# Imperial Oil Ltd: Form 10-Q for the period ended Sep 30, 2014

- Company: [Imperial Oil Ltd](/companies/imo.md) (CIK 49938)
- Form: 10-Q
- Filed: 2014-11-05
- Accepted by EDGAR: Nov 5, 2014, 11:09 ET
- Period: 2014-09-30
- Accession: 0001193125-14-397755
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/49938/000119312514397755/d799505d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/49938/000119312514397755/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2014-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Selling, general and administrative | 3 months, 2014-07-01 to 2014-09-30 | CAD 254.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2014-01-01 to 2014-09-30 | CAD 825.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Interest expense | 3 months, 2014-07-01 to 2014-09-30 | −CAD 1.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2014-01-01 to 2014-09-30 | CAD 3.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2014-07-01 to 2014-09-30 | CAD 309.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2014-01-01 to 2014-09-30 | CAD 1.04bn | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2014-07-01 to 2014-09-30 | CAD 936.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2014-01-01 to 2014-09-30 | CAD 3.11bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2014-07-01 to 2014-09-30 | CAD 1.10 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2014-01-01 to 2014-09-30 | CAD 3.66 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2014-07-01 to 2014-09-30 | CAD 1.10 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2014-01-01 to 2014-09-30 | CAD 3.67 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2014-07-01 to 2014-09-30 | 850,900,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2014-01-01 to 2014-09-30 | 850,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2014-07-01 to 2014-09-30 | CAD 1.23bn | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Operating cash flow | 9 months, 2014-01-01 to 2014-09-30 | CAD 3.31bn | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Capital expenditure | 3 months, 2014-07-01 to 2014-09-30 | CAD 1.35bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 9 months, 2014-01-01 to 2014-09-30 | CAD 3.85bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2014-07-01 to 2014-09-30 | CAD 111.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 9 months, 2014-01-01 to 2014-09-30 | CAD 331.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2014-09-30 | CAD 43.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2014-09-30 | CAD 4.46bn | us-gaap:AssetsCurrent |
| Total assets | at 2014-09-30 | CAD 40.24bn | us-gaap:Assets |
| Current liabilities | at 2014-09-30 | CAD 7.03bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2014-09-30 | CAD 17.86bn | us-gaap:Liabilities |
| Long-term debt | at 2014-09-30 | CAD 4.32bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2014-09-30 | CAD 1.76bn | us-gaap:DebtCurrent |
| Shareholders' equity | at 2014-09-30 | CAD 22.38bn | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |
| Shares outstanding | at 2014-09-30 | 847,599,011 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 9,238 characters.

### OPERATING RESULTS

### Third quarter 2014 vs. third quarter 2013

The company’s net income for the third quarter of 2014 was $936 million or $1.10 per share on a diluted basis, compared with $647 million or $0.76 per share for the same period last year.

Upstream net income in the third quarter was $532 million, $72 million lower than the same period of 2013. Earnings in the third quarter of 2014 reflected the impact of lower bitumen and synthetic crude oil realizations of about $200 million. Earnings also decreased due to higher royalties along with higher energy and other operating costs totalling about $90 million. These factors were partially offset by higher liquids volumes of about $140 million, primarily due to incremental contribution from Kearl production, and the impact of a weaker Canadian dollar of about $85 million.

The company’s average realizations from the sales of synthetic crude oil decreased about 10 percent in the third quarter of 2014 to $102.58 per barrel versus $113.63 per barrel in the third quarter of 2013. The decreased realizations largely followed the West Texas Intermediate (WTI) crude oil benchmark price, which was down about eight percent to $97.25 per barrel, in U.S. dollars. The company’s average bitumen realizations at $74.82 per barrel, also followed the trend of WTI, and were down about eight percent versus the third quarter of 2013. The company’s average realizations on natural gas sales of $3.58 per thousand cubic feet in the third quarter of 2014 were higher by $0.92 per thousand cubic feet versus the same period in 2013.

Gross production of Cold Lake bitumen averaged 149,000 barrels per day in the third quarter, up from 147,000 barrels in the same period last year.

Gross production from the Kearl initial development in the third quarter was 78,000 barrels per day (55,000 barrels Imperial’s share) up from 33,000 barrels per day (23,000 barrels Imperial’s share) in the third quarter of 2013. Excluding the impact of major planned maintenance, which was executed over a two week period in September, gross production averaged 92,000 barrels per day (65,000 barrels Imperial’s share).

The company’s share of Syncrude’s gross production in the third quarter was 61,000 barrels per day, up from 57,000 barrels in the third quarter of 2013. Increased volumes were due to lower maintenance activities.

Gross production of conventional crude oil averaged 16,000 barrels per day in the third quarter, versus 22,000 barrels in the corresponding period in 2013. The lower production volume was primarily due to the impact of properties divested during the first half of 2014.

Gross production of natural gas during the third quarter of 2014 was 149 million cubic feet per day, down from 211 million cubic feet in the same period last year, reflecting the impact of properties divested during the first half of 2014.

Downstream net income was $343 million in the third quarter, $297 million higher than the third quarter of 2013. Earnings increased due to the impacts of improved refinery reliability and feedstock mix of about $110 million, along with higher industry refining margins of about $100 million, and higher marketing margins and sales volumes totalling about $70 million.

Chemical net income in the third quarter was a record $66 million, up from $39 million in the same quarter in 2013. Strong margins across all major product lines and the processing of cost-advantaged ethane feedstock from Marcellus shale gas contributed to these best-ever quarterly results.

Net income effects from Corporate and Other were negative $5 million in the third quarter, versus negative $42 million in the same period of 2013 due to lower share-based compensation charges.

### Nine months 2014 vs. nine months 2013

Net income in the first nine months of 2014 was $3,114 million, or $3.66 per share on a diluted basis, versus $1,772 million or $2.08 per share for the first nine months of 2013.

Upstream net income for the first nine months of 2014 was $1,841 million, $540 million higher than the same period of 2013. Earnings in 2014 included a gain of $478 million from the divestment of conventional upstream producing assets. Earnings also increased due to the impacts of a weaker Canadian dollar of about $240 million and higher liquids volumes of about $150 million, primarily due to incremental contribution from Kearl production. These factors were partially offset by higher royalty costs of about $220 million and higher energy and other operating costs of about $100 million.

The company’s average realizations from the sale of synthetic crude oil increased about four percent in the first nine months of 2014 to $106.59 per barrel versus $102.98 per barrel in the corresponding period last year. The increased realizations reflected the increase in the WTI crude oil benchmark price, which was up about one percent, and the impact of a weaker Canadian dollar. The company’s average bitumen realizations in Canadian dollars for the nine months to-date in 2014 were $72.11 per barrel versus $63.86 per barrel in the same period in 2013 as the price spread between light crude oil and bitumen narrowed. The company’s average realizations on natural gas sales of $4.97 per thousand cubic feet in the first nine months of 2014 were higher by $1.76 per thousand cubic feet versus the same period in 2013.

Gross production of Cold Lake bitumen averaged 145,000 barrels per day in the first nine months, down from 152,000 barrels from the same period last year. Lower volumes were primarily due to the cyclic nature of steaming and associated production and the impact of several unplanned third-party power outages in the first quarter.

Gross production from the Kearl initial development in the first nine months of 2014 was 73,000 barrels per day (52,000 barrels Imperial’s share) versus 13,000 barrels (9,000 barrels Imperial’s share) in the same period of 2013.

During the first nine months of 2014, the company’s share of gross production from Syncrude averaged 62,000 barrels per day, compared to 63,000 barrels from the same period of 2013.

Gross production of conventional crude oil averaged 18,000 barrels per day in the first nine months of 2014, versus 21,000 barrels from the same period in 2013. The lower production volume was primarily due to the impact of properties divested during the first half of 2014.

Gross production of natural gas during the first nine months of 2014 was 171 million cubic feet per day, down from 201 million cubic feet in the same period last year. The lower production volume was primarily the result of the impact of divested properties.

Downstream net income was $1,197 million, up $770 million in the same period of 2013. Earnings in the first nine months of 2013 included a charge of $264 million associated with the conversion of the Dartmouth refinery to a fuels terminal. Earnings also increased due to the impacts of improved refinery reliability and feedstock mix of about $330 million, higher marketing margins and sales volumes totalling about $140 million and a weaker Canadian dollar of about $90 million. These factors were partially offset by lower industry refining margins of about $60 million.

Chemical net income was $166 million for the first nine months of 2014, up $50 million over the same period in 2013.

For the first nine months of 2014, net income effects from Corporate & Other were negative $90 million, versus negative $72 million in 2013, primarily due to changes in share-based compensation charges.

### LIQUIDITY AND CAPITAL RESOURCES

Cash flow generated from operating activities was $1,230 million in the third quarter, $932 million higher than the corresponding period in 2013. Higher cash flow was primarily due to working capital effects and higher earnings.

Investing activities used net cash of $1,379 million in the third quarter, compared with $1,804 million in the same period of 2013. Additions to property, plant and equipment were $1,351 million in the third quarter, compared with $1,810 million during the same quarter in 2013. Expenditures during the quarter were primarily directed towards the advancement of Kearl expansion and Cold Lake Nabiye projects.

Cash from financing activities was $21 million in the third quarter, compared with $1,040 million in the third quarter of 2013. Dividends paid in the third quarter of 2014 were $111 million, $9 million higher than the corresponding period in 2013. Per-share dividend paid in the third quarter was $0.13, up from $0.12 in the same period of 2013.

The above factors led to a decrease in the company’s balance of cash to $43 million at September 30, 2014 from $272 million at the end of 2013.

### RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

In May 2014, the Financial Accounting Standards Board issued a new standard, *Revenue from Contracts with Customers*. The standard establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements and expands disclosure requirements. The standard is required to be adopted beginning January 1, 2017. Imperial Oil is evaluating the standard and its effect on the company’s financial statements.

## Market risk

As filed, 266 characters.

Information about market risks for the nine months ended September 30, 2014 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, 2013 and Form 10-Q for the quarter ended March 31, 2014.

## 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, 2014. 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, 2014.
Source: SEC EDGAR, the filing index for accession 0001193125-14-397755. Last ingested by Listed: Nov 5, 2026, 13:58 ET. No prices; not investment advice.