# Imperial Oil Ltd: Form 10-Q for the period ended Jun 30, 2011

- Company: [Imperial Oil Ltd](/companies/imo.md) (CIK 49938)
- Form: 10-Q
- Filed: 2011-08-04
- Accepted by EDGAR: Aug 4, 2011, 11:41 ET
- Period: 2011-06-30
- Accession: 0001193125-11-209701
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/49938/000119312511209701/d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/49938/000119312511209701/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2011-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2011-04-01 to 2011-06-30 | CAD 1.09bn | us-gaap:Revenues |
| Revenue | 6 months, 2011-01-01 to 2011-06-30 | CAD 2.09bn | us-gaap:Revenues |
| Selling, general and administrative | 3 months, 2011-04-01 to 2011-06-30 | CAD 253.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2011-01-01 to 2011-06-30 | CAD 574.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Interest expense | 3 months, 2011-04-01 to 2011-06-30 | CAD 1.0m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2011-01-01 to 2011-06-30 | CAD 1.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2011-04-01 to 2011-06-30 | CAD 233.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2011-01-01 to 2011-06-30 | CAD 503.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2011-04-01 to 2011-06-30 | CAD 726.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2011-01-01 to 2011-06-30 | CAD 1.51bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2011-04-01 to 2011-06-30 | CAD 0.85 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2011-01-01 to 2011-06-30 | CAD 1.76 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2011-04-01 to 2011-06-30 | CAD 0.86 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2011-01-01 to 2011-06-30 | CAD 1.78 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2011-04-01 to 2011-06-30 | 853,900,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2011-01-01 to 2011-06-30 | 854,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2011-04-01 to 2011-06-30 | CAD 656.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 6 months, 2011-01-01 to 2011-06-30 | CAD 1.61bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2011-04-01 to 2011-06-30 | CAD 903.0m | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 6 months, 2011-01-01 to 2011-06-30 | CAD 1.73bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2011-04-01 to 2011-06-30 | CAD 94.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 6 months, 2011-01-01 to 2011-06-30 | CAD 187.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2011-04-01 to 2011-06-30 | CAD 8.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Share repurchases | 6 months, 2011-01-01 to 2011-06-30 | CAD 44.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2011-06-30 | CAD 419.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2011-06-30 | CAD 4.61bn | us-gaap:AssetsCurrent |
| Total assets | at 2011-06-30 | CAD 22.97bn | us-gaap:Assets |
| Current liabilities | at 2011-06-30 | CAD 5.47bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2011-06-30 | CAD 10.60bn | us-gaap:Liabilities |
| Long-term debt | at 2011-06-30 | CAD 820.0m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2011-06-30 | CAD 364.0m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2011-06-30 | CAD 12.36bn | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |
| Shares outstanding | at 2011-06-30 | 847,599,011 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 11,301 characters.

### OPERATING RESULTS

The company’s net income for the second quarter of 2011 was $726 million or $0.85 a share on a diluted basis, compared with $517 million or $0.60 a share for the same period last year. Net income for the first six months of 2011 was $1,507 million or $1.76 a share on a diluted basis, versus $993 million or $1.16 a share for the first half of 2010.

Earnings in the second quarter were higher than the same quarter in 2010 primarily due to the impacts of higher crude oil commodity prices of about $430 million, stronger industry refining margins of about $80 million and increased Cold Lake bitumen production of about $70 million. These factors were partially offset by the unfavourable effects of higher royalty costs of about $120 million, lower Syncrude volumes of about $50 million, primarily a result of higher unplanned maintenance activities, and lower conventional crude oil volumes of about $45 million due to third-party pipeline reliability issues. Earnings were also negatively impacted by the foreign exchange effects of the stronger Canadian dollar of about $70 million and higher planned refinery maintenance activities of about $40 million. Second quarter 2010 earnings included a gain of about $25 million from the sale of non-operating assets.

For the six months, increased earnings were primarily attributable to higher crude oil commodity prices of about $460 million, stronger industry refining margins of about $255 million and increased Cold Lake bitumen production of about $100 million. These factors were partially offset by the unfavourable effects of the stronger Canadian dollar of about $140 million, higher royalty costs of about $130 million and lower conventional crude oil volumes of about $45 million due to third party pipeline issues.

### Upstream

Net income in the second quarter was $624 million, $178 million higher than the same period of 2010. Earnings benefited from higher crude oil commodity prices of about $430 million and increased Cold Lake bitumen production of about $70 million. These factors were partially offset by lower Syncrude volumes of about $50 million, primarily a result of higher unplanned maintenance activities, and lower conventional crude oil volumes of about $45 million due to third-party pipeline reliability issues. Earnings were also negatively impacted by higher royalty costs due to higher commodity prices of about $120 million and the foreign exchange effects of the stronger Canadian dollar of about $55 million.

Net income for the six months of 2011 was $1,152 million, up $262 million from 2010. Earnings increased primarily due to the impacts of higher crude oil commodity prices of about $460 million and increased Cold Lake bitumen production of about $100 million. These factors were partially offset by the unfavourable effects of higher royalty costs of about $130 million, the stronger Canadian dollar of about $105 million and lower conventional crude oil volumes of about $45 million as a result of the second quarter 2011 third-party pipeline issues.

The average price of Brent crude oil in U.S. dollars, a common benchmark for Atlantic Basin oil markets, was $117.33 a barrel in the second quarter and $111.20 a barrel in the six months of 2011, up about 50 percent and 44 percent from the corresponding periods last year. The average price of West Texas Intermediate (WTI) crude oil in U.S. dollars, a common benchmark for mid-continent North American oil markets, was $102.34 a barrel in the second quarter and $98.50 a barrel in the six months of 2011, up about 31 percent and 26 percent from the corresponding periods last year. The company’s average realizations on sales of Canadian conventional crude oil and synthetic crude oil increased accordingly. The company’s average bitumen realizations in the second quarter and in the first six months of 2011 were about 26 percent and six percent higher than that in the corresponding periods of 2010.

Cold Lake bitumen realizations were negatively impacted by third-party pipeline integrity issues carried over from the second half of 2010 into the first quarter of 2011 and continued weakness in WTI crude oil markets.

Gross production of Cold Lake bitumen averaged 158 thousand barrels a day during the second quarter, up from 140 thousand barrels in the same quarter last year. For the six months, gross production was 157 thousand barrels a day this year, compared with 144 thousand barrels in the same period of 2010. Increased volumes in both periods were due to contributions from new wells steamed in 2010 and 2011 and the cyclic nature of production at Cold Lake.

The company’s share of Syncrude’s gross production in the second quarter was 70 thousand barrels a day, versus 81 thousand barrels in the second quarter of 2010. Lower production was primarily the result of higher unplanned maintenance activities and the negative impact of wild fires in northern Alberta on the Syncrude operations. During the six months of the year, the company’s share of gross production from Syncrude averaged 75 thousand barrels a day, up slightly from 74 thousand barrels in 2010. Increased production was due to improved operating reliability.

Gross production of conventional crude oil averaged 16 thousand barrels a day in the second quarter, down from 24 thousand barrels in the second quarter of 2010. Lower volumes were primarily due to the third-party pipeline unplanned downtime which caused significantly reduced production at the Norman Wells field. In the first six months of the year, gross production was 19 thousand barrels a day, compared with 24 thousand barrels in 2010. Lower volumes were primarily due to third-party pipeline downtime, which reduced production at the Norman Wells field, and natural reservoir decline. This pipeline downtime carried forward into the third quarter.

Gross production of natural gas during the second quarter of 2011 was 257 million cubic feet a day, down from 289 million cubic feet in the same period last year. In the six months of the year, gross production was 263 million cubic feet a day, down from 281 million cubic feet in the six months of 2010. The lower production volumes in both periods were primarily a result of natural reservoir decline.

### Downstream

Net income was $64 million in the second quarter of 2011, compared with $68 million in the same period a year ago. Second quarter earnings in 2010 included a gain of about $25 million from sale of non-operating assets. Impacting earnings in the second quarter of 2011 when compared to the prior year’s second quarter were higher planned refinery maintenance activities totalling about $40 million. Unfavourable effects of the stronger Canadian dollar were about $15 million. Offsetting these negative factors was the favourable impact of stronger industry refining margins of about $80 million in the quarter. Planned refinery maintenance activity impacted second quarter 2011 results by about $95 million.

Six months net income was $340 million, an increase of $233 million over 2010. Higher earnings were primarily due to favourable impacts of stronger industry refining margins of about $255 million and $40 million associated with improved refinery operations. These factors were partially offset by the unfavourable impact of the stronger Canadian dollar of about $35 million. Earnings in 2010 included a gain of about $25 million from sale of non-operating assets.

### Chemical

Net income was $36 million in the second quarter, $14 million higher than the same quarter last year. Higher polyethylene and intermediate products sales volumes and lower costs due to lower planned maintenance activities were the main contributors to the increase.

Six months net income was $74 million, up $53 million from 2010. Earnings were positively impacted by improved industry margins across all product channels, lower costs due to lower planned maintenance activities and higher polyethylene sales volumes.

### Corporate and other

Net income effects were $2 million in the second quarter, compared with negative $19 million in the same period of 2010. Favourable effects were primarily due to lower share-based compensation charges. For the six months of 2011, net income effects from Corporate and other were negative $59 million, versus negative $25 million last year. Unfavourable effects were primarily due to changes in share-based compensation charges.

### LIQUIDITY AND CAPITAL RESOURCES

Cash flow generated from operating activities was $656 million during the second quarter of 2011, compared with $324 million in the same period last year. Higher cash flow was primarily driven by higher earnings and working capital effects. Year-to-date cash flow generated from operating activities was $1,615 million, compared with $1,238 million in the same period last year. Higher cash flow was primarily due to higher earnings partially offset by the timing of scheduled income tax payments.

Investing activities used net cash of $893 million in the second quarter, an increase of $96 million from the corresponding period in 2010. Additions to property, plant and equipment were $903 million in the second quarter, compared with $851 million during the same quarter 2010. For the Upstream segment, expenditures during the quarter were primarily directed towards the advancement of the Kearl oil sands project. Other investments included development drilling and advancing the Nabiye expansion project at Cold Lake, environmental and other projects at Syncrude, as well as exploration drilling and the advancement of the production pilot at Horn River. The Downstream segment’s capital expenditures were focused mainly on refinery projects to improve reliability, feedstock flexibility, energy efficiency and environmental performance.

Cash from financing activities was $355 million in the second quarter, compared with $3 million in the second quarter of 2010. In the second quarter, the company increased its long-term debt level by $320 million by drawing on an existing facility and issued additional commercial paper which increased short-term debt by $135 million.

In June, the company received approval from the Toronto Stock Exchange for a new normal course issuer bid to replace its existing share-purchase program that expired on June 24, 2011. The new share-purchase program enables the company to repurchase up to about 42 million shares during the period from June 25, 2011, to June 24, 2012, including shares purchased for the company’s employee savings plan, the company’s employee retirement plan and from ExxonMobil. During the second quarter of 2011, the company limited its share repurchases to those to offset the dilutive effects from the exercise of stock options. The company will continue to evaluate its share-purchase program in the context of its overall capital project activities.

Cash dividends of $94 million were paid in the second quarter of 2011 compared with dividends of $85 million in the same period of 2010. Per-share dividends declared in the first six months of 2011 totaled $0.22, up from $0.21 in the same period of 2010.

The above factors led to an increase in the company’s balance of cash to $419 million at June 30, 2011, from $267 million at the end of 2010.

## Market risk

As filed, 1,168 characters.

Information about market risks for the six months ended June 30, 2011 does not differ materially from that discussed on page 23 in the company’s annual report on Form 10-K for the year ended December 31, 2010 except for the following:

| Earnings sensitivity (a) millions of dollars after tax |  |  |
| --- | --- | ---: |
| Ten cents decrease (increase) in the value of the Canadian dollar versus the U.S. dollar | + (-) | 430 |

(a) The amount quoted to illustrate the impact of the sensitivity represents a change of about 10 percent in the value of the rate at the end of the second quarter 2011. 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.

The sensitivity of net income to changes in the Canadian dollar versus the U.S. dollar decreased from 2010 year-end by about $5 million (after tax) for each one-cent difference. This was primarily due to the widened price spread between light crude oils and Cold Lake bitumen.

## Controls and procedures

As filed, 1,076 characters.

As indicated in the certifications in Exhibit 31 of this report, the company’s principal executive officer and principal financial officer have evaluated the company’s disclosure controls and procedures as of June 30, 2011. Based on that evaluation, these officers have concluded that the company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to them in a manner that allows for timely decisions regarding required disclosures and are effective in ensuring that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There has not been any change in the company’s internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

Filed Aug 4, 2011.
Source: SEC EDGAR, the filing index for accession 0001193125-11-209701. Last ingested by Listed: Nov 5, 2026, 13:58 ET. No prices; not investment advice.