Item 1. Financial statements
Consolidated statement of income (U.S. GAAP, unaudited)
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Six Months
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Second Quarter
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to June 30
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millions of Canadian dollars
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2018
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2017
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2018
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2017
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Revenues and other income
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Revenues
(a)
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9,516
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6,985
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17,416
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13,943
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Investment and other income
(note 5)
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27
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48
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61
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246
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Total revenues and other income
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9,543
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7,033
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17,477
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14,189
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Expenses
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Exploration
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1
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-
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9
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22
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Purchases of crude oil and products
(b)
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6,537
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4,642
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11,317
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8,975
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Production and manufacturing
(c)
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1,646
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1,495
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3,077
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2,840
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Selling and general
(c)
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273
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198
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467
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401
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Federal excise tax
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412
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421
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809
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815
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Depreciation and depletion
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358
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352
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735
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744
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Non-service
pension and postretirement benefit
(d)
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26
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33
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53
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66
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Financing
(note
7)
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26
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17
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49
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31
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Total expenses
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9,279
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7,158
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16,516
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13,894
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Income (loss) before income taxes
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264
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(125
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)
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961
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295
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Income taxes
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68
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(48
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)
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249
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39
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Net income (loss)
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196
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(77
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)
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712
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256
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Per share information
(Canadian
dollars)
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Net income (loss) per common share - basic
(note 10)
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0.24
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(0.09
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)
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0.86
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0.30
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Net income (loss) per common share - diluted
(note 10)
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0.24
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(0.09
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)
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0.86
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0.30
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Dividends per common share - declared
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0.19
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0.16
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0.35
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0.31
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(a)
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Amounts from related parties included in revenues.
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1,769
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1,008
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3,142
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2,045
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(b)
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Amounts to related parties included in purchases of crude oil and products.
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1,374
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706
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2,266
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1,315
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(c)
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Amounts to related parties included in production and manufacturing, and selling and general expenses.
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156
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147
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297
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288
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(d)
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Prior year amounts have been reclassified. See note 2 for additional details.
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The information in the notes to consolidated financial statements is an integral part of these statements.
3
IMPERIAL OIL LIMITED
Consolidated statement of comprehensive income (U.S. GAAP, unaudited)
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Six Months
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Second Quarter
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to June 30
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millions of Canadian dollars
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2018
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2017
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2018
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2017
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Net income (loss)
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196
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(77
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)
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712
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256
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Other comprehensive income (loss), net of income taxes
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Postretirement benefits liability adjustment (excluding amortization)
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-
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-
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(19
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)
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41
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Amortization of postretirement benefits liability
adjustment
included in net periodic benefit costs
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33
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36
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67
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72
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Total other comprehensive income (loss)
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33
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36
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48
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113
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Comprehensive income (loss)
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229
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(41
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)
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760
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369
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The information in the notes to consolidated financial statements is an integral part of these statements.
4
IMPERIAL OIL LIMITED
Consolidated balance sheet (U.S. GAAP, unaudited)
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As at
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As at
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June 30
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Dec 31
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millions of Canadian dollars
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2018
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2017
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Assets
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Current assets
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Cash
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873
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1,195
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Accounts receivable, less estimated doubtful accounts
(a)
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2,625
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2,712
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Inventories of crude oil and products
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1,221
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1,075
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Materials, supplies and prepaid expenses
(b)
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456
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425
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Total current assets
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5,175
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5,407
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Investments and long-term receivables
(b)
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860
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865
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Property, plant and equipment,
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53,272
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52,778
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less accumulated depreciation and depletion
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(19,028
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)
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(18,305
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)
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Property, plant and equipment, net
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34,244
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34,473
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Goodwill
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186
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186
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Other assets, including intangibles, net
(note 9)
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925
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670
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Total assets
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41,390
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41,601
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Liabilities
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Current liabilities
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Notes and loans payable
(c)
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202
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202
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Accounts payable and accrued liabilities
(a) (note 9)
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3,923
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3,877
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Income taxes payable
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89
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57
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Total current liabilities
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4,214
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4,136
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Long-term debt
(d) (note 8)
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4,992
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5,005
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Other long-term obligations
(e) (note 9)
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3,943
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3,780
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Deferred income tax liabilities
|
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4,476
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4,245
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Total liabilities
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17,625
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17,166
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Shareholders equity
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Common shares at stated value
(f) (note 10)
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1,483
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1,536
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Earnings reinvested
(note 11)
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24,049
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24,714
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Accumulated other comprehensive income (loss)
(note 12)
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(1,767
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)
|
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(1,815
|
)
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Total shareholders equity
|
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|
23,765
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|
24,435
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Total liabilities and shareholders equity
|
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41,390
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|
|
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41,601
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|
(a)
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Accounts receivable, less estimated doubtful accounts included net amounts receivable from related parties of $344 million (2017 - $509 million).
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(b)
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Investments and long-term receivables included amounts from related parties of $56 million (2017 - $19 million).
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(c)
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Notes and loans payable included amounts to related parties of $75 million (2017 - $75 million).
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(d)
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Long-term debt included amounts to related parties of $4,447 million (2017 - $4,447 million).
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(e)
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Other long-term obligations included amounts to related parties of $38 million (2017 - $60 million).
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(f)
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Number of common shares authorized and outstanding were 1,100 million and 803 million, respectively (2017 - 1,100 million and 831 million, respectively).
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The information in the notes to consolidated financial statements is an integral part of these statements.
5
IMPERIAL OIL LIMITED
Consolidated statement of cash flows (U.S. GAAP, unaudited)
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Six Months
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Inflow (outflow)
|
|
Second Quarter
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to June 30
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millions of Canadian dollars
|
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2018
|
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2017
|
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2018
|
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2017
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net income (loss)
|
|
|
196
|
|
|
|
(77
|
)
|
|
|
712
|
|
|
|
256
|
|
Adjustments for
non-cash
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Depreciation and depletion
|
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358
|
|
|
|
352
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|
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|
735
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|
744
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|
(Gain) loss on asset sales
(note 5)
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(9
|
)
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|
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(31
|
)
|
|
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(19
|
)
|
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(213
|
)
|
Deferred income taxes and other
|
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24
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|
|
|
(37
|
)
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209
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|
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163
|
|
Changes in operating assets and liabilities:
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|
|
|
|
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|
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|
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|
|
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Accounts receivable
|
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(340
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)
|
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|
146
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|
|
|
87
|
|
|
|
424
|
|
Inventories, materials, supplies and prepaid expenses
|
|
|
40
|
|
|
|
(45
|
)
|
|
|
(177
|
)
|
|
|
(117
|
)
|
Income taxes payable
|
|
|
16
|
|
|
|
16
|
|
|
|
32
|
|
|
|
(448
|
)
|
Accounts payable and accrued liabilities
|
|
|
439
|
|
|
|
(30
|
)
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|
|
24
|
|
|
|
(240
|
)
|
All other items - net
(a)
(b)
|
|
|
135
|
|
|
|
198
|
|
|
|
241
|
|
|
|
277
|
|
Cash flows from (used in) operating activities
|
|
|
859
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|
|
|
492
|
|
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|
1,844
|
|
|
|
846
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Additions to property, plant and equipment
(b)
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|
|
(357
|
)
|
|
|
(320
|
)
|
|
|
(728
|
)
|
|
|
(442
|
)
|
Proceeds from asset sales
(note 5)
|
|
|
9
|
|
|
|
39
|
|
|
|
21
|
|
|
|
222
|
|
Loan to equity company
|
|
|
(31
|
)
|
|
|
-
|
|
|
|
(37
|
)
|
|
|
-
|
|
Cash flows from (used in) investing activities
|
|
|
(379
|
)
|
|
|
(281
|
)
|
|
|
(744
|
)
|
|
|
(220
|
)
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in capitalized lease obligations
(note 8)
|
|
|
(7
|
)
|
|
|
(6
|
)
|
|
|
(13
|
)
|
|
|
(13
|
)
|
Dividends paid
|
|
|
(132
|
)
|
|
|
(127
|
)
|
|
|
(266
|
)
|
|
|
(254
|
)
|
Common shares purchased
(note 10)
|
|
|
(893
|
)
|
|
|
(127
|
)
|
|
|
(1,143
|
)
|
|
|
(127
|
)
|
Cash flows from (used in) financing activities
|
|
|
(1,032
|
)
|
|
|
(260
|
)
|
|
|
(1,422
|
)
|
|
|
(394
|
)
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
(552
|
)
|
|
|
(49
|
)
|
|
|
(322
|
)
|
|
|
232
|
|
Cash at beginning of period
|
|
|
1,425
|
|
|
|
672
|
|
|
|
1,195
|
|
|
|
391
|
|
Cash at end of period
(c)
|
|
|
873
|
|
|
|
623
|
|
|
|
873
|
|
|
|
623
|
|
(a)
|
|
Included contribution to registered pension plans.
|
|
|
(57
|
)
|
|
|
(58
|
)
|
|
|
(101
|
)
|
|
|
(98
|
)
|
(b)
|
|
The impact of carbon emission programs are included in additions to property, plant and equipment, and all other items, net.
|
|
(c)
|
|
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.
|
|
The information in the notes to consolidated financial statements is an integral part of these statements.
|
|
6
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 companys 2017 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. Prior years data has been
reclassified in certain cases to conform to the current presentation basis.
The companys exploration and production activities are accounted for under the
successful efforts method.
The results for the six months ended June 30, 2018, are not necessarily indicative of the operations to be expected for
the full year.
All amounts are in Canadian dollars unless otherwise indicated.
7
IMPERIAL OIL LIMITED
2. Accounting changes
Effective January 1, 2018, Imperial adopted the Financial Accounting Standards Boards standard,
Revenue from Contracts with Customers,
as amended. The
standard establishes a single revenue recognition model for all contracts with customers, eliminates industry and transaction specific requirements, and expands disclosure requirements. The standard was adopted using the modified retrospective
method, under which prior year results are not restated, but supplemental information is provided for any material impacts of the standard on 2018 results. The adoption of the standard did not have a material impact on any of the lines reported in
the companys consolidated financial statements. The cumulative effect of adoption of the new standard was de minimis. The company did not elect any practical expedients that require disclosure. See note 4 for additional details.
Effective January 1, 2018, Imperial adopted the Financial Accounting Standards Boards standard update, Compensation Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
. The update requires separate presentation of the service cost component from other components of net benefit costs. The other components are
reported in a new line on the companys consolidated statement of income,
Non-service
pension and postretirement benefit. Imperial elected to use the practical expedient which uses the amounts
disclosed in the pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements, as it is impracticable to determine the amounts capitalized in
those periods. Beginning in 2018, the other components of net benefit costs are included in the Corporate and other expenses. The
Non-service
pension and postretirement benefit line reflects the
non-service
costs, which primarily includes interest costs, expected return on plan assets, and amortization of actuarial gains and losses, that were previously included in Production and manufacturing
and Selling and general expenses. Additionally, only the service cost component of net benefit costs is eligible for capitalization in situations where it is otherwise appropriate to capitalize employee costs in connection with the
construction or production of an asset.
The impact of the retrospective presentation change on Imperials consolidated statement of income for the period
ended June 30, 2018 is shown below.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
|
|
|
Six Months to
|
|
millions of Canadian dollars
|
|
2017
|
|
|
|
|
|
June 30, 2017
|
|
|
|
As
reported
|
|
|
Change
|
|
|
As
adjusted
|
|
|
|
|
|
As
reported
|
|
|
Change
|
|
|
As
adjusted
|
|
Production and manufacturing
|
|
|
1,525
|
|
|
|
(30)
|
|
|
|
1,495
|
|
|
|
|
|
|
|
2,900
|
|
|
|
(60)
|
|
|
|
2,840
|
|
|
|
|
|
|
|
|
|
Selling and general
|
|
|
201
|
|
|
|
(3)
|
|
|
|
198
|
|
|
|
|
|
|
|
407
|
|
|
|
(6)
|
|
|
|
401
|
|
|
|
|
|
|
|
|
|
Non-service
pension and
postretirement benefit
|
|
|
-
|
|
|
|
33
|
|
|
|
33
|
|
|
|
|
|
|
|
-
|
|
|
|
66
|
|
|
|
66
|
|
Effective January 1, 2018, Imperial adopted the Financial Accounting Standards Boards standard update, Financial Instruments
- Overall (Subtopic
825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities
. The standard requires investments in equity securities other than consolidated subsidiaries and
equity method investments to be measured at fair value, with changes in the fair value recognized through net income. The company elected a modified approach for equity securities that do not have a readily determinable fair value. This modified
approach measures investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. There was no cumulative effect
related to the adoption of this standard. The carrying value of equity securities without readily determinable fair values as at June 30, 2018 were not significant to Imperial.
The standard also expanded disclosures related to financial statements. The companys only notable financial instrument is long-term debt ($4,447 million,
excluding capitalized lease obligations), where the difference between fair value and carrying value was de minimis. The fair value of long-term debt was primarily a level 2 measurement.
8
IMPERIAL OIL LIMITED
3. Business segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Upstream
|
|
Downstream
|
|
Chemical
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
(a)
|
|
|
2,318
|
|
|
|
1,787
|
|
|
|
6,870
|
|
|
|
4,909
|
|
|
|
328
|
|
|
|
289
|
|
Intersegment sales
|
|
|
650
|
|
|
|
289
|
|
|
|
332
|
|
|
|
242
|
|
|
|
74
|
|
|
|
62
|
|
Investment and other income
(note
5)
|
|
|
3
|
|
|
|
5
|
|
|
|
19
|
|
|
|
42
|
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
|
2,971
|
|
|
|
2,081
|
|
|
|
7,221
|
|
|
|
5,193
|
|
|
|
402
|
|
|
|
349
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Purchases of crude oil and products
|
|
|
1,573
|
|
|
|
1,026
|
|
|
|
5,803
|
|
|
|
4,014
|
|
|
|
216
|
|
|
|
193
|
|
Production and manufacturing
(b)
|
|
|
1,106
|
|
|
|
1,051
|
|
|
|
488
|
|
|
|
426
|
|
|
|
52
|
|
|
|
48
|
|
Selling and general
(b)
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
197
|
|
|
|
185
|
|
|
|
23
|
|
|
|
19
|
|
Federal excise tax
|
|
|
-
|
|
|
|
-
|
|
|
|
412
|
|
|
|
421
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation and depletion
|
|
|
300
|
|
|
|
298
|
|
|
|
49
|
|
|
|
47
|
|
|
|
4
|
|
|
|
3
|
|
Non-service
pension and postretirement benefit
(b)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Financing
(note 7)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total expenses
|
|
|
2,980
|
|
|
|
2,368
|
|
|
|
6,949
|
|
|
|
5,093
|
|
|
|
295
|
|
|
|
263
|
|
Income (loss) before income taxes
|
|
|
(9
|
)
|
|
|
(287
|
)
|
|
|
272
|
|
|
|
100
|
|
|
|
107
|
|
|
|
86
|
|
Income taxes
|
|
|
(3
|
)
|
|
|
(86
|
)
|
|
|
71
|
|
|
|
22
|
|
|
|
29
|
|
|
|
22
|
|
Net income (loss)
|
|
|
(6
|
)
|
|
|
(201
|
)
|
|
|
201
|
|
|
|
78
|
|
|
|
78
|
|
|
|
64
|
|
Cash flows from (used in) operating activities
|
|
|
(10
|
)
|
|
|
117
|
|
|
|
776
|
|
|
|
302
|
|
|
|
116
|
|
|
|
100
|
|
Capital and exploration expenditures
(c)
|
|
|
183
|
|
|
|
91
|
|
|
|
88
|
|
|
|
39
|
|
|
|
7
|
|
|
|
3
|
|
|
|
|
|
Second Quarter
|
|
Corporate and other
|
|
Eliminations
|
|
Consolidated
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
(a)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,516
|
|
|
|
6,985
|
|
Intersegment sales
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,056
|
)
|
|
|
(593
|
)
|
|
|
-
|
|
|
|
-
|
|
Investment and other income
(note
5)
|
|
|
5
|
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27
|
|
|
|
48
|
|
|
|
|
5
|
|
|
|
3
|
|
|
|
(1,056
|
)
|
|
|
(593
|
)
|
|
|
9,543
|
|
|
|
7,033
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
Purchases of crude oil and products
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,055
|
)
|
|
|
(591
|
)
|
|
|
6,537
|
|
|
|
4,642
|
|
Production and manufacturing
(b)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,646
|
|
|
|
1,525
|
|
Selling and general
(b)
|
|
|
54
|
|
|
|
6
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
273
|
|
|
|
201
|
|
Federal excise tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
412
|
|
|
|
421
|
|
Depreciation and depletion
|
|
|
5
|
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
358
|
|
|
|
352
|
|
Non-service
pension and postretirement benefit
(b)
|
|
|
26
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26
|
|
|
|
-
|
|
Financing
(note 7)
|
|
|
26
|
|
|
|
17
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26
|
|
|
|
17
|
|
Total expenses
|
|
|
111
|
|
|
|
27
|
|
|
|
(1,056
|
)
|
|
|
(593
|
)
|
|
|
9,279
|
|
|
|
7,158
|
|
Income (loss) before income taxes
|
|
|
(106
|
)
|
|
|
(24
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
264
|
|
|
|
(125
|
)
|
Income taxes
|
|
|
(29
|
)
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
68
|
|
|
|
(48
|
)
|
Net income (loss)
|
|
|
(77
|
)
|
|
|
(18
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
196
|
|
|
|
(77
|
)
|
Cash flows from (used in) operating activities
|
|
|
(23
|
)
|
|
|
(27
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
859
|
|
|
|
492
|
|
Capital and exploration expenditures
(c)
|
|
|
6
|
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
284
|
|
|
|
143
|
|
9
IMPERIAL OIL LIMITED
(a)
|
Included export sales to the United States of $1,561 million (2017 - $1,045 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
|
(b)
|
As part of the implementation of Accounting Standard Update, Compensation Retirement Benefits (Topic 715), beginning January 1, 2018, Corporate and other includes all
non-service
pension and postretirement benefit expense. Prior to 2018, the majority of these costs were allocated to the operating segments. See note 2 for additional details.
|
(c)
|
Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to capital leases, additional investments and acquisitions. CAPEX excludes the purchase of
carbon emission credits.
|
10
IMPERIAL OIL LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months to June 30
|
|
Upstream
|
|
Downstream
|
|
Chemical
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
(a)
|
|
|
4,307
|
|
|
|
3,498
|
|
|
|
12,477
|
|
|
|
9,883
|
|
|
|
632
|
|
|
|
562
|
|
Intersegment sales
|
|
|
1,307
|
|
|
|
907
|
|
|
|
694
|
|
|
|
551
|
|
|
|
147
|
|
|
|
129
|
|
Investment and other income
(note
5)
|
|
|
4
|
|
|
|
10
|
|
|
|
41
|
|
|
|
233
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
|
5,618
|
|
|
|
4,415
|
|
|
|
13,212
|
|
|
|
10,667
|
|
|
|
779
|
|
|
|
690
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
|
9
|
|
|
|
22
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Purchases of crude oil and products
|
|
|
2,947
|
|
|
|
2,142
|
|
|
|
10,097
|
|
|
|
8,023
|
|
|
|
418
|
|
|
|
394
|
|
Production and manufacturing
(b)
|
|
|
2,118
|
|
|
|
2,024
|
|
|
|
856
|
|
|
|
775
|
|
|
|
103
|
|
|
|
101
|
|
Selling and general
(b)
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
370
|
|
|
|
373
|
|
|
|
44
|
|
|
|
41
|
|
Federal excise tax
|
|
|
-
|
|
|
|
-
|
|
|
|
809
|
|
|
|
815
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation and depletion
|
|
|
618
|
|
|
|
634
|
|
|
|
100
|
|
|
|
95
|
|
|
|
7
|
|
|
|
6
|
|
Non-service
pension and postretirement benefit
(b)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Financing
(note 7)
|
|
|
-
|
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total expenses
|
|
|
5,692
|
|
|
|
4,822
|
|
|
|
12,232
|
|
|
|
10,081
|
|
|
|
572
|
|
|
|
542
|
|
Income (loss) before income taxes
|
|
|
(74
|
)
|
|
|
(407
|
)
|
|
|
980
|
|
|
|
586
|
|
|
|
207
|
|
|
|
148
|
|
Income taxes
|
|
|
(24
|
)
|
|
|
(120
|
)
|
|
|
258
|
|
|
|
128
|
|
|
|
56
|
|
|
|
39
|
|
Net income (loss)
|
|
|
(50
|
)
|
|
|
(287
|
)
|
|
|
722
|
|
|
|
458
|
|
|
|
151
|
|
|
|
109
|
|
Cash flows from (used in) operating activities
|
|
|
327
|
|
|
|
425
|
|
|
|
1,366
|
|
|
|
358
|
|
|
|
199
|
|
|
|
77
|
|
Capital and exploration expenditures
(c)
|
|
|
389
|
|
|
|
194
|
|
|
|
145
|
|
|
|
73
|
|
|
|
11
|
|
|
|
7
|
|
Total assets as at June 30
|
|
|
34,781
|
|
|
|
35,527
|
|
|
|
5,090
|
|
|
|
4,334
|
|
|
|
408
|
|
|
|
384
|
|
|
|
|
|
Six Months to June 30
|
|
Corporate and other
|
|
Eliminations
|
|
Consolidated
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
(a)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,416
|
|
|
|
13,943
|
|
Intersegment sales
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,148
|
)
|
|
|
(1,587
|
)
|
|
|
-
|
|
|
|
-
|
|
Investment and other income
(note
5)
|
|
|
16
|
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61
|
|
|
|
246
|
|
|
|
|
16
|
|
|
|
4
|
|
|
|
(2,148
|
)
|
|
|
(1,587
|
)
|
|
|
17,477
|
|
|
|
14,189
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
|
22
|
|
Purchases of crude oil and products
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,145
|
)
|
|
|
(1,584
|
)
|
|
|
11,317
|
|
|
|
8,975
|
|
Production and manufacturing
(b)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,077
|
|
|
|
2,900
|
|
Selling and general
(b)
|
|
|
56
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
467
|
|
|
|
407
|
|
Federal excise tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
809
|
|
|
|
815
|
|
Depreciation and depletion
|
|
|
10
|
|
|
|
9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
735
|
|
|
|
744
|
|
Non-service
pension and postretirement benefit
(b)
|
|
|
53
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53
|
|
|
|
-
|
|
Financing
(note 7)
|
|
|
49
|
|
|
|
27
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49
|
|
|
|
31
|
|
Total expenses
|
|
|
168
|
|
|
|
36
|
|
|
|
(2,148
|
)
|
|
|
(1,587
|
)
|
|
|
16,516
|
|
|
|
13,894
|
|
Income (loss) before income taxes
|
|
|
(152
|
)
|
|
|
(32
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
961
|
|
|
|
295
|
|
Income taxes
|
|
|
(41
|
)
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
249
|
|
|
|
39
|
|
Net income (loss)
|
|
|
(111
|
)
|
|
|
(24
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
712
|
|
|
|
256
|
|
Cash flows from (used in) operating activities
|
|
|
(48
|
)
|
|
|
(14
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,844
|
|
|
|
846
|
|
Capital and exploration expenditures
(c)
|
|
|
13
|
|
|
|
22
|
|
|
|
-
|
|
|
|
-
|
|
|
|
558
|
|
|
|
296
|
|
Total assets as at June 30
|
|
|
1,438
|
|
|
|
1,071
|
|
|
|
(327
|
)
|
|
|
(211
|
)
|
|
|
41,390
|
|
|
|
41,105
|
|
11
IMPERIAL OIL LIMITED
(a)
|
Included export sales to the United States of $2,768 million (2017 - $1,944 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
|
(b)
|
As part of the implementation of Accounting Standard Update, Compensation Retirement Benefits (Topic 715), beginning January 1, 2018, Corporate and other includes all
non-service
pension and postretirement benefit expense. Prior to 2018, the majority of these costs were allocated to the operating segments. See note 2 for additional details.
|
(c)
|
Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to capital leases, additional investments and acquisitions. CAPEX excludes the purchase of
carbon emission credits.
|
12
IMPERIAL OIL LIMITED
4. Accounting policy for revenue recognition
Imperial generally sells crude oil, natural gas and petroleum and chemical products under short-term agreements at prevailing market prices. In some cases, products may
be sold under long-term agreements, with periodic price adjustments to reflect market conditions.
Revenue is recognized at the amount the company expects to
receive when the customer has taken control, which is typically when title transfers and the customer has assumed the risks and rewards of ownership. The prices of certain sales are based on price indexes that are sometimes not available until the
next period. In such cases, estimated realizations are accrued when the sale is recognized, and are finalized when final information is available. Such adjustments to revenue from performance obligations satisfied in previous periods are not
significant. Payment for revenue transactions is typically due within 30 days. Future volume delivery obligations that are unsatisfied at the end of the period are expected to be fulfilled through ordinary production or purchases. These performance
obligations are based on market prices at the time of the transaction and are fully constrained due to market price volatility.
Revenues and
Accounts receivable, less estimated doubtful accounts primarily arise from contracts with customers. Long-term receivables are primarily from
non-customers.
Contract assets are mainly from
marketing assistance programs and are not significant. Contract liabilities are mainly customer prepayments, loyalty programs and accruals of expected volume discounts, and are not significant.
5. Investment and other income
Investment and other income included
gains and losses on asset sales as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Second Quarter
|
|
to June 30
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Proceeds from asset sales
|
|
|
9
|
|
|
|
39
|
|
|
|
21
|
|
|
|
222
|
|
Book value of asset sales
|
|
|
-
|
|
|
|
9
|
|
|
|
2
|
|
|
|
10
|
|
Gain (loss) on asset sales, before tax
(a)
|
|
|
9
|
|
|
|
31
|
|
|
|
19
|
|
|
|
213
|
|
Gain (loss) on asset sales, after tax
(a)
|
|
|
8
|
|
|
|
28
|
|
|
|
15
|
|
|
|
186
|
|
(a)
|
The six months ended June 30, 2017 included a gain of $174 million ($151 million after tax) from the sale of surplus property in Ontario.
|
6. Employee retirement benefits
The components of net benefit cost
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Second Quarter
|
|
to June 30
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Pension benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost
|
|
|
60
|
|
|
|
54
|
|
|
|
120
|
|
|
|
109
|
|
Interest cost
|
|
|
75
|
|
|
|
79
|
|
|
|
151
|
|
|
|
158
|
|
Expected return on plan assets
|
|
|
(100
|
)
|
|
|
(101
|
)
|
|
|
(201
|
)
|
|
|
(202
|
)
|
Amortization of prior service cost
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
|
|
5
|
|
Amortization of actuarial loss (gain)
|
|
|
43
|
|
|
|
45
|
|
|
|
87
|
|
|
|
89
|
|
Net periodic benefit cost
|
|
|
79
|
|
|
|
79
|
|
|
|
159
|
|
|
|
159
|
|
|
|
|
|
|
Other postretirement benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost
|
|
|
4
|
|
|
|
4
|
|
|
|
8
|
|
|
|
8
|
|
Interest cost
|
|
|
6
|
|
|
|
6
|
|
|
|
11
|
|
|
|
12
|
|
Amortization of actuarial loss (gain)
|
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
Net periodic benefit cost
|
|
|
11
|
|
|
|
12
|
|
|
|
22
|
|
|
|
24
|
|
13
IMPERIAL OIL LIMITED
7. Financing and additional notes and loans payable information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Second Quarter
|
|
to June 30
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Debt-related interest
|
|
|
32
|
|
|
|
27
|
|
|
|
62
|
|
|
|
49
|
|
Capitalized interest
|
|
|
(6
|
)
|
|
|
(10
|
)
|
|
|
(13
|
)
|
|
|
(22
|
)
|
Net interest expense
|
|
|
26
|
|
|
|
17
|
|
|
|
49
|
|
|
|
27
|
|
Other interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
Total financing
|
|
|
26
|
|
|
|
17
|
|
|
|
49
|
|
|
|
31
|
|
8. Long-term debt
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
As at
|
|
|
June 30
|
|
Dec 31
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
Long-term debt
|
|
|
4,447
|
|
|
|
4,447
|
|
Capital leases
|
|
|
545
|
|
|
|
558
|
|
Total long-term debt
|
|
|
4,992
|
|
|
|
5,005
|
|
9. Other long-term obligations
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
As at
|
|
|
June 30
|
|
Dec 31
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
Employee retirement benefits
(a)
|
|
|
1,501
|
|
|
|
1,529
|
|
Asset retirement obligations and other environmental liabilities
(b)
|
|
|
1,471
|
|
|
|
1,460
|
|
Share-based incentive compensation liabilities
|
|
|
129
|
|
|
|
99
|
|
Other obligations
(c)
|
|
|
842
|
|
|
|
692
|
|
Total other long-term obligations
|
|
|
3,943
|
|
|
|
3,780
|
|
(a)
|
Total recorded employee retirement benefits obligations also included $56 million in current liabilities (2017 - $56 million).
|
(b)
|
Total asset retirement obligations and other environmental liabilities also included $101 million in current liabilities (2017 - $101 million).
|
(c)
|
Included carbon emission program obligations. Carbon emission program credits are recorded under other assets, including intangibles, net.
|
On July 3, 2018, the Government of Ontario revoked its carbon emission cap and trade regulation, prohibiting all trading of emissions allowances. On July 25,
2018, the Government of Ontario introduced legislation proposing to repeal Ontarios cap and trade legislation and providing the framework for the wind down of the cap and trade program. The companys net carbon emission program credits
(obligations) reflected in the Consolidated balance sheet approximately totalled $65 million at June 30, 2018. Imperial will continue to assess this financial position in light of these announcements and the anticipated legislative
process.
14
IMPERIAL OIL LIMITED
10. Common shares
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
June 30
|
|
Dec 31
|
thousands of shares
|
|
2018
|
|
2017
|
Authorized
|
|
|
1,100,000
|
|
|
|
1,100,000
|
|
Common shares outstanding
|
|
|
802,680
|
|
|
|
831,242
|
|
The
12-month
normal course issuer bid program that was in place during the second quarter of
2018 came into effect in June of 2017 and was amended on April 27, 2018. The program enabled the company to purchase up to a maximum of 42,326,545 common shares (5 percent of the total shares on June 13, 2017), which included shares
purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. Exxon Mobil Corporation participated to maintain its ownership percentage in Imperial at approximately
69.6 percent.
The company announced another
12-month
normal course issuer bid program effective June 27, 2018 and
will continue its existing share purchase program. The program enables the company to purchase up to a maximum of 40,391,196 common shares (5 percent of the total shares on June 13, 2018) 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 companys common share activities are summarized below:
|
|
|
|
|
|
|
|
|
|
|
Thousands of
shares
|
|
Millions of
dollars
|
Balance as at December 31, 2016
|
|
|
847,599
|
|
|
|
1,566
|
|
|
|
|
Issued under employee share-based awards
|
|
|
2
|
|
|
|
-
|
|
|
|
|
Purchases at stated value
|
|
|
(16,359
|
)
|
|
|
(30
|
)
|
Balance as at December 31, 2017
|
|
|
831,242
|
|
|
|
1,536
|
|
|
|
|
Issued under employee share-based awards
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Purchases at stated value
|
|
|
(28,562
|
)
|
|
|
(53
|
)
|
Balance as at June 30, 2018
|
|
|
802,680
|
|
|
|
1,483
|
|
The following table provides the calculation of basic and diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Six Months
to June 30
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net income (loss) per common share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
(millions of Canadian dollars)
|
|
|
196
|
|
|
|
(77
|
)
|
|
|
712
|
|
|
|
256
|
|
Weighted average number of common shares outstanding
(millions of shares)
|
|
|
816.1
|
|
|
|
847.0
|
|
|
|
822.6
|
|
|
|
847.3
|
|
Net income (loss) per common share
(dollars)
|
|
|
0.24
|
|
|
|
(0.09
|
)
|
|
|
0.86
|
|
|
|
0.30
|
|
|
|
|
|
|
Net income (loss) per common share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
(millions of Canadian dollars)
|
|
|
196
|
|
|
|
(77
|
)
|
|
|
712
|
|
|
|
256
|
|
Weighted average number of common shares outstanding
(millions of shares)
|
|
|
816.1
|
|
|
|
847.0
|
|
|
|
822.6
|
|
|
|
847.3
|
|
Effect of employee share-based awards
(millions of shares)
|
|
|
2.7
|
|
|
|
2.9
|
|
|
|
2.6
|
|
|
|
2.8
|
|
Weighted average number of common shares outstanding, assuming dilution
(millions of shares)
|
|
|
818.8
|
|
|
|
849.9
|
|
|
|
825.2
|
|
|
|
850.1
|
|
|
|
|
|
|
Net income (loss) per common share
(dollars)
|
|
|
0.24
|
|
|
|
(0.09
|
)
|
|
|
0.86
|
|
|
|
0.30
|
|
15
IMPERIAL OIL LIMITED
11. Earnings reinvested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Six Months
to June 30
|
|
millions of Canadian dollars
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Earnings reinvested at beginning of period
|
|
|
24,861
|
|
|
|
25,558
|
|
|
|
24,714
|
|
|
|
25,352
|
|
Net income (loss) for the period
|
|
|
196
|
|
|
|
(77
|
)
|
|
|
712
|
|
|
|
256
|
|
Share purchases in excess of stated value
|
|
|
(853
|
)
|
|
|
(121
|
)
|
|
|
(1,090
|
)
|
|
|
(121
|
)
|
Dividends declared
|
|
|
(155
|
)
|
|
|
(136
|
)
|
|
|
(287
|
)
|
|
|
(263
|
)
|
Earnings reinvested at end of period
|
|
|
24,049
|
|
|
|
25,224
|
|
|
|
24,049
|
|
|
|
25,224
|
|
12. Other comprehensive income (loss) information
Changes in accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
Balance at January 1
|
|
|
(1,815
|
)
|
|
|
(1,897
|
)
|
Postretirement benefits liability adjustment:
|
|
|
|
|
|
|
|
|
Current period change excluding amounts reclassified
from accumulated other comprehensive income
|
|
|
(19
|
)
|
|
|
41
|
|
Amounts reclassified from accumulated other comprehensive
income
|
|
|
67
|
|
|
|
72
|
|
Balance at June 30
|
|
|
(1,767
|
)
|
|
|
(1,784
|
)
|
Amounts reclassified out of accumulated other comprehensive income (loss) -
before-tax
income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Six Months
to June 30
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Amortization of postretirement benefits liability
adjustment
included in net periodic benefit cost
(a)
|
|
|
(46
|
)
|
|
|
(49
|
)
|
|
|
(92
|
)
|
|
|
(98
|
)
|
(a)
|
This accumulated other comprehensive income component is included in the computation of net periodic benefit cost (note 6).
|
Income tax expense (credit) for components of other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Six Months
to June 30
|
millions of Canadian dollars
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Postretirement benefits liability adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement benefits liability adjustment (excluding amortization)
|
|
|
-
|
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
16
|
|
Amortization of postretirement benefits liability adjustment included
in net periodic benefit
cost
|
|
|
13
|
|
|
|
13
|
|
|
|
25
|
|
|
|
26
|
|
Total
|
|
|
13
|
|
|
|
13
|
|
|
|
18
|
|
|
|
42
|
|
13. Recently issued accounting standards
Effective January 1, 2019, Imperial will adopt the Financial Accounting Standards Boards standard,
Leases (Topic 842)
, as amended. The standard
requires all leases with an initial term greater than one year be recorded on the balance sheet as a right of use asset and a lease liability. The company acquired lease accounting software to facilitate implementation, and is currently installing,
configuring and testing the software. Based on leases outstanding at the end of 2017, the company estimates the operating lease right of use asset and lease liability would have been in the range of $200 million to $250 million at that
time. The effect on Imperials consolidated balance sheet as a result of implementing the standard on January 1, 2019 could differ considerably depending on operating leases commenced in 2018 as well as interest rates and other factors
such as the expiry or renewal of leases during the year.
16
IMPERIAL OIL LIMITED
Item 2.
|
Managements discussion and analysis of financial condition and results of operations
|
Operating results
Second quarter 2018 vs. second quarter 2017
The companys net
income for the second quarter of 2018 was $196 million or $0.24 per share on a diluted basis, an increase of $273 million compared to the net loss of $77 million or $0.09 per share, for the same period last year.
Upstream recorded a net loss in the second quarter of $6 million compared to a net loss of $201 million in the same period of 2017. Improved results reflect
the impact of higher Canadian crude oil realizations of about $280 million, partially offset by higher royalty costs of about $50 million and higher operating expenses of about $50 million mainly associated with planned turnarounds.
West Texas Intermediate (WTI) averaged US$67.91 per barrel in the second quarter of 2018, up from US$48.20 per barrel in the same quarter of 2017. Western Canada
Select (WCS) averaged US$48.81 per barrel and US$37.18 per barrel respectively for the same periods. The WTI / WCS differential widened to approximately US$19 per barrel in the second quarter of 2018, from approximately US$11 per barrel in the same
period of 2017.
The Canadian dollar averaged US$0.78 in the second quarter of 2018, an increase of US$0.04 from the second quarter of 2017.
Imperials average Canadian dollar realizations for bitumen and synthetic crudes increased generally in line with the North American benchmarks, adjusted for
changes in exchange rates and transportation costs. Bitumen realizations averaged $48.90 per barrel for the second quarter of 2018, an increase of $10.68 per barrel versus the second quarter of 2017. Synthetic crude realizations averaged $86.31 per
barrel, an increase of $21.24 per barrel for the same period of 2017.
Gross production of Cold Lake bitumen averaged 133,000 barrels per day in the second quarter,
compared to 160,000 barrels per day in the same period last year. Lower volumes were primarily due to planned maintenance and production timing.
Gross production
of Kearl bitumen averaged 180,000 barrels per day in the second quarter (128,000 barrels Imperials share), up from 171,000 barrels per day (121,000 barrels Imperials share) during the second quarter of 2017. Higher production was mainly
the result of mining optimization, partially offset by planned turnaround activities.
The companys share of gross production from Syncrude averaged 50,000
barrels per day, up from 27,000 barrels per day in the second quarter of 2017. Higher production was due to the absence of the Syncrude Mildred Lake upgrader fire that occurred in March 2017, partially offset by planned turnaround activities and a
power disruption that occurred on June 20, 2018, resulting in a complete shutdown of all processing units for the remainder of the second quarter. Recovery from the power outage is ongoing with partial production restored in July and return to
full rates anticipated in September.
Downstream net income was $201 million in the second quarter, up from $78 million in the second quarter of 2017.
Earnings increased mainly due to stronger margins of about $390 million, partially offset by the impact of increased planned turnaround activity of about $200 million, and the impact of a stronger Canadian dollar.
Refinery throughput averaged 363,000 barrels per day, up from 358,000 barrels per day in the second quarter of 2017. Capacity utilization increased to 86 percent
from 85 percent in the second quarter of 2017.
Petroleum product sales were 510,000 barrels per day, up from 486,000 barrels per day in the second quarter of
2017. Sales growth continues to be driven by optimization across the full Downstream value chain, and the expansion of Imperials logistics capabilities.
17
IMPERIAL OIL LIMITED
Chemical net income of $78 million in the second quarter matched best-ever quarterly results. Earnings increased
$14 million from the same period of 2017, benefitting from increased volumes and margins.
Corporate and other expenses were $77 million in the second
quarter, compared to $18 million in the same period of 2017, primarily due to higher share-based compensation charges. In addition, as part of the implementation of the Financial Accounting Standards Boards update, Compensation
Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
, beginning January 1, 2018, Corporate and other includes all
non-service
pension and postretirement benefit expenses. Prior to 2018, the majority of these costs were allocated to the operating segments.
18
IMPERIAL OIL LIMITED
Six months 2018 vs. six months 2017
Net income in the first six months of 2018 was $712 million, or $0.86 per share on a diluted basis, an increase of $456 million compared to a net income of
$256 million or $0.30 per share in the first six months of 2017.
Upstream recorded a net loss of $50 million in the first six months of 2018, compared to
a net loss of $287 million from the same period of 2017. Improved results reflect the impact of higher Canadian crude oil realizations of about $350 million, partially offset by the impact of higher operating costs of about
$50 million mainly associated with planned turnarounds. Results also reflect the impact of higher royalties and the strengthening of the Canadian dollar compared to the prior year.
West Texas Intermediate averaged US$65.44 per barrel in the first six months of 2018, up from US$49.96 per barrel in the prior year. Western Canada Select averaged
US$43.74 per barrel and US$37.22 per barrel respectively for the same periods. The WTI / WCS differential widened to approximately US$22 per barrel in the first six months of 2018, from approximately US$13 per barrel in the same period of 2017.
The Canadian dollar averaged US$0.78 in the first six months of 2018, an increase of about US$0.03 from the same period of 2017.
Imperials average Canadian dollar realizations for bitumen and synthetic crudes increased generally in line with the North American benchmarks, adjusted for
changes in the exchange rate and transportation costs. Bitumen realizations averaged $41.84 per barrel for the first six months of 2018, an increase of $4.63 per barrel versus 2017. Synthetic crude realizations averaged $81.24 per barrel, an
increase of $14.24 per barrel from the same period of 2017.
Gross production of Cold Lake bitumen averaged 143,000 barrels per day in the first six months of 2018,
compared to 159,000 barrels per day from the same period of 2017. Lower volumes were primarily due to planned maintenance and production timing.
Gross production
of Kearl bitumen averaged 181,000 barrels per day in the first six months of 2018 (128,000 barrels Imperials share) up from 177,000 barrels per day (125,000 barrels Imperials share) from the same period of 2017.
During the first six months of 2018, the companys share of gross production from Syncrude averaged 57,000 barrels per day, up from 46,000 barrels per day from the
same period of 2017. Higher production was due to the absence of the impact associated with the March 2017 fire at the Syncrude Mildred Lake upgrader, partially offset by planned turnaround activities, and a power disruption that occurred on
June 20, 2018, resulting in a complete shutdown of all processing units for the remainder of the second quarter. Recovery from the power outage is ongoing with partial production restored in July and return to full rates anticipated in
September.
Downstream net income was $722 million, an increase of $264 million versus the prior year. Higher earnings reflect stronger margins of about
$690 million, partially offset by the impact of increased planned turnaround activity of about $200 million, the impact of a stronger Canadian dollar of about $60 million and the absence of the $151 million gain on the sale of a
surplus property in 2017.
Refinery throughput averaged 386,000 barrels per day in the first six months of 2018, up from 378,000 barrels per day from the same
period of 2017. Capacity utilization increased to 91 percent from 90 percent in the same period of 2017.
Petroleum product sales were 494,000 barrels per
day in the first six months of 2018, up from 486,000 barrels per day from the same period of 2017. Sales growth continues to be driven by optimization across the full Downstream value chain, and the expansion of Imperials logistics
capabilities.
Chemical net income was $151 million, up from $109 million in the first half of 2017, primarily due to higher margins and volumes.
19
IMPERIAL OIL LIMITED
Corporate and other expenses were $111 million for the first six months of 2018, compared to $24 million in
the same period of 2017, primarily due to higher share-based compensation charges. In addition, beginning January 1, 2018, Corporate and other includes all
non-service
pension and postretirement benefit
expenses. Prior to 2018, the majority of these costs were allocated to the operating segments.
20
IMPERIAL OIL LIMITED
Liquidity and capital resources
Cash flow generated from operating activities was $859 million in the second quarter, an increase of $367 million from the corresponding period in 2017,
reflecting higher earnings.
Investing activities used net cash of $379 million in the second quarter, compared with $281 million used in the same period
of 2017.
Cash used in financing activities was $1,032 million in the second quarter, compared with $260 million used in the second quarter of 2017.
Dividends paid in the second quarter of 2018 were $132 million. The per share dividend paid in the second quarter was $0.16, up from $0.15 in the same period of 2017. During the second quarter, the company purchased about 21.4 million
shares for $893 million.
The companys cash balance was $873 million at June 30, 2018, versus $623 million at the end of second quarter
2017.
Cash flow generated from operating activities was $1,844 million in the first six months of 2018, compared with $846 million from the same period
of 2017, reflecting higher earnings and working capital effects.
Investing activities used net cash of $744 million in the first six months of 2018, compared
with $220 million used in the same period of 2017, reflecting higher additions to property, plant and equipment, and lower proceeds from asset sales.
Cash
used in financing activities was $1,422 million in the first six months of 2018, compared with $394 million used in the same period of 2017. Dividends paid in the first six months of 2018 were $266 million. The per share dividend paid
in the first six months of 2018 was $0.32, up from $0.30 from the same period of 2017. During the first six months of 2018, the company purchased about 28.6 million shares for $1,143 million, including shares purchased from Exxon Mobil
Corporation.
On April 27, 2018, the company announced by news release that it had received final approval from the Toronto Stock Exchange for an amendment to
its normal course issuer bid to increase the number of common shares that it may purchase. Under the amendment, the number of common shares eligible for purchase increased to a maximum of 42,326,545 common shares during the period June 27, 2017
to June 26, 2018.
On June 22, 2018, 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 40,391,196 common shares during the period June 27, 2018 to June 26, 2019. 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, 2019.
Recently issued accounting standards
Effective January 1, 2019,
Imperial will adopt the Financial Accounting Standards Boards standard,
Leases (Topic 842)
, as amended. The standard requires all leases with an initial term greater than one year be recorded on the balance sheet as a right of use asset
and a lease liability. The company acquired lease accounting software to facilitate implementation, and is currently installing, configuring and testing the software. Based on leases outstanding at the end of 2017, the company estimates the
operating lease right of use asset and lease liability would have been in the range of $200 million to $250 million at that time. The effect on Imperials consolidated balance sheet as a result of implementing the standard on
January 1, 2019 could differ considerably depending on operating leases commenced in 2018 as well as interest rates and other factors such as the expiry or renewal of leases during the year.
21
IMPERIAL OIL LIMITED
Forward-looking statements
Statements in this report regarding future events or conditions are forward-looking statements. Actual future financial and operating 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.
22
IMPERIAL OIL LIMITED