# Imperial Oil Ltd: Form 10-Q for the period ended Sep 30, 2015

- Company: [Imperial Oil Ltd](/companies/imo.md) (CIK 49938)
- Form: 10-Q
- Filed: 2015-11-04
- Accepted by EDGAR: Nov 4, 2015, 11:50 ET
- Period: 2015-09-30
- Accession: 0001193125-15-365532
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/49938/000119312515365532/d92757d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/49938/000119312515365532/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2015-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Selling, general and administrative | 3 months, 2015-07-01 to 2015-09-30 | CAD 267.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2015-01-01 to 2015-09-30 | CAD 803.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Income tax | 3 months, 2015-07-01 to 2015-09-30 | CAD 158.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2015-01-01 to 2015-09-30 | CAD 774.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2015-07-01 to 2015-09-30 | CAD 479.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2015-01-01 to 2015-09-30 | CAD 1.02bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2015-07-01 to 2015-09-30 | CAD 0.56 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2015-01-01 to 2015-09-30 | CAD 1.20 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2015-07-01 to 2015-09-30 | CAD 0.56 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2015-01-01 to 2015-09-30 | CAD 1.20 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2015-07-01 to 2015-09-30 | 850,900,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2015-01-01 to 2015-09-30 | 850,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2015-07-01 to 2015-09-30 | CAD 1.10bn | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Operating cash flow | 9 months, 2015-01-01 to 2015-09-30 | CAD 1.76bn | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Capital expenditure | 3 months, 2015-07-01 to 2015-09-30 | CAD 647.0m | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 9 months, 2015-01-01 to 2015-09-30 | CAD 2.43bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2015-07-01 to 2015-09-30 | CAD 110.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 9 months, 2015-01-01 to 2015-09-30 | CAD 330.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2015-09-30 | CAD 366.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2015-09-30 | CAD 4.11bn | us-gaap:AssetsCurrent |
| Total assets | at 2015-09-30 | CAD 43.45bn | us-gaap:Assets |
| Current liabilities | at 2015-09-30 | CAD 5.77bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2015-09-30 | CAD 20.29bn | us-gaap:Liabilities |
| Long-term debt | at 2015-09-30 | CAD 5.85bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2015-09-30 | CAD 1.95bn | us-gaap:DebtCurrent |
| Shareholders' equity | at 2015-09-30 | CAD 23.16bn | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |
| Shares outstanding | at 2015-09-30 | 847,599,011 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 9,658 characters.

### OPERATING RESULTS

### Third quarter 2015 vs. third quarter 2014

The company’s net income for the third quarter of 2015 was $479 million or $0.56 per share on a diluted basis compared with $936 million or $1.10 per share for the same period last year.

Upstream recorded a net loss in the third quarter of $52 million, compared to net income of $532 million in the same period of 2014. Earnings in the third quarter of 2015 reflected lower crude oil and gas realizations of about $1,250 million and higher depreciation expense of about $80 million. These factors were partially offset by higher Kearl and Cold Lake volumes of about $280 million, the favourable impact of a weaker Canadian dollar of about $270 million and lower royalties of about $230 million.

West Texas Intermediate (WTI), the main U.S. dollar benchmark crude for North America, decreased by 52 percent compared to the same quarter in 2014. The company’s average Canadian dollar realizations for synthetic crude oil and bitumen decreased about 40 and 56 percent in the third quarter of 2015 to $61.21 and $32.61 per barrel respectively, as the decline in the benchmark crude and increased light-heavy differentials were partially offset by the weaker Canadian dollar. The company’s average realizations on sales of natural gas of $1.75 per thousand cubic feet in the third quarter of 2015, were lower by $1.83 per thousand cubic feet, versus the same period in 2014.

Gross production of Cold Lake bitumen averaged 166,000 barrels per day in the third quarter, up from 149,000 barrels in the same period last year, primarily due to the continued ramp-up of Nabiye production.

Gross production of Kearl bitumen averaged 181,000 barrels per day in the third quarter (128,000 barrels Imperial’s share) up from 78,000 barrels per day (55,000 barrels Imperial’s share) during the third quarter of 2014, reflecting the strong start-up of the Kearl expansion project.

The company’s share of gross production from Syncrude averaged 59,000 barrels per day, compared to 61,000 barrels in the third quarter of 2014.

Gross production of conventional crude oil averaged 12,000 barrels per day in the third quarter, down from 16,000 barrels in the corresponding period in 2014. The lower production volume was primarily due to planned maintenance activity and natural reservoir decline.

Gross production of natural gas during the third quarter of 2015 was 116 million cubic feet per day, down from 149 million cubic feet in the same period last year.

Downstream net income was $454 million in the third quarter, $111 million higher than the third quarter of 2014. Earnings increased mainly due to the favourable impact of a weaker Canadian dollar of about $160 million, partially offset by higher refinery planned maintenance and operating costs, mainly associated with the Edmonton Rail Terminal, of about $70 million.

Chemical net income was $78 million in the third quarter, the highest quarterly earnings on record, up 18 percent from $66 million in the same quarter in 2014.

Net income effects from Corporate and Other were negative $1 million in the third quarter, compared to negative $5 million in the same period of 2014.

### Nine months 2015 vs. nine months 2014

Net income in the first nine months of 2015 was $1,020 million, or $1.20 per share on a diluted basis and reflected a net charge, largely non-cash, of $320 million associated with the enacted Alberta corporate income tax rate increase, versus $3,114 million or $3.66 per share for the first nine months of 2014, which included a $478 million gain on the sale of conventional upstream producing assets.

Upstream recorded a net loss of $415 million for the first nine months of 2015, compared to net income of $1,841 million in the same period of 2014. Earnings in 2015 reflected lower crude oil and gas realizations of about $3,000 million, a net charge of $327 million associated with increased Alberta corporate income taxes and higher depreciation expense of about $130 million. Earnings in 2014 included a gain of $478 million from the divestment of conventional upstream producing assets. These factors were partially offset by the favourable impact of a weaker Canadian dollar of about $590 million, lower royalties of about $560 million, higher liquid volumes of about $490 million, primarily Kearl and Cold Lake, and lower energy costs of about $90 million.

WTI, the main U.S. dollar benchmark crude for North America, decreased by 49 percent compared to the same period in 2014. The company’s average Canadian dollar realizations for synthetic crude oil and bitumen decreased about 41 and 49 percent in the first nine months of 2015 to $63.03 and $36.48 per barrel respectively, as the decline in benchmark crude and increased light-heavy differentials were partially offset by the weaker Canadian dollar. The company’s average realizations on sales of natural gas of $2.44 per thousand cubic feet in 2015, were lower by $2.53 per thousand cubic feet, versus the same period in 2014.

Gross production of Cold Lake bitumen averaged 160,000 barrels per day in the first nine months, up from 145,000 barrels from the same period last year, primarily due to Nabiye production.

Gross production of Kearl bitumen averaged 136,000 barrels per day in the first nine months of 2015 (96,000 barrels Imperial’s share) up from 73,000 barrels per day (52,000 barrels Imperial’s share), reflecting early start-up of the Kearl expansion project and improved reliability of the initial development.

During the first nine months of 2015, the company’s share of gross production from Syncrude averaged 61,000 barrels per day, compared to 62,000 barrels from the same period of 2014.

Gross production of conventional crude oil averaged 14,000 barrels per day in the first nine months of 2015, compared to 18,000 barrels during the same period of 2014. 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 2015 was 132 million cubic feet per day, down from 171 million cubic feet in the same period last year, reflecting the impact of divested properties.

Downstream net income was $1,234 million, up $37 million in the same period of 2014. Earnings increased due to the favourable impact of a weaker Canadian dollar of about $360 million, higher fuels marketing margins and volumes of about $70 million, lower energy costs of $70 million and a 2015 gain of $17 million from the sale of assets. These factors were partially offset by the impacts of lower refining margins of about $280 million, higher refinery planned maintenance and operating costs, mainly associated with the Edmonton Rail Terminal, of about $220 million.

Chemical net income was $213 million for the first nine months of 2015, an increase of $47 million over the same period in 2014.

For the first nine months of 2015, net income effects from Corporate & Other were negative $12 million, compared to negative $90 million in 2014, primarily due to lower share-based compensation charges and the impact of the Alberta corporate income tax rate increase.

### LIQUIDITY AND CAPITAL RESOURCES

Cash flow generated from operating activities was $1,104 million in the third quarter, versus $1,230 million in the corresponding period in 2014. Lower cash flow was due to lower earnings and was partially offset by favourable working capital effects.

Investing activities used net cash of $619 million in the third quarter, compared with $1,379 million in the same period of 2014, reflecting the decline in additions to property, plant and equipment to $647 million during the third quarter, compared with $1,351 million during the same quarter in 2014. Expenditures during the quarter were primarily in support of completion of upstream growth projects.

Cash used in financing activities was $147 million in the third quarter, compared with cash from financing activities of $21 million in the third quarter of 2014. Dividends paid in the third quarter of 2015 were $110 million. Per-share dividend paid in the third quarter was $0.13, consistent with the same period of 2014.

The company’s cash balance was $366 million as at September 30, 2015, versus $43 million at the end of the third quarter of 2014.

In July 2015, the company increased the capacity of its existing floating rate loan facility with an affiliated company of ExxonMobil from $6.25 billion to $7.75 billion. Also, the company entered into a long-term capital lease related to the Woodland pipeline for approximately $480 million. A commitment related to this obligation was previously reported as a firm capital commitment in the company’s 2014 Form 10-K.

### RECENTLY ISSUED 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 will be adopted beginning January 1, 2018. Imperial is evaluating the standard and its effect on the company’s financial statements.

### FORWARD-LOOKING STATEMENTS

Statements in this report regarding future events or conditions are forward-looking statements. Actual results could differ materially due to the impact of market conditions, changes in law or governmental policy, changes in operating conditions and costs, changes in project schedules, operating performance, demand for oil and gas, commercial negotiations or other technical and economic factors.

## Market risk

As filed, 733 characters.

Information about market risks for the nine months ended September 30, 2015 does not differ materially from that discussed on page 22 in the company’s Annual Report on Form 10-K for the year ended December 31, 2014 and Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015 except for the following:

|  |  |
| --- | --- |
| Earnings sensitivity millions of dollars after tax |  |
| Four dollars (U.S.) per barrel change in crude oil prices | + (-) 314 |

The sensitivity of net income to changes in crude oil prices increased from the second quarter of 2015 by about $9 million (after tax) a year for each one U.S. dollar change. The increase was primarily the result of lower royalty costs due to lower crude oil prices.

## 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, 2015. 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 4, 2015.
Source: SEC EDGAR, the filing index for accession 0001193125-15-365532. Last ingested by Listed: Nov 5, 2026, 13:58 ET. No prices; not investment advice.