e10vq
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2007
OR
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-12014
IMPERIAL OIL LIMITED
(Exact name of registrant as specified in its charter)
|
|
|
CANADA
|
|
98-0017682 |
(State or other jurisdiction of
|
|
(I.R.S. Employer |
incorporation or organization)
|
|
Identification No.) |
|
|
|
237 Fourth Avenue S.W. |
|
|
Calgary, Alberta, Canada
|
|
T2P 3M9 |
(Address of principal executive offices)
|
|
(Postal Code) |
Registrants telephone number, including area code: 1-800-567-3776
The registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES þ NO o
The registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (see definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Securities Exchange Act of 1934).
Large accelerated filer
þ Accelerated filer o
Non-accelerated filer o
The registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
YES o NO
þ
The number of common shares outstanding, as of September 30, 2007, was 914,215,617.
IMPERIAL OIL LIMITED
INDEX
In this report all dollar amounts are expressed in Canadian dollars unless otherwise stated. This
report should be read in conjunction with the companys Annual Report on Form 10-K for the year ended
December 31, 2006, and Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007.
Statements in this report regarding future events or conditions are forward-looking statements. Actual
results could differ materially due to the impact of market conditions, changes in law or governmental
policy, changes in operating conditions and costs, changes in project schedules, operating
performance, demand for oil and gas, commercial negotiations or other technical and economic factors.
- 2 -
IMPERIAL OIL LIMITED
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED STATEMENT OF INCOME
(U.S. GAAP, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months |
|
|
Third quarter |
|
to September 30 |
millions of Canadian dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
REVENUES AND OTHER INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues (a)(b) |
|
|
6,306 |
|
|
|
6,612 |
|
|
|
18,372 |
|
|
|
19,002 |
|
Investment and other income (4) |
|
|
124 |
|
|
|
39 |
|
|
|
331 |
|
|
|
155 |
|
|
|
|
|
|
TOTAL REVENUES AND OTHER INCOME |
|
|
6,430 |
|
|
|
6,651 |
|
|
|
18,703 |
|
|
|
19,157 |
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration |
|
|
19 |
|
|
|
5 |
|
|
|
90 |
|
|
|
18 |
|
Purchases of crude oil and products (c) |
|
|
3,519 |
|
|
|
3,832 |
|
|
|
10,142 |
|
|
|
10,834 |
|
Production and manufacturing (5)(d) |
|
|
846 |
|
|
|
772 |
|
|
|
2,580 |
|
|
|
2,619 |
|
Selling and general (5) |
|
|
298 |
|
|
|
276 |
|
|
|
969 |
|
|
|
891 |
|
Federal excise tax (a) |
|
|
343 |
|
|
|
336 |
|
|
|
972 |
|
|
|
954 |
|
Depreciation and depletion |
|
|
205 |
|
|
|
197 |
|
|
|
592 |
|
|
|
627 |
|
Financing costs (6)(e) |
|
|
10 |
|
|
|
3 |
|
|
|
33 |
|
|
|
10 |
|
|
|
|
|
|
TOTAL EXPENSES |
|
|
5,240 |
|
|
|
5,421 |
|
|
|
15,378 |
|
|
|
15,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
1,190 |
|
|
|
1,230 |
|
|
|
3,325 |
|
|
|
3,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAXES |
|
|
374 |
|
|
|
408 |
|
|
|
1,023 |
|
|
|
954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (3) |
|
|
816 |
|
|
|
822 |
|
|
|
2,302 |
|
|
|
2,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER COMMON SHARE BASIC (dollars) (9) |
|
|
0.88 |
|
|
|
0.84 |
|
|
|
2.46 |
|
|
|
2.29 |
|
NET INCOME PER COMMON SHARE DILUTED (dollars) (9) |
|
|
0.88 |
|
|
|
0.84 |
|
|
|
2.45 |
|
|
|
2.28 |
|
DIVIDENDS PER COMMON SHARE (dollars) (9) |
|
|
0.09 |
|
|
|
0.08 |
|
|
|
0.26 |
|
|
|
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Federal excise tax included in operating revenues |
|
|
343 |
|
|
|
336 |
|
|
|
972 |
|
|
|
954 |
|
(b) Amounts from related parties included in operating revenues |
|
|
431 |
|
|
|
528 |
|
|
|
1,277 |
|
|
|
1,649 |
|
(c) Amounts to related parties included in purchases of crude oil and products |
|
|
893 |
|
|
|
1,088 |
|
|
|
2,440 |
|
|
|
3,071 |
|
(d) Amounts to related parties included in production and manufacturing expenses |
|
|
62 |
|
|
|
35 |
|
|
|
143 |
|
|
|
104 |
|
(e) Amounts to related parties included in financing costs |
|
|
9 |
|
|
|
9 |
|
|
|
26 |
|
|
|
24 |
|
The notes to the financial statements are an integral part of these financial statements.
- 3 -
IMPERIAL OIL LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
(U.S. GAAP, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months |
inflow/(outflow) |
|
Third quarter |
|
to September 30 |
millions of Canadian dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
816 |
|
|
|
822 |
|
|
|
2,302 |
|
|
|
2,250 |
|
Adjustment for non-cash items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion |
|
|
205 |
|
|
|
197 |
|
|
|
592 |
|
|
|
627 |
|
(Gain)/loss on asset sales, after income tax (4) |
|
|
(51 |
) |
|
|
(7 |
) |
|
|
(152 |
) |
|
|
(61 |
) |
Deferred income taxes and other |
|
|
(12 |
) |
|
|
60 |
|
|
|
39 |
|
|
|
17 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(23 |
) |
|
|
272 |
|
|
|
(255 |
) |
|
|
292 |
|
Inventories and prepaids |
|
|
(51 |
) |
|
|
(54 |
) |
|
|
(249 |
) |
|
|
(263 |
) |
Income taxes payable |
|
|
183 |
|
|
|
284 |
|
|
|
(225 |
) |
|
|
(11 |
) |
Accounts payable |
|
|
(80 |
) |
|
|
30 |
|
|
|
400 |
|
|
|
(97 |
) |
All other items net (a) |
|
|
27 |
|
|
|
36 |
|
|
|
(38 |
) |
|
|
(226 |
) |
|
|
|
|
|
CASH FROM (USED IN) OPERATING ACTIVTIES |
|
|
1,014 |
|
|
|
1,640 |
|
|
|
2,414 |
|
|
|
2,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment and intangibles |
|
|
(226 |
) |
|
|
(258 |
) |
|
|
(598 |
) |
|
|
(850 |
) |
Proceeds from asset sales |
|
|
82 |
|
|
|
20 |
|
|
|
268 |
|
|
|
154 |
|
Loans to equity company |
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FROM (USED IN) INVESTING ACTIVITIES |
|
|
(143 |
) |
|
|
(236 |
) |
|
|
(330 |
) |
|
|
(696 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt net |
|
|
(1 |
) |
|
|
|
|
|
|
404 |
|
|
|
72 |
|
Repayment of long-term debt |
|
|
(251 |
) |
|
|
|
|
|
|
(906 |
) |
|
|
(72 |
) |
Long-term Debt issued |
|
|
250 |
|
|
|
|
|
|
|
500 |
|
|
|
|
|
Issuance of common shares under stock option plan |
|
|
1 |
|
|
|
3 |
|
|
|
10 |
|
|
|
7 |
|
Common shares purchased (9) |
|
|
(600 |
) |
|
|
(468 |
) |
|
|
(1,791 |
) |
|
|
(1,405 |
) |
Dividends paid |
|
|
(84 |
) |
|
|
(79 |
) |
|
|
(236 |
) |
|
|
(238 |
) |
|
|
|
|
|
CASH FROM (USED IN) FINANCING ACTIVITIES |
|
|
(685 |
) |
|
|
(544 |
) |
|
|
(2,019 |
) |
|
|
(1,636 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH |
|
|
186 |
|
|
|
860 |
|
|
|
65 |
|
|
|
196 |
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD |
|
|
2,037 |
|
|
|
997 |
|
|
|
2,158 |
|
|
|
1,661 |
|
|
|
|
|
|
|
CASH AT END OF PERIOD |
|
|
2,223 |
|
|
|
1,857 |
|
|
|
2,223 |
|
|
|
1,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Includes contribution to registered pension plans |
|
|
(5 |
) |
|
|
(13 |
) |
|
|
(158 |
) |
|
|
(369 |
) |
The notes to the financial statements are an integral part of these financial statements.
- 4 -
IMPERIAL OIL LIMITED
CONSOLIDATED BALANCE SHEET
(U.S. GAAP, unaudited)
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
Sept. 30 |
|
|
Dec. 31 |
|
millions of Canadian dollars |
|
2007 |
|
|
2006 |
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash |
|
|
2,223 |
|
|
|
2,158 |
|
Accounts receivable, less estimated doubtful accounts |
|
|
2,126 |
|
|
|
1,871 |
|
Inventories of crude oil and products |
|
|
790 |
|
|
|
556 |
|
Materials, supplies and prepaid expenses |
|
|
166 |
|
|
|
151 |
|
Deferred income tax assets |
|
|
635 |
|
|
|
573 |
|
|
|
|
Total current assets |
|
|
5,940 |
|
|
|
5,309 |
|
|
|
|
|
|
|
|
|
|
Investments and other long-term assets |
|
|
657 |
|
|
|
104 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, |
|
|
22,694 |
|
|
|
22,478 |
|
less accumulated depreciation and depletion |
|
|
12,305 |
|
|
|
12,021 |
|
|
|
|
Property, plant and equipment (net) |
|
|
10,389 |
|
|
|
10,457 |
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
204 |
|
|
|
204 |
|
Other intangible assets, net |
|
|
63 |
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
17,253 |
|
|
|
16,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Short-term debt |
|
|
575 |
|
|
|
171 |
|
Accounts payable and accrued liabilities (8)(a) |
|
|
3,485 |
|
|
|
3,080 |
|
Income taxes payable |
|
|
1,351 |
|
|
|
1,190 |
|
Current portion of long-term debt (7)(b) |
|
|
322 |
|
|
|
907 |
|
|
|
|
Total current liabilities |
|
|
5,733 |
|
|
|
5,348 |
|
|
|
|
|
|
|
|
|
|
Long-term debt (7)(c) |
|
|
538 |
|
|
|
359 |
|
Other long-term obligations (8) |
|
|
1,775 |
|
|
|
1,683 |
|
Deferred income tax liabilities |
|
|
1,483 |
|
|
|
1,345 |
|
|
|
|
TOTAL LIABILITIES |
|
|
9,529 |
|
|
|
8,735 |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Common shares at stated value (9)(d) |
|
|
1,617 |
|
|
|
1,677 |
|
Earnings reinvested (10) |
|
|
6,815 |
|
|
|
6,462 |
|
Accumulated other comprehensive income (11) |
|
|
(708 |
) |
|
|
(733 |
) |
|
|
|
TOTAL SHAREHOLDERS EQUITY |
|
|
7,724 |
|
|
|
7,406 |
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
17,253 |
|
|
|
16,141 |
|
|
|
|
|
|
|
(a) |
|
Accounts payable and accrued liabilities include amounts to related parties of $221 million (2006 $151 million). |
|
(b) |
|
Current portion of long-term debt includes amounts to related parties of $318 million (2006 $500 million). |
|
(c) |
|
Long-term debt includes amounts to related parties of $500 million (2006 $318 million). |
|
(d) |
|
Number of common shares outstanding was 914 million (2006 953 million). |
The notes to the financial statements are an integral part of these financial statements.
- 5 -
IMPERIAL OIL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of financial statement presentation
These unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the United States of America and
follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements.
In the opinion of the management, the information furnished herein reflects all known accruals and adjustments necessary for a fair presentation of the financial
position of the company as at September 30, 2007, and December 31, 2006, and the results of operations and changes in cash flows for the nine months ending September
30, 2007 and 2006. All such adjustments are of a normal recurring nature. The companys exploration and production activities are accounted for under the successful
efforts method. Certain reclassifications to the prior year have been made to conform to the 2007 presentation.
The results for the nine months ending September 30, 2007, are not necessarily indicative of the operations to be expected for the full year.
All amounts are in Canadian dollars unless otherwise indicated.
2. Accounting change for uncertainty in income taxes
Effective January 1, 2007, the company adopted the Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income
Taxes. FIN 48 is an interpretation of FASB Statement No. 109, Accounting for Income Taxes and prescribes a comprehensive model for recognizing, measuring,
presenting and disclosing in the financial statements uncertain tax positions that the company has taken or expects to take in its income tax returns. Upon the
adoption of FIN 48, the company recognized a transition gain of $14 million in shareholders equity. The gain reflected the recognition of several refund claims with
associated interest, partly offset by increased income tax reserves.
The total amount of unrecognized income tax benefits at January 1, 2007, was $142 million. The companys effective tax rate will be reduced if any of these tax
benefits are subsequently recognized. The unrecognized tax benefits described above will not be included in the companys annual Form 10-K contractual obligations
table because the company does not expect that there will be any cash impact from the final settlements as sufficient general funds have been deposited with the
Canada Revenue Agency (CRA).
The companys tax filings from 2003 to 2006 are subject to examination by the tax authorities. The CRA has proposed certain adjustments to the companys filings for
several years in the period 1987 to 2002. Management is currently evaluating those proposed adjustments. Management believes that a number of outstanding matters
before 2002 are expected to be resolved in 2007. The impact on unrecognized tax benefits and associated earnings effects, if any, from these matters are not expected
to be material.
The company classifies interest on income tax related balances as interest expense or interest income and classifies tax related penalties as operating expense.
- 6 -
IMPERIAL OIL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
3. Business segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural |
|
|
Petroleum |
|
|
|
|
Third quarter |
|
Resources |
|
|
Products |
|
|
Chemicals |
|
millions of dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
REVENUES AND OTHER INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales (a) |
|
|
1,028 |
|
|
|
1,178 |
|
|
|
4,934 |
|
|
|
5,086 |
|
|
|
344 |
|
|
|
348 |
|
Intersegment sales |
|
|
1,227 |
|
|
|
1,090 |
|
|
|
552 |
|
|
|
570 |
|
|
|
74 |
|
|
|
87 |
|
Investment and other income |
|
|
85 |
|
|
|
|
|
|
|
14 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,340 |
|
|
|
2,268 |
|
|
|
5,500 |
|
|
|
5,677 |
|
|
|
418 |
|
|
|
435 |
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration (b) |
|
|
19 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of crude oil and products |
|
|
817 |
|
|
|
736 |
|
|
|
4,243 |
|
|
|
4,535 |
|
|
|
312 |
|
|
|
307 |
|
Production and manufacturing |
|
|
479 |
|
|
|
453 |
|
|
|
321 |
|
|
|
271 |
|
|
|
46 |
|
|
|
49 |
|
Selling and general |
|
|
2 |
|
|
|
3 |
|
|
|
251 |
|
|
|
266 |
|
|
|
19 |
|
|
|
19 |
|
Federal excise tax |
|
|
|
|
|
|
|
|
|
|
343 |
|
|
|
336 |
|
|
|
|
|
|
|
|
|
Depreciation and depletion |
|
|
141 |
|
|
|
131 |
|
|
|
59 |
|
|
|
61 |
|
|
|
4 |
|
|
|
3 |
|
Financing costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EXPENSES |
|
|
1,458 |
|
|
|
1,328 |
|
|
|
5,217 |
|
|
|
5,467 |
|
|
|
381 |
|
|
|
378 |
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
882 |
|
|
|
940 |
|
|
|
283 |
|
|
|
210 |
|
|
|
37 |
|
|
|
57 |
|
INCOME TAXES |
|
|
275 |
|
|
|
323 |
|
|
|
92 |
|
|
|
61 |
|
|
|
13 |
|
|
|
19 |
|
|
|
|
|
|
|
|
NET INCOME |
|
|
607 |
|
|
|
617 |
|
|
|
191 |
|
|
|
149 |
|
|
|
24 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Export sales to the United States |
|
|
490 |
|
|
|
585 |
|
|
|
268 |
|
|
|
233 |
|
|
|
212 |
|
|
|
193 |
|
Cash flows from (used in) operating activities |
|
|
760 |
|
|
|
1,236 |
|
|
|
184 |
|
|
|
378 |
|
|
|
60 |
|
|
|
33 |
|
CAPEX (b) |
|
|
184 |
|
|
|
183 |
|
|
|
50 |
|
|
|
63 |
|
|
|
2 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
Third quarter |
|
and Other |
|
Eliminations |
|
Consolidated |
millions of dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
REVENUES AND OTHER INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,306 |
|
|
|
6,612 |
|
Intersegment sales |
|
|
|
|
|
|
|
|
|
|
(1,853 |
) |
|
|
(1,747 |
) |
|
|
|
|
|
|
|
|
Investment and other income |
|
|
25 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
124 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
18 |
|
|
|
(1,853 |
) |
|
|
(1,747 |
) |
|
|
6,430 |
|
|
|
6,651 |
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
5 |
|
Purchases of crude oil and products |
|
|
|
|
|
|
|
|
|
|
(1,853 |
) |
|
|
(1,746 |
) |
|
|
3,519 |
|
|
|
3,832 |
|
Production and manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
846 |
|
|
|
772 |
|
Selling and general |
|
|
26 |
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
298 |
|
|
|
276 |
|
Federal excise tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
343 |
|
|
|
336 |
|
Depreciation and depletion |
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
205 |
|
|
|
197 |
|
Financing costs |
|
|
10 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
3 |
|
|
|
|
|
|
|
|
TOTAL EXPENSES |
|
|
37 |
|
|
|
(5 |
) |
|
|
(1,853 |
) |
|
|
(1,747 |
) |
|
|
5,240 |
|
|
|
5,421 |
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
(12 |
) |
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
1,190 |
|
|
|
1,230 |
|
INCOME TAXES |
|
|
(6 |
) |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
374 |
|
|
|
408 |
|
|
|
|
|
|
|
|
NET INCOME |
|
|
(6 |
) |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
816 |
|
|
|
822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Export sales to the United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
970 |
|
|
|
1,011 |
|
Cash flows from (used in) operating activities |
|
|
10 |
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
1,014 |
|
|
|
1,640 |
|
CAPEX (b) |
|
|
9 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
245 |
|
|
|
263 |
|
|
|
|
(a) |
|
Include crude sales made by Products in order to optimize refining operations. |
|
(b) |
|
Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant, equipment and intangibles and additions to capital leases. |
- 7 -
IMPERIAL OIL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
3. Business segments (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural |
|
Petroleum |
|
|
Nine months to September 30 |
|
Resources |
|
Products |
|
Chemicals |
millions of dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
REVENUES AND OTHER INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales (a) |
|
|
3,377 |
|
|
|
3,584 |
|
|
|
14,016 |
|
|
|
14,367 |
|
|
|
979 |
|
|
|
1,051 |
|
Intersegment sales |
|
|
2,977 |
|
|
|
2,942 |
|
|
|
1,609 |
|
|
|
1,776 |
|
|
|
247 |
|
|
|
255 |
|
Investment and other income |
|
|
225 |
|
|
|
65 |
|
|
|
38 |
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,579 |
|
|
|
6,591 |
|
|
|
15,663 |
|
|
|
16,187 |
|
|
|
1,226 |
|
|
|
1,306 |
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration (b) |
|
|
90 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of crude oil and products |
|
|
2,241 |
|
|
|
2,201 |
|
|
|
11,821 |
|
|
|
12,678 |
|
|
|
913 |
|
|
|
926 |
|
Production and manufacturing |
|
|
1,515 |
|
|
|
1,498 |
|
|
|
925 |
|
|
|
976 |
|
|
|
140 |
|
|
|
147 |
|
Selling and general |
|
|
6 |
|
|
|
10 |
|
|
|
728 |
|
|
|
751 |
|
|
|
54 |
|
|
|
58 |
|
Federal excise tax |
|
|
|
|
|
|
|
|
|
|
972 |
|
|
|
954 |
|
|
|
|
|
|
|
|
|
Depreciation and depletion |
|
|
399 |
|
|
|
443 |
|
|
|
180 |
|
|
|
172 |
|
|
|
9 |
|
|
|
9 |
|
Financing costs |
|
|
3 |
|
|
|
|
|
|
|
1 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EXPENSES |
|
|
4,254 |
|
|
|
4,170 |
|
|
|
14,627 |
|
|
|
15,529 |
|
|
|
1,116 |
|
|
|
1,140 |
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
2,325 |
|
|
|
2,421 |
|
|
|
1,036 |
|
|
|
658 |
|
|
|
110 |
|
|
|
166 |
|
INCOME TAXES |
|
|
695 |
|
|
|
653 |
|
|
|
333 |
|
|
|
248 |
|
|
|
36 |
|
|
|
58 |
|
|
|
|
|
|
|
|
NET INCOME |
|
|
1,630 |
|
|
|
1,768 |
|
|
|
703 |
|
|
|
410 |
|
|
|
74 |
|
|
|
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Export sales to the United States |
|
|
1,512 |
|
|
|
1,540 |
|
|
|
770 |
|
|
|
725 |
|
|
|
576 |
|
|
|
608 |
|
Cash flows from (used in) operating activities |
|
|
1,702 |
|
|
|
2,052 |
|
|
|
656 |
|
|
|
447 |
|
|
|
1 |
|
|
|
100 |
|
CAPEX (b) |
|
|
495 |
|
|
|
544 |
|
|
|
133 |
|
|
|
278 |
|
|
|
8 |
|
|
|
9 |
|
Total assets as at September 30 |
|
|
7,923 |
|
|
|
7,325 |
|
|
|
6,889 |
|
|
|
6,429 |
|
|
|
499 |
|
|
|
489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
Nine months to September 30 |
|
and Other |
|
Eliminations |
|
Consolidated |
millions of dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
REVENUES AND OTHER INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,372 |
|
|
|
19,002 |
|
Intersegment sales |
|
|
|
|
|
|
|
|
|
|
(4,833 |
) |
|
|
(4,973 |
) |
|
|
|
|
|
|
|
|
Investment and other income |
|
|
68 |
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
331 |
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
68 |
|
|
|
46 |
|
|
|
(4,833 |
) |
|
|
(4,973 |
) |
|
|
18,703 |
|
|
|
19,157 |
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 |
|
|
|
18 |
|
Purchases of crude oil and products |
|
|
|
|
|
|
|
|
|
|
(4,833 |
) |
|
|
(4,971 |
) |
|
|
10,142 |
|
|
|
10,834 |
|
Production and manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
2,580 |
|
|
|
2,619 |
|
Selling and general |
|
|
181 |
|
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
969 |
|
|
|
891 |
|
Federal excise tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
972 |
|
|
|
954 |
|
Depreciation and depletion |
|
|
4 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
592 |
|
|
|
627 |
|
Financing costs |
|
|
29 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
33 |
|
|
|
10 |
|
|
|
|
|
|
|
|
TOTAL EXPENSES |
|
|
214 |
|
|
|
87 |
|
|
|
(4,833 |
) |
|
|
(4,973 |
) |
|
|
15,378 |
|
|
|
15,953 |
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
(146 |
) |
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
3,325 |
|
|
|
3,204 |
|
INCOME TAXES |
|
|
(41 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
1,023 |
|
|
|
954 |
|
|
|
|
|
|
|
|
NET INCOME |
|
|
(105 |
) |
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
2,302 |
|
|
|
2,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Export sales to the United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,858 |
|
|
|
2,873 |
|
Cash flows from (used in) operating activities |
|
|
55 |
|
|
|
(71 |
) |
|
|
|
|
|
|
|
|
|
|
2,414 |
|
|
|
2,528 |
|
CAPEX (b) |
|
|
25 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
661 |
|
|
|
868 |
|
Total assets as at September 30 |
|
|
2,256 |
|
|
|
2,147 |
|
|
|
(314 |
) |
|
|
(482 |
) |
|
|
17,253 |
|
|
|
15,908 |
|
|
|
|
(a) |
|
Includes crude oil sales made by Products in order to optimize refining operations. |
|
(b) |
|
Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant, equipment and intangibles and additions to capital leases. |
- 8 -
IMPERIAL OIL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
4. Investment and other income
Investment and other income includes gains and losses on asset sales as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months |
|
|
|
Third quarter |
|
|
to September 30 |
|
millions of dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
Proceeds from asset sales |
|
|
82 |
|
|
|
20 |
|
|
|
268 |
|
|
|
154 |
|
Book value of assets sold |
|
|
10 |
|
|
|
13 |
|
|
|
57 |
|
|
|
69 |
|
|
|
|
|
|
Gain/(loss) on asset sales, before tax (a) |
|
|
72 |
|
|
|
7 |
|
|
|
211 |
|
|
|
85 |
|
|
|
|
|
|
Gain/(loss) on asset sales, after tax (a) |
|
|
51 |
|
|
|
7 |
|
|
|
152 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
(a) |
|
Third quarter 2007 included a gain of $71 million ($51million after tax) from the sale of the companys interest in the Willesden Green producing property. |
5. Employee retirement benefits
The components of net benefit cost included in production and manufacturing and selling and general expenses in the consolidated statement of income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months |
|
|
|
Third quarter |
|
|
to September 30 |
|
millions of dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
Pension benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
|
|
25 |
|
|
|
25 |
|
|
|
75 |
|
|
|
75 |
|
Interest cost |
|
|
62 |
|
|
|
60 |
|
|
|
185 |
|
|
|
179 |
|
Expected return on plan assets |
|
|
(83 |
) |
|
|
(75 |
) |
|
|
(247 |
) |
|
|
(225 |
) |
Amortization of prior service cost |
|
|
5 |
|
|
|
5 |
|
|
|
15 |
|
|
|
15 |
|
Recognized actuarial loss |
|
|
19 |
|
|
|
29 |
|
|
|
57 |
|
|
|
86 |
|
|
|
|
|
|
Net benefit cost |
|
|
28 |
|
|
|
44 |
|
|
|
85 |
|
|
|
130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other post-retirement benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
|
|
1 |
|
|
|
2 |
|
|
|
4 |
|
|
|
6 |
|
Interest cost |
|
|
5 |
|
|
|
6 |
|
|
|
17 |
|
|
|
18 |
|
Recognized actuarial loss |
|
|
2 |
|
|
|
2 |
|
|
|
5 |
|
|
|
6 |
|
|
|
|
|
|
Net benefit cost |
|
|
8 |
|
|
|
10 |
|
|
|
26 |
|
|
|
30 |
|
|
|
|
|
|
6. Financing costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months |
|
|
|
Third quarter |
|
|
to September 30 |
|
millions of dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
Debt related interest |
|
|
18 |
|
|
|
17 |
|
|
|
51 |
|
|
|
46 |
|
Capitalized interest |
|
|
(9 |
) |
|
|
(13 |
) |
|
|
(25 |
) |
|
|
(37 |
) |
|
|
|
|
|
Net interest expense |
|
|
9 |
|
|
|
4 |
|
|
|
26 |
|
|
|
9 |
|
Other interest |
|
|
1 |
|
|
|
(1 |
) |
|
|
7 |
|
|
|
1 |
|
|
|
|
|
|
Total financing costs |
|
|
10 |
|
|
|
3 |
|
|
|
33 |
|
|
|
10 |
|
|
|
|
|
|
7. Long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
|
|
|
|
|
|
|
|
Sept. 30 |
|
|
Dec. 31 |
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Issued |
|
Maturity date |
|
Interest rate |
|
millions of dollars |
|
2003 |
|
|
January 19, 2008 |
|
Variable |
|
|
|
|
|
|
318 |
|
2007 |
|
|
$250 million due May 26, 2009 and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$250 million due August 26, 2009 (a) |
|
Variable |
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
500 |
|
|
|
318 |
|
Capital leases |
|
|
|
|
|
|
38 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt (b) |
|
|
|
|
|
|
538 |
|
|
|
359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
On August 26, 2007, the company retired $250 million variable-rate debt on maturity and replaced it with long-term variable-rate loans of $250 million from an affiliated company of Exxon
Mobil Corporation at interest equivalent to Canadian market rates. |
|
(b) |
|
These amounts exclude that portion of long-term debt totalling $322 million (December 31, 2006 $907 million), which matures within one year and is included in current liabilities. |
- 9 -
IMPERIAL OIL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
8. Other long-term obligations
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
Sept. 30 |
|
|
Dec. 31 |
millions of dollars |
|
2007 |
|
|
2006 |
|
|
Employee retirement benefits (a) |
|
|
881 |
|
|
|
1,017 |
|
Asset retirement obligations and other environmental liabilities (b) |
|
|
441 |
|
|
|
438 |
|
Other obligations |
|
|
453 |
|
|
|
228 |
|
|
|
|
Total other long-term obligations |
|
|
1,775 |
|
|
|
1,683 |
|
|
|
|
|
|
|
(a) |
|
Total recorded employee retirement benefits obligations also include $55 million in current liabilities
(December 31, 2006 $51 million). |
|
(b) |
|
Total asset retirement obligations and other environmental liabilities also include $97 million in current liabilities
(December 31, 2006 $97 million). |
9. Common shares
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
Sept. 30 |
|
|
Dec. 31 |
|
thousands of shares |
|
2007 |
|
|
2006 |
|
|
Authorized |
|
|
1,100,000 |
|
|
|
1,100,000 |
|
Common shares outstanding |
|
|
914,216 |
|
|
|
952,988 |
|
From 1995 through 2006, the company purchased shares under twelve 12-month normal course issuer bid share repurchase programs, as well as an auction tender. On June 25, 2007, another 12-month normal
course issuer bid program was implemented with an allowable purchase of about 46.5 million shares (five percent of the total on June 22, 2007), less any shares purchased by the employee savings plan
and company pension fund. The results of these activities are as shown below:
|
|
|
|
|
|
|
|
|
|
|
millions of |
Year |
|
shares |
|
dollars |
|
1995 - 2005 |
|
|
750.1 |
|
|
|
8,635 |
|
2006 - Third quarter |
|
|
11.5 |
|
|
|
468 |
|
- Full year |
|
|
45.5 |
|
|
|
1,818 |
|
2007 - Third quarter |
|
|
12.8 |
|
|
|
600 |
|
- Year-to-date |
|
|
39.4 |
|
|
|
1,791 |
|
Cumulative purchases to date |
|
|
835.0 |
|
|
|
12,244 |
|
Exxon Mobil Corporations participation in the above share repurchase maintained its ownership interest in Imperial at 69.6 percent.
The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.
- 10 -
IMPERIAL OIL LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following table provides the calculation of net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months |
|
|
|
Third quarter |
|
|
to September 30 |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
Net income per common share basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (millions of dollars) |
|
|
816 |
|
|
|
822 |
|
|
|
2,302 |
|
|
|
2,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding (millions of shares) |
|
|
922.0 |
|
|
|
969.6 |
|
|
|
935.0 |
|
|
|
980.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share (dollars) |
|
|
0.88 |
|
|
|
0.84 |
|
|
|
2.46 |
|
|
|
2.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (millions of dollars) |
|
|
816 |
|
|
|
822 |
|
|
|
2,302 |
|
|
|
2,250 |
|
|
Weighted average number of common shares
outstanding (millions of shares) |
|
|
922.0 |
|
|
|
969.6 |
|
|
|
935.0 |
|
|
|
980.7 |
|
Effect of employee stock-based awards (millions of shares) |
|
|
5.9 |
|
|
|
4.5 |
|
|
|
5.7 |
|
|
|
4.4 |
|
|
|
|
|
|
Weighted average number of common shares
outstanding, assuming dilution (millions of shares) |
|
|
927.9 |
|
|
|
974.1 |
|
|
|
940.7 |
|
|
|
985.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share (dollars) |
|
|
0.88 |
|
|
|
0.84 |
|
|
|
2.45 |
|
|
|
2.28 |
|
10. Earnings reinvested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months |
|
|
Third quarter |
|
to September 30 |
millions of dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
Earnings reinvested at beginning of period |
|
|
6,659 |
|
|
|
5,841 |
|
|
|
6,462 |
|
|
|
5,466 |
|
Cumulative effect of accounting change (2) |
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
Net income for the period |
|
|
816 |
|
|
|
822 |
|
|
|
2,302 |
|
|
|
2,250 |
|
Share purchases in excess of stated value |
|
|
(577 |
) |
|
|
(448 |
) |
|
|
(1,721 |
) |
|
|
(1,343 |
) |
Dividends |
|
|
(83 |
) |
|
|
(77 |
) |
|
|
(242 |
) |
|
|
(235 |
) |
|
|
|
|
|
Earnings reinvested at end of period |
|
|
6,815 |
|
|
|
6,138 |
|
|
|
6,815 |
|
|
|
6,138 |
|
|
|
|
|
|
11. Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months |
|
|
|
Third quarter |
|
|
to September 30 |
|
millions of dollars |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
Net income |
|
|
816 |
|
|
|
822 |
|
|
|
2,302 |
|
|
|
2,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement benefit liability adjustment (excluding amortization) |
|
|
|
|
|
|
|
|
|
|
(28 |
) |
|
|
|
|
Amortization of post retirement benefit liability adjustment
included in net periodic benefit costs |
|
|
18 |
|
|
|
|
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (net of income taxes) |
|
|
18 |
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
834 |
|
|
|
822 |
|
|
|
2,327 |
|
|
|
2,250 |
|
|
|
|
|
|
12. Additional SFAS 158 Adoption Disclosure
In its 2006 Form 10-K financial statements, the company reported the adjustment related to the adoption of Statement of Financial Accounting Standards No. 158 (SFAS
158), Employers Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment to FASB Statements No. 87, 88, 106 and 132(R) as a component
of 2006 comprehensive income. Based on further regulatory guidance, this adjustment should have been reported as an adjustment to ending 2006 accumulated other
comprehensive income. The amount reported by the company as 2006 comprehensive income (nonowner changes in equity) was $2,891 million. Excluding the negative $487
million SFAS 158 adoption adjustment (which was separately disclosed in the 2006 Form 10-K footnote 6, Employee retirement benefits), the amount would have been
$3,378 million. The company will accordingly revise the presentation of 2006 comprehensive income (nonowner changes in equity) in its 2007 Form 10-K financial
statements.
- 11 -
IMPERIAL OIL LIMITED
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations.
OPERATING RESULTS
The companys net income for the third quarter of 2007 was $816 million or $0.88 a share on a
diluted basis, compared with $822 million or $0.84 a share for the same period last year. Net
income for the first nine months of 2007 was $2,302 million or $2.45 a share on a diluted basis,
versus $2,250 million or $2.28 a share for the first nine months of 2006.
Earnings in the third quarter were essentially equal to that in the same period in 2006. Earnings
were positively impacted by higher crude oil realizations of about $60 million and higher Syncrude
volumes of about $50 million. Earnings were also about $60 million higher due to favourable
refinery operations and inventory effects partially offset by weaker industry refining margins.
Higher gains from asset divestments of about $50 million also contributed to earnings. Offsetting
these positive factors were lower natural gas, conventional crude oil and natural gas liquids (NGL)
volumes totaling about $80 million and lower Cold Lake heavy oil realizations of about $45 million.
A stronger Canadian dollar also negatively impacted earnings by about $80 million.
For the first nine months, earnings increased primarily due to the positive impacts of about $160
million from refinery operations, stronger industry refining and marketing margins of about $130
million and higher Syncrude volumes of about $125 million. Gains from asset divestments were also
higher in 2007 by about $100 million. Higher earnings were partially offset by lower conventional
resources volumes of about $180 million, higher share-based compensation and exploration expenses
totaling about $110 million and higher tax expense of about $80 million. A stronger Canadian dollar
also negatively impacted earnings by about $80 million.
Natural resources
Net income from natural resources in the third quarter was $607 million, versus $617 million in the
same period of 2006. The impact of natural resources volumes and realizations on earnings were
mixed. Higher Syncrude volumes of about $50 million were more than offset by lower natural gas,
conventional crude oil and NGL volumes totaling about $80 million. Higher crude oil realizations of
about $60 million were partially offset by lower Cold Lake heavy oil realizations of about $45
million. Earnings were negatively impacted by a higher Canadian dollar of about $60 million and
higher production, exploration and other operating costs of about $40 million. These negative
factors were essentially offset by gains from asset divestments of about $50 million and lower tax
expense of about $35 million.
Net income for the first nine months was $1,630 million versus $1,768 million during the same
period last year. Earnings decreased primarily due to lower natural gas, conventional crude oil,
and NGL volumes of about $180 million. Earnings were also lower due to higher tax expense of $80
million, the negative impact of a higher Canadian dollar of about $60 million and higher
exploration expense of about $40 million. These factors were partially offset by higher Syncrude
volumes of about $125 million. Higher crude oil realizations of about $35 million were more than
offset by lower natural gas and Cold Lake heavy oil realizations totaling $50 million. Gains from
asset divestments were higher in 2007 by about $100 million.
- 12 -
IMPERIAL OIL LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued .....)
Brent crude oil prices in U.S. dollars averaged eight percent higher in the third quarter and were
at about the same level for the first nine months compared with the same periods last year.
However, mainly because of a stronger Canadian dollar, the companys realizations for conventional
crude oil were only about two percent higher in the third quarter and about four percent lower for
the first nine months compared with the same periods last year. Average realizations for Cold Lake
heavy oil in the third quarter were about 15 percent lower than the third quarter of 2006 as the
price spread between light crude oil and Cold Lake heavy oil widened. For the first nine months in
2007, average realizations for Cold Lake heavy oil were slightly lower than the same period in
2006. Realizations for natural gas averaged $5.73 a thousand cubic feet in the third quarter, down
from $6.29 in the same quarter last year. For the first nine-month period, realizations for natural
gas averaged $7.11 a thousand cubic feet in 2007, down from $7.42 in the same period of 2006.
Total gross production of crude oil and NGLs in the third quarter was 291 thousand barrels a day,
versus 281 thousand barrels in the third quarter of 2006. For the first nine months of the year,
total gross production of crude oil and NGLs averaged 274 thousand barrels a day, compared with 273
thousand barrels in the same period of 2006.
Gross production of Cold Lake heavy oil averaged 160 thousand barrels a day during the third
quarter, versus 158 thousand barrels in the same quarter last year. For the first nine months,
gross production was 152 thousand barrels a day this year, compared with 155 thousand barrels in
the same period of 2006. Lower production in the first nine months was due to maintenance
activities and the cyclic nature of production at Cold Lake.
The companys share of Syncrudes gross production was 87 thousand barrels a day in the third
quarter compared with 71 thousand barrels during the same period a year ago. During the nine-month
period, the companys share of gross production from Syncrude averaged 76 thousand barrels a day in
2007, up from 61 thousand barrels in the same period of 2006. Increased volumes from the new coker
were partially offset by lower production due to planned maintenance activities.
In the third quarter, gross production of conventional crude oil averaged 28 thousand barrels a
day, compared with 31 thousand barrels during the same period in 2006. For the first nine months,
gross production of conventional crude oil averaged 29 thousand barrels a day, compared with 32
thousand barrels during the same period in 2006. Natural reservoir decline in the Western Canadian
Basin and the impact of divested producing properties were the main reasons for the reduced
production.
Gross production of NGLs available for sale was 16 thousand barrels a day in the third quarter,
down from 21 thousand barrels in the same quarter last year. During the first nine months of 2007,
gross production of NGLs available for sale decreased to 17 thousand barrels a day, from 25
thousand barrels in the same period of 2006, mainly due to declining NGL content of Wizard Lake gas
production.
- 13 -
IMPERIAL OIL LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued .....)
Gross production of natural gas during the third quarter of 2007 decreased to 430 million cubic
feet a day from 560 million cubic feet in the same period last year. In the first nine months of
the year, gross production was 482 million cubic feet a day, down from 566 million in the first
nine months of 2006. The lower production volume was primarily due to decline in production from
the gas cap at Wizard Lake and natural decline in other producing properties in the Western
Canadian Basin.
In the quarter, the company realized a gain of $51 million from the sale of its interest in the
Willesden Green producing property in Alberta for net proceeds of about $78 million. Production of
the companys share of the Willesden Green property averaged about one thousand oil-equivalent
barrels a day in 2006.
On October 25, the Alberta government proposed increases to the royalty rates on oil and gas
production beginning in 2009. The company believes that this proposal could have an adverse effect
on future company investments in Alberta and the companys future financial results. The magnitude
of the potential impact will depend on the final form of enacted legislation and the future prices
of oil and gas and cannot be reasonably estimated at this time.
Petroleum products
Net income from petroleum products was $191 million in the third quarter of 2007, an increase of
$42 million from the same period a year ago. Earnings were about $60 million higher due mainly to
favourable refinery operations and inventory effects partially offset by weaker industry refining
margins. A stronger Canadian dollar negatively impacted earnings by about $20 million.
Nine-month net income was $703 million, $293 million higher than the same period of 2006. Increased
earnings were primarily due to the positive impacts of about $160 million from refinery operations
including lower refinery maintenance and project activities, and stronger industry refining and
marketing margins totaling about $130 million.
Chemicals
Net income from chemicals was $24 million in the third quarter, compared with $38 million in the
same period last year. Lower earnings were due primarily to lower industry margin for polyethylene
products. Nine-month net income was $74 million, compared with $108 million for the same period in
2006. Lower earnings were due primarily to lower industry margin for polyethylene products
partially offset by increased margin and sales volume for intermediate chemical products. A
stronger Canadian dollar also negatively impacted earnings in the third quarter and the first nine
months of 2007.
Corporate and other
Net income from corporate and other was negative $6 million in the third quarter, compared with
$18 million in the same period of 2006. Nine-month net income was negative $105 million, versus
negative $36 million last year. Unfavourable earnings effects were due mainly to higher share-based
compensation charges.
- 14 -
IMPERIAL OIL LIMITED
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued .....)
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $1,014 million during the third quarter of 2007, compared
with $1,640 million in the same period last year. Lower cash flow was driven primarily by higher
working capital requirements. Year-to-date cash flow from operating activities was $2,414 million,
a decrease of $114 million from the first nine months of 2006. Lower cash flow was due mainly to
higher working capital requirements partially offset by lower funding to employee pension plans.
Capital and exploration expenditures were $245 million in the third quarter, compared with
$263 million during the same quarter of 2006, and $661 million in the first nine months of 2007,
versus $868 million in the same period a year ago. Lower expenditures were primarily due to the
completion of the Stage 3 upgrader expansion project at Syncrude and also the completion of the
project to produce ultra-low sulphur diesel. In 2007, for the natural resources segment, capital
and exploration expenditures included ongoing development drilling and programs at Cold Lake to
maintain and expand production capacity, drilling at conventional fields in Western Canada and
advancing the Mackenzie gas and Kearl oil sands projects. The petroleum products segments capital
expenditures were mainly on projects to improve operating efficiency and upgrade the network of
Esso retail outlets.
In the third quarter of 2007, the company retired its $250-million variable-rate loan from an
affiliated company of Exxon Mobil Corporation on maturity and replaced it with a $250 million
long-term variable-rate loan, also from an affiliated company of Exxon Mobil Corporation, at
interest equivalent to Canadian market rates.
During the third quarter of 2007, the company repurchased about 12.8 million shares for
$600 million. Under the current share-repurchase program, which began on June 25, 2007, the company
has purchased about 14 million shares, and can purchase an additional 32.5 million shares before
June 24, 2008 when the current program expires.
Cash dividends of $236 million were paid in the first nine months of 2007. This compared with
dividends of $238 million in the same period of 2006. Increased repurchase of shares reduced the
number of shares outstanding and total dividend payments. Per-share dividends declared in the first
three quarters of 2007 totaled $0.26, up from $0.24 in the same period last year.
The above factors led to an increase in the companys balance of cash and marketable securities to
$2,223 million at September 30, 2007, from $2,158 million at the end of 2006.
- 15 -
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Information about market risks for the nine months ended September 30, 2007 does not differ
materially from that discussed on page 30 in the companys annual report on Form 10-K for the year
ended December 31, 2006 and Form 10-Q for the quarter ended March 31, 2007 except for the
following:
|
|
|
|
|
Earnings sensitivity (a) |
|
|
|
|
millions of dollars after tax |
|
|
|
|
Ten cents decrease (increase) in the value of the Canadian dollar
versus the U.S. dollar |
|
|
+ (-) 400 |
|
Eight dollars (U.S.) a barrel change in crude oil price |
|
|
+ (-) 320 |
|
The sensitivity of net income to changes in the Canadian dollar versus the U.S. dollar decreased
from the first quarter 2007 by about $13 million (after tax) for each one-cent difference. This was
primarily due to the impact of lower industry refining margins.
The sensitivity to changes in crude oil prices decreased from 2006 year-end by about $5 million
(after tax) for each one U.S.-dollar difference. An increase in the value of the Canadian dollar
has lessened the impact of U.S. dollar denominated crude oil prices on the companys revenues and
earnings.
(a) The amount quoted to illustrate the impact of the sensitivity represents a change of about 10
percent in the value of the commodity at the end of the third quarter 2007. The sensitivity
calculation shows the impact on annual net income that results from a change in one factor, after
tax and royalties and holding all other factors constant. While the sensitivity is applicable under
current conditions, it may not apply proportionately to larger fluctuations.
Item 4. Controls and Procedures.
As indicated in the certifications in Exhibit 31 of this report, the companys principal executive
officer and principal financial officer have evaluated the companys disclosure controls and
procedures as of September 30, 2007. Based on that evaluation, these officers have concluded that
the companys disclosure controls and procedures are effective in ensuring that information
required to be disclosed by the company in the reports that it files or submits under the
Securities Exchange Act of 1934, as amended, is accumulated and communicated to them in a manner
that allows for timely decisions regarding required disclosures and are effective in ensuring that
such information is recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commissions rules and forms.
There has not been any change in the companys internal control over financial reporting during the
last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
companys internal control over financial reporting.
- 16 -
PART II OTHER INFORMATION
Item 1. Legal Proceedings
On August 24, 2007 Imperial Oil Limited pled guilty to a charge of discharging sulphur dioxide
into the atmosphere at levels that exceeded air quality limits. The events occurred during an
operating upset at the Sarnia refinery on December 6, 2005. The minimum fine of $100,000, plus
victim surcharge of 25%, was paid by Imperial Oil Limited.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the period July 1, 2007 to September 30, 2007, the company issued 61,428 common shares
to employees or former employees outside the U.S.A. for $15.50 per share upon the exercise of
stock options. These issuances were not registered under the Securities Act in reliance on
Regulation S thereunder.
Issuer Purchases of Equity Securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) Maximum |
|
|
|
|
|
|
(c) Total |
|
number (or |
|
|
|
|
|
|
number of |
|
approximate |
|
|
|
|
(b) |
|
shares (or units) |
|
dollar value) of |
|
|
(a) Total |
|
Average |
|
purchased as |
|
shares (or units) |
|
|
number of |
|
price |
|
part of publicly |
|
that may yet be |
|
|
shares (or |
|
paid per |
|
announced |
|
purchased |
|
|
units) |
|
share (or |
|
plans or |
|
under the plans |
Period |
|
purchased |
|
unit) |
|
programs |
|
or programs |
July 2007 |
|
1,480,260 |
|
50.13 |
|
1,480,260 |
|
43,432,099 |
(July 1-July 31) |
|
|
|
|
|
|
|
|
August 2007 |
|
5,685,417 |
|
44.51 |
|
5,685,417 |
|
37,685,573 |
(August 1-August 31) |
|
|
|
|
|
|
|
|
September 2007 |
|
5,625,987 |
|
48.55 |
|
5,625,987 |
|
32,059,586 |
(September 1-September 30) |
|
|
|
|
|
|
|
|
(1) On June 21, 2007, the company announced by news release that it had received final
approval from the Toronto Stock Exchange for a new normal course issuer bid to continue its
share repurchase program. The new program enables the company to repurchase up to a maximum
of 46,459,967 common shares, including common shares purchased for the companys employee
savings plan and employee retirement plan during the period June 25, 2007 to June 24, 2008.
If not previously terminated, the program will end on June 24, 2008.
- 17 -
Item 6. Exhibits.
(10)(ii)(25) Amendment to Syncrude Ownership and Management Agreement made as of June 1, 2006
and fully executed as of September 24, 2007
(31.1) Certification by the principal executive officer of the company pursuant to Rule
13a-14(a)
(31.2) Certification by the principal financial officer of the company pursuant to Rule
13a-14(a)
(32.1) Certification by the chief executive officer and of the company pursuant to Rule
13a-14(b) and 18 U.S.C. Section 1350.
(32.2) Certification by the chief financial officer and of the company pursuant to Rule
13a-14(b) and 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
IMPERIAL OIL LIMITED |
|
|
(Registrant) |
|
|
|
|
|
Date: October 30, 2007
|
|
/s/ P.A. Smith |
|
|
|
|
|
|
|
|
|
(Signature) |
|
|
|
|
Paul A. Smith
Controller and Senior Vice-President,
Finance and Administration
(Principal Accounting Officer) |
|
|
|
|
|
|
|
Date: October 30, 2007
|
|
/s/ Brent.A. Latimer |
|
|
|
|
|
|
|
|
|
(Signature) |
|
|
|
|
Brent A. Latimer
Assistant Secretary |
|
|
- 18 -