Imperial Oil announces third quarter financial and operating results



    CALGARY, Oct. 30 /CNW/ - Imperial Oil today announced that net income for
the third quarter was a record $1,389 million or $1.57 a share, compared with
$816 million or $0.88 a share for the same period last year. Net income for
the first nine months of 2008 was $3,218 million or $3.60 a share, versus
$2,302 million or $2.45 a share for the first nine months of 2007.
    Earnings in the third quarter were higher than the same quarter of 2007
as earnings improved in all segments. In the Upstream, higher crude oil and
natural gas commodity prices were partially offset by the negative impacts of
lower volumes, higher royalties, and higher energy and planned maintenance
costs. Higher Downstream earnings were primarily due to stronger margins.
Chemical earnings benefited from higher margins for polyethylene products.
Lower share-based compensation costs also contributed to higher earnings.
    Operating revenues were $9,478 million in the third quarter, compared
with $6,306 million in the corresponding period last year. Capital and
exploration expenditures were $388 million in the third quarter, compared with
$245 million during the same quarter of 2007. For the first nine months of
2008, capital and exploration expenditures were $996 million, versus
$661 million in the same period a year ago. During the third quarter and the
first nine months of 2008, the company repurchased about 12 million shares for
$610 million and about 34 million shares for $1,806 million, respectively. At
September 30, the company's balance of cash was $1,933 million, compared with
$1,208 million at the end of 2007.
    "Imperial's strong balance sheet coupled with the company's long-term
approach to disciplined investment and operational excellence is a proven
combination," said Bruce March, chairman, president and chief executive
officer of Imperial Oil. "Over the past quarter it has allowed us to provide
advantage to our shareholders by advancing our major projects, continuing the
company's share buyback and dividend programs, and maintaining a solid
financial footing during these unsettling economic times," March added.
    Imperial Oil is one of Canada's largest corporations and a leading member
of the country's petroleum industry. It is one of the country's largest
producers of crude oil and natural gas, is the 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

    In total, about $400 million has been spent on the Kearl project as of
the end of the third quarter. Detailed design engineering continues and
long-lead procurement items are being advanced. Site activities are focused on
access road construction and plant site earthworks preparation.

    Beaufort Sea exploration update

    Imperial completed a 3-D seismic survey in the Beaufort Sea, a promising
frontier exploration area.  This work follows the acquisition of a multi-year
exploration licence covering more than 500,000 acres that was acquired by
Imperial (50 percent interest) and ExxonMobil Canada in 2007.

    
    Sarnia refinery to reduce sulphur dioxide (SO2) emissions by more than
    50 percent
    

    Imperial will construct a Tail Gas Clean-Up unit at its Sarnia refinery
to reduce the site's SO2 emissions. The unit's high efficiency process will
increase overall product sulphur recovery at the sulphur recovery units to
more than 99.5 percent. This new facility, together with operational
enhancements at the refinery, will enable the site to reduce its SO2 emissions
by more than 50 percent. The unit will involve an investment of more than
$100 million and is expected to take about 16 months to build.

    Third quarter dividend declared - increased to 10 cents a share

    On July 31, 2008, the company declared a quarterly dividend of ten cents
a share, an increase of one cent share from the previous quarter, payable on
October 1, 2008.

    
                                 IMPERIAL OIL LIMITED

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

                                                               Nine months
                                             Third quarter   to September 30
                                             2008     2007     2008     2007
                                          ----------------- -----------------
    Net income (U.S. GAAP, millions
     of dollars)
      Upstream                                999      607    2,587    1,630
      Downstream                              270      191      539      703
      Chemical                                 38       24       72       74
      Corporate and other                      82       (6)      20     (105)
                                          ----------------- -----------------
    Net income (U.S. GAAP)                  1,389      816    3,218    2,302
                                          ----------------- -----------------

    Cash flow from operating activities     1,663    1,014    3,417    2,414
    Capital and exploration expenditures      388      245      996      661

    Per-share information (dollars)
      Net income - basic                     1.57     0.88     3.62     2.46
      Net income - diluted                   1.57     0.88     3.60     2.45
      Dividends                              0.10     0.09     0.28     0.26

      Share prices - close at September 30
      Toronto Stock Exchange
       (Canadian dollars)                                     45.58    49.29
      American Stock Exchange (U.S. dollars)                  42.60    49.56


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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 third quarter of 2008 was a record
$1,389 million or $1.57 a share on a diluted basis, compared with $816 million
or $0.88 a share for the same period last year. Net income for the first nine
months of 2008 was $3,218 million or $3.60 a share on a diluted basis, versus
$2,302 million or $2.45 a share for the first nine months of 2007.
    Earnings in the third quarter were higher than the same quarter of 2007
as earnings improved in all segments. In the Upstream, higher crude oil and
natural gas commodity prices were partially offset by the negative impacts of
lower volumes, higher royalties, and higher energy and planned maintenance
costs. Higher Downstream earnings were primarily due to stronger margins.
Chemical earnings benefited from higher margins for polyethylene products.
Lower share-based compensation costs also contributed to higher earnings.
    For the first nine months, 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, lower overall downstream margins and a stronger Canadian
dollar.

    Upstream

    Net income in the third quarter was a record $999 million, $392 million
higher than the same period in 2007. Increased earnings were primarily due to
higher crude oil and natural gas commodity prices totaling about $960 million.
Improved realizations were partially offset by the negative impacts of higher
royalties of about $150 million, lower conventional volumes from expected
reservoir decline of about $95 million, lower cyclical Cold Lake heavy oil
production of about $85 million and lower Syncrude volumes of about $70
million. Earnings were also negatively impacted by higher energy and planned
Syncrude maintenance costs totaling about $120 million and lower gains from
asset divestments of about $50 million.
    Net income for the first nine months was $2,587 million versus $1,630
million during the same period last year. Crude oil and natural gas commodity
prices were stronger by about $2,500 million. Their positive impact on
earnings was partially offset by lower conventional volumes of about $375
million, lower Syncrude volumes of about $130 million and lower cyclical Cold
Lake heavy oil production of about $70 million. Earnings were also negatively
impacted by higher royalties of about $425 million, a stronger Canadian dollar
of about $180 million, higher energy, Syncrude maintenance, and other
production costs totaling about $240 million and lower gains from asset
divestments of about $140 million.
    Gross production of Cold Lake heavy oil averaged 143 thousand barrels a
day during the third quarter, versus 160 thousand barrels in the same quarter
last year. For the first nine months, gross production was 147 thousand
barrels a day this year, compared with 152 thousand barrels in the same period
of 2007. Lower production volumes in the third quarter and nine months of 2008
were due to the cyclic nature of production at Cold Lake.
    The company's share of Syncrude's gross production in the third quarter
was 79 thousand barrels a day compared with 87 thousand barrels during the
same period a year ago. Lower volumes were attributed to planned maintenance
of a coker unit which began in the third quarter. During the nine-month
period, the company's share of gross production from Syncrude averaged 71
thousand barrels a day, down from 76 thousand barrels in 2007. Lower volumes
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 third quarter and nine months of 2008, gross production of
conventional crude oil averaged 27 thousand barrels a day and was essentially
the same when compared to corresponding periods in 2007.
    Gross production of natural gas during the third quarter of 2008
decreased to 309 million cubic feet a day from 430 million cubic feet in the
same period last year. In the first nine months of the year, gross production
was 315 million cubic feet a day, down from 482 million in the first nine
months of 2007. The lower production volume was primarily due to the decline,
as expected, in production from the Wizard Lake gas cap blowdown, which is
largely complete.
    Gross production of natural gas liquids (NGLs) available for sale was 9
thousand barrels a day in the third quarter, down from 16 thousand barrels in
the same quarter last year. During the first nine months of 2008, gross
production of NGLs available for sale decreased to 11 thousand barrels a day,
from 17 thousand barrels in 2007. The lower production volumes in the third
quarter and the first nine months of 2008 were mainly due to the expected
decline in production from Wizard Lake.

    Downstream

    Net income was $270 million in the third quarter of 2008, compared with
$191 million in the same period a year ago. Earnings were higher mainly due to
stronger margins in the quarter. Also contributing to higher earnings was
increased throughput at the refineries, with refinery utilization averaging 93
percent in the third quarter.
    Nine-month net income was $539 million compared with $703 million in
2007. Earnings decreased primarily due to lower overall downstream margins of
about $285 million and the negative impact of a stronger Canadian dollar of
about $50 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 $38 million in the third quarter, compared with $24
million in the same quarter last year. Higher earnings in the third quarter
were primarily due to higher margins for polyethylene products partially
offset by lower overall sales volumes. Nine-month net income was $72 million,
compared with $74 million in 2007. Lower margins for intermediate and other
chemical products were essentially offset by higher margins for polyethylene
products.

    Corporate and other

    Net income effects were $82 million in the third quarter, compared with
negative $6 million in the same period of 2007. For the nine months of 2008,
net income effects were $20 million, versus negative $105 million last year.
Favourable earnings effects in the third quarter and the first nine months of
2008 were primarily due to lower share-based compensation charges.

    
    LIQUIDITY AND CAPITAL RE

SOURCES ------------------------------- Cash flow from operating activities was $1,663 million during the third quarter of 2008, $649 million higher than the same period last year. Year-to-date cash flow from operating activities was $3,417 million, an increase of $1,003 million from the first nine months of 2007. Higher cash flow in the third quarter and the nine months of 2008 were primarily due to higher earnings. Investing activities used net cash of $335 million in the third quarter and $647 million in the nine months of 2008, compared to $143 million and $330 million in the corresponding periods in 2007. Additions to property, plant and equipment were $354 million in the third quarter, compared with $226 million during the same quarter of 2007, and $905 million in the first nine months, compared with $598 million in the first nine months of 2007. For the Upstream segment, capital and exploration expenditures included ongoing development drilling at Cold Lake to maintain and expand production capacity, advancing the Kearl oil sands project, investments in facilities improvement at Syncrude, drilling at 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 reducing air emissions and improving refinery reliability and utilization. Proceeds from asset sales were $260 million in the nine months of 2008 compared with $268 million in the corresponding period of 2007. During the third quarter and the first nine months of 2008, the company repurchased about 12 million shares for $610 million and about 34 million shares for $1,806 million, respectively. Under the current share repurchase program, which began on June 25, 2008, the company has purchased about 14 million shares, including shares purchased from ExxonMobil. Cash dividends of $242 million were paid in the first nine months of 2008 compared with dividends of $236 million in the same period of 2007. On July 31, 2008, the company declared a quarterly dividend of ten cents a share, an increase of one cent a share from the previous quarter, payable on October 1, 2008. Per-share dividends declared in the first three quarters of 2008 totaled $0.28, up from $0.26 in the same period of 2007. The above factors led to an increase in the company's balance of cash to $1,933 million at September 30, 2008, from $1,208 million at the end of 2007. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS ----------------------------------------------------------- Information about market risks for the nine months ended September 30, 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 and June 30, 2008 except for the following: ------------------------------------------------------------------------- Earnings sensitivity (a) millions of dollars after tax ------------------------------------------------------------------------- Nine cents decrease (increase) in the value of the Canadian dollar versus the U.S. dollar + (-) 600 ------------------------------------------------------------------------- The sensitivity of net income to changes in the Canadian dollar versus the U.S. dollar decreased from the second quarter of 2008 by about $5 million (after tax) for each one-cent difference. This was primarily due to the decrease in crude oil prices partially offset by the impacts of narrowing price spread between light crude oil and Cold Lake heavy oil and higher industry refining margins. (a) The amount quoted to illustrate the impact of the sensitivity represents a change of about 10 percent in the value of the commodity at the end of the third quarter 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) Nine months Third quarter to September 30 millions of Canadian dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME Operating revenues (a)(b) 9,478 6,306 25,327 18,372 Investment and other income (4) 37 124 310 331 ---------------- ----------------- TOTAL REVENUES AND OTHER INCOME 9,515 6,430 25,637 18,703 ---------------- ----------------- EXPENSES Exploration 34 19 91 90 Purchases of crude oil and products (c) 5,727 3,519 15,535 10,142 Production and manufacturing (5)(d) 1,092 846 3,183 2,580 Selling and general (5) 175 298 794 969 Federal excise tax (a) 341 343 981 972 Depreciation and depletion 188 205 550 592 Financing costs (6)(e) 1 10 (2) 33 ---------------- ----------------- TOTAL EXPENSES 7,558 5,240 21,132 15,378 ---------------- ----------------- INCOME BEFORE INCOME TAXES 1,957 1,190 4,505 3,325 INCOME TAXES 568 374 1,287 1,023 ---------------- ----------------- NET INCOME (3) 1,389 816 3,218 2,302 ---------------- ----------------- NET INCOME PER COMMON SHARE - BASIC (dollars) (8) 1.57 0.88 3.62 2.46 NET INCOME PER COMMON SHARE - DILUTED (dollars) (8) 1.57 0.88 3.60 2.45 DIVIDENDS PER COMMON SHARE (dollars) 0.10 0.09 0.28 0.26 (a) Federal excise tax included in operating revenues 341 343 981 972 (b) Amounts from related parties included in operating revenues 637 431 1,856 1,277 (c) Amounts to related parties included in purchases of crude oil and products 1,442 866 3,951 2,357 (d) Amounts to related parties included in production and manufacturing expenses 48 55 138 148 (e) Amounts to related parties included in financing costs - 9 (1) 26 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) Nine months inflow/(outflow) Third quarter to September 30 millions of Canadian dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- OPERATING ACTIVITIES Net income 1,389 816 3,218 2,302 Adjustment for non-cash items: Depreciation and depletion 188 205 550 592 (Gain)/loss on asset sales (4) (4) (72) (236) (211) Deferred income taxes and other 137 9 (105) 98 Changes in operating assets and liabilities: Accounts receivable 128 (23) (636) (255) Inventories and prepaids (8) (51) (477) (249) Income taxes payable 200 183 559 (225) Accounts payable (409) (80) 654 400 All other items - net (a) 42 27 (110) (38) ---------------- ----------------- CASH FROM (USED IN) OPERATING ACTIVITIES 1,663 1,014 3,417 2,414 ---------------- ----------------- INVESTING ACTIVITIES Additions to property, plant and equipment and intangibles (354) (226) (905) (598) Proceeds from asset sales 19 82 260 268 Loans to equity company - 1 (2) - ---------------- ----------------- CASH FROM (USED IN) INVESTING ACTIVITIES (335) (143) (647) (330) ----------------- ----------------- FINANCING ACTIVITIES Short-term debt - net - (1) - 404 Repayment of long-term debt - (250) - (904) Long-term debt issued - 250 - 500 Reduction in capitalized lease obligations (1) (1) (3) (2) Issuance of common shares under stock option plan - 1 6 10 Common shares purchased (8) (610) (600) (1,806) (1,791) Dividends paid (79) (84) (242) (236) ---------------- ----------------- CASH FROM (USED IN) FINANCING ACTIVITIES (690) (685) (2,045) (2,019) ---------------- ----------------- INCREASE (DECREASE) IN CASH 638 186 725 65 CASH AT BEGINNING OF PERIOD 1,295 2,037 1,208 2,158 ---------------- ----------------- CASH AT END OF PERIOD 1,933 2,223 1,933 2,223 ---------------- ----------------- (a) Includes contribution to registered pension plans (6) (5) (159) (158) 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 2008 2007 ------------------------------------------------------------------------- ASSETS Current assets Cash 1,933 1,208 Accounts receivable, less estimated doubtful accounts 2,770 2,132 Inventories of crude oil and products 898 566 Materials, supplies and prepaid expenses 273 128 Deferred income tax assets 807 660 ----------------- Total current assets 6,681 4,694 Long-term receivables, investments and other long-term assets 785 766 Property, plant and equipment, 23,709 22,962 less accumulated depreciation and depletion 12,812 12,401 ----------------- Property, plant and equipment, net 10,897 10,561 Goodwill 204 204 Other intangible assets, net 60 62 ----------------- TOTAL ASSETS 18,627 16,287 ----------------- LIABILITIES Current liabilities Short-term debt 105 105 Accounts payable and accrued liabilities (7)(a) 3,995 3,335 Income taxes payable 2,057 1,498 Current portion of capitalized lease obligations 3 3 ----------------- Total current liabilities 6,160 4,941 Capitalized lease obligations 35 38 Other long-term obligations (7) 1,879 1,914 Deferred income tax liabilities 1,503 1,471 ----------------- TOTAL LIABILITIES 9,577 8,364 SHAREHOLDERS' EQUITY Common shares at stated value (8)(b) 1,546 1,600 Earnings reinvested (9) 8,294 7,071 Accumulated other comprehensive income (10) (790) (748) ----------------- TOTAL SHAREHOLDERS' EQUITY 9,050 7,923 ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 18,627 16,287 ----------------- (a) Accounts payable and accrued liabilities include amounts to related parties of $556 million (2007 - $260 million). (b) Number of common shares outstanding was 870 million (2007 - 903 million). The notes to the financial statements are an integral part of these financial statements. ------------------------------------------------------------------------- Approved by the directors October 30, 2008 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 September 30, 2008, and December 31, 2007, and the results of operations and changes in cash flows for the nine months ending September 30, 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. The results for the nine months ending September 30, 2008, 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 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 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 Third quarter Upstream Downstream Chemical millions of dollars 2008 2007 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales (a) 1,692 1,028 7,393 4,934 393 344 Intersegment sales 1,682 1,227 747 552 132 74 Investment and other income 5 85 18 14 - - ------------------------------------------------ 3,379 2,340 8,158 5,500 525 418 ------------------------------------------------ EXPENSES Exploration (b) 34 19 - - - - Purchases of crude oil and products 1,134 817 6,759 4,243 395 312 Production and manufacturing 671 479 369 321 52 46 Selling and general 2 2 256 251 19 19 Federal excise tax - - 341 343 - - Depreciation and depletion 124 141 57 59 4 4 Financing costs 1 - - - - - ------------------------------------------------ TOTAL EXPENSES 1,966 1,458 7,782 5,217 470 381 ------------------------------------------------ INCOME BEFORE INCOME TAXES 1,413 882 376 283 55 37 INCOME TAXES 414 275 106 92 17 13 ------------------------------------------------ NET INCOME 999 607 270 191 38 24 ------------------------------------------------ Export sales to the United States 984 490 682 200 250 212 Cash flows from (used in) operating activities 1,534 760 93 184 32 60 CAPEX (b) 316 184 67 50 3 2 Corporate Third quarter and Other Eliminations Consolidated millions of dollars 2008 2007 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales (a) - - - - 9,478 6,306 Intersegment sales - - (2,561) (1,853) - - Investment and other income 14 25 - - 37 124 ------------------------------------------------ 14 25 (2,561) (1,853) 9,515 6,430 ------------------------------------------------ EXPENSES Exploration (b) - - - - 34 19 Purchases of crude oil and products - - (2,561) (1,853) 5,727 3,519 Production and manufacturing - - - - 1,092 846 Selling and general (102) 26 - - 175 298 Federal excise tax - - - - 341 343 Depreciation and depletion 3 1 - - 188 205 Financing costs - 10 - - 1 10 ------------------------------------------------ TOTAL EXPENSES (99) 37 (2,561) (1,853) 7,558 5,240 ------------------------------------------------ INCOME BEFORE INCOME TAXES 113 (12) - - 1,957 1,190 INCOME TAXES 31 (6) - - 568 374 ------------------------------------------------ NET INCOME 82 (6) - - 1,389 816 ------------------------------------------------ Export sales to the United States - - - - 1,916 902 Cash flows from (used in) operating activities 4 10 - - 1,663 1,014 CAPEX (b) 2 9 - - 388 245 (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. Nine months to September 30 Upstream Downstream Chemical millions of dollars 2008 2007 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales (a) 4,977 3,377 19,223 14,016 1,127 979 Intersegment sales 4,528 2,977 2,418 1,609 374 247 Investment and other income 14 225 260 38 1 - ------------------------------------------------ 9,519 6,579 21,901 15,663 1,502 1,226 ------------------------------------------------ EXPENSES Exploration (b) 91 90 - - - - Purchases of crude oil and products 3,480 2,241 18,202 11,821 1,173 913 Production and manufacturing 1,927 1,515 1,097 925 159 140 Selling and general 5 6 732 728 56 54 Federal excise tax - - 981 972 - - Depreciation and depletion 359 399 175 180 10 9 Financing costs 1 3 (5) 1 - - ------------------------------------------------ TOTAL EXPENSES 5,863 4,254 21,182 14,627 1,398 1,116 ------------------------------------------------ INCOME BEFORE INCOME TAXES 3,656 2,325 719 1,036 104 110 INCOME TAXES 1,069 695 180 333 32 36 ------------------------------------------------ NET INCOME 2,587 1,630 539 703 72 74 ------------------------------------------------ Export sales to the United States 2,635 1,512 1,275 702 701 576 Cash flows from (used in) operating activities 3,075 1,702 336 656 42 1 CAPEX (b) 821 495 162 133 7 8 Total assets as at September 30 8,790 7,923 7,820 6,889 516 499 Capital employed as at September 30 4,614 4,143 3,380 3,476 257 323 Nine months to Corporate September 30 and Other Eliminations Consolidated millions of dollars 2008 2007 2008 2007 2008 2007 ------------------------------------------------------------------------- REVENUES AND OTHER INCOME External sales (a) - - - - 25,327 18,372 Intersegment sales - - (7,320) (4,833) - - Investment and other income 35 68 - - 310 331 ------------------------------------------------ 35 68 (7,320) (4,833) 25,637 18,703 ------------------------------------------------ EXPENSES Exploration (b) - - - - 91 90 Purchases of crude oil and products - - (7,320) (4,833) 15,535 10,142 Production and manufacturing - - - - 3,183 2,580 Selling and general 1 181 - - 794 969 Federal excise tax - - - - 981 972 Depreciation and depletion 6 4 - - 550 592 Financing costs 2 29 - - (2) 33 ------------------------------------------------ TOTAL EXPENSES 9 214 (7,320) (4,833) 21,132 15,378 ------------------------------------------------ INCOME BEFORE INCOME TAXES 26 (146) - - 4,505 3,325 INCOME TAXES 6 (41) - - 1,287 1,023 ------------------------------------------------ NET INCOME 20 (105) - - 3,218 2,302 ------------------------------------------------ Export sales to the United States - - - - 4,611 2,790 Cash flows from (used in) operating activities (36) 55 - - 3,417 2,414 CAPEX (b) 6 25 - - 996 661 Total assets as at September 30 1,956 2,256 (455) (314) 18,627 17,253 Capital employed as at September 30 983 1,273 - - 9,234 9,215 (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: Nine months Third quarter to September 30 millions of dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- Proceeds from asset sales 19 82 260 268 Book value of assets sold 15 10 24 57 ----------------- ----------------- Gain/(loss) on asset sales, before tax (a) 4 72 236 211 ----------------- ----------------- Gain/(loss) on asset sales, after tax (a) 2 51 203 152 ----------------- ----------------- (a) Third quarter of 2007 included a gain of $71 million ($51 million, 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 Third quarter to September 30 millions of dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- Pension benefits: Current service cost 24 25 71 75 Interest cost 67 62 203 185 Expected return on plan assets (82) (83) (247) (247) Amortization of prior service cost 5 5 14 15 Recognized actuarial loss 22 19 68 57 ----------------- ----------------- Net benefit cost 36 28 109 85 ----------------- ----------------- Other post-retirement benefits: Current service cost 2 1 5 4 Interest cost 7 5 19 17 Recognized actuarial loss 1 2 4 5 ----------------- ----------------- Net benefit cost 10 8 28 26 ----------------- ----------------- 6. Financing costs Nine months Third quarter to September 30 millions of dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- Debt related interest 2 18 6 51 Capitalized interest (2) (9) (6) (25) ----------------- ----------------- Net interest expense - 9 - 26 Other interest 1 1 (2) 7 ----------------- ----------------- Total financing costs 1 10 (2) 33 ----------------- ----------------- 7. Other long-term obligations As at As at Sept.30 Dec.31 millions of dollars 2008 2007 ------------------------------------------------------------------------- Employee retirement benefits (a) 904 954 Asset retirement obligations and other environmental liabilities (b) 516 522 Share-based incentive compensation liabilities 253 210 Other obligations 206 228 ------- ------- Total other long-term obligations 1,879 1,914 ------- ------- (a) Total recorded employee retirement benefits obligations also include $59 million in current liabilities (December 31, 2007 - $59 million). (b) Total asset retirement obligations and other environmental liabilities also include $74 million in current liabilities (December 31, 2007 - $74 million). 8. Common shares As at As at Sept.30 Dec.31 thousands of shares 2008 2007 ------------------------------------------------------------------------- Authorized 1,100,000 1,100,000 Common shares outstanding 869,673 903,263 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 24, 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 - Third quarter 12.8 600 - Full year 50.5 2,358 2008 - Third quarter 12.4 610 - Year-to-date 34.0 1,806 Cumulative purchases to date 880.1 14,617 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 Third quarter to September 30 2008 2007 2008 2007 ------------------------------------------------------------------------- Net income per common share - basic Net income (millions of dollars) 1,389 816 3,218 2,302 Weighted average number of common shares outstanding (millions of shares) 877.3 922.0 888.4 935.0 Net income per common share (dollars) 1.57 0.88 3.62 2.46 Net income per common share - diluted Net income (millions of dollars) 1,389 816 3,218 2,302 Weighted average number of common shares outstanding (millions of shares) 877.3 922.0 888.4 935.0 Effect of employee share-based awards (millions of shares) 6.5 5.9 6.4 5.7 ----------------- ----------------- Weighted average number of common shares outstanding, assuming dilution (millions of shares) 883.8 927.9 894.8 940.7 Net income per common share (dollars) 1.57 0.88 3.60 2.45 9. Earnings reinvested Nine months Third quarter to September 30 millions of dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- Earnings reinvested at beginning of period 7,581 6,659 7,071 6,462 Cumulative effect of accounting change (2) - - - 14 Net income for the period 1,389 816 3,218 2,302 Share purchases in excess of stated value (588) (577) (1,746) (1,721) Dividends (88) (83) (249) (242) ----------------- ----------------- Earnings reinvested at end of period 8,294 6,815 8,294 6,815 ----------------- ----------------- 10. Comprehensive income Nine months Third quarter to September 30 millions of dollars 2008 2007 2008 2007 ------------------------------------------------------------------------- Net income 1,389 816 3,218 2,302 Post-retirement benefit liability adjustment (excluding amortization) - - (105) (28) Amortization of post retirement benefit liability adjustment included in net periodic benefit costs 21 18 63 53 ----------------- ----------------- Other comprehensive income (net of income taxes) 21 18 (42) 25 ----------------- ----------------- Total comprehensive income 1,410 834 3,176 2,327 ----------------- ----------------- IMPERIAL OIL LIMITED ------------------------------------------------------------------------- OPERATING STATISTICS (unaudited) Nine months Third quarter to September 30 2008 2007 2008 2007 ------------------------------------------------------------------------- GROSS CRUDE OIL AND NGL PRODUCTION (thousands of barrels a day) Cold Lake 143 160 147 152 Syncrude 79 87 71 76 Conventional 27 28 27 29 ----------------- ----------------- Total crude oil production 249 275 245 257 Natural gas liquids (NGLs) available for sale 9 16 11 17 ----------------- ----------------- Total crude oil and NGL production 258 291 256 274 ----------------- ----------------- NET CRUDE OIL AND NGL PRODUCTION (thousands of barrels a day) Cold Lake 117 132 122 127 Syncrude 66 72 60 64 Conventional 20 21 19 22 ----------------- ----------------- Total crude oil production 203 225 201 213 Natural gas liquids (NGLs) available for sale 7 11 9 13 ----------------- ----------------- Total crude oil and NGL production 210 236 210 226 ----------------- ----------------- COLD LAKE BLEND SALES (thousands of barrels a day) 180 202 191 197 NGL SALES (thousands of barrels a day) 8 16 11 20 NATURAL GAS (millions of cubic feet a day) Production (gross) 309 430 315 482 Production (net) 248 379 254 423 Sales 286 378 287 432 AVERAGE REALIZATIONS AND PRICES (Canadian dollars) Conventional crude oil realizations (a barrel) 114.58 75.73 108.89 68.45 NGL realizations (a barrel) 78.21 45.57 65.70 44.94 Natural gas realizations (a thousand cubic feet) 9.20 5.73 9.16 7.11 Par crude oil price at Edmonton (a barrel) 123.19 82.07 116.34 74.50 Heavy crude oil at Hardisty (Bow River, a barrel) 104.90 56.17 95.57 52.97 TOTAL REFINERY THROUGHPUT (thousands of barrels a day) 468 451 448 435 REFINERY CAPACITY UTILIZATION (percent) 93 90 89 86 PETROLEUM PRODUCTS SALES (millions of litres a day) Gasolines 33.3 33.8 32.4 32.6 Heating, diesel and jet fuels 25.5 25.2 24.9 25.8 Heavy fuel oils 5.1 6.2 4.7 5.0 Lube oils and other products 8.2 7.7 7.2 7.1 ----------------- ----------------- Net petroleum products sales 72.1 72.9 69.2 70.5 ----------------- ----------------- PETROCHEMICAL SALES (thousands of tonnes a day) 2.8 3.2 3.0 3.1 ------------------------------------------------------------------------- IMPERIAL OIL LIMITED ------------------------------------------------------------------------- SHARE OWNERSHIP, TRADING AND PERFORMANCE (unaudited) Nine months Third quarter to September 30 2008 2007 2008 2007 ------------------------------------------------------------------------- RETURN ON AVERAGE CAPITAL EMPLOYED (a) (rolling 4 quarters, percent) 48.2 34.4 RETURN ON AVERAGE SHAREHOLDERS' EQUITY (rolling 4 quarters, percent) 49.3 40.9 INTEREST COVERAGE RATIO - EARNINGS BASIS (rolling 4 quarters, times covered) 328.0 63.1 SHARE OWNERSHIP Outstanding shares (thousands) Monthly weighted average 877,294 921,976 888,382 934,950 At September 30 869,673 914,216 Number of shareholders At September 30 13,162 13,141 SHARE PRICES Toronto Stock Exchange (Canadian dollars) High 57.80 51.90 62.54 54.70 Low 41.60 40.86 41.60 37.40 Close at September 30 45.58 49.29 American Stock Exchange (U.S. dollars) (b) High 56.89 50.95 63.08 50.95 Low 40.00 37.99 40.00 31.87 Close at September 30 42.60 49.56 (a) Return on capital employed is net income excluding the after-tax cost of financing divided by the average rolling four quarters' capital employed. (b) Share price presented is based on consolidated U.S. market data. -------------------------------------------------------------------------

For further information:

For further information: Investor relations, Dee Brandes, (403)
237-4537; Media relations, Gordon Wong, (403) 237-2710


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