Imperial Oil announces fourth quarter and 2008 financial and operating results



    CALGARY, Jan. 29 /CNW/ - Imperial Oil today announced net income for 2008
of $3,878 million or $4.36 per share compared with $3,188 million or $3.41 per
share in 2007. Fourth quarter earnings were $660 million or $0.76 per share in
2008 compared with $886 million or $0.96 per share in the fourth quarter of
2007.
    Fourth quarter earnings were primarily impacted by lower crude oil and
natural gas commodity prices. For the full year 2008, earnings increased
primarily due to higher crude oil and natural gas commodity prices with
improved upstream realizations partially offset by the negative impacts of
lower upstream volumes, higher royalties, higher energy and maintenance costs
and lower overall downstream margins.
    Total operating revenues were $5,913 million in the fourth quarter of
2008 and $31,240 million for the year versus $6,697 million and $25,069
million in the corresponding periods of 2007. Capital and exploration
expenditures were $433 million in the fourth quarter and $1,363 million for
the year compared with $317 million in the fourth quarter and $978 million in
2007. In 2008, Imperial repurchased about 44.3 million shares for $2,210
million. The company's balance of cash and marketable securities at the end of
2008 was $1,974 million versus $1,208 million at the end of 2007.
    "Imperial's consistent business model, which combines disciplined
investment and operational excellence, has allowed the company to continue to
advance its growth projects and provide shareholder value through the
company's share buyback and dividend programs," said Bruce March, chairman,
president and chief executive officer of Imperial Oil. "Our long-term approach
has created a strong financial position that will continue to serve our
shareholders well during times of economic uncertainty."
    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 about 1,900 service stations.

    Highlights/Items of interest

    Progress on Kearl oil sands project

    At the end of 2008, Imperial has spent about $500 million to advance the
proposed Kearl oil sands project and currently has nearly 1,200 contractors
and employees engaged in the field and in engineering offices to progress this
high quality project. The company also awarded contracts for engineering,
procurement and construction management services to two international
companies.

    Horn River update

    In the quarter, Imperial began drilling the first of four planned
exploration wells on acreage in the Horn River basin. Imperial and ExxonMobil
Canada each have a 50-percent interest in acreage in this promising natural
gas prospect, located in northeastern British Columbia. The company also added
an additional 16,000 acres to existing holdings in the area, bringing total
acreage for Imperial and ExxonMobil Canada to about 152,000 net acres.

    Syncrude royalty

    Imperial, along with the other Syncrude Joint Venture owners,
successfully concluded negotiations and signed agreements with the Government
of Alberta in November to amend the existing Syncrude Crown Agreement.

    Capital and exploration program

    In the fourth quarter, the company approved plans to increase its capital
and exploration program for 2009 to $2.2 billion, up about 60 percent from
$1.4 billion in 2008. The program includes funding to progress the company's
major upstream projects such as the proposed Kearl oil sands project.

    Reducing sulphur emissions

    In the fourth quarter, Imperial initiated activities to reduce sulphur
dioxide emissions (SO(2)) at its Dartmouth refinery. New units will be built
and commissioned in 2009 and 2010, which will further increase the refinery's
ability to recover sulphur and reduce its SO(2) emissions by 25 percent.
    In October, the company also successfully started up a sulphur recovery
unit at its Cold Lake Mahkeses plant. In conjunction with an existing sulphur
recovery unit at its Mahihkan plant, these units are designed to reduce SO(2)
emissions by about 70 percent at these facilities.
    The Dartmouth and Mahkeses investments total about $70 million.
    Work also continues on the Syncrude Emission Reduction project, which
involves retrofitting sulphur scrubbing technology into the operation of
Syncrude's original two cokers, resulting in reduced stack emissions of
sulphur compounds.


    
                             IMPERIAL OIL LIMITED

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    FINANCIAL HIGHLIGHTS (unaudited)
    -------------------------------------------------------------------------

                                                               Twelve months
                                            Fourth quarter    to December 31
                                             2008     2007     2008     2007
                                          ----------------- -----------------
    Net income (U.S. GAAP, millions of
     dollars)
      Upstream                                336      739    2,923    2,369
      Downstream                              257      218      796      921
      Chemical                                 28       23      100       97
      Corporate and other                      39      (94)      59     (199)
                                          ----------------- -----------------
    Net income (U.S. GAAP)                    660      886    3,878    3,188
                                          ----------------- -----------------

    Cash flow from operating activities       912    1,212    4,263    3,626
    Capital and exploration expenditures      433      317    1,363      978

    Per-share information (dollars)
      Net income - basic                     0.77     0.97     4.39     3.43
      Net income - diluted                   0.76     0.96     4.36     3.41
      Dividends                              0.10     0.09     0.38     0.35

      Share prices - close at December 31
      Toronto Stock Exchange (Canadian
       dollars)                                               40.99    54.62
      NYSE Alternext U.S. (U.S. dollars)                      33.72    54.78


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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 2008 was $660 million
or $0.76 a share on a diluted basis, compared with $886 million or $0.96 a
share for the same period last year. Net income for the full year 2008 was a
record $3,878 million or $4.36 a share on a diluted basis, versus $3,188
million or $3.41 a share for the full year 2007.
    Earnings in the fourth quarter were lower than the same quarter in 2007,
as lower Upstream earnings were partially offset by higher Downstream earnings
and lower share-based compensation costs. In the Upstream, earnings decreased
primarily due to lower crude oil commodity prices of about $410 million.
Higher Downstream earnings were primarily due to stronger margins of about
$140 million partially offset by unfavourable inventory and associated tax
effects of about $70 million.
    For the full year 2008, earnings increased primarily due to higher crude
oil and natural gas commodity prices. Improved upstream realizations were
partially offset by the negative impacts of lower upstream volumes, higher
royalties, higher energy and maintenance costs and lower overall downstream
margins.

    Upstream

    Net income in the fourth quarter was $336 million versus $739 million in
the same period of 2007. Earnings decreased primarily due to lower crude oil
commodity prices of about $410 million. Earnings were also negatively impacted
by lower cyclical Cold Lake heavy oil production and lower conventional
volumes from expected reservoir decline totaling about $90 million and the
absence of the favourable effects of tax rate changes of about $170 million
reported in the fourth quarter of 2007. These factors were partially offset by
the impact of a lower Canadian dollar of about $170 million and lower
royalties of about $115 million due to lower prices and volumes.
    Net income for the year was $2,923 million versus $2,369 million in 2007.
Earnings benefited from higher overall crude oil and natural gas commodity
prices totaling about $2,100 million. Their positive impact on earnings was
partially offset by lower conventional volumes of about $420 million, lower
Syncrude volumes of about $135 million and lower cyclical Cold Lake heavy oil
production of about $105 million. Earnings were also negatively impacted by
higher royalties of about $310 million, higher energy, Syncrude maintenance,
and other production costs totaling about $290 million, the absence of
favourable effects of tax rate changes of about $170 million and lower gains
from asset divestments of about $140 million.
    World crude oil prices declined in the fourth quarter of 2008 from record
levels reached earlier in the year. The average price of Brent crude oil was
$54.94 a barrel, in U.S. dollars, in the fourth quarter, down about 38 percent
from the same quarter last year. The average price of Brent crude oil in 2008
was $96.99 (U.S.) a barrel, up about 34 percent from last year. The company's
realizations on sales of Canadian conventional crude oil mirrored the same
trends as world prices, decreasing about 30 percent in the fourth quarter
compared to the same period last year and increasing about 34 percent in 2008
from 2007.
    Prices for Canadian heavy oil, including the company's heavy oil from
Cold Lake, moved generally in line with that of the lighter crude oil. The
price of Bow River, a benchmark Canadian heavy oil, fell by about 14 percent
in the fourth quarter compared to the same quarter last year and increased by
about 56 percent in 2008 from 2007.
    Gross production of Cold Lake heavy oil averaged 146 thousand barrels a
day during the fourth quarter, versus 158 thousand barrels in the same quarter
last year. For the full year, gross production was 147 thousand barrels a day
this year, compared with 154 thousand barrels in the same period 2007. Lower
production volumes in the fourth quarter and 2008 were due to the cyclic
nature of production at Cold Lake.
    The company's share of Syncrude's gross production in the fourth quarter
was 77 thousand barrels a day compared with 78 thousand barrels during the
same period a year ago. During 2008, the company's share of gross production
from Syncrude averaged 72 thousand barrels a day, down from 76 thousand
barrels in 2007. Lower volumes for the year were due primarily to unplanned
shutdowns in the first quarter and planned maintenance activities in the
second and third quarters of 2008.
    In both the fourth quarter and full year of 2008, gross production of
conventional crude oil averaged 27 thousand barrels a day, down from 29
thousand barrels a day in the same periods last year, due to the natural
reservoir decline in the Western Canada Basin.
    Gross production of natural gas during the fourth quarter of 2008
decreased to 297 million cubic feet a day from 386 million cubic feet in the
same period last year. In the year, gross production was 310 million cubic
feet a day, down from 458 million in 2007. The most significant reason for the
lower production volume was the completion of production, as expected, from
the Wizard Lake gas cap blowdown.
    Gross production of natural gas liquids (NGLs) available for sale was
nine thousand barrels a day in the fourth quarter, down from 14 thousand
barrels in the same quarter last year. During 2008, gross production of NGLs
available for sale decreased to ten thousand barrels a day, from 16 thousand
barrels in 2007. The lower production volumes in the fourth quarter and 2008
were mainly due to the completion of production from Wizard Lake.
    In November 2008, Imperial, along with the other Syncrude joint-venture
owners, signed an agreement with the Government of Alberta to amend the
existing Syncrude Crown Agreement. Under the amended agreement, beginning
January 1, 2010, Syncrude will begin transitioning to the new oil sands
royalty regime by paying additional royalties. Also, beginning January 1,
2009, Syncrude's royalty will be based on bitumen value with upgrading costs
and revenues excluded from the calculation.

    Downstream

    Net income was $257 million in the fourth quarter of 2008, compared with
$218 million in the same period a year ago. Earnings were higher in the
quarter mainly due to stronger downstream margins of about $140 million and
the impact of a lower Canadian dollar of about $30 million. Partially
offsetting these factors were unfavourable inventory and associated tax
effects of about $70 million, higher planned refinery maintenance costs of
about $35 million and lower sales volumes of about $25 million.
    Full year net income was $796 million compared with $921 million in 2007.
Earnings decreased primarily due to lower overall downstream margins of about
$160 million and unfavourable inventory and associated tax effects of about
$70 million. Earnings were also lower due to higher planned maintenance costs
of about $40 million and lower sales volumes of about $40 million. These
factors were partially offset by a gain of $187 million from the sale of the
company's equity investment in Rainbow Pipe Line Co. Ltd. in the second
quarter of 2008.

    Chemical

    Net income was $28 million in the fourth quarter, compared with $23
million in the same quarter last year. Higher earnings in the fourth quarter
were primarily due to higher margins for polyethylene and intermediate
products, partially offset by lower sales volumes for those products. Full
year net income was $100 million, compared with $97 million in 2007. Higher
margins for polyethylene products were essentially offset by lower margins for
intermediate products and lower sales volumes for both polyethylene and
intermediate products.

    Corporate and other

    Net income effects were $39 million in the fourth quarter, compared with
negative $94 million in the same period of 2007. For 2008, net income effects
were $59 million, versus negative $199 million last year. Favourable earnings
effects in the fourth quarter and the full year of 2008 were primarily due to
lower share-based compensation charges and the absence of unfavourable effects
of tax rate changes reported in the fourth quarter of 2007.

    LIQUIDITY AND CAPITAL RE

SOURCES Cash flow from operating activities was $912 million during the fourth quarter of 2008, $300 million lower than the same period last year. Lower cash flow in the fourth quarter was primarily driven by lower earnings and the unfavourable impact of the timing of income tax payments, partially offset by the net effects of lower commodity prices on working capital balances. Full year cash flow from operating activities was $4,263 million, an increase of $637 million from the full year 2007. Higher cash flow in the full year 2008 was primarily due to higher earnings. Investing activities used net cash of $380 million in the fourth quarter and $961 million in 2008, compared to $290 million and $620 million in the corresponding periods in 2007. Additions to property, plant and equipment were $392 million in the fourth quarter, compared with $301 million during the same quarter 2007, and $1,231 million in the full year, compared with $899 million in the full year 2007. For the Upstream segment, expenditures during the year were primarily for advancing the Kearl oil sands project and ongoing development drilling at Cold Lake. Other 2008 investments included facilities improvements at Syncrude, drilling at Horn River and conventional fields in Western Canada and a 3-D seismic program in the Beaufort Sea. The Downstream segment's capital expenditures were focused mainly on improving air emissions, increasing refinery capacity utilization and upgrading the retail network. Proceeds from asset sales were $272 million in 2008 compared with $279 million in 2007. During the fourth quarter and the full year of 2008, the company repurchased about 10.3 million shares for $404 million and about 44.3 million shares for $2,210 million, respectively. Under the current share repurchase program, which began on June 25, 2008, the company has purchased about 24 million shares, including shares purchased from ExxonMobil. Cash dividends of $330 million were paid in 2008 compared with dividends of $319 million in 2007. On October 30, 2008, the company declared a quarterly dividend of ten cents a share, payable on January 1, 2009. Per-share dividends declared in 2008 totaled $0.38, up from $0.35 in 2007. The above factors led to an increase in the company's balance of cash to $1,974 million at December 31, 2008, from $1,208 million at the end of 2007. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS ----------------------------------------------------------- Information about market risks for the year ended December 31, 2008 does not differ materially from that discussed on page 33 in the company's annual report to shareholders for the year ended December 31, 2007 and interim reports to shareholders for the quarters ended March 31, 2008, June 30, 2008 and September 30, 2008 except for the following: ------------------------------------------------------------------------- Earnings sensitivity (a) millions of dollars after tax ------------------------------------------------------------------------- Three dollars (U.S.) a barrel change in crude oil prices + (-) 150 Eight cents decrease (increase) in the value of the Canadian dollar versus the U.S. dollar + (-) 300 ------------------------------------------------------------------------- The sensitivity of net income to changes in crude oil prices increased from 2007 year end by about $13 million (after-tax) for each one U.S.-dollar difference. A decrease in the value of the Canadian dollar has increased the impact of the U.S. dollar denominated crude oil prices on the company's revenues and earnings. The sensitivity of net income to changes in the Canadian dollar versus the U.S. dollar decreased from the third quarter of 2008 by about $29 million (after tax) for each one-cent difference. This was primarily due to the decrease in crude oil prices. (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 2008. 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. ------------------------------------------------------------------------- IMPERIAL OIL LIMITED ------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF INCOME (U.S. GAAP, unaudited) Twelve months Fourth quarter to December 31 millions of Canadian dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME Operating revenues (a)(b) 5,913 6,697 31,240 25,069 Investment and other income (4) 29 43 339 374 ----------------- ----------------- TOTAL REVENUES AND OTHER INCOME 5,942 6,740 31,579 25,443 ----------------- ----------------- EXPENSES Exploration 41 16 132 106 Purchases of crude oil and products (c) 3,330 3,884 18,865 14,026 Production and manufacturing (5)(d) 1,045 894 4,228 3,474 Selling and general (5) 244 366 1,038 1,335 Federal excise tax (a) 331 335 1,312 1,307 Depreciation and depletion 178 188 728 780 Financing costs (6)(e) 2 3 - 36 ----------------- ----------------- TOTAL EXPENSES 5,171 5,686 26,303 21,064 ----------------- ----------------- INCOME BEFORE INCOME TAXES 771 1,054 5,276 4,379 INCOME TAXES 111 168 1,398 1,191 ----------------- ----------------- NET INCOME (3) 660 886 3,878 3,188 ----------------- ----------------- NET INCOME PER COMMON SHARE - BASIC (dollars) (8) 0.77 0.97 4.39 3.43 NET INCOME PER COMMON SHARE - DILUTED (dollars) (8) 0.76 0.96 4.36 3.41 DIVIDENDS PER COMMON SHARE (dollars) 0.10 0.09 0.38 0.35 (a) Federal excise tax included in operating revenues 331 335 1,312 1,307 (b) Amounts from related parties included in operating revenues 294 495 2,150 1,772 (c) Amounts to related parties included in purchases of crude oil and products 778 974 4,729 3,331 (d) Amounts to related parties included in production and manufacturing expenses 23 48 161 194 (e) Amounts to related parties included in financing costs - 6 (1) 32 The notes to the financial statements are an integral part of these financial statements. IMPERIAL OIL LIMITED ------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP, unaudited) Twelve months inflow/(outflow) Fourth quarter to December 31 millions of Canadian dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- OPERATING ACTIVITIES Net income 660 886 3,878 3,188 Adjustment for non-cash items: Depreciation and depletion 178 188 728 780 (Gain)/loss on asset sales (4) (5) (4) (241) (215) Deferred income taxes and other 492 (23) 387 75 Changes in operating assets and liabilities: Accounts receivable 1,315 (6) 679 (261) Inventories and prepaids 318 262 (159) 13 Income taxes payable (559) 148 - (77) Accounts payable (1,452) (150) (798) 250 All other items - net (a) (35) (89) (211) (127) ----------------- ----------------- CASH FROM (USED IN) OPERATING ACTIVITIES 912 1,212 4,263 3,626 ----------------- ----------------- INVESTING ACTIVITIES Additions to property, plant and equipment and intangibles (392) (301) (1,231) (899) Proceeds from asset sales 12 11 272 279 Loans to equity company - - (2) - ----------------- ----------------- CASH FROM (USED IN) INVESTING ACTIVITIES (380) (290) (961) (620) ----------------- ----------------- FINANCING ACTIVITIES Short-term debt - net - (469) - (65) Repayment of long-term debt - (818) - (1,722) Long-term debt issued - - - 500 Reduction in capitalized lease obligations - (2) (3) (4) Issuance of common shares under stock option plan 1 2 7 12 Common shares purchased (8) (404) (567) (2,210) (2,358) Dividends paid (88) (83) (330) (319) ----------------- ----------------- CASH FROM (USED IN) FINANCING ACTIVITIES (491) (1,937) (2,536) (3,956) ----------------- ----------------- INCREASE (DECREASE) IN CASH 41 (1,015) 766 (950) CASH AT BEGINNING OF PERIOD 1,933 2,223 1,208 2,158 ----------------- ----------------- CASH AT END OF PERIOD 1,974 1,208 1,974 1,208 ----------------- ----------------- (a) Includes contribution to registered pension plans (6) (5) (165) (163) 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 Dec.31 Dec.31 millions of Canadian dollars 2008 2007 ------------------------------------------------------------------------- ASSETS Current assets Cash 1,974 1,208 Accounts receivable, less estimated doubtful accounts 1,455 2,132 Inventories of crude oil and products 673 566 Materials, supplies and prepaid expenses 180 128 Deferred income tax assets 361 660 ----------------- Total current assets 4,643 4,694 Long-term receivables, investments and other long-term assets 881 766 Property, plant and equipment, 24,165 22,962 less accumulated depreciation and depletion 12,917 12,401 ----------------- Property, plant and equipment, net 11,248 10,561 Goodwill 204 204 Other intangible assets, net 59 62 ----------------- TOTAL ASSETS 17,035 16,287 ----------------- LIABILITIES Current liabilities Notes and loans payable 109 108 Accounts payable and accrued liabilities (7)(a) 2,542 3,335 Income taxes payable 1,498 1,498 ----------------- Total current liabilities 4,149 4,941 Capitalized lease obligations 34 38 Other long-term obligations (7) 2,298 1,914 Deferred income tax liabilities 1,489 1,471 ----------------- TOTAL LIABILITIES 7,970 8,364 SHAREHOLDERS' EQUITY Common shares at stated value (8)(b) 1,528 1,600 Earnings reinvested (9) 8,484 7,071 Accumulated other comprehensive income (10) (947) (748) ----------------- TOTAL SHAREHOLDERS' EQUITY 9,065 7,923 ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 17,035 16,287 ----------------- (a) Accounts payable and accrued liabilities include amounts to related parties of $96 million (2007 - $260 million). (b) Number of common shares outstanding was 859 million (2007 - 903 million). The notes to the financial statements are an integral part of these financial statements. ------------------------------------------------------------------------- Approved by the directors January 29, 2009 (signed) (signed) Chairman, president and Senior vice-president, chief executive officer finance and administration, and treasurer ------------------------------------------------------------------------- IMPERIAL OIL LIMITED ------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ------------------------------------------------------------------------- 1. Basis of financial statement presentation These unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the United States of America and follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements. In the opinion of the management, the information furnished herein reflects all known accruals and adjustments necessary for a fair presentation of the financial position of the company as at December 31, 2008, and December 31, 2007, and the results of operations and changes in cash flows for the twelve months ending December, 2008 and 2007. 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 2008 presentation. All amounts are in Canadian dollars unless otherwise indicated. 2. Accounting changes Uncertainty in income taxes As of January 1, 2007, the company adopted the Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes". The cumulative adjustment for the accounting change reported in the first quarter of 2007 was an after-tax gain of $14 million. Fair value measurements Effective January 1, 2008, the company adopted the Financial Accounting Standards Board's (FASB) Statement No. 157 (SFAS 157), "Fair Value Measurements" for financial assets and liabilities that are measured at fair value and nonfinancial assets and liabilities that are remeasured at fair value on a recurring basis. SFAS 157 defines fair value, establishes a framework for measuring fair value when an entity is required to use a fair value measure for recognition or disclosure purposes and expands the disclosures about fair value measurements. The initial application of SFAS 157 had no material impact on the company's financial statements. On January 1, 2009, the company will adopt SFAS 157 for nonfinancial assets and liabilities that are not remeasured at fair value on a recurring basis. The application of SFAS 157 to the company's nonfinancial assets and liabilities will mostly be limited to the recognition and measurement of nonmonetary exchange transactions, asset retirement obligations and asset impairments. The company does not expect the adoption to have a material impact on the company's financial statements. 3. Business Segments ------------------------------------------------------------------------- Fourth quarter Upstream Downstream Chemical millions of dollars 2008 2007 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales (a) 842 1,162 4,826 5,214 245 321 Intersegment sales 875 1,169 474 696 86 88 Investment and other income 4 8 11 14 - - ------------------------------------------------ 1,721 2,339 5,311 5,924 331 409 ------------------------------------------------ EXPENSES Exploration (b) 41 16 - - - - Purchases of crude oil and products 515 872 4,021 4,648 228 317 Production and manufacturing 642 542 355 307 49 45 Selling and general 1 2 266 259 16 17 Federal excise tax - - 331 335 - - Depreciation and depletion 115 120 59 64 2 3 Financing costs 1 1 - - - - ------------------------------------------------ TOTAL EXPENSES 1,315 1,553 5,032 5,613 295 382 ------------------------------------------------ INCOME BEFORE INCOME TAXES 406 786 279 311 36 27 INCOME TAXES 70 47 22 93 8 4 ------------------------------------------------ NET INCOME 336 739 257 218 28 23 ------------------------------------------------ Export sales to the United States 460 501 410 220 143 192 Cash flows from (used in) operating activities 690 709 (56) 495 141 108 CAPEX (b) 355 249 70 54 6 3 Corporate Fourth quarter and Other Eliminations Consolidated millions of dollars 2008 2007 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales (a) - - - - 5,913 6,697 Intersegment sales - - (1,435) (1,953) - - Investment and other income 14 21 - - 29 43 ------------------------------------------------ 14 21 (1,435) (1,953) 5,942 6,740 ------------------------------------------------ EXPENSES Exploration (b) - - - - 41 16 Purchases of crude oil and products - - (1,434) (1,953) 3,330 3,884 Production and manufacturing - - (1) - 1,045 894 Selling and general (39) 88 - - 244 366 Federal excise tax - - - - 331 335 Depreciation and depletion 2 1 - - 178 188 Financing costs 1 2 - - 2 3 ------------------------------------------------ TOTAL EXPENSES (36) 91 (1,435) (1,953) 5,171 5,686 ------------------------------------------------ INCOME BEFORE INCOME TAXES 50 (70) - - 771 1,054 INCOME TAXES 11 24 - - 111 168 ------------------------------------------------ NET INCOME 39 (94) - - 660 886 ------------------------------------------------ Export sales to the United States - - - - 1,013 913 Cash flows from (used in) operating activities 137 (100) - - 912 1,212 CAPEX (b) 2 11 - - 433 317 (a) Includes crude oil sales made by Downstream in order to optimize refining operations. (b) Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant, equipment and intangibles and additions to capital leases. Twelve months to December 31 Upstream Downstream Chemical millions of dollars 2008 2007 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales (a) 5,819 4,539 24,049 19,230 1,372 1,300 Intersegment sales 5,403 4,146 2,892 2,305 460 335 Investment and other income 18 233 271 52 1 - ------------------------------------------------ 11,240 8,918 27,212 21,587 1,833 1,635 ------------------------------------------------ EXPENSES Exploration (b) 132 106 - - - - Purchases of crude oil and products 3,995 3,113 22,223 16,469 1,401 1,230 Production and manufacturing 2,569 2,057 1,452 1,232 208 185 Selling and general 6 8 998 987 72 71 Federal excise tax - - 1,312 1,307 - - Depreciation and depletion 474 519 234 244 12 12 Financing costs 2 4 (5) 1 - - ------------------------------------------------ TOTAL EXPENSES 7,178 5,807 26,214 20,240 1,693 1,498 ------------------------------------------------ INCOME BEFORE INCOME TAXES 4,062 3,111 998 1,347 140 137 INCOME TAXES 1,139 742 202 426 40 40 ------------------------------------------------ NET INCOME 2,923 2,369 796 921 100 97 ------------------------------------------------ Export sales to the United States 3,095 2,013 1,685 922 844 768 Cash flows from (used in) operating activities 3,699 2,411 280 1,151 183 109 CAPEX (b) 1,110 744 232 187 13 11 Total assets as at December 31 8,758 8,171 6,038 6,727 431 476 Capital employed as at December 31 4,616 4,436 3,692 3,228 178 219 Twelve months to Corporate December 31 and Other Eliminations Consolidated millions of dollars 2008 2007 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales (a) - - - - 31,240 25,069 Intersegment sales - - (8,755) (6,786) - - Investment and other income 49 89 - - 339 374 ------------------------------------------------ 49 89 (8,755) (6,786) 31,579 25,443 ------------------------------------------------ EXPENSES Exploration (b) - - - - 132 106 Purchases of crude oil and products - - (8,754) (6,786) 18,865 14,026 Production and manufacturing - - (1) - 4,228 3,474 Selling and general (38) 269 - - 1,038 1,335 Federal excise tax - - - - 1,312 1,307 Depreciation and depletion 8 5 - - 728 780 Financing costs 3 31 - - - 36 ------------------------------------------------ TOTAL EXPENSES (27) 305 (8,755) (6,786) 26,303 21,064 ------------------------------------------------ INCOME BEFORE INCOME TAXES 76 (216) - - 5,276 4,379 INCOME TAXES 17 (17) - - 1,398 1,191 ------------------------------------------------ NET INCOME 59 (199) - - 3,878 3,188 ------------------------------------------------ Export sales to the United States - - - - 5,624 3,703 Cash flows from (used in) operating activities 101 (45) - - 4,263 3,626 CAPEX (b) 8 36 - - 1,363 978 Total assets as at December 31 1,982 1,251 (174) (338) 17,035 16,287 Capital employed as at December 31 762 236 - - 9,248 8,119 (a) Includes crude oil sales made by Downstream in order to optimize refining operations. (b) Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant, equipment and intangibles and additions to capital leases. 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 2008 2007 2008 2007 ------------------------------------------------------------------------- Proceeds from asset sales 12 11 272 279 Book value of assets sold 7 7 31 64 ----------------- ----------------- Gain/(loss) on asset sales, before tax (a)(b) 5 4 241 215 ----------------- ----------------- Gain/(loss) on asset sales, after tax (a)(b) 5 4 209 156 ----------------- ----------------- (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. (b) 2008 included a gain of $219 million ($187 million, after tax) from the sale of the company's equity investment in Rainbow Pipe Line Co. Ltd. 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 2008 2007 2008 2007 ------------------------------------------------------------------------- Pension benefits: Current service cost 23 25 94 100 Interest cost 68 61 271 246 Expected return on plan assets (83) (82) (330) (329) Amortization of prior service cost 5 5 19 20 Recognized actuarial loss 23 19 91 76 ----------------- ----------------- Net benefit cost 36 28 145 113 ----------------- ----------------- Other post-retirement benefits: Current service cost 1 2 6 6 Interest cost 6 6 25 23 Recognized actuarial loss 2 1 6 6 ----------------- ----------------- Net benefit cost 9 9 37 35 ----------------- ----------------- 6. Financing costs Twelve months Fourth quarter to December 31 millions of dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- Debt related interest 2 11 8 62 Capitalized interest (2) (11) (8) (36) ----------------- ----------------- Net interest expense - - - 26 Other interest 2 3 - 10 ----------------- ----------------- Total financing costs 2 3 - 36 ----------------- ----------------- 7. Other long-term obligations As at As at Dec.31 Dec.31 millions of dollars 2008 2007 ------------------------------------------------------------------------- Employee retirement benefits (a) 1,151 954 Asset retirement obligations and other environmental liabilities (b) 728 522 Share-based incentive compensation liabilities 203 210 Other obligations 216 228 ------- ------- Total other long-term obligations 2,298 1,914 (a) Total recorded employee retirement benefits obligations also include $45 million in current liabilities (December 31, 2007 - $59 million). (b) Total asset retirement obligations and other environmental liabilities also include $83 million in current liabilities (December 31, 2007 - $74 million). 8. Common shares As at As at Dec.31 Dec.31 thousands of shares 2008 2007 ------------------------------------------------------------------------- Authorized 1,100,000 1,100,000 Common shares outstanding 859,402 903,263 From 1995 through 2007, the company purchased shares under thirteen 12-month normal course issuer bid share repurchase programs, as well as an auction tender. On June 25, 2008, another 12-month normal course issuer bid program was implemented with an allowable purchase of 44.2 million shares (five percent of the total on June 16, 2008), less shares purchased from Exxon Mobil Corporation and shares purchased by the employee savings plan and company pension fund. The results of these activities are as shown below: millions of Year Shares Dollars ------------------------------------------------------------------------- 1995 - 2006 795.6 10,453 2007 - Fourth quarter 11.1 567 - Full year 50.5 2,358 2008 - Fourth quarter 10.3 404 - Full year 44.3 2,210 Cumulative purchases to date 890.4 15,021 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 2008 2007 2008 2007 ------------------------------------------------------------------------- Net income per common share - basic Net income (millions of dollars) 660 886 3,878 3,188 Weighted average number of common shares outstanding (millions of shares) 865.3 909.3 882.6 928.5 Net income per common share (dollars) 0.77 0.97 4.39 3.43 Net income per common share - diluted Net income (millions of dollars) 660 886 3,878 3,188 Weighted average number of common shares outstanding (millions of shares) 865.3 909.3 882.6 928.5 Effect of employee share-based awards (millions of shares) 6.4 6.1 6.4 5.8 ----------------- ----------------- Weighted average number of common shares outstanding, assuming dilution (millions of shares) 871.7 915.4 889.0 934.3 Net income per common share (dollars) 0.76 0.96 4.36 3.41 9. Earnings reinvested Twelve months Fourth quarter to December 31 millions of dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- Earnings reinvested at beginning of period 8,294 6,815 7,071 6,462 Cumulative effect of accounting change (2) - - - 14 Net income for the period 660 886 3,878 3,188 Share purchases in excess of stated value (385) (548) (2,131) (2,269) Dividends (85) (82) (334) (324) ----------------- ----------------- Earnings reinvested at end of period 8,484 7,071 8,484 7,071 ----------------- ----------------- 10. Comprehensive income Twelve months Fourth quarter to December 31 millions of dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- Net income 660 886 3,878 3,188 Post-retirement benefit liability adjustment (excluding amortization) (178) (59) (283) (87) Amortization of post retirement benefit liability adjustment included in net periodic benefit costs 21 19 84 72 ----------------- ----------------- Other comprehensive income (net of income taxes) (157) (40) (199) (15) ----------------- ----------------- Total comprehensive income 503 846 3,679 3,173 ----------------- ----------------- IMPERIAL OIL LIMITED ------------------------------------------------------------------------- OPERATING STATISTICS (unaudited) Twelve months Fourth quarter to December 31 2008 2007 2008 2007 ------------------------------------------------------------------------- GROSS CRUDE OIL AND NGL PRODUCTION (thousands of barrels a day) Cold Lake 146 158 147 154 Syncrude 77 78 72 76 Conventional 27 29 27 29 ----------------- ----------------- Total crude oil production 250 265 246 259 Natural gas liquids (NGLs) available for sale 9 14 10 16 ----------------- ----------------- Total crude oil and NGL production 259 279 256 275 ----------------- ----------------- NET CRUDE OIL AND NGL PRODUCTION (thousands of barrels a day) Cold Lake 129 137 124 130 Syncrude 68 67 62 65 Conventional 20 21 19 21 ----------------- ----------------- Total crude oil production 217 225 205 216 Natural gas liquids (NGLs) available for sale 7 9 8 12 ----------------- ----------------- Total crude oil and NGL production 224 234 213 228 ----------------- ----------------- COLD LAKE BLEND SALES (thousands of barrels a day) 190 208 191 200 NGL SALES (thousands of barrels a day) 13 18 11 20 NATURAL GAS (millions of cubic feet a day) Production (gross) 297 386 310 458 Production (net) 239 345 249 404 Sales 291 334 288 407 AVERAGE REALIZATIONS AND PRICES (Canadian dollars) Conventional crude oil realizations (a barrel) 56.75 81.25 95.76 71.70 NGL realizations (a barrel) 43.61 57.80 59.35 47.92 Natural gas realizations (a thousand cubic feet) 7.31 6.33 8.69 6.95 Par crude oil price at Edmonton (a barrel) 64.55 87.51 103.60 77.67 Heavy crude oil at Hardisty (Bow River, a barrel) 48.95 56.60 83.91 53.87 TOTAL REFINERY THROUGHPUT (thousands of barrels a day) 441 467 446 442 REFINERY CAPACITY UTILIZATION (percent) 88 93 89 88 PETROLEUM PRODUCTS SALES (millions of litres a day) Gasolines 32.5 34.4 32.4 33.1 Heating, diesel and jet fuels 25.1 26.7 25.0 26.0 Heavy fuel oils 5.0 5.8 4.8 5.2 Lube oils and other products 8.6 6.5 7.5 6.9 ----------------- ----------------- Net petroleum products sales 71.2 73.4 69.7 71.2 ----------------- ----------------- PETROCHEMICAL SALES (thousands of tonnes a day) 2.2 3.1 2.8 3.1 ------------------------------------------------------------------------- IMPERIAL OIL LIMITED ------------------------------------------------------------------------- SHARE OWNERSHIP, TRADING AND PERFORMANCE (unaudited) Twelve months Fourth quarter to December 31 2008 2007 2008 2007 ------------------------------------------------------------------------- RETURN ON AVERAGE CAPITAL EMPLOYED (a) (percent) 44.7 37.7 RETURN ON AVERAGE SHAREHOLDERS' EQUITY (percent) 45.7 41.6 INTEREST COVERAGE RATIO - EARNINGS BASIS (times covered) 660.5 71.6 SHARE OWNERSHIP Outstanding shares (thousands) Monthly weighted average 865,270 909,258 882,604 928,527 At December 31 859,402 903,263 Number of shareholders At December 31 13,206 13,108 SHARE PRICES Toronto Stock Exchange (Canadian dollars) High 46.43 56.26 62.54 56.26 Low 28.79 45.57 28.79 37.40 Close at December 31 40.99 54.62 NYSE Alternext U.S. (U.S. dollars) (b) High 43.66 61.48 63.08 61.48 Low 23.84 46.43 23.84 31.87 Close at December 31 33.72 54.78 (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.

For further information:

For further information: Investor inquiries, Dee Brandes, Investor
Relations, (403) 237-4537; Media inquiries, Gordon Wong, Public Affairs, (403)
237-2710


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