# Imperial Oil Ltd: Form 10-Q for the period ended Jun 30, 2012

- Company: [Imperial Oil Ltd](/companies/imo.md) (CIK 49938)
- Form: 10-Q
- Filed: 2012-08-02
- Accepted by EDGAR: Aug 2, 2012, 06:20 ET
- Period: 2012-06-30
- Accession: 0001193125-12-330149
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/49938/000119312512330149/d364828d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/49938/000119312512330149/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2012-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2012-04-01 to 2012-06-30 | CAD 1.13bn | us-gaap:Revenues |
| Revenue | 6 months, 2012-01-01 to 2012-06-30 | CAD 2.04bn | us-gaap:Revenues |
| Selling, general and administrative | 3 months, 2012-04-01 to 2012-06-30 | CAD 247.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2012-01-01 to 2012-06-30 | CAD 531.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Income tax | 3 months, 2012-04-01 to 2012-06-30 | CAD 205.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2012-01-01 to 2012-06-30 | CAD 542.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2012-04-01 to 2012-06-30 | CAD 635.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2012-01-01 to 2012-06-30 | CAD 1.65bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2012-04-01 to 2012-06-30 | CAD 0.75 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2012-01-01 to 2012-06-30 | CAD 1.94 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2012-04-01 to 2012-06-30 | CAD 0.75 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2012-01-01 to 2012-06-30 | CAD 1.95 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 3 months, 2012-04-01 to 2012-06-30 | CAD 1.32bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 6 months, 2012-01-01 to 2012-06-30 | CAD 2.36bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2012-04-01 to 2012-06-30 | CAD 1.29bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 6 months, 2012-01-01 to 2012-06-30 | CAD 2.44bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2012-04-01 to 2012-06-30 | CAD 102.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 6 months, 2012-01-01 to 2012-06-30 | CAD 195.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2012-04-01 to 2012-06-30 | CAD 60.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Share repurchases | 6 months, 2012-01-01 to 2012-06-30 | CAD 128.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2012-06-30 | CAD 996.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2012-06-30 | CAD 4.88bn | us-gaap:AssetsCurrent |
| Total assets | at 2012-06-30 | CAD 27.24bn | us-gaap:Assets |
| Current liabilities | at 2012-06-30 | CAD 6.26bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2012-06-30 | CAD 12.58bn | us-gaap:Liabilities |
| Long-term debt | at 2012-06-30 | CAD 820.0m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2012-06-30 | CAD 364.0m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2012-06-30 | CAD 14.66bn | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |
| Shares outstanding | at 2012-06-30 | 847,599,011 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 10,264 characters.

### OPERATING RESULTS

The company’s net income for the second quarter of 2012 was $635 million or $0.75 a share on a diluted basis, compared with $726 million or $0.85 a share for the same period last year. Net income for the first six months of 2012 was $1,650 million or $1.94 a share on a diluted basis, versus $1,507 million or $1.76 a share for the first half of 2011.

Lower second quarter earnings were primarily attributable to the impacts of lower upstream realizations due to lower commodity prices of about $345 million and higher planned maintenance events totalling about $230 million, which included about $120 million at the Downstream refineries and about $110 million at Syncrude. Earnings in the second quarter of 2012 were also impacted by higher Kearl production readiness expenditures of about $30 million. These factors were partially offset by the impacts of stronger industry refining margins of about $270 million, lower royalty costs of about $145 million and a weaker Canadian dollar of about $50 million. Second quarter earnings in 2012 included a gain of about $25 million from the sale of assets.

For the six months, earnings increased primarily due to stronger industry refining margins of about $410 million and lower royalty costs of about $95 million. These factors were partially offset by lower upstream realizations of about $245 million due to lower commodity prices and lower Syncrude volumes of about $105 million, due primarily to increased planned maintenance impacts.

### Upstream

Net income in the second quarter was $360 million versus $624 million in the same period of 2011. Earnings decreased primarily due to lower realizations of about $345 million, lower Syncrude volumes due to planned maintenance activities of about $75 million and higher Syncrude maintenance costs of about $35 million. Earnings in the second quarter of 2012 were also impacted by higher Kearl production readiness expenditures of about $30 million. These factors were partially offset by lower royalty costs due to lower realizations of about $145 million and the impact of a weaker Canadian dollar of about $50 million. Second quarter earnings in 2012 included a gain of about $25 million from the sale of assets.

Net income for the six months of 2012 was $902 million versus $1,152 million from 2011. Earnings were lower primarily due to the impacts of lower realizations of about $245 million, lower Syncrude volumes of about $105 million and higher maintenance costs of about $45 million. These factors were partially offset by lower royalty costs of about $95 million and the impact of a weaker Canadian dollar of about $60 million.

Prices for most of the company’s liquids production are based on West Texas Intermediate (WTI) crude oil, a common benchmark for mid-continent North American oil markets. Compared to the corresponding periods last year, the average WTI crude price in U.S. dollars was lower by $8.99 a barrel or nine percent in the second quarter of 2012 and by $0.35 a barrel or less than one percent in the first six months of 2012. Also, discounts for bitumen and synthetic crude oils increased in the second quarter and first six months of 2012, reflecting high industry refining downtime in mid-continent North America. For the second quarter and in the first six months of 2012, bitumen realizations in Canadian dollars decreased 17 percent and one percent, respectively, and synthetic crude oil realizations in Canadian dollars decreased 19 percent and seven percent, respectively, compared to the corresponding periods last year.

Gross production of Cold Lake bitumen averaged 152 thousand barrels a day during the second quarter, versus 158 thousand barrels in the same period last year. For the six months, gross production was 155 thousand barrels a day this year, compared with 157 thousand barrels in the same period of 2011. Slightly lower volumes in both periods were primarily due to planned maintenance activities at the Mahkeses plant as well as the cyclic nature of production at Cold Lake.

The company’s share of Syncrude’s gross production in the second quarter was 60 thousand barrels a day, versus 70 thousand barrels in the second quarter of 2011. During the six months of the year, the company’s share of gross production from Syncrude averaged 67 thousand barrels a day, down from 75 thousand barrels in 2011. Planned maintenance of one of the three cokers in the second quarter was the main contributor to lower production in both periods.

Gross production of conventional crude oil averaged 20 thousand barrels a day in both the second quarter and the first six months of the year, up from the 16 thousand barrels and 19 thousand barrels, respectively, in the corresponding periods in 2011 when third-party pipeline downtime significantly reduced production at the Norman Wells field.

Gross production of natural gas during the second quarter of 2012 was 195 million cubic feet a day, down from 257 million cubic feet in the same period last year. In the six months of the year, gross production was 197 million cubic feet a day, down from 263 million cubic feet in the six months of 2011. The lower production volume in both periods was primarily a result of the impact of divested producing properties.

### Downstream

Net income was $232 million in the second quarter, $168 million higher than the second quarter of 2011. Earnings increased primarily due to the favourable impact of stronger industry refining margins of about $270 million. This factor was partially offset by the unfavourable impact of significant maintenance activities of about $120 million.

Industry refining margins continued to be strong in the second quarter, as the overall cost of crude oil processed at three of the company’s four refineries followed the trend of WTI prices and Western Canadian crude oils. Canadian wholesale prices of refined products are largely determined by wholesale prices in adjacent U.S. regions, where wholesale prices are predominately tied to international product markets. Stronger industry refining margins are the result of the widened differential between product prices and cost of crude oil processed. Substantial planned maintenance activities at Strathcona and Nanticoke refineries along with unplanned downtime at the Sarnia refinery reduced our ability to fully capitalize on the strong refining margins.

Six months net income was $687 million, an increase of $347 million over 2011. Higher earnings were primarily due to stronger industry refining margins of about $410 million. This factor was partially offset by the unfavourable impact of a higher level of refinery planned maintenance activities compared with 2011 totalling about $80 million.

### Chemical

Net income was $49 million in the second quarter, the best quarter on record and $13 million higher than the same quarter last year. Strong operating performance along with higher polyethylene sales volumes and margins were the main contributors to the increase.

Six months net income was $84 million, up $10 million from 2011. Earnings were positively impacted by improved margins across all product channels and higher polyethylene sales volumes.

### Corporate and other

Net income effects from Corporate and other were negative $6 million in the second quarter, in line with $2 million in the same period of 2011. For the six months of 2012, net income effects from Corporate and other were negative $23 million, versus negative $59 million last year due to lower share-based compensation charges.

### LIQUIDITY AND CAPITAL RESOURCES

Cash flow generated from operating activities was $1,317 million in the second quarter, an increase of $661 million from the corresponding period in 2011. Higher cash flow was primarily due to working capital effects. Year-to-date cash flow generated from operating activities was $2,364 million, compared with $1,615 million in the same period last year. Higher cash flow was primarily due to working capital effects and the timing of scheduled income tax payments.

Investing activities used net cash of $1,224 million in the second quarter, compared with $893 million in the same period of 2011. Additions to property, plant and equipment were $1,290 million in the second quarter, compared with $903 million during the same quarter 2011. Expenditures during the quarter were primarily directed towards the advancement of Kearl initial development and expansion. At the end of the second quarter of 2012, the Kearl Initial Development was 94 percent complete, with construction 88 percent complete. The project is progressing on schedule towards expected start-up in late 2012. Other investments included advancing the Nabiye expansion project at Cold Lake, environmental and efficiency projects at Syncrude, as well as tight oil acreage acquisitions.

Cash used in financing activities was $142 million in the second quarter, compared with $355 million of cash from financing activities in the second quarter of 2011. In the second quarter of 2011, the company issued additional long-term debt and commercial paper totalling $455 million. Dividends paid in the second quarter of 2012 were $102 million, $8 million higher than the corresponding period in 2011. Per-share dividends declared in the first six months of 2012 totalled $0.24, up from $0.22 in the same period of 2011.

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, 2012. The new share-purchase program enables the company to repurchase up to about 42 million shares during the period from June 25, 2012, to June 24, 2013, including shares purchased for the company’s employee savings plan, the company’s employee retirement plan and from ExxonMobil. During the second quarter of 2012, 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 a decrease in the company’s balance of cash to $996 million at June 30, 2012, from $1,202 million at the end of 2011.

## Market risk

As filed, 1,120 characters.

Information about market risks for the six months ended June 30, 2012 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, 2011 except for the following:

Earnings sensitivity (a) millions of dollars after tax

Eight dollars (U.S.) a barrel change in crude oil prices + (-) 300

(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 2012. 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 crude oil prices increased from year-end 2011 by about $4 million (after tax) a year for each one U.S. dollar change. The increase was primarily a result of the impact of lower royalty costs for bitumen production due to lower crude oil commodity prices.

## 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, 2012. 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 2, 2012.
Source: SEC EDGAR, the filing index for accession 0001193125-12-330149. Last ingested by Listed: Nov 5, 2026, 13:58 ET. No prices; not investment advice.