What was the primary driver for the significant decrease in net income in Q1 2009 compared to Q1 2008?

The primary driver was the sharp decline in crude oil and natural gas commodity prices, which significantly reduced earnings in the Upstream segment. While the Downstream segment showed improvement, it wasn't enough to offset the upstream weakness.

How did commodity price changes affect the company's different business segments?

Lower commodity prices negatively impacted the Upstream segment, reducing its earnings by approximately $940 million. Conversely, lower commodity prices also reduced royalty costs by about $270 million. The Downstream segment benefited from stronger refining margins, and the Chemical segment was negatively impacted by a slow economy leading to lower margins and sales volumes.

What is the company doing with its cash flow, given the decrease in operating cash flow?

Despite lower operating cash flow and a decrease in its overall cash balance, Imperial Oil continued to invest heavily in capital projects, particularly the Kearl oil sands project and refinery upgrades. It also continued its share repurchase program, buying back a substantial amount of shares, and increased its dividend payout.

What is the company's outlook for the Upstream segment given the current commodity price environment?

The report indicates that lower commodity prices are significantly impacting Upstream earnings. The company is focused on managing costs and has reduced royalty expenses due to lower prices. The continued investment in projects like Kearl suggests a long-term strategic view despite short-term commodity price volatility.

IMO 10-Q Quarterly Report Q1 FY2009 — Revenue, Net Income, EPS

Summary

Imperial Oil Limited's first quarter of 2009 showed a significant year-over-year decline in net income, largely attributable to lower commodity prices impacting the Upstream segment. Net income fell to $289 million ($0.33/share) from $681 million ($0.75/share) in Q1 2008. While the Downstream segment saw improved earnings due to stronger margins and higher throughput, this was insufficient to offset the substantial decrease in Upstream earnings, which were heavily affected by a ~54% drop in Brent crude oil prices and a ~50% decrease in Canadian conventional crude oil realizations. Despite lower earnings, the company maintained its capital expenditure program, with increased spending on the Kearl oil sands project and refinery upgrades. Imperial Oil also continued its share repurchase program, buying back approximately $429 million in shares during the quarter, and increased its per-share dividend to $0.10 from $0.09. The company ended the quarter with a reduced cash balance of $755 million, down from $1,974 million at the end of 2008, reflecting the lower operating cash flow and significant share repurchases.

Key Highlights

1Net income for Q1 2009 decreased to $289 million ($0.33/share) from $681 million ($0.75/share) in Q1 2008, primarily due to lower commodity prices.
2Upstream segment earnings significantly declined due to a ~54% drop in Brent crude oil prices and a ~50% decrease in Canadian crude oil realizations.
3Downstream segment earnings improved, driven by stronger refining margins and increased refinery throughput, partially offsetting upstream weakness.
4Capital expenditures increased to $411 million in Q1 2009 from $251 million in Q1 2008, with significant investments in the Kearl oil sands project and refinery upgrades.
5The company repurchased approximately $429 million in common shares during the quarter as part of its ongoing share repurchase program.
6Cash provided by operating activities turned negative at ($296 million) in Q1 2009, compared to $289 million in Q1 2008, reflecting lower earnings and tax timing.
7The company increased its quarterly dividend to $0.10 per common share, up from $0.09 in the prior year period.

IMPERIAL OIL LTD Quarterly Report for Q1 Ended Mar 31, 2009

Summary

Key Highlights

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