10-QPeriod: Q2 FY2017

IMPERIAL OIL LTD Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 2, 2017For Securities:IMO

Summary

Imperial Oil Ltd. reported a net income of $256 million for the first six months of 2017, a significant improvement from a net loss of $282 million in the same period of 2016. This turnaround was driven by stronger upstream segment performance, benefiting from higher Canadian crude oil realizations and a narrowed WTI/WCS differential. The downstream segment also contributed positively, with increased net income attributed to reduced planned turnaround activity and a gain from property sales, despite lower refining and marketing margins. For the second quarter of 2017, the company reported a net loss of $77 million, an improvement from a $181 million net loss in Q2 2016. The upstream segment's loss narrowed due to higher crude oil realizations, while the downstream segment saw increased net income. Imperial also resumed its share buyback program in the second quarter and continued to pay dividends, indicating a focus on returning capital to shareholders.

Key Highlights

  • 1Improved financial performance with net income of $256 million for the first six months of 2017, compared to a net loss of $282 million in the prior year period.
  • 2Upstream segment performance strengthened due to higher Canadian crude oil realizations and a narrower WTI/WCS differential.
  • 3Downstream segment income increased, supported by reduced turnaround activity and a gain from property sales, though impacted by lower refining and marketing margins.
  • 4Resumption of share repurchase program in Q2 2017, with approximately $127 million spent on buying back shares.
  • 5Continued dividend payments, with the per-share dividend increasing to $0.30 for the first six months of 2017 compared to $0.28 in the prior year.
  • 6Total assets decreased to $41.105 billion as of June 30, 2017, from $41.654 billion at the end of 2016.
  • 7Cash generated from operating activities increased to $846 million for the first six months of 2017, up from $492 million in the same period of 2016.

Frequently Asked Questions

The primary driver for Imperial Oil's improved financial results was the stronger performance of its Upstream segment. This was significantly influenced by higher Canadian crude oil realizations and a narrowing of the WTI/WCS differential, which positively impacted revenue and profitability.

Yes, the company reported a gain of $174 million ($151 million after tax) from the sale of a surplus property in Ontario during the six months ended June 30, 2017. Proceeds from asset sales were $222 million for the same period.

Imperial Oil demonstrated its commitment to returning capital to shareholders by continuing to pay dividends and resuming its share buyback program in the second quarter of 2017. The per-share dividend for the first six months of 2017 was $0.30, an increase from $0.28 in the prior year period, and the company purchased approximately $127 million worth of its shares.

The report mentions the absence of the Alberta wildfires in the second quarter of 2017 as a factor that positively impacted Kearl bitumen production compared to the same period in 2016. In 2016, wildfires and planned maintenance significantly impacted production, while in 2017, production was influenced by planned turnarounds and, in Syncrude's case, a fire at its Mildred Lake upgrader and planned maintenance.