncrude volumes. Gains from asset
divestments were also higher in 2007. These factors were partially offset by
lower expected conventional resources volumes, the negative impact of a
stronger Canadian dollar, higher exploration and share-based compensation
expenses and higher tax expense.

    Natural resources

    Net income from natural resources in the fourth quarter was $739 million,
$131 million higher than the same period in 2006. Increased earnings were
primarily due to higher crude oil commodity prices totaling about
$335 million. Improved realizations were partially offset by the negative
impacts of a stronger Canadian dollar of about $110 million and lower natural
gas, conventional crude oil and NGL volumes of about $100 million. The
positive impact of lower tax rates on earnings of about $70 million was mostly
offset by higher production expenses of about $30 million and lower gains from
asset divestment of about $30 million.
    Net income for the year was $2,369 million versus $2,376 million in 2006.
Earnings benefited from higher crude oil commodity prices totaling about
$325 million and higher Syncrude volumes of about $125 million. Higher gains
from asset divestment of about $65 million also contributed to higher
earnings. Offsetting these positive factors were lower natural gas,
conventional crude oil, and NGL volumes totaling about $285 million, the
negative impact of a stronger Canadian dollar of about $175 million and higher
exploration and other operating expenses of about $75 million.
    In U.S. dollars, both Brent crude oil prices and average Cold Lake heavy
oil realizations were higher in the fourth quarter and for the year compared
with the same periods last year. However, the effect of a stronger Canadian
dollar limited improvements in the company's average realizations for
conventional crude oil to 34 percent in the fourth quarter and five percent in
2007. Also mainly because of a stronger Canadian dollar, the company's average
realizations for Cold Lake heavy oil were limited to about five percent higher
in the fourth quarter and were lower by about two percent for the year.
    The company's average realizations for natural gas averaged $6.33 a
thousand cubic feet in the fourth quarter, down from $6.68 in the same quarter
last year. For the full year, realizations for natural gas averaged $6.95 a
thousand cubic feet in 2007, down from $7.24 in 2006.
    Total gross production of crude oil and NGLs in the fourth quarter was
279 thousand barrels a day, versus 267 thousand barrels in the fourth quarter
of 2006. For the year, total gross production of crude oil and NGLs averaged
275 thousand barrels a day, compared with 272 thousand barrels in 2006.
    Gross production of Cold Lake heavy oil averaged 158 thousand barrels a
day during the fourth quarter, versus 142 thousand barrels in the same quarter
last year. For the year, gross production was 154 thousand barrels a day,
compared with 152 thousand barrels in 2006. Higher production in 2007 was due
to the cyclic nature of production at Cold Lake and increased volumes from the
ongoing development drilling program.
    The company's share of Syncrude's gross production was 78 thousand
barrels a day in the fourth quarter compared with 76 thousand barrels during
the same period a year ago. During 2007, the company's share of gross
production from Syncrude averaged 76 thousand barrels a day, up from
65 thousand barrels in 2006 with increased volumes from the Stage 3 upgrader
expansion.
    In the fourth quarter, gross production of conventional crude oil
averaged 29 thousand barrels a day, unchanged from the same period in 2006.
For the full year, gross production of conventional crude oil averaged
29 thousand barrels a day, compared with 31 thousand barrels 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 14 thousand barrels a day
in the fourth quarter, down from 20 thousand barrels in the same quarter last
year. During 2007, gross production of NGLs available for sale decreased to
16 thousand barrels a day, from 24 thousand barrels in 2006, mainly due to the
declining NGL content of Wizard Lake gas production.
    Gross production of natural gas during the fourth quarter of 2007
decreased to 386 million cubic feet a day from 529 million cubic feet in the
same period last year. In the year, gross production was 458 million cubic
feet a day, down from 556 million in 2006. The lower production volume was
primarily due to decline, as expected, in production from the gas cap at
Wizard Lake.

    Petroleum products

    Net income from petroleum products was $218 million in the fourth quarter
of 2007, compared with $214 million in the same period a year ago. Earnings
benefited from stronger industry refining and marketing margins totaling about
$60 million and favourable refinery operations and inventory effects of about
$45 million. These positive factors were mostly offset by the absence of
favourable tax effects of about $70 million and the negative impact of a
stronger Canadian dollar of about $40 million.
    Full year net income was a record $921 million, $297 million higher than
2006. Increased earnings were primarily due to improved refinery operations
including lower refinery maintenance and project activities which contributed
about $205 million, and stronger industry refining and marketing margins
totaling about $190 million. These positive factors were partially offset by
the negative impact of a stronger Canadian dollar of about $60 million and the
absence of favourable tax effects of about $40 million.

    Chemicals

    Net income from chemicals was $23 million in the fourth quarter, compared
with $35 million in the same period last year. Lower earnings were primarily
due to lower industry margins for polyethylene, intermediate and other
chemical products partially offset by the positive impact of lower tax rates.
Full year net income was $97 million, compared with $143 million in 2006.
Lower earnings were primarily due to lower industry margins for polyethylene
products partially offset by the positive impact of lower tax rates. A
stronger Canadian dollar also negatively impacted earnings in the fourth
quarter and the full year of 2007.

    Corporate and other

    Net income from corporate and other was negative $94 million in the
fourth quarter, compared with negative $63 million in the same period of 2006.
Unfavourable earnings effects were primarily due to the impact of tax rate
changes. Full year net income was negative $199 million, versus negative
$99 million last year. Unfavourable earnings effects were primarily due to
higher share-based compensation charges and the impact of tax rate changes.

    LIQUIDITY AND CAPITAL RE

SOURCES ------------------------------- Cash flow from operating activities was $1,212 million during the fourth quarter of 2007, an increase of $153 million from the same period last year. Higher cash flow in the quarter was primarily driven by higher net income, the favourable impact of the timing of income tax payments and the net effects of higher commodity prices on working capital balances. Cash flow from operating activities was $3,626 million in 2007, compared with $3,587 in 2006. Higher cash flow in 2007 was primarily due to higher net income. Unfavourable impact of the timing of income tax payments was largely offset by the net effects of higher commodity prices on working capital balances. Capital and exploration expenditures were $317 million in the fourth quarter, compared with $341 million during the same quarter of 2006, and $978 million in 2007, versus $1,209 million 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 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 fourth quarter of 2007, the company retired the entire $818 million of long-term loans from an affiliated company of Exxon Mobil Corporation. During the fourth quarter of 2007, the company repurchased about 11.1 million shares for $567 million. Under the current share repurchase program, which began on June 25, 2007, the company has purchased about 25 million shares, and can purchase about another 21 million shares before June 24, 2008 when the current program expires. Cash dividends of $319 million were paid in 2007. This compared with dividends of $315 million in 2006. Per-share dividends declared in 2007 totaled $0.35, up from $0.32 in 2006. The above factors led to a decrease in the company's balance of cash and marketable securities to $1,208 million at December 31, 2007, from $2,158 million at the end of 2006. ------------------------------------------------------------------------- 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. ------------------------------------------------------------------------- IMPERIAL OIL LIMITED ------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF INCOME (U.S. GAAP, unaudited) Twelve months Fourth quarter to December 31 millions of Canadian dollars 2007 2006 2007 2006 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME Operating revenues(a)(b) 6,697 5,503 25,069 24,505 Investment and other income(4) 43 128 374 283 ------------------ ------------------ TOTAL REVENUES AND OTHER INCOME 6,740 5,631 25,443 24,788 ------------------ ------------------ EXPENSES Exploration 16 14 106 32 Purchases of crude oil and products(c) 3,884 2,959 14,026 13,793 Production and manufacturing(5)(d) 894 827 3,474 3,446 Selling and general(5) 366 393 1,335 1,284 Federal excise tax(a) 335 320 1,307 1,274 Depreciation and depletion 188 204 780 831 Financing costs(6)(e) 3 18 36 28 ------------------ ------------------ TOTAL EXPENSES 5,686 4,735 21,064 20,688 ------------------ ------------------ INCOME BEFORE INCOME TAXES 1,054 896 4,379 4,100 INCOME TAXES 168 102 1,191 1,056 ------------------ ------------------ NET INCOME(3) 886 794 3,188 3,044 ------------------ ------------------ NET INCOME PER COMMON SHARE - BASIC (dollars)(9) 0.97 0.83 3.43 3.12 NET INCOME PER COMMON SHARE - DILUTED (dollars)(9) 0.96 0.83 3.41 3.11 DIVIDENDS PER COMMON SHARE (dollars)(9) 0.09 0.08 0.35 0.32 (a) Federal excise tax included in operating revenues 335 320 1,307 1,274 (b) Amounts from related parties included in operating revenues 495 306 1,772 1,955 (c) Amounts to related parties included in purchases of crude oil and products 974 956 3,331 3,937 (d) Amounts to related parties included in production and manufacturing expenses 48 47 194 156 (e) Amounts to related parties included in financing costs 6 9 32 33 The notes to the financial statements are an integral part of these financial statements. ------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP, unaudited) Twelve months inflow/(outflow) Fourth quarter to December 31 millions of Canadian dollars 2007 2006 2007 2006 ------------------------------------------------------------------------- OPERATING ACTIVITIES Net income 886 794 3,188 3,044 Adjustment for non-cash items: Depreciation and depletion 188 204 780 831 (Gain)/loss on asset sales, after income tax(4) (4) (35) (156) (96) Deferred income taxes and other (23) 237 16 254 Changes in operating assets and liabilities: Accounts receivable (6) (89) (261) 203 Inventories and prepaids 262 166 13 (97) Income taxes payable 148 (214) (77) (225) Accounts payable (150) 11 250 (86) All other items - net(a) (89) (15) (127) (241) ------------------ ------------------ CASH FROM (USED IN) OPERATING ACTIVITIES 1,212 1,059 3,626 3,587 ------------------ ------------------ INVESTING ACTIVITIES Additions to property, plant and equipment and intangibles (301) (327) (899) (1,177) Proceeds from asset sales 11 58 279 212 ------------------ ------------------ CASH FROM (USED IN) INVESTING ACTIVITIES (290) (269) (620) (965) ------------------ ------------------ FINANCING ACTIVITIES Short-term debt - net (469) - (65) 72 Repayment of long-term debt (820) (2) (1,726) (74) Long-term debt issued - - 500 - Issuance of common shares under stock option plan 2 3 12 10 Common shares purchased(9) (567) (413) (2,358) (1,818) Dividends paid (83) (77) (319) (315) ------------------ ------------------ CASH FROM (USED IN) FINANCING ACTIVITIES (1,937) (489) (3,956) (2,125) ------------------ ------------------ INCREASE (DECREASE) IN CASH (1,015) 301 (950) 497 CASH AT BEGINNING OF PERIOD 2,223 1,857 2,158 1,661 ------------------ ------------------ CASH AT END OF PERIOD 1,208 2,158 1,208 2,158 ------------------ ------------------ (a) Includes contribution to registered pension plans (5) (26) (163) (395) The notes to the financial statements are an integral part of these financial statements. ------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEET (U.S. GAAP, unaudited) As at As at Dec.31 Dec.31 millions of Canadian dollars 2007 2006 ------------------------------------------------------------------------- ASSETS Current assets Cash 1,208 2,158 Accounts receivable, less estimated doubtful accounts 2,132 1,871 Inventories of crude oil and products 566 556 Materials, supplies and prepaid expenses 128 151 Deferred income tax assets 660 573 ------------------ Total current assets 4,694 5,309 Long-term receivables, investments and other long-term assets 766 104 Property, plant and equipment, 22,962 22,478 less accumulated depreciation and depletion 12,401 12,021 ------------------ Property, plant and equipment, net 10,561 10,457 Goodwill 204 204 Other intangible assets, net 62 67 ------------------ TOTAL ASSETS 16,287 16,141 ------------------ LIABILITIES Current liabilities Short-term debt 105 171 Accounts payable and accrued liabilities(8)(a) 3,335 3,080 Income taxes payable 1,498 1,190 Current portion of long-term debt(7)(b) 3 907 ------------------ Total current liabilities 4,941 5,348 Long-term debt(7)(c) 38 359 Other long-term obligations(8) 1,914 1,683 Deferred income tax liabilities 1,471 1,345 ------------------ TOTAL LIABILITIES 8,364 8,735 SHAREHOLDERS' EQUITY Common shares at stated value(9)(d) 1,600 1,677 Earnings reinvested(10) 7,071 6,462 Accumulated other comprehensive income(11) (748) (733) ------------------ TOTAL SHAREHOLDERS' EQUITY 7,923 7,406 ------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 16,287 16,141 ------------------ (a) Accounts payable and accrued liabilities include amounts to related parties of $260 million (2006 - $151 million). (b) Current portion of long-term debt includes amounts to related parties of nil (2006 - $500 million). (c) Long-term debt includes amounts to related parties of nil (2006 - $318 million). (d) Number of common shares outstanding was 903 million (2006 - 953 million). The notes to the financial statements are an integral part of these financial statements. ------------------------------------------------------------------------- Approved by the directors January 31, 2008 Chairman and Senior vice-president, chief executive officer finance and administration ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 December 31, 2007, and December 31, 2006, and the results of operations and changes in cash flows for the twelve months ending December 31, 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. 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 2008. 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 Fourth quarter Resources Products Chemicals millions of dollars 2007 2006 2007 2006 2007 2006 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales(a) 1,162 1,035 5,214 4,160 321 308 Intersegment sales 1,169 895 696 480 88 90 Investment and other income 8 46 14 61 - - ----------------------------------------------- 2,339 1,976 5,924 4,701 409 398 ----------------------------------------------- EXPENSES Exploration(b) 16 14 - - - - Purchases of crude oil and products 872 640 4,648 3,500 317 283 Production and manufacturing 542 496 307 290 45 42 Selling and general 2 3 259 267 17 18 Federal excise tax - - 335 320 - - Depreciation and depletion 120 141 64 61 3 2 Financing costs 1 2 - 8 - - ----------------------------------------------- TOTAL EXPENSES 1,553 1,296 5,613 4,446 382 345 ----------------------------------------------- INCOME BEFORE INCOME TAXES 786 680 311 255 27 53 INCOME TAXES 47 72 93 41 4 18 ----------------------------------------------- NET INCOME 739 608 218 214 23 35 ----------------------------------------------- Export sales to the United States 501 396 220 144 192 185 Cash flows from (used in) operating activities 709 972 495 60 108 61 CAPEX(b) 249 243 54 83 3 4 Corporate Fourth quarter and Other Eliminations Consolidated millions of dollars 2007 2006 2007 2006 2007 2006 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales(a) - - - - 6,697 5,503 Intersegment sales - - (1,953) (1,465) - - Investment and other income 21 21 - - 43 128 ----------------------------------------------- 21 21 (1,953) (1,465) 6,740 5,631 ----------------------------------------------- EXPENSES Exploration(b) - - - - 16 14 Purchases of crude oil and products - - (1,953) (1,464) 3,884 2,959 Production and manufacturing - - - (1) 894 827 Selling and general 88 105 - - 366 393 Federal excise tax - - - - 335 320 Depreciation and depletion 1 - - - 188 204 Financing costs 2 8 - - 3 18 ----------------------------------------------- TOTAL EXPENSES 91 113 (1,953) (1,465) 5,686 4,735 ----------------------------------------------- INCOME BEFORE INCOME TAXES (70) (92) - - 1,054 896 INCOME TAXES 24 (29) - - 168 102 ----------------------------------------------- NET INCOME (94) (63) - - 886 794 ----------------------------------------------- Export sales to the United States - - - - 913 725 Cash flows from (used in) operating activities (100) (34) - - 1,212 1,059 CAPEX(b) 11 11 - - 317 341 (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. Twelve months to Natural Petroleum December 31 Resources Products Chemicals millions of dollars 2007 2006 2007 2006 2007 2006 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales(a) 4,539 4,619 19,230 18,527 1,300 1,359 Intersegment sales 4,146 3,837 2,305 2,256 335 345 Investment and other income 233 111 52 105 - - ----------------------------------------------- 8,918 8,567 21,587 20,888 1,635 1,704 ----------------------------------------------- EXPENSES Exploration(b) 106 32 - - - - Purchases of crude oil and products 3,113 2,841 16,469 16,178 1,230 1,209 Production and manufacturing 2,057 1,994 1,232 1,266 185 189 Selling and general 8 13 987 1,018 71 76 Federal excise tax - - 1,307 1,274 - - Depreciation and depletion 519 584 244 233 12 11 Financing costs 4 2 1 6 - - ----------------------------------------------- TOTAL EXPENSES 5,807 5,466 20,240 19,975 1,498 1,485 ----------------------------------------------- INCOME BEFORE INCOME TAXES 3,111 3,101 1,347 913 137 219 INCOME TAXES 742 725 426 289 40 76 ----------------------------------------------- NET INCOME 2,369 2,376 921 624 97 143 ----------------------------------------------- Export sales to the United States 2,013 1,936 922 869 768 793 Cash flows from (used in) operating activities 2,411 3,024 1,151 507 109 161 CAPEX(b) 744 787 187 361 11 13 Total assets as at December 31 8,171 7,513 6,727 6,450 476 504 Capital employed as at December 31 4,436 4,080 3,228 3,285 219 241 Twelve months to Corporate December 31 and Other Eliminations Consolidated millions of dollars 2007 2006 2007 2006 2007 2006 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales(a) - - - - 25,069 24,505 Intersegment sales - - (6,786) (6,438) - - Investment and other income 89 67 - - 374 283 ----------------------------------------------- 89 67 (6,786) (6,438) 25,443 24,788 ----------------------------------------------- EXPENSES Exploration(b) - - - - 106 32 Purchases of crude oil and products - - (6,786) (6,435) 14,026 13,793 Production and manufacturing - - - (3) 3,474 3,446 Selling and general 269 177 - - 1,335 1,284 Federal excise tax - - - - 1,307 1,274 Depreciation and depletion 5 3 - - 780 831 Financing costs 31 20 - - 36 28 ----------------------------------------------- TOTAL EXPENSES 305 200 (6,786) (6,438) 21,064 20,688 ----------------------------------------------- INCOME BEFORE INCOME TAXES (216) (133) - - 4,379 4,100 INCOME TAXES (17) (34) - - 1,191 1,056 ----------------------------------------------- NET INCOME (199) (99) - - 3,188 3,044 ----------------------------------------------- Export sales to the United States - - - - 3,703 3,598 Cash flows from (used in) operating activities (45) (105) - - 3,626 3,587 CAPEX(b) 36 48 - - 978 1,209 Total assets as at December 31 1,251 2,145 (338) (471) 16,287 16,141 Capital employed as at December 31 236 1,292 - - 8,119 8,898 (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: Twelve months Fourth quarter to December 31 millions of dollars 2007 2006 2007 2006 ------------------------------------------------------------------------- Proceeds from asset sales 11 58 279 212 Book value of assets sold 7 9 64 78 ------------------ ------------------ Gain/(loss) on asset sales, before tax(a) 4 49 215 134 ------------------ ------------------ Gain/(loss) on asset sales, after tax(a) 4 35 156 96 ------------------ ------------------ (a) 2007 included a gain of $200 million ($142 million, after tax) from the sale of the company's interests in a natural gas producing property in British Columbia and 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: Twelve months Fourth quarter to December 31 millions of dollars 2007 2006 2007 2006 ------------------------------------------------------------------------- Pension benefits: Current service cost 25 25 100 100 Interest cost 61 59 246 238 Expected return on plan assets (82) (74) (329) (299) Amortization of prior service cost 5 5 20 20 Recognized actuarial loss 19 28 76 114 ------------------ ------------------ Net benefit cost 28 43 113 173 ------------------ ------------------ Other post-retirement benefits: Current service cost 2 2 6 8 Interest cost 6 5 23 23 Recognized actuarial loss 1 2 6 8 ------------------ ------------------ Net benefit cost 9 9 35 39 ------------------ ------------------ 6. Financing costs Twelve months Fourth quarter to December 31 millions of dollars 2007 2006 2007 2006 ------------------------------------------------------------------------- Debt related interest 11 17 62 63 Capitalized interest (11) (11) (36) (48) ------------------ ------------------ Net interest expense - 6 26 15 Other interest 3 12 10 13 ------------------ ------------------ Total financing costs 3 18 36 28 ------------------ ------------------ 7. Long-term debt As at As at Dec.31 Dec.31 millions of dollars 2007 2006 ------------------------------------------------------------------------- Long-term debt(a)(b) - 318 Capital leases 38 41 ------------------ Total long-term debt(c) 38 359 ------------------ (a) At 2006 year-end, the company had $818 million long-term variable- rate loans from an affiliated company of Exxon Mobil Corporation at interest equivalent to Canadian market rates. $500 million of these long-term loans were due in 2007 and included in current liabilities and $318 million was due on January 19, 2008 and included as long- term debt at 2006 year-end. (b) In the second and third quarter of 2007, two variable-rate loans totaling $500 million matured and were replaced with two long-term variable-rate loans totaling $500 million from an affiliated company of Exxon Mobil Corporation at interest equivalent to Canadian market rates. Both loans were due in 2009. In the fourth quarter of 2007, the company retired the entire $818 million long-term loans. (c) These amounts exclude that portion of long-term debt, totaling $3 million (2006 - $907 million), which matures within one year and is included in current liabilities. 8. Other long-term obligations As at As at Dec.31 Dec.31 millions of dollars 2007 2006 ------------------------------------------------------------------------- Employee retirement benefits(a) 954 1,017 Asset retirement obligations and other environmental liabilities (b) 522 438 Other obligations 438 228 ------- ------- Total other long-term obligations 1,914 1,683 ------- ------- (a) Total recorded employee retirement benefits obligations also include $59 million in current liabilities (December 31, 2006 - $51 million). (b) Total asset retirement obligations and other environmental liabilities also include $74 million in current liabilities (December 31, 2006 - $97 million). 9. Common shares As at As at Dec.31 Dec.31 thousands of shares 2007 2006 ------------------------------------------------------------------------- Authorized 1,100,000 1,100,000 Common shares outstanding 903,263 952,988 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 - Fourth quarter 9.9 413 - Full year 45.5 1,818 2007 - Fourth quarter 11.1 567 - Full year 50.5 2,358 Cumulative purchases to date 846.1 12,811 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: Twelve months Fourth quarter to December 31 2007 2006 2007 2006 ------------------------------------------------------------------------- Net income per common share - basic Net income (millions of dollars) 886 794 3,188 3,044 Weighted average number of common shares outstanding (millions of shares) 909.3 958.4 928.5 975.1 Net income per common share (dollars) 0.97 0.83 3.43 3.12 Net income per common share - diluted Net income (millions of dollars) 886 794 3,188 3,044 Weighted average number of common shares outstanding (millions of shares) 909.3 958.4 928.5 975.1 Effect of employee stock-based awards (millions of shares) 6.1 4.6 5.8 4.5 ------------------ ------------------ Weighted average number of common shares outstanding, assuming dilution (millions of shares) 915.4 963.0 934.3 979.6 Net income per common share (dollars) 0.96 0.83 3.41 3.11 10. Earnings reinvested Twelve months Fourth quarter to December 31 millions of dollars 2007 2006 2007 2006 ------------------------------------------------------------------------- Earnings reinvested at beginning of period 6,815 6,138 6,462 5,466 Cumulative effect of accounting change (2) - - 14 - Net income for the period 886 794 3,188 3,044 Share purchases in excess of stated value (548) (394) (2,269) (1,737) Dividends (82) (76) (324) (311) ------------------ ------------------ Earnings reinvested at end of period 7,071 6,462 7,071 6,462 ------------------ ------------------ 11. Comprehensive income Twelve months Fourth quarter to December 31 millions of dollars 2007 2006 2007 2006 ------------------------------------------------------------------------- Net income 886 794 3,188 3,044 Minimum pension liability adjustment - 334 - 334 Post-retirement benefit liability adjustment (excluding amortization) (59) - (87) - Amortization of post retirement benefit liability adjustment included in net periodic benefit costs 19 - 72 - ------------------ ------------------ Other comprehensive income (net of income taxes) (40) 334 (15) 334 ------------------ ------------------ Total comprehensive income 846 1,128 3,173 3,378 ------------------ ------------------ 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. ------------------------------------------------------------------------- OPERATING STATISTICS (unaudited) Twelve months Fourth quarter to December 31 2007 2006 2007 2006 ------------------------------------------------------------------------- GROSS CRUDE OIL AND NGL PRODUCTION (thousands of barrels a day) Cold Lake 158 142 154 152 Syncrude 78 76 76 65 Conventional 29 29 29 31 ------------------ ------------------ Total crude oil production 265 247 259 248 Natural gas liquids (NGLs) available for sale 14 20 16 24 ------------------ ------------------ Total crude oil and NGL production 279 267 275 272 ------------------ ------------------ NET CRUDE OIL AND NGL PRODUCTION (thousands of barrels a day) Cold Lake 137 123 130 127 Syncrude 67 68 65 58 Conventional 21 21 21 23 ------------------ ------------------ Total crude oil production 225 212 216 208 Natural gas liquids (NGLs) available for sale 9 16 12 19 ------------------ ------------------ Total crude oil and NGL production 234 228 228 227 ------------------ ------------------ COLD LAKE BLEND SALES (thousands of barrels a day) 208 186 200 198 NGL SALES (thousands of barrels a day) 18 33 20 29 NATURAL GAS (millions of cubic feet a day) Production (gross) 386 529 458 556 Production (net) 345 468 404 496 Sales 334 494 407 513 AVERAGE REALIZATIONS AND PRICES (Canadian dollars) Conventional crude oil realizations (a barrel) 81.25 60.73 71.70 68.58 NGL realizations (a barrel) 57.80 40.61 47.92 40.75 Natural gas realizations (a thousand cubic feet) 6.33 6.68 6.95 7.24 Par crude oil price at Edmonton (a barrel) 87.51 65.27 77.67 73.75 Heavy crude oil at Hardisty (Bow River, a barrel) 56.60 46.64 53.87 51.90 TOTAL REFINERY THROUGHPUT (thousands of barrels a day) 467 456 442 442 REFINERY CAPACITY UTILIZATION (percent) 93 91 88 88 PETROLEUM PRODUCTS SALES (millions of litres a day) Gasolines 34.4 33.4 33.1 32.7 Heating, diesel and jet fuels 26.7 26.5 26.0 26.4 Heavy fuel oils 5.8 5.5 5.2 5.1 Lube oils and other products 6.5 7.4 6.9 7.7 ------------------ ------------------ Net petroleum products sales 73.4 72.8 71.2 71.9 ------------------ ------------------ PETROCHEMICAL SALES (thousands of tonnes a day) 3.1 2.9 3.1 3.0 ------------------------------------------------------------------------- ------------------------------------------------------------------------- SHARE OWNERSHIP, TRADING AND PERFORMANCE (unaudited) Twelve months Fourth quarter to December 31 2007 2006 2007 2006 ------------------------------------------------------------------------- RETURN ON AVERAGE CAPITAL EMPLOYED(a) (percent) 37.7 35.9 RETURN ON AVERAGE SHAREHOLDERS' EQUITY (percent) 41.6 43.5 INTEREST COVERAGE RATIO - EARNINGS BASIS (times covered) 71.6 66.1 SHARE OWNERSHIP Outstanding shares (thousands) Monthly weighted average 909,258 958,378 928,527 975,128 At December 31 903,263 952,988 Number of shareholders At December 31 13,108 13,561 SHARE PRICES Toronto Stock Exchange (Canadian dollars) High 56.26 44.80 56.26 45.20 Low 45.57 34.31 37.40 34.31 Close at December 31 54.62 42.93 American Stock Exchange (U.S. dollars)(b) High 61.48 38.93 61.48 40.38 Low 46.43 29.99 31.87 29.99 Close at December 31 54.78 36.83 (a) Return on capital employed is the net income excluding the after-tax cost of financing, divided by the average of beginning and ending capital employed. (b) Share price presented is based on consolidated U.S. market data. -------------------------------------------------------------------------

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For further information: Investor relations, Dee Brandes, (403)
237-4537; Media relations, Richard O'Farrell, (403) 237-2710


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