What were the primary drivers of the year-over-year decrease in net income?

The decrease in net income was primarily due to lower Downstream earnings, which were more than offset by higher Upstream earnings. Specifically, lower overall industry refining margins, an unplanned shutdown at the Strathcona refinery, and a stronger Canadian dollar negatively impacted Downstream results. While Upstream benefited from higher commodity prices, this was partially counteracted by lower conventional and Syncrude volumes, increased royalties, and the appreciation of the Canadian dollar.

How did the stronger Canadian dollar affect Imperial Oil's financial performance?

The stronger Canadian dollar had a negative impact across both Upstream and Downstream segments. In the Upstream, it dampened the improvement in average realizations for conventional crude oil and Cold Lake heavy oil. In the Downstream segment, it contributed to lower earnings. The company estimated the negative impact of a stronger Canadian dollar on Upstream earnings to be approximately $110 million and on Downstream earnings to be about $20 million.

What is the status of the Kearl oil sands project?

The Kearl oil sands project is continuing to advance, with progress made in engineering work. However, there was a recent court order requiring the review panel to provide rationale for its greenhouse gas emissions conclusions, and the Federal Department of Fisheries nullified a permit previously issued for the project. Imperial Oil is working to resolve this matter while continuing to advance the project under other granted permits and approvals.

What is the company doing with its cash flow and capital?

Imperial Oil generated $298 million in cash flow from operating activities in the first quarter. Capital and exploration expenditures increased to $300 million, focused on Upstream development (Cold Lake, Kearl project, Syncrude) and Downstream efficiency projects. The company also repurchased approximately $590 million of its shares and paid increased dividends of $82 million during the quarter, leading to a decrease in its cash and marketable securities balance.

IMO 10-Q Quarterly Report Q1 FY2008 — Revenue, Net Income, EPS

Summary

Imperial Oil Ltd. reported first-quarter 2008 net income of $681 million, or $0.75 per diluted share, a decrease from $774 million, or $0.81 per diluted share, in the same period of 2007. The decline was primarily driven by lower earnings in the Downstream segment, which were more than offset by gains in the Upstream segment. Despite higher crude oil and natural gas commodity prices, Upstream earnings were impacted by lower conventional and Syncrude volumes, higher royalties, and a stronger Canadian dollar. Downstream earnings suffered from reduced industry refining margins and unplanned refinery downtime, also exacerbated by a stronger Canadian dollar. Despite these headwinds, the company saw significant increases in commodity prices, with Brent crude oil up approximately 70% and Cold Lake heavy oil realizations up about 85% year-over-year. Production at Cold Lake heavy oil also increased, driven by cyclic nature and development drilling. The company also made strategic moves, including acquiring exploration rights in British Columbia and agreeing to sell its interest in Rainbow Pipe Line Co. Ltd. Capital expenditures increased year-over-year, with significant investments in Upstream projects, and the company continued its share repurchase program and paid increased dividends.

Key Highlights

1Net income for Q1 2008 was $681 million ($0.75/share), down from $774 million ($0.81/share) in Q1 2007.
2Upstream earnings increased due to significantly higher crude oil and natural gas commodity prices, but were partially offset by lower volumes and a stronger Canadian dollar.
3Downstream earnings decreased due to lower refining margins, unplanned refinery shutdowns, and a stronger Canadian dollar.
4Production of Cold Lake heavy oil increased year-over-year, while conventional crude oil and Syncrude volumes decreased.
5The company acquired significant natural gas exploration rights in northeastern British Columbia.
6Capital and exploration expenditures increased to $300 million in Q1 2008, up from $216 million in Q1 2007.
7Imperial Oil repurchased approximately $590 million of its shares and paid increased cash dividends in the quarter.

IMPERIAL OIL LTD Quarterly Report for Q1 Ended Mar 31, 2008

Summary

Key Highlights

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