# Imperial Oil Ltd: Form 10-Q for the period ended Sep 30, 2013

- Company: [Imperial Oil Ltd](/companies/imo.md) (CIK 49938)
- Form: 10-Q
- Filed: 2013-11-05
- Accepted by EDGAR: Nov 4, 2013, 20:05 ET
- Period: 2013-09-30
- Accession: 0001193125-13-425802
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/49938/000119312513425802/d599504d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/49938/000119312513425802/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2013-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Selling, general and administrative | 3 months, 2013-07-01 to 2013-09-30 | CAD 291.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2013-01-01 to 2013-09-30 | CAD 797.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Interest expense | 3 months, 2013-07-01 to 2013-09-30 | −CAD 1.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2013-01-01 to 2013-09-30 | CAD 1.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2013-07-01 to 2013-09-30 | CAD 210.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2013-01-01 to 2013-09-30 | CAD 587.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2013-07-01 to 2013-09-30 | CAD 647.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2013-01-01 to 2013-09-30 | CAD 1.77bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2013-07-01 to 2013-09-30 | CAD 0.76 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2013-01-01 to 2013-09-30 | CAD 2.08 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2013-07-01 to 2013-09-30 | CAD 0.76 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2013-01-01 to 2013-09-30 | CAD 2.09 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2013-07-01 to 2013-09-30 | 851,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2013-01-01 to 2013-09-30 | 850,800,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2013-07-01 to 2013-09-30 | CAD 298.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 9 months, 2013-01-01 to 2013-09-30 | CAD 1.63bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2013-07-01 to 2013-09-30 | CAD 1.81bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 9 months, 2013-01-01 to 2013-09-30 | CAD 4.77bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2013-07-01 to 2013-09-30 | CAD 102.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 9 months, 2013-01-01 to 2013-09-30 | CAD 305.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2013-09-30 | CAD 76.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2013-09-30 | CAD 4.44bn | us-gaap:AssetsCurrent |
| Total assets | at 2013-09-30 | CAD 36.08bn | us-gaap:Assets |
| Current liabilities | at 2013-09-30 | CAD 7.00bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2013-09-30 | CAD 18.18bn | us-gaap:Liabilities |
| Long-term debt | at 2013-09-30 | CAD 4.25bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2013-09-30 | CAD 1.83bn | us-gaap:DebtCurrent |
| Shareholders' equity | at 2013-09-30 | CAD 17.90bn | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |
| Shares outstanding | at 2013-09-30 | 847,599,011 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 11,354 characters.

### OPERATING RESULTS

### Third quarter 2013 vs. third quarter 2012

The company’s net income for the third quarter of 2013 was $647 million or $0.76 per share on a diluted basis, compared with $1,040 million or $1.22 per share for the same period last year.

Upstream net income in the third quarter was $604 million, $106 million higher than the same period of 2012. Earnings increased primarily due to higher liquids realizations of about $350 million. This was partially offset by lower volumes and higher costs at Syncrude, mainly as a result of planned maintenance activities, totalling about $150 million and higher royalty costs of about $85 million.

The price differential between Brent crude oil, the benchmark for Atlantic basin markets, and West Texas Intermediate (WTI), a common benchmark for mid-continent North American oil markets, narrowed to $4.54 per barrel in U.S. dollars in the third quarter of 2013, compared to $17.37 per barrel in the corresponding period last year. As discounts for WTI crude oil decreased, the company’s average realizations in Canadian dollars on sales of conventional and synthetic crude oils increased about 21 and 26 percent, respectively. The company’s average bitumen realizations in Canadian dollars in the third quarter of 2013 also increased by about 36 percent to $81.21 per barrel as the price spread between light crude oil and bitumen narrowed. The company’s average realizations on natural gas sales of $2.66 per thousand cubic feet in the third quarter of 2013 were higher by about $0.48 per thousand cubic feet versus the same period in 2012. The significant narrowing of the price differential between Brent and WTI also adversely impacted industry refining margins and Downstream earnings.

Gross production of Cold Lake bitumen averaged 147,000 barrels per day versus 152,000 barrels in the same period last year. Lower volumes were primarily due to the cyclic nature of steaming and associated production at Cold Lake.

The company’s share of Syncrude’s gross production in the third quarter was 57,000 barrels per day, down from 78,000 barrels in the third quarter of 2012. The planned maintenance activities were completed, and the impacted coker unit returned to normal operations in the quarter.

The company’s share of gross production from the Kearl initial development contributed 23,000 barrels per day. Throughout the quarter we continued to address ongoing improvements in equipment reliability. Gross production averaged 11,000, 43,000 and 45,000 barrels per day in July, August and September, respectively. From September 22 through October 8, the plant was shut down to address ongoing improvements in equipment reliability and prepare for potential weather-related challenges in our first winter season of operation. Post restart, rates have averaged 80,000 barrels per day gross with current production of 100,000 barrels per day. Production is expected to reach 110,000 barrels per day gross (78,000 Imperial’s share) by the end of the year. As previously announced, diluted bitumen sales began in the third quarter, and Kearl diluted bitumen has been run at the company’s and ExxonMobil’s refineries and is performing as expected.

Gross production of conventional crude oil averaged 22,000 barrels per day in the third quarter, versus 19,000 barrels in the corresponding period in 2012.

Gross production of natural gas during the third quarter of 2013 was 211 million cubic feet per day, up from 188 million cubic feet in the same period last year. The higher production volume reflected the contributions from the Celtic (XTO Energy Canada) acquisition earlier in the year and the Horn River pilot which more than offset normal field decline.

Downstream net income was $46 million in the third quarter, $490 million lower than the third quarter of 2012. Earnings decreased primarily due to significantly lower industry refining margins of about $565 million. This was partially offset by favourable impacts of improved refinery operations and an increase in marketing margins.

Chemical net income was $39 million in the third quarter, in line with $37 million in the same quarter last year.

Net income effects from Corporate and Other were negative $42 million in the third quarter, versus negative $31 million in the same period of 2012 due to changes in share-based compensation charges.

### Nine months 2013 vs. nine months 2012

Net income in the first nine months of 2013 was $1,772 million or $2.08 per share on a diluted basis, versus $2,690 million or $3.16 per share for the first three quarters of 2012.

Earnings decreased primarily due to significantly lower industry refining margins of about $720 million, higher Kearl start-up and operating costs of about $175 million, and lower production and higher maintenance costs at Syncrude totalling about $150 million. First nine months earnings in 2013 also included an after tax charge of $264 million associated with the conversion of the Dartmouth refinery to a terminal. These factors were partially offset by higher liquids realizations of about $210 million, improved refinery operations and lower refinery maintenance activities totalling about $115 million and lower royalty costs of about $110 million due to higher cost recovery for capital investments.

Upstream net income for the first nine months of 2013 was $1,301 million versus $1,400 million in 2012. Earnings decreased primarily due to higher Kearl costs of about $175 million as third quarter production contribution was more than offset by year-to-date start-up and operating costs, lower volumes and higher maintenance costs at Syncrude totalling about $150 million, and lower bitumen production and higher maintenance costs at Cold Lake totalling about $85 million. These factors were partially offset by higher liquids realizations of about $210 million and lower royalty costs of about $110 million due to higher cost recovery for capital investments.

The price differential between Brent crude oil, the benchmark for Atlantic basin markets, and West Texas Intermediate (WTI), a common benchmark for mid-continent North American oil markets, narrowed to $10.20 per barrel in U.S. dollars in the first nine months of 2013, compared to $15.91 per barrel in the corresponding period last year. As discounts for WTI crude oil decreased, the company’s average realizations in Canadian dollars on sales of conventional and synthetic crude oils increased about eight and 11 percent, respectively. The company’s average bitumen realizations in Canadian dollars in the first nine months of 2013 also increased by about five percent to $63.86 per barrel. The company’s average realizations on natural gas sales of $3.21 per thousand cubic feet in the first three quarters of 2013 were higher by $1.09 per thousand cubic feet versus the same period in 2012.

Gross production of Cold Lake bitumen was 152,000 barrels per day, compared with 154,000 barrels in the same period of 2012. Lower volumes were primarily due to the cyclic nature of steaming and associated production at Cold Lake.

During the first nine months of the year, the company’s share of gross production from Syncrude averaged 63,000 barrels per day, down from 70,000 barrels in 2012. Planned maintenance activities in the third quarter of 2013 were the main contributor to the lower volumes.

The company’s share of gross production of Kearl initial development was 9,000 barrels per day on a 2013 year-to-date basis.

Gross production of conventional crude oil averaged 21,000 barrels per day in the first nine months of the year, versus 20,000 barrels in the corresponding period in 2012.

Gross production of natural gas during the first nine months of 2013 was 201 million cubic feet per day, up from 194 million cubic feet in the same period in 2012. The higher production volumes reflected the contributions from the Celtic acquisition and the Horn River pilot, which more than offset normal field decline.

Downstream net income was $427 million, versus $1,223 million over the same period in 2012. Earnings were negatively impacted by significantly lower industry refining margins of about $720 million resulting from the narrowing pricing differential between Brent and WTI crude oils. Earnings in the first nine months of 2013 also included an after tax charge of $264 million associated with the conversion of the Dartmouth refinery to a fuels terminal. These factors were partially offset by the favourable impacts of about $115 million associated with improved refinery operations and lower refinery maintenance activities.

Chemical net income was $116 million, versus $121 million in 2012.

For the first nine months of 2013, net income effects from Corporate and Other were negative $72 million, versus negative $54 million last year primarily due to changes in share based compensation charges.

### LIQUIDITY AND CAPITAL RESOURCES

Cash flow generated from operating activities was $298 million in the third quarter, versus $669 million in the corresponding period in 2012. Lower cash flow was primarily attributable to lower earnings. Third quarter 2013 cash flow was lower than earnings primarily due to the timing of income tax payments.

Investing activities used net cash of $1,804 million in the third quarter, compared with $1,318 million in the same period of 2012. Additions to property, plant and equipment were $1,810 million in the third quarter, compared with $1,388 million during the same quarter 2012. Expenditures during the quarter were primarily directed towards the advancement of Kearl expansion and Nabiye projects. The Kearl expansion is expected to bring on additional gross production of 110,000 barrels of bitumen per day, before royalties, of which the company’s share would be about 78,000 barrels. Start-up is expected by late 2015. The Nabiye expansion at Cold Lake is expected to bring on additional production of 40,000 barrels of bitumen per day, before royalties. Start-up is expected by late 2014.

Cash from financing activities was $1,040 million in the third quarter, compared with $122 million in the third quarter of 2012. In the third quarter, the company increased its long-term debt level by $819 million by drawing on an existing facility and issued additional commercial paper which increased short-term debt by $325 million. Subsequent to the third quarter of 2013, the company increased its total debt outstanding by $123 million by drawing on existing facilities. The increased debt was used to finance normal operations and major projects.

The above factors led to a decrease in the company’s cash balance to $76 million at September 30, 2013, from $482 million at the end of 2012.

In the first quarter of 2013, the company increased the amount of its existing stand-by long term bank credit facility from $300 million to $500 million. In the third quarter of 2013, the company extended the maturity date of this facility to August 2015. The company has not drawn on the facility.

In the first quarter of 2013, to further support the commercial paper program, the company entered into an unsecured committed bank credit facility in the amount of $250 million that matures in March 2014. In the second quarter, the amount of this facility increased to $500 million. The company has not drawn on the facility.

## Market risk

As filed, 285 characters.

Information about market risks for the nine months ended September 30, 2013 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, 2012 and Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013.

## 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, 2013. 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 5, 2013.
Source: SEC EDGAR, the filing index for accession 0001193125-13-425802. Last ingested by Listed: Nov 5, 2026, 13:58 ET. No prices; not investment advice.