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

- Company: [Imperial Oil Ltd](/companies/imo.md) (CIK 49938)
- Form: 10-Q
- Filed: 2011-11-03
- Accepted by EDGAR: Nov 3, 2011, 11:27 ET
- Period: 2011-09-30
- Accession: 0001193125-11-294402
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/49938/000119312511294402/d234647d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/49938/000119312511294402/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2011-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2011-07-01 to 2011-09-30 | CAD 974.0m | us-gaap:Revenues |
| Revenue | 9 months, 2011-01-01 to 2011-09-30 | CAD 3.07bn | us-gaap:Revenues |
| Selling, general and administrative | 3 months, 2011-07-01 to 2011-09-30 | CAD 249.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2011-01-01 to 2011-09-30 | CAD 823.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Interest expense | 9 months, 2011-01-01 to 2011-09-30 | CAD 1.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2011-07-01 to 2011-09-30 | CAD 273.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2011-01-01 to 2011-09-30 | CAD 776.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2011-07-01 to 2011-09-30 | CAD 859.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2011-01-01 to 2011-09-30 | CAD 2.37bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2011-07-01 to 2011-09-30 | CAD 1.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2011-01-01 to 2011-09-30 | CAD 2.77 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2011-07-01 to 2011-09-30 | CAD 1.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2011-01-01 to 2011-09-30 | CAD 2.79 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2011-07-01 to 2011-09-30 | 853,800,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2011-01-01 to 2011-09-30 | 854,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2011-07-01 to 2011-09-30 | CAD 1.66bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 9 months, 2011-01-01 to 2011-09-30 | CAD 3.27bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2011-07-01 to 2011-09-30 | CAD 1.09bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 9 months, 2011-01-01 to 2011-09-30 | CAD 2.81bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2011-07-01 to 2011-09-30 | CAD 93.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 9 months, 2011-01-01 to 2011-09-30 | CAD 280.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2011-07-01 to 2011-09-30 | CAD 3.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Share repurchases | 9 months, 2011-01-01 to 2011-09-30 | CAD 47.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2011-09-30 | CAD 920.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2011-09-30 | CAD 4.88bn | us-gaap:AssetsCurrent |
| Total assets | at 2011-09-30 | CAD 24.19bn | us-gaap:Assets |
| Current liabilities | at 2011-09-30 | CAD 5.86bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2011-09-30 | CAD 11.03bn | us-gaap:Liabilities |
| Long-term debt | at 2011-09-30 | CAD 820.0m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2011-09-30 | CAD 364.0m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2011-09-30 | CAD 13.16bn | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |
| Shares outstanding | at 2011-09-30 | 847,599,011 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 10,141 characters.

### OPERATING RESULTS

The company’s net income for the third quarter of 2011 was $859 million or $1.01 a share on a diluted basis, compared with $418 million or $0.49 a share for the same period last year. Net income for the first nine months of 2011 was $2,366 million or $2.77 a share on a diluted basis, versus $1,411 million or $1.65 a share for the first nine months of 2010.

Earnings in the third quarter were higher than the same quarter in 2010 primarily due to stronger industry refining margins of about $270 million, higher crude oil commodity prices of about $190 million, increased Cold Lake bitumen production of about $90 million and higher Syncrude volumes of about $45 million. These factors were partially offset by the unfavourable impacts of the foreign exchange effects of the stronger Canadian dollar of about $65 million, higher royalty costs of about $60 million and lower conventional crude oil volumes of about $35 million due to third-party pipeline reliability issues.

For the nine months, increased earnings were primarily attributable to higher crude oil commodity prices of about $650 million, stronger industry refining margins of about $525 million, increased Cold Lake bitumen production of about $190 million and higher Syncrude volumes of about $70 million. These factors were partially offset by the unfavourable impact of the stronger Canadian dollar of about $205 million, higher royalty costs of about $190 million and lower conventional crude oil volumes of about $80 million due to third party pipeline reliability issues.

### Upstream

Net income in the third quarter was $534 million, $186 million higher than the same period of 2010. Earnings benefited from higher crude oil commodity prices of about $190 million, increased Cold Lake bitumen production of about $90 million and higher Syncrude volumes of about $45 million. These factors were partially offset by higher royalty costs due to higher commodity prices of about $60 million, the foreign exchange effects of the stronger Canadian dollar of about $45 million and lower conventional crude oil volumes of about $35 million due to third-party pipeline reliability issues.

Net income for the nine months of 2011 was $1,686 million, up $448 million from 2010. Earnings increased primarily due to the impacts of higher crude oil commodity prices of about $650 million, increased Cold Lake bitumen production of about $190 million and higher Syncrude volumes of about $70 million. These factors were partially offset by the unfavourable effects of higher royalty costs of about $190 million, the stronger Canadian dollar of about $150 million and lower conventional crude oil volumes of about $120 million, of which about $80 million was a result of the second and third 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 $113.46 a barrel in the third quarter and $111.96 a barrel in the nine months of 2011, up about 48 percent and 45 percent from the corresponding periods last year. Increase in the average price of West Texas Intermediate (WTI) crude oil, a common benchmark for mid-continent North American oil markets, was limited to 17 percent and 23 percent, respectively, due to the continued weakness in WTI crude oil markets. Increases in the company’s average realizations on sales of Canadian conventional crude oil and synthetic crude oil were in line with that of WTI. Increase in the company’s average bitumen realizations in Canadian dollars in the third quarter and in the first nine months of 2011 were two percent to $58.23 a barrel and five percent to $60.90 a barrel, respectively, as the price spread between light crude oil and Cold Lake bitumen widened.

Gross production of Cold Lake bitumen averaged 162 thousand barrels a day and established a new production record in the third quarter. Cold Lake production was up 17 percent from 139 thousand barrels in the same quarter last year. For the nine months, gross production was 159 thousand barrels a day this year, compared with 143 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, increased recoveries and the cyclic nature of production at Cold Lake.

The company’s share of Syncrude’s gross production in the third quarter was 75 thousand barrels a day, versus 66 thousand barrels in the third quarter of 2010. Higher production was primarily the result of improved operating reliability partially offset by planned maintenance activities which began in September 2011 and will be complete in the fourth quarter of 2011. During the first nine months of the year, the company’s share of gross production from Syncrude averaged 75 thousand barrels a day, up from 71 thousand barrels in 2010. Increased production was due to improved operating reliability.

Gross production of conventional crude oil averaged 12 thousand barrels a day in the third quarter, down from 22 thousand barrels in the third 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 nine months of the year, gross production was 17 thousand barrels a day, compared with 23 thousand barrels in 2010. Lower volumes were primarily due to third-party pipeline downtime, which reduced production at the Norman Wells field along with natural reservoir decline.

Gross production of natural gas during the third quarter of 2011 was 252 million cubic feet a day, down from 284 million cubic feet in the same period last year. In the nine months of the year, gross production was 259 million cubic feet a day, down from 282 million cubic feet in the nine months of 2010. The lower production volumes in both periods were primarily a result of natural reservoir decline.

### Downstream

Net income was $272 million in the third quarter of 2011, compared with $69 million in the same period a year ago. Earnings increased primarily due to stronger industry refining margins of about $270 million partially offset by higher expenses of about $40 million mainly due to higher maintenance activities and the unfavourable effects of the stronger Canadian dollar of about $20 million. Refinery crude runs increased by 39 thousand barrels a day in the third quarter, following completion of planned maintenance activities in the prior quarter.

Nine months net income was $612 million, an increase of $436 million over 2010. Higher earnings were primarily due to favourable impacts of stronger industry refining margins of about $525 million and $40 million associated with improved refinery operations. These factors were partially offset by the unfavourable impacts of the stronger Canadian dollar of about $55 million and higher expenses of about $40 million mainly due to higher maintenance activities. Earnings in 2010 included a gain of about $25 million from sale of non-operating assets.

### Chemical

Net income was $37 million in the third quarter, $14 million higher than the same quarter last year. Improved industry margins for intermediate products and lower costs due to lower planned maintenance activities were the main contributors to the increase.

Net income in the first nine months of 2011 was $111 million, up $67 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 from Corporate and other were $16 million in the third quarter, compared with negative $22 million in the same period of 2010. Favourable effects were primarily due to lower share-based compensation charges. For the nine months of 2011, net income effects from Corporate and other were negative $43 million, in line with the negative $47 million reported last year.

### LIQUIDITY AND CAPITAL RESOURCES

Cash flow generated from operating activities was $1,658 million in the third quarter and $3,273 million in the first nine months of 2011, an increase of $693 million and $1,070 million from corresponding periods in 2010. Higher cash flow in both the third quarter and nine months of 2011 was primarily due to higher earnings along with working capital effects.

Investing activities used net cash of $1,061 million in the third quarter, compared with $1,113 million in the same period of 2010. Additions to property, plant and equipment were $1,087 million in the third quarter, compared with $1,147 million during the same quarter 2010. For the Upstream segment, expenditures during the quarter were primarily directed towards the advancement of the Kearl initial development and Kearl expansion oil sands project. Other investments included advancing the Nabiye expansion project at Cold Lake, environmental and efficiency 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 used in financing activities was $96 million in the third quarter, compared with $135 million of cash from financing activities in the third quarter of 2010. The 2010 results included debt issuance of $230 million.

Dividends paid in the third quarter of 2011 were $93 million, same as in the corresponding period in 2010. Per-share dividend declared for the first three quarters of 2011 totaled $0.33, up from $0.32 in the same period of 2010.

During the third 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.

The above factors led to an increase in the company’s balance of cash to $920 million at September 30, 2011, from $267 million at the end of 2010.

## Market risk

As filed, 265 characters.

Information about market risks for the nine months ended September 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 and Form 10-Q for the quarter ended June 30, 2011.

## Controls and procedures

As filed, 1,081 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 September 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 Nov 3, 2011.
Source: SEC EDGAR, the filing index for accession 0001193125-11-294402. Last ingested by Listed: Nov 5, 2026, 13:58 ET. No prices; not investment advice.