10-QPeriod: Q3 FY2022

IMPERIAL OIL LTD Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 2, 2022For Securities:IMO

Summary

Imperial Oil Ltd. reported a strong third quarter and nine-month performance for 2022, driven by significantly higher commodity prices and improved downstream margins. Net income for the third quarter reached $2.031 billion ($3.24 per diluted share), a substantial increase from $908 million ($1.29 per diluted share) in the same period last year. For the nine months ended September 30, 2022, net income was $5.613 billion ($8.58 per diluted share), compared to $1.666 billion ($2.31 per diluted share) in the prior year. The company benefited from higher realizations in its Upstream segment, largely due to increased demand and supply chain constraints, alongside improved refining margins in its Downstream operations. Operationally, Imperial Oil saw increased production at Cold Lake, though this was offset by planned turnarounds at Syncrude and downtime at Kearl earlier in the year. The company also executed significant capital allocation strategies, including substantial share repurchases totaling $1.512 billion in the third quarter and $4.461 billion year-to-date. Furthermore, Imperial announced its intention to launch another substantial issuer bid for up to $1.5 billion, signaling a continued focus on returning capital to shareholders.

Key Highlights

  • 1Strong year-over-year increase in net income for both the third quarter ($2.031 billion vs. $908 million) and the first nine months ($5.613 billion vs. $1.666 billion) of 2022, primarily driven by higher commodity prices and improved downstream margins.
  • 2Earnings per diluted share saw a significant jump, with Q3 2022 at $3.24 compared to $1.29 in Q3 2021, and YTD at $8.58 compared to $2.31.
  • 3Upstream segment benefited from significantly higher crude oil and bitumen realizations, reflecting strong market conditions and supply tightness.
  • 4Downstream segment reported improved margins and increased refinery throughput, driven by favorable market conditions and economic optimization.
  • 5The company actively returned capital to shareholders through substantial share repurchases, spending $1.512 billion in Q3 and $4.461 billion year-to-date.
  • 6Imperial Oil announced plans for a new substantial issuer bid of up to $1.5 billion, indicating a continued commitment to capital return.
  • 7Proceeds from the sale of interests in XTO Energy Canada contributed positively to investing activities, generating $760 million in the third quarter.

Frequently Asked Questions

The primary drivers for the substantial increase in net income were significantly higher commodity prices, leading to improved realizations in the Upstream segment, and stronger refining margins in the Downstream segment. These factors, combined with increased demand and supply chain constraints, contributed to robust financial performance.

Imperial Oil actively returned capital through share repurchases. In the third quarter of 2022, the company spent $1.512 billion on share repurchases, and for the nine months ended September 30, 2022, the total was $4.461 billion. This included repurchases under its normal course issuer bid and a substantial issuer bid completed in June 2022. Additionally, the company announced its intention to launch another substantial issuer bid of up to $1.5 billion.

Yes, the company recognized a favorable identified item of $208 million from the gain on the sale of its interests in XTO Energy Canada, which closed on August 31, 2022. Operationally, while production at Cold Lake increased, planned turnaround activities at Syncrude and downtime at Kearl earlier in the year led to overall lower production volumes in the Upstream segment compared to the prior year.

Imperial Oil expects commodity and product prices to remain volatile due to ongoing global economic and geopolitical uncertainty affecting supply and demand. While prices tempered in the third quarter compared to the first half of 2022, the company continues to navigate this environment, benefiting from its integrated business model and risk management strategies.