10-QPeriod: Q2 FY2020

IMPERIAL OIL LTD Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 5, 2020For Securities:IMO

Summary

Imperial Oil Ltd. reported a net loss of $526 million (C$0.72 per share) for the second quarter of 2020, a significant decline from the net income of $1,212 million (C$1.57 per share) in the same period of 2019. This downturn was primarily driven by the severe impact of the COVID-19 pandemic on global demand and prices for petroleum products. The company experienced lower realizations across its Upstream segment and reduced margins in its Downstream operations, compounded by operational adjustments to balance production with demand. Despite the challenging market conditions, Imperial Oil demonstrated resilience by implementing cost-saving measures, including significant reductions in capital and operating expenses. The company also maintained a strong liquidity position, with substantial available credit facilities and no draws made. While the near-term outlook remains uncertain due to ongoing pandemic effects, Imperial Oil continues to manage its operations to ensure reliable product supply and is assessing its long-term asset values.

Key Highlights

  • 1Net loss of C$526 million in Q2 2020 compared to net income of C$1,212 million in Q2 2019.
  • 2Earnings per diluted share of C$(0.72) in Q2 2020 versus C$1.57 in Q2 2019.
  • 3Significant decrease in Upstream segment performance due to lower crude oil prices and production adjustments.
  • 4Downstream segment impacted by reduced demand and lower refining margins.
  • 5Company implemented substantial reductions in 2020 capital and operating expenses.
  • 6Strong liquidity maintained with $233 million in cash and $1.3 billion in available credit facilities.
  • 7Suspended share purchase program in April 2020 due to market conditions.

Frequently Asked Questions

The primary driver of Imperial Oil's net loss in the second quarter of 2020 was the severe negative impact of the COVID-19 pandemic on global energy demand and prices. This led to significantly lower crude oil and petroleum product realizations, particularly impacting the Upstream segment, and reduced margins in the Downstream segment. Operational adjustments to balance production with lower demand also contributed to the results.

Imperial Oil has implemented several measures to mitigate the impact of the downturn. This includes significant reductions in planned capital and operating expenditures for 2020, operational adjustments to balance production with demand (such as reducing operating rates and advancing turnarounds), and maintaining a strong liquidity position. The company also suspended its share purchase program in April 2020.

As of June 30, 2020, Imperial Oil had a cash balance of C$233 million. The company also has access to credit facilities totaling C$1.3 billion (C$500 million existing plus C$800 million in new committed short-term lines), none of which were drawn upon. The company's total debt did not increase during the second quarter.

The company expects that unless industry conditions improve significantly, lower realized prices will result in substantially lower earnings and cash generated from operations than in 2019. The duration and severity of the COVID-19 pandemic's impact on demand remain uncertain. Imperial Oil continues to manage operations, balance production with demand, and is evaluating its long-term asset values.