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IMPERIAL OIL LTD - Quarter Report: 2019 September (Form 10-Q)

Table of Contents
 
FORM
10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[
]    
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
[    ]
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from --- to ---
Commission file number
0-12014
IMPERIAL OIL LIMITED
(Exact name of registrant as specified in its charter)
 
CANADA
 
 
98-0017682
 
(State or other jurisdiction
of incorporation or organization)
 
 
(I.R.S. Employer Identification No.)
             
 
505 Quarry Park Boulevard S.E. Calgary, Alberta, Canada
 
 
T2C 5N1
 
(Address of principal executive offices)
 
 
(Postal Code)
Registrant’s telephone number, including area code:
1-800-567-3776
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol
 
Name of each exchange on
which registered
None
 
 
None
The registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
  YES  
  
  
  NO  
        
The registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
  YES  
  
  
  NO   
        
The registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act of 1934).
Large accelerated filer
 
  
  
 
Smaller reporting company
 
        
 
Non-accelerated
 filer
 
        
 
Emerging growth company
 
        
 
                    
Accelerated filer
 
        
 
.
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
        
 
The registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act of 1934).
  YES  
        
  NO  
  
  
The number of common shares outstanding, as of September 30, 2019 was 752,947,924.
 

 
Table of Contents
 
IMPERIAL OIL LIMITED
 
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In this report all dollar amounts are expressed in Canadian dollars unless otherwise stated. This report should be read in conjunction with the company’s annual report on Form
10-K
for the year ended December 31, 2018. Note that numbers may not add due to rounding.
The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.
In this report, unless the context otherwise indicates, reference to “the company” or “Imperial” includes Imperial Oil Limited and its subsidiaries.
 
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Table of Contents
 
IMPERIAL OIL LIMITED
 
 
PART I.  FINANCIAL INFORMATION
Item 1.
Financial statements
Consolidated statement of income (U.S. GAAP, unaudited)
 
    Third Quarter
   
    Nine Months
    to September 30
 
millions of Canadian dollars
 
2019
   
2018
   
2019
   
2018
 
Revenues and other income
   
     
     
     
 
Revenues
(a)
   
8,687
     
9,697
     
25,880
 
   
27,113
 
Investment and other income
(note 4)
   
49
     
35
     
99
 
   
96
 
Total revenues and other income
   
8,736
     
9,732
     
25,979
 
   
27,209
 
                       
 
       
Expenses
   
     
     
 
   
 
Exploration
   
4
     
4
     
42
 
   
13
 
Purchases of crude oil and products
(b)
   
5,399
     
6,099
     
15,956
 
   
17,416
 
Production and manufacturing
(c)
   
1,601
     
1,480
     
4,911
 
   
4,557
 
Selling and general
(c)
   
217
     
224
     
666
 
   
691
 
Federal excise tax and fuel charge
   
486
     
432
     
1,343
 
   
1,241
 
Depreciation and depletion
   
419
     
410
     
1,201
 
   
1,145
 
Non-service
pension and postretirement benefit
   
36
     
27
     
108
 
   
80
 
Financing
(d) (note 6)
   
20
     
30
     
71
 
   
79
 
Total expenses
   
8,182
     
8,706
     
24,298
 
   
25,222
 
                       
 
       
Income (loss) before income taxes
   
554
     
1,026
     
1,681
 
   
1,987
 
                       
 
       
Income taxes
   
130
     
277
     
(248
)
   
526
 
                       
 
       
Net income (loss)
   
424
     
749
     
1,929
 
   
1,461
 
         
Per share information
(Canadian dollars)
   
 
                                 
Net income (loss) per common share - basic
(note 11)
   
0.56
     
0.94
     
2.51
 
   
1.79
 
Net income (loss) per common share - diluted
(note 11)
   
0.56
     
0.94
     
2.51
 
   
1.79
 
                       
 
       
(a)
Amounts from related parties included in revenues.
   
2,313
     
1,809
     
6,269
 
   
4,951
 
                       
 
       
(b)
Amounts to related parties included in purchases of crude oil and products.
   
717
     
1,071
     
2,353
 
   
3,337
 
                       
 
       
(c)
Amounts to related parties included in production and manufacturing, and selling and general expenses.
   
157
     
136
     
479
 
   
433
 
                       
 
       
(d)
Amounts to related parties included in financing, (note 6).
   
23
     
22
     
75
 
   
64
 
The information in the notes to consolidated financial statements is an integral part of these statements.
 
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Table of Contents
 
IMPERIAL OIL LIMITED
 
 
Consolidated statement of comprehensive income (U.S. GAAP, unaudited)
                                 
 
    Third Quarter
   
    Nine Months
    to September 30
 
millions of Canadian dollars
 
2019
   
2018
   
2019
   
2018
 
Net income (loss)
   
424
     
749
     
1,929
     
1,461
 
                                 
Other comprehensive income (loss), net of income taxes
   
     
     
     
 
Postretirement benefits liability adjustment (excluding amortization)
   
-
     
-
     
18
     
(19
)
Amortization of postretirement benefits liability adjustment included in net periodic benefit costs
   
28
     
34
     
83
     
101
 
Total other comprehensive income (loss)
   
28
     
34
     
101
     
82
 
   
     
     
     
 
Comprehensive income (loss)
   
452
     
783
     
2,030
     
1,543
 
 
 
 
The information in the notes to consolidated financial statements is an integral part of these statements.
 
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Table of Contents
 
IMPERIAL OIL LIMITED
 
 
Consolidated balance sheet (U.S. GAAP, unaudited)
 
As at
Sept 30
   
As at
Dec 31
 
millions of Canadian dollars
 
2019
   
2018
 
Assets
   
     
 
Current assets
   
     
 
Cash
   
1,531
 
   
988
 
Accounts receivable, less estimated doubtful accounts
(a)
   
2,884
 
   
2,529
 
Inventories of crude oil and products
   
989
 
   
1,297
 
Materials, supplies and prepaid expenses
   
606
 
   
541
 
Total current assets
   
6,010
 
   
5,355
 
Investments and long-term receivables
(b)
   
912
 
   
857
 
Property, plant and equipment,
   
54,531
 
   
53,944
 
less accumulated depreciation and depletion
   
(20,299
)
   
(19,719
)
Property, plant and equipment, net
   
34,232
 
   
34,225
 
Goodwill
   
186
 
   
186
 
Other assets, including intangibles, net
   
567
 
   
833
 
Total assets
   
41,907
 
   
41,456
 
       
 
       
Liabilities
   
 
   
 
Current liabilities
   
 
   
 
Notes and loans payable
(c)
   
197
 
   
202
 
Accounts payable and accrued liabilities
(a) (note 9)
   
3,904
 
   
3,688
 
Income taxes payable
   
36
 
   
65
 
Total current liabilities
   
4,137
 
   
3,955
 
Long-term debt
(d) (note 7)
   
4,964
 
   
4,978
 
Other long-term obligations
(e) (note 9)
   
3,073
 
   
2,943
 
Deferred income tax liabilities
   
4,768
 
   
5,091
 
Total liabilities
   
16,942
 
   
16,967
 
       
 
       
Shareholders’ equity
   
 
   
 
Common shares at stated value
(f) (note 11)
   
1,391
 
   
1,446
 
Earnings reinvested
   
24,990
 
   
24,560
 
Accumulated other comprehensive income (loss)
(note 12)
   
(1,416
)
   
(1,517
)
Total shareholders’ equity
   
24,965
 
   
24,489
 
       
 
       
Total liabilities and shareholders’ equity
   
41,907
 
   
41,456
 
(a) Accounts receivable, less estimated doubtful accounts included net amounts receivable from related parties of $1,121 million (2018 - $666 million).
(b) Investments and long-term receivables included amounts from related parties of $275 million (2018 - $146 million).
(c) Notes and loans payable included amounts to related parties of $75 million (2018 - $75 million).
(d) Long-term debt included amounts to related parties of $4,447 million (2018 - $4,447 million).
(e) Other long-term obligations included amounts to related parties of $0 million (2018 - $15 million).
(f) Number of common shares authorized and outstanding were 1,100 million and 753 million, respectively (2018 - 1,100 million and 783 million, respectively).
The information in the notes to consolidated financial statements is an integral part of these statements.
 
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Table of Contents
 
IMPERIAL OIL LIMITED
 
 
Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)
                                 
 
    Third Quarter
   
Nine Months
to September 30
 
millions of Canadian dollars
 
2019
   
2018
   
2019
   
2018
 
Common shares at stated value 
(note 11)
   
     
     
     
 
At beginning of period
   
1,410
 
   
1,483
     
1,446
 
   
1,536
 
Issued under the stock option plan
   
-
 
   
-
     
-
 
   
-
 
Share purchases at stated value
   
(19
)
   
(18
)    
(55
)
   
(71
)
At end of period
   
1,391
 
   
1,465
     
1,391
 
   
1,465
 
       
 
             
 
       
Earnings reinvested
   
 
   
     
 
   
 
At beginning of period
   
25,056
 
   
24,049
     
24,560
 
   
24,714
 
Net income (loss) for the period
   
424
 
   
749
     
1,929
 
   
1,461
 
Share purchases in excess of stated value
   
(324
)
   
(400
)    
(1,017
)
   
(1,490
)
Dividends declared
   
(166
)
   
(151
)    
(482
)
   
(438
)
At end of period
   
24,990
 
   
24,247
     
24,990
 
   
24,247
 
       
 
             
 
       
Accumulated other comprehensive income (loss)
(note 12)
   
 
   
     
 
   
 
At beginning of period
   
(1,444
)
   
(1,767
)    
(1,517
)
   
(1,815
)
Other comprehensive income (loss)
   
28
 
   
34
     
101
 
   
82
 
At end of period
   
(1,416
)
   
(1,733
)    
(1,416
)
   
(1,733
)
       
 
             
 
       
Shareholders’ equity at end of period
   
24,965
 
   
23,979
     
24,965
 
   
23,979
 
 
 
 
 
The information in the notes to consolidated financial statements is an integral part of these statements.
 
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Table of Contents
 
IMPERIAL OIL LIMITED
 
 
Consolidated statement of cash flows (U.S. GAAP, unaudited)
Inflow (outflow)
 
    Third Quarter
   
Nine Months
to September 30
 
millions of Canadian dollars
 
2019
   
2018
   
2019
   
2018
 
Operating activities
   
     
     
     
 
Net income (loss)
   
424
 
   
749
     
1,929
 
   
1,461
 
Adjustments for
non-cash
items:
   
 
   
     
 
   
 
Depreciation and depletion
   
419
 
   
364
     
1,201
 
   
1,099
 
Impairment of intangible assets
(note 3)
   
-
 
   
46
     
-
 
   
46
 
(Gain) loss on asset sales
(note 4)
   
(28
)
   
(10
)    
(34
)
   
(29
)
Deferred income taxes and other
   
116
 
   
276
     
(359
)
   
485
 
Changes in operating assets and liabilities:
   
 
   
     
 
   
 
Accounts receivable
   
250
 
   
(104
)    
(355
)
   
(17
)
Inventories, materials, supplies and prepaid expenses
   
264
 
   
(179
)    
243
 
   
(356
)
Income taxes payable
   
8
 
   
(78
)    
(29
)
   
(46
)
Accounts payable and accrued liabilities
   
(82
)
   
78
     
646
 
   
102
 
All other items - net
(a) (
c
)
   
5
 
   
65
     
163
 
   
306
 
Cash flows from (used in) operating activities
   
1,376
 
   
1,207
     
3,405
 
   
3,051
 
       
 
             
 
       
Investing activities
   
 
   
     
 
   
 
Additions to property, plant and equipment
(
a
)
   
(417
)
   
(327
)    
(1,242
)
   
(1,055
)
Proceeds from asset sales
(note 4)
   
30
 
   
13
     
66
 
   
34
 
Loan to equity company
   
(26
)
   
(38
)    
(129
)
   
(75
)
Cash flows from (used in) investing activities
   
(413
)
   
(352
)    
(1,305
)
   
(1,096
)
       
 
             
 
       
Financing activities
   
 
   
     
 
   
 
Reduction in finance lease obligations
(note 8)
   
(7
)
   
(7
)    
(20
)
   
(20
)
Dividends paid
   
(169
)
   
(155
)    
(465
)
   
(421
)
Common shares purchased
(note 11)
   
(343
)
   
(418
)    
(1,072
)
   
(1,561
)
Cash flows from (used in) financing activities
   
(519
)
   
(580
)    
(1,557
)
   
(2,002
)
       
 
             
 
       
Increase (decrease) in cash
   
444
 
   
275
     
543
 
   
(47
)
Cash at beginning of period
   
1,087
 
   
873
     
988
 
   
1,195
 
Cash at end of period
(
b
)
   
1,531
 
   
1,148
     
1,531
 
   
1,148
 
(a)
 The impact of carbon emission programs are included in additions to property, plant and equipment, and all other items - net.
(b)
 Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all highly liquid securities with maturity of three months or less when purchased.
(c)
 
 
Included contribution to registered pension plans.
 
 
 
 
 
(57
)
 
 
 
 
(52
)
 
 
 
(155
)
 
 
 
(153​​​​​​​
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income taxes (paid) refunded.
 
 
35
 
 
 
(75
)
 
 
84
 
 
(85
)
Interest (paid), net of capitalization.
 
 
(11
)
 
 
(16
)
 
 
(41
)
 
(44
)
Non-cash transaction
In 2019, the company removed $
570
 million of assets and corresponding liabilities associated with the Government of Ontario’s revocation of its cap and trade legislation. The impact of this removal was not reflected in “Accounts payable and accrued liabilities” and “All other items - net” lines on the Consolidated statement of cash flows as it was not a cash transaction.
The information in the notes to consolidated financial statements is an integral part of these statements.
 
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Table of Contents
 
IMPERIAL OIL LIMITED
 
 
Notes to consolidated financial statements (unaudited)
1.  Basis of financial statement preparation
These unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) and follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC) in the company’s 2018 annual report on Form
10-K.
In the opinion of the company, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature.
The company’s exploration and production activities are accounted for under the “successful efforts” method.
The results for the nine months ended September 30, 2019, are not necessarily indicative of the operations to be expected for the full year.
All amounts are in Canadian dollars unless otherwise indicated.
2.  Accounting changes
Effective January 1, 2019, Imperial adopted the Financial Accounting Standards Board’s standard,
Leases (Topic 842)
, as amended. The standard requires all leases to be recorded on the balance sheet as a right of use asset and a lease liability. The company used a transition method that applies the new lease standard at January 1, 2019. The company applied a policy election to exclude short-term leases from the balance sheet recognition and also elected certain practical expedients at adoption. As permitted, Imperial did not reassess whether existing contracts are or contain leases, the lease classification for any existing leases, initial direct costs for any existing lease and whether existing land easements and right of way, which were not previously accounted for as leases, are or contain a lease. At adoption of the lease accounting change, on January 1, 2019, an operating lease liability of $298 million was recorded and the operating lease right of use asset was $298 million. There was no cumulative earnings effect ​​​​​​​adjustment.
 
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Table of Contents
 
IMPERIAL OIL LIMITED
 
 
3.  Business segments
Third Quarter
 
Upstream         
 
  Downstream       
 
Chemical        
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
 
2019 
 
2018 
Revenues and other income
 
 
 
 
 
 
 
 
 
 
 
Revenues
(a)
 
2,185
 
2,489
 
6,266
 
6,880
 
236
 
328
Intersegment sales
 
913
 
771
 
314
 
425
 
61
 
79
Investment and other income
(note 4)
 
7
 
2
 
32
 
25
 
1
 
1
 
3,105
 
3,262
 
6,612 
 
7,330
 
298
 
408
Expenses
 
 
 
 
 
 
 
 
 
Exploration
 
4
 
4
 
-
 
-
 
-
 
-
Purchases of crude oil and products
 
1,376
 
1,566
 
5,142
 
5,567
 
167
 
239
Production and manufacturing
 
1,087
 
1,073
 
460
 
356
 
54
 
51
Selling and general
 
-
 
-
 
191
 
199
 
23
 
21
Federal excise tax and fuel charge
 
-
 
-
 
486
 
432
 
-
 
-
Depreciation and depletion
(b)
 
364
 
309
 
45
 
91
 
4
 
4
Non-service
pension and postretirement benefit
 
-
 
-
 
-
 
-
 
-
 
-
Financing
(note 6)
 
-
 
-
 
-
 
-
 
-
 
-
Total expenses
 
2,831
 
2,952
 
6,324
 
6,645
 
248
 
315
Income (loss) before income taxes
 
274
 
310
 
288
 
685
 
50
 
93
Income taxes
 
65
 
88
 
67
 
183
 
12
 
24
Net income (loss)
 
209
 
222
 
221
 
502
 
38
 
69
Cash flows from (used in) operating activities
 
392
 
872
 
900
 
281
 
75
 
79
Capital and exploration expenditures
 
(c)
 
302
 
257
 
124
 
105
 
4
 
8
             
Third Quarter
 
Corporate and other 
 
Eliminations       
 
Consolidated       
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
 
2019 
 
2018 
Revenues and other income
 
 
 
 
 
 
 
 
 
 
Revenues
(a)
 
-
 
-
 
-
 
-
 
8,687
 
9,697
Intersegment sales
 
-
 
-
 
(1,288)
 
(1,275)
 
-
 
-
Investment and other income
(note 4)
 
9
 
7
 
-
 
-
 
49
 
35
 
9
 
7
 
(1,288)
 
(1,275)
 
8,736
 
9,732
Expenses
 
 
 
 
 
 
 
 
 
 
Exploration
 
-
 
-
 
-
 
-
 
4
 
4
Purchases of crude oil and products
 
-
 
-
 
(1,286)
 
(1,273)
 
5,399
 
6,099
Production and manufacturing
 
-
 
-
 
-
 
-
 
1,601
 
1,480
Selling and general
 
5
 
6
 
(2)
 
(2)
 
217
 
224
Federal excise tax and fuel charge
 
-
 
-
 
-
 
-
 
486
 
432
Depreciation and depletion
(b)
 
6
 
6
 
-
 
-
 
419
 
410
Non-service
pension and postretirement benefit
 
36
 
27
 
-
 
-
 
36
 
27
Financing
(note 6)
 
20
 
30
 
-
 
-
 
20
 
30
Total expenses
 
67
 
69
 
(1,288)
 
(1,275)
 
8,182
 
8,706
Income (loss) before income taxes
 
(58)
 
(62)
 
-
 
-
 
554
 
1,026
Income taxes
 
(14)
 
(18)
 
-
 
-
 
130
 
277
Net income (loss)
 
(44)
 
(44)
 
-
 
-
 
424
 
749
Cash flows from (used in) operating activities
 
9
 
(25)
 
-
 
-
 
1,376
 
1,207
Capital and exploration expenditures 
(c)
 
12
 
6
 
-
 
-
 
442
 
376
 
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IMPERIAL OIL LIMITED
 
 
(a) Included export sales to the United States of $1,807 million (2018 - $1,741 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b) In 2018, the Downstream segment included a
non-cash
impairment charge of $46 million, before tax, associated with the Government of Ontario’s revocation of its cap and trade legislation.
(c) Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.
 
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IMPERIAL OIL LIMITED
 
 
                         
Nine Months to September 30
 
Upstream         
 
Downstream       
 
Chemical          
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
 
2019
 
2018 
Revenues and other income
 
 
 
 
 
 
Revenues
(a)
 
7,012
 
 
6,796
 
 
18,115
 
 
19,357 
 
753 
 
960 
Intersegment sales
 
2,977
 
 
2,078
 
 
1,249
 
 
1,119
 
 
181
 
 
226
 
Investment and other income
(note 4)
 
11 
 
 
61
 
 
66 
 
 
1
 
 
10,000
 
 
8,880 
 
19,425
 
 
20,542 
 
935 
 
1,187 
Expenses
 
 
 
 
 
 
Exploration
 
42 
 
13 
 
 
 
 
Purchases of crude oil and products
 
4,764 
 
4,513 
 
15,062 
 
15,664 
 
531 
 
657 
Production and manufacturing
 
3,414 
 
3,191 
 
1,315 
 
1,212 
 
182 
 
154 
Selling and general
 
-
 
 
571 
 
569 
 
67 
 
65 
Federal excise tax and fuel charge
 
-
 
 
1,343 
 
1,241 
 
 
Depreciation and depletion
(b)
 
1,036 
 
927 
 
137 
 
191 
 
11 
 
11 
Non-service
pension and postretirement benefit
 
-
 
 
 
 
 
Financing
(note 6)
 
-
 
 
 
 
 
Total expenses
 
9,256 
 
8,644 
 
18,428 
 
18,877 
 
791 
 
887 
Income (loss) before income taxes
 
744 
 
236 
 
997 
 
1,665 
 
144 
 
300 
Income taxes
 
(508)
 
64 
 
261 
 
441 
 
34 
 
80 
Net income (loss)
 
1,252 
 
172 
 
736 
 
1,224 
 
110 
 
220 
Cash flows from (used in) operating activities
 
1,257 
 
1,199 
 
2,055 
 
1,647 
 
175 
 
278 
Capital and exploration expenditures 
(c)
 
975 
 
646 
 
364 
 
250 
 
27 
 
19 
Total assets as at September 30 
(d) (e)
 
35,066 
 
34,570 
 
4,433 
 
5,426 
 
423 
 
427 
             
Nine Months to September 30
 
Corporate and other 
 
Eliminations       
 
Consolidated       
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
 
2019
 
2018 
Revenues and other income
 
 
 
 
 
 
Revenues
(a)
 
 
 
 
 
25,880 
 
27,113 
Intersegment sales
 
 
 
(4,407)
 
(3,423)
 
 
Investment and other income
(note 4)
 
26 
 
23 
 
 
 
99 
 
96 
 
26 
 
23 
 
(4,407)
 
(3,423)
 
25,979
 
27,209
Expenses
 
 
 
 
 
 
Exploration
 
 
 
 
 
42
 
13 
Purchases of crude oil and products
 
 
 
(4,401)
 
(3,418)
 
15,956
 
17,416 
Production and manufacturing
 
 
 
 
 
4,911
 
4,557 
Selling and general
 
34 
 
62 
 
(6)
 
(5)
 
666
 
691 
Federal excise tax and fuel charge
 
 
 
 
 
1,343 
 
1,241 
Depreciation and depletion
(b)
 
17 
 
16 
 
 
 
1,201 
 
1,145 
Non-service
pension and postretirement benefit
 
108 
 
80 
 
 
 
108 
 
80 
Financing
(note 6)
 
71 
 
79 
 
 
 
71 
 
79 
Total expenses
 
230 
 
237 
 
(4,407)
 
(3,423)
 
24,298 
 
25,222 
Income (loss) before income taxes
 
(204)
 
(214)
 
 
 
1,681 
 
1,987 
Income taxes
 
(35)
 
(59)
 
 
 
(248)
 
526 
Net income (loss)
 
(169)
 
(155)
 
 
 
1,929
 
1,461 
Cash flows from (used in) operating activities
 
(82)
 
(73)
 
 
 
3,405 
 
3,051 
Capital and exploration expenditures 
(c)
 
34 
 
19 
 
 
 
1,400 
 
934 
Total assets as at September 30 
(d) (e)
 
2,298 
 
1,727 
 
(313)
 
(331)
 
41,907 
 
41,819 
 
 
 
 
 
 
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IMPERIAL OIL LIMITED
 
 
(a) Included export sales to the United States of $5,623 million (2018 - $4,509 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
 
 
 
 
 
 
 
 
 
 
 
 
(b) In 2018, the Downstream segment included a
non-cash
impairment charge of $46 million, before tax, associated with the Government of Ontario’s revocation of its cap and trade legislation.
 
 
 
 
 
 
 
 
 
 
 
 
(c) Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.
 
 
 
 
 
 
 
 
 
 
 
 
(d) Effective January 1, 2019, Imperial adopted the Financial Accounting Standards Board’s standard,
Leases (Topic 842)
, as amended. As at September 30, 2019, Total assets include operating lease right of use assets of $283 million. An election was made not to restate prior periods. See note 8 for additional details.
 
 
 
 
 
 
 
 
 
 
 
 
(e) In 2019, the company removed $570 million from Total assets and corresponding liabilities in the Downstream segment associated with the Government of Ontario’s revocation of its cap and trade legislation.
 
 
 
 
 
 
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IMPERIAL OIL LIMITED
 
 
4.  Investment and other income
Investment and other income included gains and losses on asset sales as follows:
 
Third Quarter     
 
         Nine Months
         to September 30
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
Proceeds from asset sales
 
30 
 
13 
 
66 
 
34 
Book value of asset sales
 
 
 
32 
 
Gain (loss) on asset sales, before tax
 
28 
 
10 
 
34 
 
29 
Gain (loss) on asset sales, after tax
 
25 
 
 
31 
 
21 
 
5.  Employee retirement benefits
 
The components of net benefit ​​​​​​​cost were as follows:
 
 
Third Quarter     
 
         Nine Months
         to September 30
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
Pension benefits:
 
 
 
 
Current service cost
 
57 
 
59 
 
171 
 
179 
Interest cost
 
81 
 
76 
 
243 
 
227 
Expected return on plan assets
 
(87)
 
(100)
 
(262)
 
(301)
Amortization of prior service cost
 
 
 
 
Amortization of actuarial loss (gain)
 
37 
 
43 
 
112 
 
130 
Net periodic benefit cost
 
88 
 
79 
 
264 
 
238 
                 
Other postretirement benefits:
 
 
 
 
Current service cost
 
 
 
12 
 
13 
Interest cost
 
 
 
16 
 
16 
Amortization of actuarial loss (gain)
 
 
 
(1)
 
Net periodic benefit cost
 
 
12 
 
27 
 
34 
 
6.  Financing and additional notes and loans payable information
 
Third Quarter     
 
         Nine Months
         to September 30
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
Debt-related interest
 
32 
 
36 
 
105 
 
98 
Capitalized interest
 
(12)
 
(6)
 
(34)
 
(19)
Net interest expense
 
20 
 
30 
 
71 
 
79 
Other interest
 
 
 
 
Total financing
 
20 
 
30 
 
71 
 
79 
 
7.  Long-term debt
 
 
As at 
 Sept 30 
 
As at 
 Dec 31 
millions of Canadian dollars
 
2019 
 
2018 
Long-term debt
 
4,447 
 
4,447 
Finance leases
(a)
 
517 
 
531 
Total long-term debt
 
4,964 
 
4,978 
(a) Maturity analysis of finance lease liabilities is disclosed in note 8.
In September 2019, the company extended the maturity date of its existing long-term, variable-rate, Canadian dollar loan from ExxonMobil to June 30, 2025. All other terms and conditions remain
unchanged.
 
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IMPERIAL OIL LIMITED
 
 
8.  Leases
The company generally purchases the property, plant and equipment used in operations, but there are situations where assets are leased, primarily rail cars, marine vessels, storage tanks and other moveable equipment. Right of use assets and lease liabilities are established on the balance sheet for leases with an expected term greater than one year, by discounting the amounts fixed in the lease agreement for the duration of the lease which is reasonably certain, considering the probability of exercising any early termination and extension options. The portion of the fixed payment related to service costs for long-term transportation agreements is excluded from the calculation of right of use assets and lease liabilities. Usually, assets are leased only for a portion of their useful lives and are accounted for as operating leases. In limited situations assets are leased for nearly all of their useful lives and are accounted for as finance leases. In general, leases are capitalized using the company’s incremental borrowing rate.
Variable payments under these lease agreements are not significant. Residual value guarantees, restrictions, or covenants related to leases, and transactions with related parties are also not significant. The company’s activities as a lessor are not material.
At adoption of the lease accounting change (see note 2), on January 1, 2019, an operating lease liability of $298 million was recorded and the operating lease right of use asset was $298 million. There was no cumulative earnings effect adjustment.
The table below summarizes the total lease cost incurred:
 
Third Quarter
2019
   
Nine Months
to September 30
2019
 
                         
millions of Canadian dollars
 
    Operating
leases
   
Finance
leases
   
    Operating
leases
   
Finance
leases
 
Operating lease cost
   
39
     
     
113
     
 
Short-term and other (net of sublease rental income)
   
14
     
     
54
     
 
                                 
Amortization of right of use assets
   
     
14
     
     
41
 
Interest on lease liabilities
   
     
10
     
     
30
 
Total lease cost
   
53
     
24
     
167
     
71
 
The following table summarizes the amounts related to operating leases and finance leases recorded on the Consolidated balance sheet:
 
As at
September 30
2019
 
             
millions of Canadian dollars
 
    Operating
leases
   
  Finance
leases
 
Right of use assets
   
 
 
 
 
Included in Other assets, including intangibles, net
   
283
 
 
 
 
Included in Property, plant and equipment, net
   
 
 
 
560
 
Total right of use assets
   
283
 
 
 
560
 
     
 
 
 
 
 
 
Lease liability due within one year
   
 
 
 
 
Included in Accounts payable and accrued liabilities
   
121
 
 
 
27
 
Included in Notes and loans payable
   
 
 
 
22
 
Long-term lease liability
   
 
 
 
 
Included in Other long-term obligations
   
160
 
 
 
-
 
Included in Long-term debt
   
 
 
 
517
 
Total lease liability
   
281
 
 
 
566
 
 
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IMPERIAL OIL LIMITED
 
 
The maturity analysis of the company’s lease liabilities, weighted average remaining lease term and weighted average discount rates applied are summarized below:
                 
 
As at
September 30
2019
 
             
millions of Canadian dollars, unless noted
 
    Operating
leases
   
    Finance
leases
 
Maturity analysis of lease liabilities
   
     
 
2019 remaining months
   
37
     
28
 
2020
   
114
     
71
 
2021
   
66
     
50
 
2022
   
30
     
49
 
2023
   
13
     
48
 
2024
   
11
     
47
 
2025 and beyond
   
30
     
1,086
 
Total lease payments
   
301
     
1,379
 
                 
Discount to present value
   
(20)
     
(813
)
Total lease liability
   
281
     
566
 
                 
Weighted average remaining lease term
(years)
   
4
     
40
 
Weighted average discount rate
(percent)
   
2.5
     
7.5
 
 
 
 
 
 
In addition to the operating lease liabilities in the table immediately above, at September 30, 2019, additional undiscounted commitments for leases not yet commenced totalled $2 million.
The table below summarizes the cash paid for amounts included in the measurement of lease liabilities and the right of use assets obtained in exchange for new lease liabilities:
                                 
 
Third Quarter
2019
   
Nine Months
to September 30
2019
 
                         
millions of Canadian dollars
 
    Operating
leases
   
    Finance
leases
   
    Operating
leases
   
    Finance
leases
 
Cash paid for amounts included in the measurement of lease liabilities
   
     
     
     
 
Cash flows from operating activities
   
37
     
11
     
110
     
33
 
Cash flows from financing activities
   
     
7
     
     
20
 
                                 
Non-cash
right of use assets recorded for lease liabilities
   
     
     
     
 
For January 1 adoption of
Leases (Topic 842)
   
     
     
298
     
 
In exchange for new lease liabilities during the period
   
     
     
90
     
 
 
 
 
 
 
 
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IMPERIAL OIL LIMITED
 
 
At December 31, 2018, the company held
non-cancelable
operating leases covering primarily storage tanks, rail cars and marine vessels, with minimum undiscounted lease commitments totaling $291 million as indicated in the following table:
         
millions of Canadian dollars
 
As at
Dec 31
2018
 
Payments due by period
   
 
2019
   
130
 
2020
   
82
 
2021
   
43
 
2022
   
13
 
2023
   
11
 
2024 and beyond
   
12
 
Total lease payments under minimum commitments
(a)
   
291
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Net rental cost under cancelable and
non-cancelable
operating leases incurred in 2018 was $221 million (2017 - $206 million, 2016 - $253 million). Related rental income was not material.
 
 
 
 
 
9.  Other long-term obligations
                 
 
As at
   
As at
 
 
Sept 30
   
Dec 31
 
millions of Canadian dollars
 
2019
   
2018
 
Employee retirement benefits
(a)
   
1,145
     
1,195
 
Asset retirement obligations and other environmental liabilities
(b)
   
1,445
     
1,435
 
Share-based incentive compensation liabilities
   
94
     
78
 
Operating lease liability
(c)
   
160
     
-
 
Other obligations
   
229
     
235
 
Total other long-term obligations
   
3,073
     
2,943
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Total recorded employee retirement benefits obligations also included $55 million in current liabilities (2018 - $55 million).
 
 
 
 
 
 
 
 
 
 
 
 
(b) Total asset retirement obligations and other environmental liabilities also included $118 million in current liabilities (2018 - $118 million).
 
 
 
 
 
 
 
 
 
 
 
 
(c) Effective January 1, 2019, Imperial adopted the Financial Accounting Standards Board’s standard,
Leases (Topic 842)
, as amended. The standard requires all leases to be recorded on the balance sheet as a right of use asset and liability. The long-term lease liability for operating leases is included in Other long-term obligations (see note 8).
 
 
 
 
 
 
10.  Financial instruments
The fair value of the company’s financial instruments is determined by reference to various market data and other appropriate valuation techniques. There are no material differences between the fair value of the company’s financial instruments and the recorded carrying value. At September 30, 2019 and December 31, 2018 the fair value of long-term debt ($4,447 million, excluding finance lease obligations) was primarily a level 2 measurement.
 
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IMPERIAL OIL LIMITED
 
 
11.  Common shares
                 
thousands of shares
 
As of
Sept 30
2019
   
As of
Dec 31
2018
 
Authorized
   
1,100,000
     
1,100,000
 
Common shares outstanding
   
752,948
     
782,565
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The current
12-month
normal course issuer bid program came into effect June 27, 2019, under which Imperial will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 38,211,086 common shares (
5
 percent of the total shares on June 13, 2019) which includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent.
The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.
The company’s common share activities are summarized below:
 
 
 
 
 
 
 
 
 
 
 
Thousands
of shares
   
 
 
 
 
 
 
Millions of
dollars
 
Balance as at December 31, 2017
   
831,242
     
1,536
 
Issued under employee share-based awards
   
2
     
-
 
Purchases at stated value
   
(48,679
)    
(90
)
Balance as at December 31, 2018
   
   782,565
     
1,446
 
Issued under employee share-based awards
   
-
     
-
 
Purchases at stated value
 
 
(29,617
)
 
 
(55
)
Balance as at September 30, 2019
 
 
752,948
 
 
 
1,391
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table provides the calculation of basic and diluted earnings per common share and the dividends declared by the company on its outstanding common shares:
                                 
 
Third Quarter
   
    Nine Months
    to September 30
 
 
2019
   
2018
   
2019
   
2018
 
Net income (loss) per common share - basic
   
     
     
     
 
Net income (loss)
(millions of Canadian dollars)
   
424
     
749
     
1,929
     
1,461
 
Weighted average number of common shares outstanding
(millions of shares)
   
757.8
     
797.6
     
767.6
     
814.2
 
Net income (loss) per common share
(dollars)
   
0.56
     
0.94
     
2.51
     
1.79
 
                                 
Net income (loss) per common share - diluted
   
     
     
     
 
Net income (loss)
(millions of Canadian dollars)
   
424
     
749
     
1,929
     
1,461
 
Weighted average number of common shares outstanding
(millions of shares)
   
757.8
     
797.6
     
767.6
     
814.2
 
Effect of employee share-based awards
(millions of shares)
   
2.5
     
2.9
     
2.4
     
2.7
 
Weighted average number of common shares outstanding, assuming dilution
(millions of shares)
   
760.3
     
800.5
     
770.0
     
816.9
 
Net income (loss) per common share
(dollars)
   
0.56
     
0.94
     
2.51
     
1.79
 
                                 
Dividends per common share - declared
(dollars)
   
0.22
     
0.19
     
0.63
     
0.54
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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IMPERIAL OIL LIMITED
 
 
12.  Other comprehensive income (loss) information
Changes in accumulated other comprehensive income (loss):
         
millions of Canadian dollars
 
2019 
 
2018 
Balance at January 1
 
(1,517)
 
(1,815)
Postretirement benefits liability adjustment:
 
 
Current period change excluding amounts reclassified from accumulated other comprehensive income
 
18 
 
(19)
Amounts reclassified from accumulated other comprehensive income
 
83 
 
101
 
Balance at September 30
 
(1,416)
 
(1,733)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts reclassified out of accumulated other comprehensive income (loss) -
before-tax
income (expense):
                 
 
 
Third Quarter     
 
         Nine Months
         to September 30
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost
(a)
 
(37)
 
(46)
 
(111)
 
(138)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) This accumulated other comprehensive income component is included in the computation of net periodic benefit cost, (note 5).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense (credit) for components of other comprehensive income (loss):
                 
 
 
Third Quarter     
 
         Nine Months
         to September 30
millions of Canadian dollars
 
2019 
 
2018 
 
2019 
 
2018 
Postretirement benefits liability adjustments:
 
 
 
 
 
 
 
 
Postretirement benefits liability adjustment (excluding amortization)
 
 
 
 
(7)
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost
 
 
12 
 
28 
 
37 
Total
 
 
12 
 
35 
 
30 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13.  Recently issued accounting standards
Effective January 1, 2020, Imperial will adopt the Financial Accounting Standards Board’s update,
Financial Instruments - Credit Losses (Topic 326)
, as amended.
The standard requires a valuation allowance for credit losses be recognized for certain financial assets that reflects the current expected credit loss over the asset’s contractual life. The valuation allowance considers the risk of loss, even if remote and considers past events, current conditions and expectations of the future. The company does not expect a material change in the credit allowance for trade receivables and continues to evaluate the impact on other financial assets in scope of the standard
.
 
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IMPERIAL OIL LIMITED
 
 
Item 2.
Management’s discussion and analysis of financial condition and results of operations
 
 
 
 
 
 
 
Operating results
Third quarter 2019 vs. third quarter 2018
The company’s net income for the third quarter of 2019 was $424 million or $0.56 per share on a diluted basis, compared to net income of $749 million or $0.94 per share in the same period of 2018.
Upstream net income was $209 million in the third quarter, compared to net income of $222 million in the same period of 2018. Earnings decreased mainly due to higher operating expenses of about $70 million and higher royalties of about $50 million, partially offset by higher volumes of about $110 million primarily at Syncrude.
West Texas Intermediate (WTI) averaged US$56.44 per barrel in the third quarter of 2019, down from US$69.43 per barrel in the same quarter of 2018. Western Canada Select (WCS) averaged US$44.21 per barrel and US$47.49 per barrel for the same periods. The WTI / WCS differential narrowed during the third quarter of 2019 to average approximately US$12 per barrel for the quarter, compared to around US$22 per barrel in the same period of 2018.
The Canadian dollar averaged US$0.76 in the third quarter of 2019, essentially unchanged from the third quarter of 2018.
Imperial’s average Canadian dollar realizations for bitumen increased in the quarter supported primarily by lower diluent costs partially offset by a decrease in WCS. Bitumen realizations averaged $51.12 per barrel in the third quarter of 2019, up from $50.42 per barrel in the third quarter of 2018. The company’s average Canadian dollar realizations for synthetic crude declined generally in line with WTI in the quarter, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $77.27 per barrel in the third quarter of 2019, compared to $89.70 per barrel in the same period of 2018. 
Gross production of Cold Lake bitumen averaged 142,000 barrels per day in the third quarter, compared to 150,000 barrels per day in the same period of 2018.
Gross production of Kearl bitumen averaged 224,000 barrels per day in the third quarter (159,000 barrels Imperial’s share), compared to 244,000 barrels per day (173,000 barrels Imperial’s share) in the third quarter of 2018. Lower production was mainly due to timing of planned turnaround activity.
The company’s share of gross production from Syncrude averaged 69,000 barrels per day, up from 45,000 barrels per day in the third quarter of 2018. Higher production was mainly due to the absence of production impacts from the 2018 power disruption, partially offset by planned turnaround activity.
Downstream net income was $221 million in the third quarter, compared to $502 million in the third quarter of 2018. Earnings were negatively impacted by lower margins of about $230 million and planned turnaround activity of about $70 million.
Refinery throughput averaged 363,000 barrels per day, compared to 388,000 barrels per day in the third quarter of 2018. Capacity utilization was 86 percent, compared to 92 percent in the third quarter of 2018. Reduced throughput was mainly due to planned turnaround activity at Nanticoke and ongoing impacts from the fractionation tower incident at Sarnia which occurred earlier in 2019.
Petroleum product sales were 488,000 barrels per day, compared to 516,000 barrels per day in the third quarter of 2018. Lower petroleum product sales were mainly due to lower refinery throughput.
Chemical net income was $38 million in the third quarter, compared to $69 million from the same quarter of 2018, primarily reflecting lower margins.
Corporate and other expenses were $44 million in the third quarter, unchanged from the same period of 2018.
 
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Nine months 2019 vs. nine months 2018
Net income in the first nine months of 2019 was $1,929 million, or $2.51 per share on a diluted basis, up from net income of $1,461 million or $1.79 per share in the first nine months of 2018. 2019 results include a favourable impact, largely
non-cash,
of $662 million associated with the Alberta corporate income tax rate decrease. On June 28, 2019, the Alberta government enacted a 4 percent decrease in the provincial tax rate, from 12 percent to 8 percent by 2022.
Upstream net income was $1,252 million for the first nine months of the year, reflecting the favourable impact associated with the decreased Alberta corporate income tax rate of $689 million. Excluding this impact, 2019 net income was $563 million, up from net income of $172 million in the same period of 2018. Improved results reflect higher volumes of about $530 million at Syncrude, Kearl and Norman Wells, as well as the impact of higher crude oil realizations of about $220 million and favourable foreign exchange impacts of about $90 million. Results were negatively impacted by higher operating expenses of about $270 million, higher royalties of about $130 million, and lower Cold Lake volumes of about $70 million.
West Texas Intermediate averaged US$57.10 per barrel in the first nine months of 2019, down from US$66.77 per barrel in the same period of 2018. Western Canada Select averaged US$45.32 per barrel and US$44.98 per barrel for the same periods. The WTI / WCS differential narrowed to average approximately US$12 per barrel in the first nine months of 2019, from around US$22 per barrel in the same period of 2018.
The Canadian dollar averaged US$0.75 in the first nine months of 2019, a decrease of $0.03 from the same period in 2018.
Imperial’s average Canadian dollar realizations for bitumen increased in the first nine months of 2019, supported primarily by lower diluent costs. Bitumen realizations averaged $52.44 per barrel, up from $45.04 per barrel from the same period in 2018. The company’s average Canadian dollar realizations for synthetic crude declined generally in line with WTI, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $74.59 per barrel, compared to $83.66 per barrel from the same period in 2018.
Gross production of Cold Lake bitumen averaged 141,000 barrels per day in the first nine months of 2019, compared to 145,000 barrels per day in the same period of 2018.
Gross production of Kearl bitumen averaged 204,000 barrels per day in the first nine months of 2019 (145,000 barrels Imperial’s share), up from 202,000 barrels per day (144,000 barrels Imperial’s share) in the same period of 2018.
During the first nine months of 2019, the company’s share of gross production from Syncrude averaged 76,000 barrels per day, up from 53,000 barrels per day in the same period of 2018. Higher production was mainly due to the absence of production impacts from the 2018 power disruption.
Downstream net income was $736 million for the first nine months of 2019, compared to $1,224 million for the same period of 2018. Earnings were negatively impacted by lower margins of about $430 million, reliability events of about $140 million, including the fractionation tower incident at Sarnia, and lower sales volumes of about $100 million. These factors were partially offset by lower net turnaround impacts of about $80 million, and favourable foreign exchange effects of about $60 million.
Refinery throughput averaged 363,000 barrels per day in the first nine months of 2019, compared to 386,000 barrels per day in the same period of 2018. Capacity utilization was 86 percent, compared to 91 percent in the same period of 2018. Reduced throughput was mainly due to higher planned turnaround activities and impacts from the Sarnia fractionation tower incident.
Petroleum product sales were 481,000 barrels per day in the first nine months of 2019, compared to 503,000 barrels per day in the same period of 2018. Lower petroleum product sales were mainly due to lower refinery throughput.
Chemical net income was $110 million in the first nine months of 2019, compared to $220 million in the same period of 2018, primarily reflecting lower margins.
Corporate and other expenses were $169 million in the first nine months of 2019, compared to $155 million in the same period of 2018.
 
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Liquidity and capital resources
Cash flow generated from operating activities was $1,376 million in the third quarter, up from $1,207 million in the corresponding period in 2018, primarily reflecting favourable working capital effects, partially offset by lower earnings.
Investing activities used net cash of $413 million in the third quarter, compared with $352 million used in the same period of 2018.
Cash used in financing activities was $519 million in the third quarter, compared with $580 million used in the third quarter of 2018. Dividends paid in the third quarter of 2019 were $169 million. The per share dividend paid in the third quarter was $0.22, up from $0.19 in the same period of 2018. During the third quarter, the company, under its share purchase program, purchased about 9.8 million shares for $343 million, including shares purchased from Exxon Mobil Corporation. In the third quarter of 2018, the company purchased about 10 million shares for $418 million.
The company’s cash balance was $1,531 million at September 30, 2019, versus $1,148 million at the end of third quarter 2018.
Cash flow generated from operating activities was $3,405 million in the first nine months of 2019, up from $3,051 million in the same period of 2018, primarily reflecting favourable working capital effects.
Investing activities used net cash of $1,305 million in the first nine months of 2019, compared with $1,096 million used in 2018, primarily reflecting higher additions to property, plant and equipment.
Cash used in financing activities was $1,557 million in the first nine months of 2019, compared with $2,002 million used in the same period of 2018. Dividends paid in the first nine months of 2019 were $465 million. The per share dividend paid in the first nine months of 2019 was $0.60, up from $0.51 in the same period of 2018. During the first nine months of 2019, the company, under its share purchase program, purchased about 29.6 million shares for $1,072 million, including shares purchased from Exxon Mobil Corporation. In the first nine months of 2018, the company purchased about 38.5 million shares for $1,561 million.
In September 2019, the company extended the maturity date of its existing long-term, variable-rate, Canadian dollar loan from ExxonMobil to June 30, 2025. All other terms and conditions remain unchanged.
Recently issued accounting standards
Effective January 1, 2020, Imperial will adopt the Financial Accounting Standards Board’s update,
Financial Instruments - Credit Losses (Topic 326)
, as amended. The standard requires a valuation allowance for credit losses be recognized for certain financial assets that reflects the current expected credit loss over the asset’s contractual life. The valuation allowance considers the risk of loss, even if remote and considers past events, current conditions and expectations of the future. The company does not expect a material change in the credit allowance for trade receivables and continues to evaluate the impact on other financial assets in scope of the standard.
 
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Forward-looking statements
Statements of future events or conditions in this report, including projections, targets, expectations, estimates, and business plans are forward-looking statements. Disclosure related to the share purchase program and the expected impact from accounting standard changes constitute forward-looking statements. Forward-looking statements are based on the company’s current expectations, estimates, projections and assumptions at the time the statements are made. Actual future financial and operating results, including expectations and assumptions concerning demand growth and energy source, supply and mix; commodity prices and foreign exchange rates; production rates, growth and mix; applicable laws and government policies; financing sources; and capital and environmental expenditures could differ materially depending on a number of factors. These factors include changes in the supply of and demand for crude oil, natural gas, and petroleum and petrochemical products and resulting price and margin impacts; transportation for accessing markets; political or regulatory events, including changes in law or government policy; environmental risks inherent in oil and gas exploration and production activities; environmental regulation; currency exchange rates; availability and allocation of capital; unanticipated operational disruptions; project management and schedules; operational hazards and risks; cybersecurity incidents; disaster response preparedness; and other factors discussed in Item 1A risk factors and Item 7 management’s discussion and analysis of financial condition and results of operations of Imperial Oil Limited’s most recent annual report on Form
10-K.
Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to Imperial. Imperial’s actual results may differ materially from those expressed or implied by its forward-looking statements and readers are cautioned not to place undue reliance on them. Imperial undertakes no obligation to update any forward-looking statements contained herein, except as required by applicable law.
The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.
 
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Item 3.
Quantitative and qualitative disclosures about market risk
 
 
 
 
 
 
 
Information about market risks for the nine months ended September 30, 2019, does not differ materially from that discussed on page 25 of the company’s annual report on Form
10-K
for the year ended December 31, 2018.
Item 4.
Controls and procedures
 
 
 
 
 
 
 
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, 2019. 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.
 
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PART II. OTHER INFORMATION
Item 2.
Unregistered sales of equity securities and use of proceeds
 
 
 
 
 
 
 
 
 
Issuer purchases of equity securities
                                     
 
Total number of
shares purchased
   
Average price paid
per share
(Canadian dollars)
   
Total number of
shares purchased
as part of publicly
announced plans
or programs
   
Maximum number
of shares that may
yet be purchased
under the plans or
programs 
(a)
   
     
July 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
(July 1 - July 31)
 
 
3,431,194
 
 
 
36.50
 
 
 
3,431,194
 
 
 
34,779,892
 
 
August 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
(August 1 - August 31)
 
 
3,275,232
 
 
 
32.84
 
 
 
3,275,232
 
 
 
31,504,660
 
 
September 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
(September 1 - September 30)
 
 
3,119,269
 
 
 
35.07
 
 
 
3,119,269
 
 
 
28,385,391
 
 
(b)
     
 
 
 
 
 
(a) On June 21, 2019, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid and will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 38,211,086 common shares during the period June 27, 2019 to June 26, 2020. This maximum includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent. The program will end should the company purchase the maximum allowable number of shares, or on June 26, 2020.
 
 
 
 
 
(b) In its most recent quarterly earnings release, the company stated that it currently anticipates exercising its share purchases uniformly over the duration of the program. Purchase plans may be modified at any time without prior notice.
 
 
 
 
 
The company will continue to evaluate its share purchase program in the context of its overall capital activities.
 
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Item 6.
Exhibits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(31.1) Certification by the principal executive officer of the company pursuant to Rule
 13a-14(a).
 
(31.2) Certification by the principal financial officer of the company pursuant to Rule
13a-14(a).
 
(32.1) Certification by the chief executive officer of the company pursuant to Rule
13a-14(b)
and 18 U.S.C. Section 1350.
 
(32.2) Certification by the chief financial officer of the company pursuant to Rule
13a-14(b)
and 18 U.S.C. Section 1350.
 
(101) Interactive Data Files (formatted as Inline XBRL).
 
(104) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
 
 
Imperial Oil Limited
(Registrant)
         
Date:    November 6, 2019
 
 
/s/ Daniel E. Lyons
---------------------------------------------------
 
 
(Signature)
 
 
Daniel E. Lyons
 
 
Senior vice-president, finance and
administration, and controller
(Principal accounting officer)
 
 
 
 
 
 
         
         
Date:    November 6, 2019
 
 
/s/ Cathryn Walker
---------------------------------------------------
 
 
(Signature)
 
 
Cathryn Walker
 
 
Assistant corporate secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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