10-KPeriod: FY2019

IMPERIAL OIL LTD Annual Report, Year Ended Dec 31, 2019

Filed February 26, 2020For Securities:IMO

Summary

Imperial Oil Limited's 2019 10-K report highlights its position as a major integrated oil company in Canada, with operations spanning upstream (exploration and production of oil, natural gas, synthetic oil, and bitumen), downstream (refining and marketing of petroleum products), and chemical manufacturing. The company's substantial proved reserves are primarily located in Canada, with a significant portion in bitumen. In 2019, Imperial Oil focused on operational efficiency and capital discipline. The report details production volumes, average sales prices, and production costs across its segments. The company continued development on key projects like Kearl and Cold Lake, while also managing risks associated with commodity price volatility, government regulations, and environmental stewardship. Significant capital expenditures were allocated to environmental protection, reflecting a commitment to sustainability. The company's strong relationship with ExxonMobil, its majority shareholder, is also a recurring theme throughout the filing.

Key Highlights

  • 1Imperial Oil holds significant proved reserves in Canada, with bitumen representing the largest component, totaling 2,939 million oil-equivalent barrels.
  • 2The company's operations are diversified across Upstream, Downstream, and Chemical segments, providing a balanced revenue stream.
  • 3In 2019, average daily bitumen production was 254,000 net barrels per day, while synthetic oil production was 65,000 net barrels per day.
  • 4Refinery throughput averaged 353,000 barrels per day in 2019, with a capacity utilization of 83%, impacted by turnaround activities and an incident at the Sarnia refinery.
  • 5The company invested approximately $328 million in 2019 towards developing proved undeveloped reserves, representing 26% of total Upstream capital expenditures.
  • 6Environmental protection remained a priority, with approximately $0.8 billion spent in 2019 on related capital and operating expenditures, and an expected $1.0 billion for 2020.
  • 7Imperial Oil is subject to significant risks, including commodity price volatility, government regulations (such as production curtailments in Alberta), and evolving environmental policies related to climate change and greenhouse gas emissions.

Frequently Asked Questions

Imperial Oil's primary sources of revenue are derived from its three main business segments: Upstream (exploration and production of crude oil, natural gas, synthetic oil, and bitumen), Downstream (refining of crude oil and marketing of petroleum products like gasoline and diesel), and Chemical (manufacturing and marketing of petrochemicals). The company also benefits from its share of production from joint ventures like Kearl and Syncrude.

Key risks include significant volatility in commodity prices (oil, natural gas, petrochemicals), which directly impact earnings and reserve valuations. Regulatory and political factors are also crucial, with potential impacts from changes in government policies, environmental regulations (including those related to climate change and greenhouse gas emissions), and provincial production curtailments. Operational risks such as pipeline capacity constraints, environmental incidents, and cybersecurity threats are also highlighted.

Imperial Oil has made substantial capital and operating expenditures on environmental protection, totaling approximately $0.8 billion in 2019 and projected at $1.0 billion for 2020. The company is subject to various environmental regulations, including greenhouse gas emission pricing mechanisms and low carbon fuel standards. It is also investing in technologies and operational improvements to reduce its environmental footprint and adapt to evolving climate policies, while noting the uncertainty of future regulatory impacts.

ExxonMobil Corporation owns approximately 69.6% of Imperial Oil's outstanding shares, making it a majority shareholder. This relationship is significant as it implies potential synergies in operations, technology sharing, and access to capital. ExxonMobil's involvement also influences certain aspects of Imperial's business, including supply chain arrangements and strategic direction, as noted by ExxonMobil's participation in share repurchase programs to maintain its ownership percentage.