FORM10-Q


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

[✓]    

FORM 10-Q
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)

15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

March 31, 2023

OR

[]

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)

15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ---___ to ---

___

Commission file number0-12014

IMPERIAL OIL LIMITED

(Exact name of registrant as specified in its charter)

CANADACanada98-0017682
(State or other jurisdiction(I.R.S. Employer
of incorporation or organization)Identification No.)
505 Quarry Park Boulevard S.E.
Calgary, Alberta, CanadaT2C 5N1
(Address of principal executive offices)(Postal Code)

1-800-567-3776
(Registrant’s telephone number, including area code:1-800-567-3776                

Thecode)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol
Name of each exchange on
which registered
NoneNone
Indicate by check mark whether 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 9190 days.

YES  ✓  NO  

The

Yes ✓No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES  ✓  NO  

The

Yes ✓No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act of 1934).

1934.

Large accelerated filer

 ✓Smaller reporting company

Non-accelerated filer

Emerging growth company

Accelerated filer

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

The___

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act of 1934).

YES    NO  ✓

The number of common shares outstanding, as of September 30, 2017 was 837,581,329.

IMPERIAL OIL LIMITED

Table of contents

Yes No ✓

The number of common shares outstanding, as of March 31, 2023 was 584,152,718.


Page
IMPERIAL OIL LIMITED
Table of contents
Page
3
Financial statements
3

Consolidated statement of income

3

Consolidated statement of comprehensive income

4

Consolidated balance sheet

5
Consolidated statement of shareholders’ equity
6

Consolidated statement of cash flows

6
7

Notes to the consolidated financial statements

7
8
Management’s discussion and analysis of financial condition and results of operations15
17
Quantitative and qualitative disclosures about market risk21
22
Controls and procedures21
22
22
23
23
Unregistered sales of equity securities and use of proceeds22
23
Exhibits24
23
24
25

In this report all dollar amounts are expressed in Canadian dollars unless otherwise stated. This report should be read in conjunction with the company’s annual report on Form10-K for the year ended December 31, 2016.2022. Note that numbers may not add due to rounding.

The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.

In this report, unless the context otherwise indicates, reference to “the company” or “Imperial” includes Imperial Oil Limited and its subsidiaries.

IMPERIAL OIL LIMITED

2

IMPERIAL OIL LIMITED
PART I. FINANCIAL INFORMATION

Item 1. Financial statements

Consolidated statement of income (U.S. GAAP, unaudited)

        Third Quarter   

Nine Months

to September 30

 
millions of Canadian dollars  2017   2016   2017       2016    

 

 

Revenues and other income

        

Operating revenues(a)

   7,134    6,568    21,077    17,967    

Investment and other income(note 3)

   24    874    270    945    

 

 

Total revenues and other income

   7,158    7,442    21,347    18,912    

 

 

Expenses

        

Exploration

   7    16    29    75    

Purchases of crude oil and products(b)

   4,251    3,857    13,226    10,884    

Production and manufacturing(c)

   1,338    1,261    4,238    3,842    

Selling and general(c)

   219    275    626    812    

Federal excise tax

   438    434    1,253    1,237    

Depreciation and depletion

   391    398    1,135    1,229    

Financing costs(note 5)

   18    19    49    52    

 

 

Total expenses

   6,662    6,260    20,556    18,131    

 

 

Income (loss) before income taxes

   496    1,182    791    781    

Income taxes

   125    179    164    60    

 

 

Net income (loss)

   371    1,003    627    721    

 

 

Per-share information(Canadian dollars)

        

Net income (loss) per common share - basic(note 8)

   0.44    1.18    0.74    0.85    

Net income (loss) per common share - diluted(note 8)

   0.44    1.18    0.74    0.85    

Dividends per common share

   0.16    0.15    0.47    0.44    

 

 

(a)

 

Amounts from related parties included in operating revenues.

   756    448    2,801    1,457    

(b)

 

Amounts to related parties included in purchases of crude oil and products.

   604    623    1,919    1,540    

(c)

 Amounts to related parties included in production and manufacturing, and selling and general expenses.   127    133    415    394    

The information in the notes to consolidated financial statements is an integral part of these statements.

IMPERIAL OIL LIMITED

Consolidated statement of income (U.S. GAAP, unaudited)
 
       Three Months
       to March 31
millions of Canadian dollars2023 2022 
Revenues and other income
Revenues (a)
12,057 12,657 
Investment and other income (note 3)
64 29 
Total revenues and other income12,121 12,686 
 
Expenses
Exploration1 2 
Purchases of crude oil and products (b)
7,478 8,350 
Production and manufacturing (c)
1,756 1,659 
Selling and general (c)
186 225 
Federal excise tax and fuel charge529 479 
Depreciation and depletion490 426 
Non-service pension and postretirement benefit20 4 
Financing (d) (note 5)
16 7 
Total expenses10,476 11,152 
 
Income (loss) before income taxes1,645 1,534 
Income taxes397 361 
Net income (loss)1,248 1,173 
Per share information (Canadian dollars)
Net income (loss) per common share - basic (note 9)
2.14 1.75 
Net income (loss) per common share - diluted (note 9)
2.13 1.75 
(a) Amounts from related parties included in revenues.3,136 3,959 
(b) Amounts to related parties included in purchases of crude oil and products.1,078 650 
(c) Amounts to related parties included in production and manufacturing,
and selling and general expenses.		135 118 
(d) Amounts to related parties included in financing, (note 5).39 4 
The information in the notes to consolidated financial statements is an integral part of these statements.

3

IMPERIAL OIL LIMITED
Consolidated statement of comprehensive income (U.S. GAAP, unaudited)

   Third Quarter   

Nine Months

to September 30

 
millions of Canadian dollars  2017   2016       2017       2016    

 

 

Net income (loss)

   371    1,003    627    721    

Other comprehensive income (loss), net of income taxes

        

Post-retirement benefits liability adjustment (excluding amortization)

   -    -    41    100    

Amortization of post-retirement benefits liability adjustment included in net periodic benefit costs

   34    34    106    108    

 

 

Total other comprehensive income (loss)

   34    34    147    208    

 

 
        

 

 

Comprehensive income (loss)

   405    1,037    774    929    

 

 

The information in the notes to consolidated financial statements is an integral part of these statements.

IMPERIAL OIL LIMITED

Consolidated balance sheet (U.S. GAAP, unaudited)

millions of Canadian dollars  

As at

Sept 30
2017

  

As at

Dec 31
2016

 
  

Assets

   

Current assets

   

Cash

   833   391 

Accounts receivable, less estimated doubtful accounts(a)

   1,896   2,023 

Inventories of crude oil and products

   989   949 

Materials, supplies and prepaid expenses

   441   468 
  

Total current assets

   4,159   3,831 

Investments and long-term receivables

   931   1,030 

Property, plant and equipment,

   53,844   53,515 

less accumulated depreciation and depletion

   (18,248)   (17,182) 
  

Property, plant and equipment, net

   35,596   36,333 

Goodwill

   186   186 

Other assets, including intangibles, net

   498   274 
  

Total assets

   41,370   41,654 
  

Liabilities

   

Current liabilities

   

Notes and loans payable(b)

   202   202 

Accounts payable and accrued liabilities(a) (note 7)

   3,041   3,193 

Income taxes payable

   59   488 
  

Total current liabilities

   3,302   3,883 

Long-term debt(c) (note 6)

   5,013   5,032 

Other long-term obligations(d) (note 7)

   3,698   3,656 

Deferred income tax liabilities

   4,336   4,062 
  

Total liabilities

   16,349   16,633 
  

Shareholders’ equity

   

Common shares at stated value(e) (note 8)

   1,547   1,566 

Earnings reinvested(note 9)

   25,224   25,352 

Accumulated other comprehensive income (loss)(note 10)

   (1,750)   (1,897) 
  

Total shareholders’ equity

   25,021   25,021 
  

Total liabilities and shareholders’ equity

   41,370   41,654 
  
 
        Three Months
        to March 31
millions of Canadian dollars2023 2022 
Net income (loss)1,248 1,173 
Other comprehensive income (loss), net of income taxes  
Postretirement benefits liability adjustment (excluding amortization)21 24 
Amortization of postretirement benefits liability adjustment
       included in net benefit costs
10 21 
Total other comprehensive income (loss)31 45 
Comprehensive income (loss)1,279 1,218 
The information in the notes to consolidated financial statements is an integral part of these statements.
4

(a)Accounts receivable, less estimated doubtful accounts included net amounts receivable from related parties of $87 million (2016 - $172 million).
IMPERIAL OIL LIMITED
(b)Notes and loans payable included amounts to related parties of $75 million (2016 - $75 million).
Consolidated balance sheet (U.S. GAAP, unaudited)
millions of Canadian dollars
As at
Mar 31
2023
As at
Dec 31
2022
Assets  
Current assets  
Cash and cash equivalents2,243 3,749 
Accounts receivable - net (a)
4,283 4,719 
Inventories of crude oil and products1,757 1,514 
Materials, supplies and prepaid expenses989 754 
Total current assets9,272 10,736 
Investments and long-term receivables (b)
995 893 
Property, plant and equipment,54,991 54,568 
less accumulated depreciation and depletion(24,549)(24,062)
Property, plant and equipment, net30,442 30,506 
Goodwill166 166 
Other assets, including intangibles - net1,240 1,223 
Total assets42,115 43,524 
Liabilities  
Current liabilities  
Notes and loans payable122 122 
Accounts payable and accrued liabilities (a) (note 7)
5,930 6,194 
Income taxes payable505 2,582 
Total current liabilities6,557 8,898 
Long-term debt (c) (note 6)
4,027 4,033 
Other long-term obligations (note 7)
3,409 3,467 
Deferred income tax liabilities4,687 4,713 
Total liabilities18,680 21,111 
Shareholders’ equity  
Common shares at stated value (d) (note 9)
1,079 1,079 
Earnings reinvested22,837 21,846 
Accumulated other comprehensive income (loss) (note 10)
(481)(512)
Total shareholders’ equity23,435 22,413 
 
Total liabilities and shareholders’ equity42,115 43,524 
(a) Accounts receivable - net included net amounts receivable from related parties of $908 million (2022 - $1,108 million).
(b) Investments and long-term receivables included amounts from related parties of $287 million (2022 - $288 million).
(c) Long-term debt included amounts to related parties of $3,447 million (2022 - $3,447 million).
(d) Number of common shares authorized and outstanding were 1,100 million and 584 million, respectively (2022 - 1,100 million and 584 million, respectively).
The information in the notes to consolidated financial statements is an integral part of these statements.
(c)Long-term debt included amounts to related parties of $4,447 million (2016 - $4,447 million).
5

(d)Other long-term obligations included amounts to related parties of $71 million (2016 - $104 million).
IMPERIAL OIL LIMITED
(e)Number
Consolidated statement of common shares authorized and outstanding were 1,100 million and 838 million, respectively (2016 - 1,100 million and 848 million, respectively).shareholders’ equity (U.S. GAAP, unaudited)

The information in the notes to consolidated financial statements is an integral part of these statements.

IMPERIAL OIL LIMITED

 
        Three Months
        to March 31
millions of Canadian dollars2023 2022 
Common shares at stated value (note 9)
  
At beginning of period1,079 1,252 
Share purchases at stated value— (15)
At end of period1,079 1,237 
Earnings reinvested
At beginning of period21,846 21,660 
Net income (loss) for the period1,248 1,173 
Share purchases in excess of stated value— (434)
Dividends declared(257)(228)
At end of period22,837 22,171 
 
Accumulated other comprehensive income (loss) (note 10)
  
At beginning of period(512)(1,177)
Other comprehensive income (loss)31 45 
At end of period(481)(1,132)
Shareholders’ equity at end of period23,435 22,276 
The information in the notes to consolidated financial statements is an integral part of these statements.

6

IMPERIAL OIL LIMITED
Consolidated statement of cash flows (U.S. GAAP, unaudited)

Inflow (outflow)  Third Quarter  

    Nine Months

    to September 30

 
millions of Canadian dollars  2017  2016  2017  2016 

 

 

Operating activities

     

Net income (loss)

   371   1,003   627   721 

Adjustments fornon-cash items:

     

Depreciation and depletion

   391   398   1,135   1,229 

(Gain) loss on asset sales(note 3)

   (6)   (909)   (219)   (952) 

Deferred income taxes and other

   131   215   294   35 

Changes in operating assets and liabilities:

     

Accounts receivable

   (297)   275   127   (121) 

Inventories, materials, supplies and prepaid expenses

   104   (7)   (13)   112 

Income taxes payable

   19   (13)   (429)   - 

Accounts payable and accrued liabilities

   81   (241)   (159)   (59) 

All other items - net(a)

   43   51   320   299 

 

 

Cash flows from (used in) operating activities

   837   772   1,683   1,264 

 

 

Investing activities

     

Additions to property, plant and equipment

   (241)   (189)   (683)   (893) 

Proceeds from asset sales(note 3)

   8   1,194   230   1,244 

Additional investments

   (1)   -   (1)   (1) 

 

 

Cash flows from (used in) investing activities

   (234)   1,005   (454)   350 

 

 

Financing activities

     

Short-term debt - net

   -   (1,591)   -   (1,679) 

Long-term debt - additions(note 6)

   -   -   -   495 

Reduction in capitalized lease obligations(note 6)

   (7)   (6)   (20)   (21) 

Dividends paid

   (136)   (127)   (390)   (364) 

Common shares purchased(note 8)

   (250)   -   (377)   - 

 

 

Cash flows from (used in) financing activities

   (393)   (1,724)   (787)   (1,569) 

 

 

Increase (decrease) in cash

   210   53   442   45 

Cash at beginning of period

   623   195   391   203 

 

 

Cash at end of period(b)

   833   248   833   248 

 

 

(a)   Included contribution to registered pension plans.

   (78)   (44)   (176)   (120) 
(b)Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all highly liquid securities with maturity of three months or less when purchased.flows (U.S. GAAP, unaudited)

The information in the notes to consolidated financial statements is an integral part of these statements.

IMPERIAL OIL LIMITED

 
        Three Months
        to March 31
millions of Canadian dollars2023 2022 
Operating activities  
Net income (loss)1,248 1,173 
Adjustments for non-cash items:
Depreciation and depletion490 426 
(Gain) loss on asset sales (note 3)
(9)(20)
Deferred income taxes and other(56)(331)
Changes in operating assets and liabilities:  
Accounts receivable436 (1,544)
Inventories, materials, supplies and prepaid expenses(479)(364)
Income taxes payable(2,077)459 
Accounts payable and accrued liabilities(255)2,144 
All other items - net (b)
(119)(29)
Cash flows from (used in) operating activities(821)1,914 
 
Investing activities  
Additions to property, plant and equipment(429)(304)
Proceeds from asset sales (note 3)
14 24 
Loans to equity companies - net1 1 
Cash flows from (used in) investing activities(414)(279)
Financing activities  
Finance lease obligations - reduction (note 6)
(5)(5)
Dividends paid(266)(185)
Common shares purchased (note 9)
— (449)
Cash flows from (used in) financing activities(271)(639)
 
Increase (decrease) in cash and cash equivalents(1,506)996 
Cash and cash equivalents at beginning of period3,749 2,153 
Cash and cash equivalents at end of period (a)
2,243 3,149 
(a)  Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all highly liquid securities with maturity of
       three months or less.
(b)  Included contributions to registered pension plans.(42)(50)
 
Income taxes (paid) refunded.(2,632)(223)
Interest (paid), net of capitalization.(21)(12)
The information in the notes to consolidated financial statements is an integral part of these statements.
7

IMPERIAL OIL LIMITED
Notes to consolidated financial statements (unaudited)

1.Basis of financial statement preparation

These unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles of the United States of America (GAAP) 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 filed with the U.S. Securities and Exchange Commission (SEC) in the company’s 20162022 annual report on Form10-K. In the opinion of the company, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature. Prior data has been reclassified in certain cases to conform to the current presentation basis.

The company’s exploration and production activities are accounted for under the “successful efforts” method.

The results for the ninethree months ended September 30, 2017,March 31, 2023, are not necessarily indicative of the operations to be expected for the full year.

All amounts are in Canadian dollars unless otherwise indicated.

IMPERIAL OIL LIMITED

8

IMPERIAL OIL LIMITED
2. Business segments

Third Quarter             Upstream    Downstream     Chemical 
millions of Canadian dollars  2017  2016   2017  2016  2017   2016  

 

 

Revenues and other income

        

Operating revenues(a)

   1,668   1,316   5,204   4,971   262    281 

Intersegment sales

   587   709   241   253   62    58 

Investment and other income(note 3)

   7   1   15   870   -    1 

 

 
   2,262   2,026   5,460   6,094   324    340 

 

 

Expenses

        

Exploration

   7   16   -   -   -    -  

Purchases of crude oil and products

   947   861   4,014   3,827   179    188 

Production and manufacturing

   893   887   394   323   51    51 

Selling and general

   5   (1)   167   238   19    22 

Federal excise tax

   -   -    438   434   -    -  

Depreciation and depletion

   330   346   53   46   3    2 

Financing costs(note 5)

   1   (2)   -   -   -    -  

 

 

Total expenses

   2,183   2,107   5,066   4,868   252    263 

 

 

Income (loss) before income taxes

   79   (81)   394   1,226   72    77 

Income taxes

   17   (55)   102   224   20    21 

 

 

Net income (loss)

   62   (26)   292   1,002   52    56 

 

 

Cash flows from (used in) operating activities

   479   432   268   264   99    73 

Capital and exploration expenditures(b)

   92   149   55   38   5    7 

 

 
Third Quarter          Corporate and Other     Eliminations   Consolidated 
millions of Canadian dollars  2017  2016   2017  2016  2017   2016  

 

 

Revenues and other income

        

Operating revenues(a)

   -   -    -   -   7,134    6,568 

Intersegment sales

   -   -    (890)   (1,020)   -    -  

Investment and other income(note 3)

   2   2   -   -   24    874 

 

 
   2   2   (890)   (1,020)   7,158    7,442 

 

 

Expenses

        

Exploration

   -   -    -   -   7    16 

Purchases of crude oil and products

   -   -    (889)   (1,019)   4,251    3,857 

Production and manufacturing

   -   -    -   -   1,338    1,261 

Selling and general

   29   17   (1)   (1)   219    275 

Federal excise tax

   -   -    -   -   438    434 

Depreciation and depletion

   5   4   -   -   391    398 

Financing costs(note 5)

   17   21   -   -   18    19 

 

 

Total expenses

   51   42   (890)   (1,020)   6,662    6,260 

 

 

Income (loss) before income taxes

   (49)   (40)   -   -   496    1,182 

Income taxes

   (14)   (11)   -   -   125    179 

 

 

Net income (loss)

   (35)   (29)   -   -   371    1,003 

 

 

Cash flows from (used in) operating activities

   (9)   3   -   -   837    772 

Capital and exploration expenditures(b)

   7   11   -   -   159    205 

 

 
Three Months to March 31        Upstream        Downstream       Chemical
millions of Canadian dollars202320222023202220232022
Revenues and other income
Revenues (a) (b)
76 99 11,639 12,191 342 367 
Intersegment sales
3,622 4,431 1,823 1,833 91 104 
Investment and other income (note 3)
2 4 20 21 — — 
3,700 4,534 13,482 14,045 433 471 
Expenses
Exploration1 2 — — — — 
Purchases of crude oil and products
1,543 1,890 11,196 12,512 274 315 
Production and manufacturing1,287 1,249 411 356 58 54 
Selling and general— — 157 147 26 23 
Federal excise tax and fuel charge— — 528 479 1 — 
Depreciation and depletion434 373 45 41 4 5 
Non-service pension and postretirement benefit— — — — — — 
Financing (note 5)
— — — — — — 
Total expenses3,265 3,514 12,337 13,535 363 397 
Income (loss) before income taxes435 1,020 1,145 510 70 74 
Income tax expense (benefit)105 238 275 121 17 18 
Net income (loss)
330 782 870 389 53 56 
Cash flows from (used in) operating activities
(398)1,447 (419)375 (32)67 
Capital and exploration expenditures (c)
321 222 74 68 4 1 
Total assets as at March 31
29,059 29,182 9,535 10,179 477 501 
Three Months to March 31Corporate and other       Eliminations        Consolidated
millions of Canadian dollars202320222023202220232022
Revenues and other income
Revenues (a) (b)
— — — — 12,057 12,657 
Intersegment sales
— — (5,536)(6,368)— — 
Investment and other income (note 3)
42 4 — — 64 29 
42 4 (5,536)(6,368)12,121 12,686 
Expenses
Exploration— — — — 1 2 
Purchases of crude oil and products
— — (5,535)(6,367)7,478 8,350 
Production and manufacturing— — — — 1,756 1,659 
Selling and general4 56 (1)(1)186 225 
Federal excise tax and fuel charge— — — — 529 479 
Depreciation and depletion7 7 — — 490 426 
Non-service pension and postretirement benefit20 4 — — 20 4 
Financing (note 5)
16 7 — — 16 7 
Total expenses47 74 (5,536)(6,368)10,476 11,152 
Income (loss) before income taxes(5)(70)— — 1,645 1,534 
Income tax expense (benefit)— (16)— — 397 361 
Net income (loss)
(5)(54)— — 1,248 1,173 
Cash flows from (used in) operating activities
28 25 — — (821)1,914 
Capital and exploration expenditures (c)
30 5 — — 429 296 
Total assets as at March 31
3,815 4,136 (771)(188)42,115 43,810 

9

(a)Included export sales to the United States of $1,080 million (2016 - $941 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
IMPERIAL OIL LIMITED
(a)Includes export sales to the United States of $2,375 million (2022 - $2,504 million).
(b)Revenues include both revenue within the scope of ASC 606 and outside the scope of ASC 606. Trade receivables in "Accounts receivable – net" reported on the Consolidated balance sheet include both receivables within the scope of ASC 606 and those outside the scope of ASC 606. Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives. Contractual terms, credit quality, and type of customer are generally similar between those revenues and receivables within the scope of ASC 606 and those outside it.
Revenues
       Three Months
       to March 31
millions of Canadian dollars2023 2022 
Revenue from contracts with customers10,520 10,864 
Revenue outside the scope of ASC 606
1,537 1,793 
Total12,057 12,657 
(c)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions and the company’s share of similar costs for equity companies. CAPEX excludes the purchase of carbon emission credits.
10

(b)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to capital leases, additional investments and acquisitions.
IMPERIAL OIL LIMITED

IMPERIAL OIL LIMITED

Nine Months to September 30              Upstream      Downstream   Chemical 
millions of Canadian dollars  2017  2016  2017  2016  2017  2016  

 

 

Revenues and other income

       

Operating revenues(a)

   5,166   3,699   15,087   13,470   824   798  

Intersegment sales

   1,494   1,516   792   689   191   156  

Investment and other income(note 3)

   17   22   248   919   (1)   1  

 

 
   6,677   5,237   16,127   15,078   1,014   955  

 

 

Expenses

       

Exploration

   29   75   -   -   -   -  

Purchases of crude oil and products

   3,089   2,584   12,037   10,139   573   518  

Production and manufacturing

   2,917   2,634   1,169   1,059   152   149  

Selling and general

   1   (3)   540   729   60   63  

Federal excise tax

   -   -   1,253   1,237   -   -  

Depreciation and depletion

   964   1,053   148   158   9   6  

Financing costs(note 5)

   5   (6)   -   -   -   -  

 

 

Total expenses

   7,005   6,337   15,147   13,322   794   736  

 

 

Income (loss) before income taxes

   (328)   (1,100)   980   1,756   220   219  

Income taxes

   (103)   (336)   230   363   59   59  

 

 

Net income (loss)

   (225)   (764)   750   1,393   161   160  

 

 

Cash flows from (used in) operating activities

   904   32   626   1,028   176   205  

Capital and exploration expenditures(b)

   286   745   128   145   12   21  

Total assets as at September 30

   35,387   36,975   4,671   4,403   365   379  
  
Nine Months to September 30              Corporate and Other      Eliminations   Consolidated 
millions of Canadian dollars  2017  2016  2017  2016  2017  2016  

 

 

Revenues and other income

       

Operating revenues(a)

   -   -   -   -   21,077   17,967  

Intersegment sales

   -   -   (2,477)   (2,361)   -   -  

Investment and other income(note 3)

   6   3   -   -   270   945  

 

 
   6   3   (2,477)   (2,361)   21,347   18,912  

 

 

Expenses

       

Exploration

   -   -   -   -   29   75  

Purchases of crude oil and products

   -   -   (2,473)   (2,357)   13,226   10,884  

Production and manufacturing

   -   -   -   -   4,238   3,842  

Selling and general

   29   27   (4)   (4)   626   812  

Federal excise tax

   -   -   -   -   1,253   1,237  

Depreciation and depletion

   14   12   -   -   1,135   1,229  

Financing costs(note 5)

   44   58   -   -   49   52  

 

 

Total expenses

   87   97   (2,477)   (2,361)   20,556   18,131  

 

 

Income (loss) before income taxes

   (81)   (94)   -   -   791   781  

Income taxes

   (22)   (26)   -   -   164   60  

 

 

Net income (loss)

   (59)   (68)   -   -   627   721  

 

 

Cash flows from (used in) operating activities

   (23)   (1)   -   -   1,683   1,264  

Capital and exploration expenditures(b)

   29   37   -   -   455   948  

Total assets as at September 30

   1,283   674   (336)   (337)   41,370   42,094  

 

 
(a)Included export sales to the United States of $3,024 million (2016 - $2,704 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b)Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to capital leases, additional investments and acquisitions.

IMPERIAL OIL LIMITED

3.Investment and other income

3. Investment and other income
Investment and other income included gains and losses on asset sales as follows:

   Third Quarter   

Nine Months

to September 30

 
  millions of Canadian dollars  2017     2016     2017     2016   
  

  Proceeds from asset sales

   8      1,194      230      1,244   

  Book value of asset sales

   2      285      12      292   
  

  Gain (loss) on asset sales, before tax(a) (b)

   6      909      219      952   
  

  Gain (loss) on asset sales, after tax(a) (b)

   5      774      191      808   
  
(a)The nine months ended September 30, 2017 included a gain of $174 million ($151 million after tax) for the sale of a surplus property in Ontario.
(b)Third quarter and nine months ended September 30, 2016, included gains of $0.8 billion ($0.7 billion, after tax) from the sale of company-owned Esso retail sites in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia and Newfoundland.

4.Employee retirement benefits

           Three Months
           to March 31
millions of Canadian dollars2023 2022 
Proceeds from asset sales14 24 
Book value of asset sales5 4 
Gain (loss) on asset sales, before tax9 20 
Gain (loss) on asset sales, after tax8 16 
4. Employee retirement benefits
The components of net benefit cost were as follows:

   Third Quarter  Nine Months
to September 30		 
  millions of Canadian dollars  2017  2016  2017  2016 
  

  Pension benefits:

     

Current service cost

   54   50   163   152 

Interest cost

   77   82   235   240 

Expected return on plan assets

   (104)   (101)   (306)   (300) 

Amortization of prior service cost

   2   2   7   7 

Amortization of actuarial loss (gain)

   43   39   132   121 
  

Net periodic benefit cost

   72   72   231   220 
  

  Other post-retirement benefits:

     

Current service cost

   4   4   12   12 

Interest cost

   6   7   18   20 

Amortization of actuarial loss (gain)

   2   3   6   10 
  

Net periodic benefit cost

   12   14   36   42 
  

 
         Three Months
         to March 31
millions of Canadian dollars2023 2022 
Pension benefits:
Service cost41 70 
Interest cost93 73 
Expected return on plan assets(93)(103)
Amortization of prior service cost4 4 
Amortization of actuarial loss (gain)11 22 
Net benefit cost56 66 
Other postretirement benefits:
Service cost3 6 
Interest cost7 6 
Amortization of actuarial loss (gain)(2)2 
Net benefit cost8 14 
5. Financing costs
        Three Months
         to March 31
millions of Canadian dollars2023 2022 
Debt-related interest46 12 
Capitalized interest(30)(5)
Net interest expense16 7 
Other interest— — 
Total financing16 7 
11

5.Financing costs and additional notes and loans payable information
IMPERIAL OIL LIMITED

   Third Quarter   Nine Months
to September 30		 
  millions of Canadian dollars  2017    2016    2017    2016  
  

  Debt-related interest

   24     32     73     95  

  Capitalized interest

   (7)    (11)    (29)    (37) 
  

  Net interest expense

   17     21     44     58  

  Other interest

   1     (2)    5     (6) 
  

  Total financing costs

   18     19     49     52  
  

IMPERIAL OIL LIMITED

6. Long-term debt
millions of Canadian dollarsAs at
Mar 31		As at
Dec 31
20232022
Long-term debt
3,447 3,447 
Finance leases
580 586 
Total long-term debt4,027 4,033 
7. Other long-term obligations
 
As at
Mar 31
As at
 Dec 31
millions of Canadian dollars20232022
Employee retirement benefits (a)
875 902 
Asset retirement obligations and other environmental liabilities (b)
2,158 2,150 
Share-based incentive compensation liabilities99 101 
Operating lease liability (c)
137 151 
Other obligations140 163 
Total other long-term obligations3,409 3,467 
(a)Total recorded employee retirement benefits obligations also included $63 million in current liabilities (2022 - $63 million).
(b)Total asset retirement obligations and other environmental liabilities also included $116 million in current liabilities (2022 - $116 million).
(c)Total operating lease liability also included $100 million in current liabilities (2022 - $100 million). In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled $13 million (2022 - $14 million).

12

6.Long-term debt
IMPERIAL OIL LIMITED

     As at
Sept 30		   As at
Dec 31		 
millions of Canadian dollars  2017   2016 
  

Long-term debt

   4,447    4,447 

Capital leases

   566    585 
  

Total long-term debt

   5,013    5,032 
  

8. Financial and derivative instruments
Financial instruments
The fair value of the company’s financial instruments is determined by reference to various market data and other appropriate valuation techniques. There are no material differences between the fair value of the company’s financial instruments and the recorded carrying value. At March 31, 2023 and December 31, 2022, the fair value of long-term debt ($3,447 million, excluding finance lease obligations) was primarily a level 2 measurement.
Derivative instruments
The company’s size, strong capital structure and the complementary nature of its business segments reduce the company’s enterprise-wide risk from changes in commodity prices and currency exchange rates. In addition, the company uses commodity-based contracts, including derivatives, to manage commodity price risk and to generate returns from trading. Commodity contracts held for trading purposes are presented in the Consolidated statement of income on a net basis in the line “Revenues”. The company does not designate derivative instruments as a hedge for hedge accounting purposes.
Credit risk associated with the company’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial limits placed on derivative counterparties. The company maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity.
The net notional long/(short) position of derivative instruments was:
 
As at
Mar 31
As at
Dec 31
thousands of barrels20232022
Crude3,490 1,800 
Products(400)(350)
Realized and unrealized gain/(loss) on derivative instruments recognized in the Consolidated statement of income is included in the following lines on a before-tax basis:
 
    Three Months
    to March 31
millions of Canadian dollars2023 2022 
Revenues(23)37 


















13

7.Other long-term obligations
IMPERIAL OIL LIMITED

     As at
Sept 30		   As at
Dec 31		 
millions of Canadian dollars  2017   2016 
  

Employee retirement benefits(a)

   1,410    1,645 

Asset retirement obligations and other environmental liabilities(b)

   1,577    1,544 

Share-based incentive compensation liabilities

   138    139 

Other obligations

   573    328 
  

Total other long-term obligations

   3,698    3,656 

 

 
(a)Total recorded employee retirement benefits obligations also included $58 million in current liabilities (2016 - $58 million).
(b)Total asset retirement obligations and other environmental liabilities also included $108 million in current liabilities (2016 - $108 million).

8.Common shares

     As of
Sept 30		   As of
Dec 31		 
thousands of shares  2017   2016 

 

 

Authorized

   1,100,000    1,100,000 

Common shares outstanding

   837,581    847,599 

 

 

From 1995 through September 2017,

The estimated fair value of derivative instruments, and the related hierarchy level for the fair value measurement was as follows:

At March 31, 2023
millions of Canadian dollars
Fair valueEffect of
counterparty
netting		Effect of
collateral
netting		Net
carrying
value
Level 1Level 2Level 3Total
Assets
Derivative assets (a)
13 26 — 39 (25)— 14 
Liabilities
Derivative liabilities (b)
17 47 — 64 (25)(3)36 
(a)Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”, “Accounts receivable - net” and “Other assets, including intangibles - net”.
(b)Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities” and “Other long-term obligations”.

At December 31, 2022
millions of Canadian dollars
Fair valueEffect of
counterparty
netting		Effect of
collateral
netting		Net
carrying
value
Level 1Level 2Level 3Total
Assets
Derivative assets (a)
17 32 — 49 (27)— 22 
Liabilities
Derivative liabilities (b)
21 20 — 41 (27)(4)10 
(a)Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”, “Accounts receivable - net” and “Other assets, including intangibles - net”.
(b)Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities” and “Other long-term obligations”.
At March 31, 2023 and December 31, 2022, the company had $9 million and $14 million, respectively, of collateral under a series of12-month normal course issuer bidmaster netting arrangement not offset against the derivatives on the Consolidated balance sheet in “Accounts receivable - net”, primarily related to initial margin requirements.
14

IMPERIAL OIL LIMITED
9. Common shares

thousands of shares
As of
Mar 31
2023
 As of
Dec 31
2022
Authorized1,100,000 1,100,000 
Common shares outstanding584,153 584,153 
The company’s common share purchase programs. Cumulatively, 916,563 thousand shares were purchased under these programs. Exxon Mobil Corporation’s participation in these programs, including concurrent programs outside the normal course issuer bids, maintained its ownership interest in Imperial at approximately 69.6 percent.

The current12-month normal course issuer bid program was announced on June 22, 2017, under which Imperial plans to continue its share purchase program. The program enables the company to purchase up to a maximum of 25,395,927 common shares (3 percent of the total shares on June 13, 2017), which includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent. The results of these activities are as shownsummarized below:

year  Purchased shares
thousands		   Millions of
dollars		 

 

 

1995 - 2015

   906,544    15,708 

2016 - Third quarter

   -    - 

         - Full year

   1    - 

2017 - Third quarter

   6,732    250 

         -Year-to-date

   10,018    377 

 

 

Cumulative purchase to date

   916,563    16,085 

 

 

IMPERIAL OIL LIMITED

The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.

 Thousands of
 shares		Millions of
 dollars
Balance as at December 31, 2021678,080 1,252 
Issued under employee share-based awards— — 
Purchases at stated value(93,927)(173)
Balance as at December 31, 2022584,153 1,079 
Issued under employee share-based awards— — 
Purchases at stated value— — 
Balance as at March 31, 2023584,153 1,079 
The following table provides the calculation of net incomebasic and diluted earnings per common share:

       Nine Months 
       Third Quarter   to September 30 
   2017   2016   2017   2016 
  

Net income (loss) per common share - basic

        

Net income (loss)(millions of Canadian dollars)

   371    1,003    627    721 

Weighted average number of common shares outstanding(millions of shares)

   841.8    847.6    845.5    847.6 

Net income (loss) per common share(dollars)

   0.44    1.18    0.74    0.85 
                     

Net income (loss) per common share - diluted

        

Net income (loss)(millions of Canadian dollars)

        371      1,003         627         721 

Weighted average number of common shares outstanding(millions of shares)

   841.8    847.6    845.5    847.6 

Effect of employee share-based awards(millions of shares)

   3.1    3.2    2.9    3.0 
                     

Weighted average number of common shares outstanding, assuming dilution(millions of shares)

   844.9    850.8    848.4    850.6 

Net income (loss) per common share(dollars)

   0.44    1.18    0.74    0.85 
                     

share and the dividends declared by the company on its outstanding common shares:
 
    Three Months
    to March 31
 20232022
Net income (loss) per common share – basic
Net income (loss) (millions of Canadian dollars)
1,2481,173
Weighted average number of common shares outstanding (millions of shares)
584.2670.5
Net income (loss) per common share (dollars)
2.141.75
Net income (loss) per common share – diluted
Net income (loss) (millions of Canadian dollars)
1,2481,173
Weighted average number of common shares outstanding (millions of shares)
584.2670.5
Effect of employee share-based awards (millions of shares)
1.21.4
Weighted-average number of common shares outstanding,
        assuming dilution (millions of shares)
585.4671.9
Net income (loss) per common share (dollars)
2.131.75
Dividends per common share – declared (dollars)
0.440.34
15

9.Earnings reinvested
IMPERIAL OIL LIMITED

      Nine Months 
       Third Quarter  to September 30 
millions of Canadian dollars  2017  2016  2017  2016 
                  

Earnings reinvested at beginning of period

   25,224   23,160   25,352   23,687 

Net income (loss) for the period

   371   1,003   627   721 

Share purchases in excess of stated value

   (237)   -   (358)   - 

Dividends declared

   (134)   (127)   (397)   (373) 

Earnings reinvested at end of period

   25,224   24,036   25,224   24,036 
                  

IMPERIAL OIL LIMITED

10.Other comprehensive income (loss) information

10. Other comprehensive income (loss) information
Changes in accumulated other comprehensive income (loss):

millions of Canadian dollars  2017  2016 

 

 

Balance at January 1

   (1,897)   (1,828) 

Post-retirement benefits liability adjustment:

   

Current period change excluding amounts reclassified from accumulated other comprehensive
income

   41   100 

Amounts reclassified from accumulated other comprehensive income

   106   108 

 

 

Balance at September 30

   (1,750)   (1,620) 

 

 

Amounts reclassified out of accumulated other comprehensive income (loss) -before-tax income (expense):

   Third Quarter  Nine Months
to September 30		 
millions of Canadian dollars  2017  2016  2017  2016 
  

Amortization of post-retirement benefits liability adjustment
included in net periodic benefit cost (a)

   (47)   (44)   (145)   (138) 
  

(a)    This accumulated other comprehensive income component is included in the computation of net periodic benefit cost (note 4).

     

Income tax expense (credit) for components of other comprehensive income (loss):

   Third Quarter   Nine Months
to September 30		 
millions of Canadian dollars  2017   2016   2017   2016 
  

Post-retirement benefits liability adjustments:

        

Post-retirement benefits liability adjustment (excluding amortization)

   -    -    16    37 

Amortization of post-retirement benefits liability adjustment included in
net periodic benefit cost

   13    10    39    30 
  

Total

   13    10    55    67 
  

millions of Canadian dollars2023 2022 
Balance at January 1(512)(1,177)
Postretirement benefits liability adjustment:
Current period change excluding amounts reclassified
       from accumulated other comprehensive income
21 24 
Amounts reclassified from accumulated other comprehensive income10 21 
Balance at March 31(481)(1,132)
11.Recently issued accounting standards
Amounts reclassified out of accumulated other comprehensive income (loss) - before-tax income (expense):

In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard,Revenue from Contracts with Customers. The standard establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements and expands disclosure requirements. The standard is required to be adopted beginning January 1, 2018. The company expects to adopt the standard using the modified retrospective method, under which prior years’ results are not restated, but supplemental information on the impact of the new standard will be included in the 2018 results. The impact from the standard is not expected to have a material effect on the company’s financial statements.

In February 2016, the FASB issued a new standard, Leases. The standard requires all leases with an initial term greater than one year be recorded on the balance sheet as a lease asset and lease liability. The standard is required to be adopted beginning January 1, 2019. Imperial is evaluating the standard and its effect on the company’s financial statements and plans to adopt it in 2019.

IMPERIAL OIL LIMITED

In March 2017, the FASB issued an Accounting Standards Update2017-07, Compensation – Retirement Benefits (Topic 715):Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The update requires that the service cost component of net benefit costs be reported in the same line in the income statement as other compensation costs and that the other components of net benefit costs be presented separately from the service cost component. Additionally, only the service cost component of net benefit costs will be eligible for capitalization. Imperial will adopt the update beginning January 1, 2018. As a result of Imperial’s adoption of the update, the company expects to add a new lineNon-service pension and other postretirement benefit expense to its consolidated statement of income. This line would reflect the other components of net benefit costs as described in the Accounting Standards Update and would include amounts that were previously included in Production and manufacturing expenses, and Selling and general expenses. As of January 1, 2018, these costs will no longer be considered for capitalization. The impact from this change on the company’s net income is not expected to be material. Furthermore, as part of the adoption of the update, the company expects it will include all of these costs in its Corporate and Other expenses.

IMPERIAL OIL LIMITED

 
        Three Months
       to March 31
millions of Canadian dollars2023 2022 
Amortization of postretirement benefits liability adjustment
       included in net benefit cost (a)
(13)(28)
(a) This accumulated other comprehensive income component is included in the computation of net benefit cost (note 4).

Income tax expense (credit) for components of other comprehensive income (loss):
     Three Months
      to March 31
millions of Canadian dollars2023 2022 
Postretirement benefits liability adjustments:
Postretirement benefits liability adjustment (excluding amortization)7 8 
Amortization of postretirement benefits liability adjustment
       included in net benefit cost
3 7 
Total10 15 

16

IMPERIAL OIL LIMITED
Item 2.
Item 2. Management’s discussion and analysis of financial condition and results of operations

Operating results

Third quarter 2017 vs. third quarter 2016

The company’s of operations

Non-GAAP financial measures and other specified financial measures
Certain measures included in this document are not prescribed by U.S. Generally Accepted Accounting Principles (GAAP). These measures constitute “non-GAAP financial measures” under Securities and Exchange Commission Regulation G and Item 10(e) of Regulation S-K, and “specified financial measures” under National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosureof the Canadian Securities Administrators.

Reconciliation of these non-GAAP financial measures to the most comparable GAAP measure, and other information required by these regulations, have been provided. Non-GAAP financial measures and specified financial measures are not standardized financial measures under GAAP and do not have a standardized definition. As such, these measures may not be directly comparable to measures presented by other companies, and should not be considered a substitute for GAAP financial measures.
Net income (loss) excluding identified items
Net income (loss) excluding identified items is a non-GAAP financial measure that is total net income (loss) excluding individually significant non-operational events with an absolute corporate total earnings impact of at least $100 million in a given quarter. The net income (loss) impact of an identified item for an individual segment in a given quarter may be less than $100 million when the thirditem impacts several segments or several periods. The most directly comparable financial measure that is disclosed in the financial statements is "Net income (loss)" within the company’s Consolidated statement of income. Management uses these figures to improve comparability of the underlying business across multiple periods by isolating and removing significant non-operational events from business results. The company believes this view provides investors increased transparency into business results and trends, and provides investors with a view of the business as seen through the eyes of management. Net income (loss) excluding identified items is not meant to be viewed in isolation or as a substitute for net income (loss) as prepared in accordance with U.S. GAAP. All identified items are presented on an after-tax basis.
Reconciliation of net income (loss) excluding identified items
There were no identified items in the first quarter of 20172023 and 2022.
17

IMPERIAL OIL LIMITED
Recent business environment

During the first quarter of 2023, the price of crude oil decreased as the global oil market saw higher inventory levels. The increase in inventory levels was $371 million or $0.44per-share on a diluted basis, compared to the net income of $1,003 million or $1.18per-share for the same period last year. Third quarter 2016 results included a $716 million gain from the sale of retail sites.

Upstream recorded net incomefollowed by announcements early in the thirdsecond quarter of $62 million, compareddecreased production in certain key oil-producing countries. In addition, the Canadian WTI/WCS spread continued to a net losswiden in January and February before beginning to recover in March. Refining margins remained high due to low inventory levels of $26 million in the same periodpetroleum products.

Operating results
First quarter 2023 vs. first quarter 2022
         First Quarter
millions of Canadian dollars, unless noted20232022
Net income (loss) (U.S. GAAP)1,2481,173
Net income (loss) per common share, assuming dilution (dollars)2.131.75
Upstream
Net income (loss) factor analysis
millions of 2016. Results in the third quarter of 2017 reflected the impact of higher Canadian crude oildollars
78

Price – Lower bitumen realizations of about $190 million and higher Kearl volumes of about $50 million. These impacts were partially offsetprimarily driven by lower Syncrudemarker prices and conventional volumes of about $80 million, including the absence of production at Norman Wells, and higher royalties of about $50 million.

West Texas Intermediate (WTI) averaged US$48.23widening WTI/WCS spread. Average bitumen realizations decreased by $39.03 per barrel, in the third quarter of 2017, up from US$44.94 per barrel in the same quarter of 2016. Western Canada Select (WCS) averaged US$38.29 per barrel and US$31.43 per barrel respectively for the same periods. The WTI / WCS differential narrowed to 21 percent in the third quarter of 2017, from 30 percent in the same period of 2016.

The Canadian dollar averaged US$0.80 in the third quarter of 2017, an increase of US$0.03 from the third quarter of 2016.

Imperial’s average Canadian dollar realizations for bitumen and synthetic crudes increased generally in line with the North American benchmarks, adjusted for changes in exchange ratesWCS, and transportation costs. Bitumensynthetic crude oil realizations averaged $39.02decreased by $14.79 per barrel, for the third quarter of 2017, an increase of $8.86 per barrel versus the third quarter of 2016. Synthetic crude realizations averaged $61.14 per barrel, an increase of $2.17 per barrel for the same period of 2016.

Gross production of Cold Lake bitumen averaged 163,000 barrels per daygenerally in the third quarter, up from 157,000 barrels per day in the same period last year. The higher production was mainly due to the timing of the steam cycles.

Gross production of Kearl bitumen averaged 182,000 barrels per day in the third quarter (129,000 barrels Imperial’s share) up from 159,000 barrels per day (113,000 barrels Imperial’s share) during the third quarter of 2016.line with WTI.


Volumes – Higher production was mainly the result of improved reliability.

The company’s share of gross production from Syncrude averaged 74,000 barrels per day, compared to 85,000 barrels per day in the third quarter of 2016. Repairs associated with the Syncrude Mildred Lake upgrader firevolumes were completed in late July. Lower third quarter volumes reflect the impact of the fire on operations, when compared to the same quarter in 2016.

Downstream net income was $292 million in the third quarter, compared to $1,002 million in the same period of 2016. Earnings decreased mainly due toprimarily driven by the absence of extreme cold weather, and reduced unplanned downtime at Kearl as a $716 million gain fromresult of the salesuccessful rollout of company-owned retail sites and higher refining turnaround activitythe winterization strategy.


Royalty – Lower royalties primarily driven by weakened commodity prices.

Other – Includes favourable foreign exchange impacts of about $100 million. These factors were$150 million, partly offset by higher refining marginsoperating expenses of about $140$80 million.

Refinery throughput averaged 385,000 barrels per day, compared to 407,000 barrels per day in the third quarter of 2016. Reduced throughput reflects increased turnaround activity associated with the Nanticoke refinery in the third quarter 2017.

Petroleum product sales were 500,000 barrels per day, compared to 505,000 barrels per day in the third quarter of 2016.

IMPERIAL OIL LIMITED

Chemical net income


Marker prices and average realizations
        First Quarter
Canadian dollars, unless noted2023 2022 
West Texas Intermediate (US$ per barrel)
75.98 95.01 
Western Canada Select (US$ per barrel)
51.42 80.46 
WTI/WCS Spread (US$ per barrel)
24.56 14.55 
Bitumen (per barrel)
50.33 89.36 
Synthetic crude oil (per barrel)
102.45 117.24 
Average foreign exchange rate (US$)
0.74 0.79 
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IMPERIAL OIL LIMITED
Production
       First Quarter
thousands of barrels per day2023 2022 
Kearl (Imperial's share)
184 132 
Cold Lake141 140 
Syncrude (a)
76 77 
Kearl total gross production (thousands of barrels per day)
259 186 
(a) In the first quarter of 2023, Syncrude gross production included about 2 thousand barrels per day of bitumen and other products (2022 - 2 thousand barrels per day) that were exported to the operator's facilities using an existing interconnect pipeline.

Higher production at Kearl was $52 million in the third quarter, compared to $56 million in the same quarter of 2016.

Net income effects from Corporate and Other were negative $35 million in the third quarter, compared to negative $29 million in the same period of 2016.

IMPERIAL OIL LIMITED

Nine months 2017 vs. nine months 2016

Net income in the first nine months of 2017 was $627 million, or $0.74per-share on a diluted basis versus net income of $721 million or $0.85 per-share in the first nine months of 2016.

Upstream recorded a net loss of $225 million in the first nine months of 2017, compared to a net loss of $764 million from the same period of 2016. Results reflected the impact of higher Canadian crude oil realizations of about $940 million and higher Kearl volumes of about $50 million. These impacts were partially offsetprimarily driven by higher royalties of about $150 million, lower Syncrude and conventional volumes of about $130 million, including the absence of production at Norman Wells, higher energy costsextreme cold weather, and reduced unplanned downtime as a result of the successful rollout of the winterization strategy.

Downstream
Net income (loss) factor analysis
millions of Canadian dollars
81

Margins – Higher margins primarily reflect improved market conditions.

Other – Improved volumes of about $90 million and higher operating expenses at Syncrudefavourable foreign exchange impacts of about $90$80 million.

West Texas Intermediate averaged US$49.40 per barrel


Refinery utilization and petroleum product sales
        First Quarter
thousands of barrels per day, unless noted2023 2022 
Refinery throughput417 399 
Refinery capacity utilization (percent)
96 93 
Petroleum product sales455 447 
Improved refinery throughput in the first nine monthsquarter of 2017, up from US$41.54 per barrel in the same period of 2016. Western Canada Select averaged US$37.57 per barrel and US$27.74 per barrel respectively for the same periods. The WTI / WCS differential narrowed to 24 percent in the first nine months of 2017, from 33 percent in the same period of 2016.

During the first nine months of 2017, the Canadian dollar strengthened relative to the US dollar versus the same period of 2016. The Canadian dollar averaged US$0.77 in the first nine months of 2017, an increase of about US$0.01 from the same period of 2016.

Imperial’s average Canadian dollar realizations for bitumen and synthetic crudes increased generally in line with the North American benchmarks, adjusted for changes in the exchange rate and transportation costs. Bitumen realizations averaged $37.82 per barrel for the first nine months of 2017, an increase of $14.05 per barrel versus the same period of 2016. Synthetic crude realizations averaged $64.37 per barrel, an increase of $10.92 per barrel from the same period of 2016.

Gross production of Cold Lake bitumen averaged 161,000 barrels per day in the first nine months of 2017, compared to 162,000 barrels per day from the same period of 2016.

Gross production of Kearl bitumen averaged 179,000 barrels per day in the first nine months of 2017 (127,000 barrels Imperial’s share) up from 169,000 barrels per day (120,000 barrels Imperial’s share) from the same period of 2016. Increased 2017 production reflects improved reliability associated with the mining and ore preparation operations.

During the first nine months of 2017, the company’s share of gross production from Syncrude averaged 56,000 barrels per day, compared to 61,000 barrels per day from the same period of 2016. Syncrude year to date production2023 was impacted by the March 2017 fire at the Syncrude Mildred Lake upgrader and planned maintenance. In 2016, production was impacted by the Alberta wildfires and planned maintenance.

Downstream net income was $750 million, compared to $1,393 million from the same period of 2016. Earnings decreased mainly due to the absence of a $719 million gain from the sale of company-owned retail sites and lower marketing margins of approximately $170 million associated with the impact of the retail divestment. These factors were partially offset by a gain of $151 million from the sale of a surplus property and higher industry refining margins of about $90 million.

Refinery throughput averaged 381,000 barrels per day in the first nine months of 2017, up from 351,000 barrels per day from the same period of 2016. Capacity utilization increased to 90 percent from 83 percent in the same period of 2016, reflecting reduced turnaround maintenance activity.

Petroleum product sales were 492,000 barrels per day in the first nine months of 2017, up from 481,000 barrels per day from the same period of 2016. Sales growth continues to beprimarily driven by strong collaboration across our downstream value chain and the expansionlower planned maintenance.

Chemicals
Net income (loss) factor analysis
millions of Imperial’s wholesale, industrial and commercial networks.

Chemical net income was $161 million, up from $160 million from the same period of 2016.

IMPERIAL OIL LIMITED

For the first nine months of 2017, net income effects from Canadian dollars

80

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IMPERIAL OIL LIMITED
Corporate and Other were negative $59 million, versus negative $68 million from the same period of 2016.

IMPERIAL OIL LIMITED

other

         First Quarter
millions of Canadian dollars2023 2022 
Net income (loss) (U.S. GAAP)
(5)(54)
Liquidity and capital resources

        First Quarter
millions of Canadian dollars2023 2022 
Cash flow generated from (used in):  
Operating activities(821)1,914 
Investing activities(414)(279)
Financing activities(271)(639)
Increase (decrease) in cash and cash equivalents(1,506)996 
Cash and cash equivalents at period end2,243 3,149 

Cash flow generated fromused in operating activities was $837 million in the third quarter, compared with $772 million in the corresponding period in 2016.

Investing activities used net cash of $234 million in the third quarter, compared with $1,005 million cash generated from investing activities in the same period of 2016, reflecting lower proceeds from asset sales.

Cash used in financing activities was $393 million in the third quarter, compared with $1,724 million in the third quarter of 2016, reflecting the absence of debt repayments. Dividends paid in the third quarter of 2017 were $136 million. Theper-share dividend paid in the third quarter was $0.16, up from $0.15 in the same period of 2016. In the second quarter of 2017, Imperial resumed share purchases under its share buyback program. During the third quarter, the company purchased about 6.7 million shares for approximately $250 million.

The company’s cash balance was $833 million at September 30, 2017, versus $248 million at the end of the third quarter of 2016.

Cash flow generated from operating activities was $1,683 million in the first nine months of 2017, compared with $1,264 million in 2016, reflecting higher earnings, excluding the impact of asset sales, partially offset byprimarily reflects unfavourable working capital effects.

Investing activitiesimpacts including, an income tax catch-up payment of $2.1 billion and lower Upstream realizations, partly offset by improved Downstream margins.


Cash flow used net cash of $454 million in the first nine months of 2017, compared with cash generated from investing activities of $350 million from the same period of 2016, reflecting lower proceeds from asset sales partially offset by lowerprimarily reflects higher additions to property, plant and equipment.


Cash flow used in financing activities was $787 million inprimarily reflects:
        First Quarter
millions of Canadian dollars, unless noted2023 2022 
Dividends paid266 185 
Per share dividend paid (dollars)
0.44 0.27 
Share repurchases (a)
— 449 
  Number of shares purchased (millions) (a)
— 8.9 
(a)The company did not purchase shares during the first quarter of 2023. In the first quarter of 2022, share repurchases were made under the company's normal course issuer bid program, and included shares purchased from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid.

Contractual obligations

In the first nine monthssecond quarter of 2017, compared with $1,569 million from the same period of 2016, reflecting the absence of debt repayments. Dividends paid in the first nine months of 2017 were $390 million. Theper-share dividend paid in the first nine months of 2017 was $0.46, up from $0.43 for the same period of 2016.

During the first nine months of 20172023, the company purchasedentered into a long-term purchase agreement with a third party for about 10 million shares for $377 million, including shares purchased from Exxon Mobil Corporation.

Recently issued accounting standards

In May 2014,$3billion. It has no impact on the Financial Accounting Standards Board (FASB) issued a new standard,Revenue from Contracts with Customers. The standard establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements2023 and expands disclosure requirements. The standard is required to be adopted beginning January 1, 2018.2024 obligations disclosed in Imperial's 2022 annual report on Form 10-K. The company expects to adoptdoes not believe that the standard using the modified retrospective method, under which prior years’ results are not restated, but supplemental information on the impact of the new standardincreased obligation will be included in the 2018 results. The impact from the standard is not expected to have a material effect on the company’sImperial's operations, financial statements.

In February 2016, the FASB issued a new standard, Leases. The standard requires all leases with an initial term greater than one year be recorded on the balance sheet as a lease asset and lease liability. The standard is required to be adopted beginning January 1, 2019. Imperial is evaluating the standard and its effect on the company’scondition or financial statements and plans to adopt it in 2019.

IMPERIAL OIL LIMITED

In March 2017, the FASB issued an Accounting Standards Update2017-07, Compensation – Retirement Benefits (Topic 715):Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The update requires that the service cost component of net benefit costs be reported in the same line in the income statement as other compensation costs and that the other components of net benefit costs be presented separately from the service cost component. Additionally, only the service cost component of net benefit costs will be eligible for capitalization. Imperial will adopt the update beginning January 1, 2018. As a result of Imperial’s adoption of the update, the company expects to add a new lineNon-service pension and other postretirement benefit expense to its consolidated statement of income. This line would reflect the other components of net benefit costs as described in the Accounting Standards Update and would include amounts that were previously included in Production and manufacturing expenses, and Selling and general expenses. As of January 1, 2018, these costs will no longer be considered for capitalization. The impact from this change on the company’s net income is not expected to be material. Furthermore, as part of the adoption of the update, the company expects it will include all of these costs in its Corporate and Other expenses.

statements.

20

IMPERIAL OIL LIMITED
Forward-looking statements


Statements in this report regardingof future events or conditions in this report, including projections, targets, expectations, estimates, and business plans are forward-looking statements. Forward-looking statements can be identified by words such as believe, anticipate, intend, propose, plan, goal, seek, project, predict, target, estimate, expect, strategy, outlook, schedule, future, continue, likely, may, should, will and similar references to future periods. Forward-looking statements in this release include, but are not limited to, references to the use of derivative instruments and effectiveness of risk mitigation; the company’s belief that the commitment related to long-term purchase agreement will not have a material adverse effect on the company.

Forward-looking statements are based on the company's current expectations, estimates, projections and assumptions at the time the statements are made. Actual future financial and operating results, including expectations and assumptions concerning demand growth and energy source, supply and mix; production rates, growth and mix; for shareholder returns, assumptions such as cash flow forecasts, financing sources and capital structure; project plans, timing, costs, technical evaluations and capacities and the company’s ability to effectively execute on these plans and operate its assets; capital and environmental expenditures; and commodity prices, foreign exchange rates and general market conditions could differ materially duedepending on a number of factors.

These factors include global, regional or local changes in supply and demand for oil, natural gas, and petroleum and petrochemical products and resulting price, differential and margin impacts, including foreign government action with respect to supply levels and prices, the impact of market conditions,COVID-19 on demand and the occurrence of wars; availability and allocation of capital; project management and schedules and timely completion of projects; unanticipated technical or operational difficulties; availability and performance of third-party service providers; environmental risks inherent in oil and gas exploration and production activities; political or regulatory events, including changes in law or governmental policy, changesgovernment policy; management effectiveness and disaster response preparedness; operational hazards and risks; cybersecurity incidents, including increased reliance on remote working arrangements; currency exchange rates; general economic conditions; and other factors discussed in operating conditionsItem 1A risk factors and costs, changes in project schedules, operatingItem 7 management’s discussion and analysis of financial condition and results of operations of Imperial Oil Limited’s most recent annual report on Form 10-K and subsequent interim reports.

Forward-looking statements are not guarantees of future performance demand forand involve a number of risks and uncertainties, some that are similar to other oil and gas commercial negotiationscompanies and some that are unique to Imperial. Imperial’s actual results may differ materially from those expressed or other technicalimplied by its forward-looking statements and economic factors.

IMPERIAL OIL LIMITED

readers are cautioned not to place undue reliance on them. Imperial undertakes no obligation to update any forward-looking statements contained herein, except as required by applicable law.

The term "project" as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.
21

IMPERIAL OIL LIMITED

Item 3. Quantitative and qualitative disclosures about market risk

Information about market risks for the nine months ended September 30, 2017, does not differ materially from that discussed on page 22 of the company’s annual report on Form10-K for the year ended December 31, 2016.

Information about market risks for the three months ended March 31, 2023, does not differ materially from that discussed on page 32 of the company’s annual report on Form 10-K for the year ended December 31, 2022.

Item 4. Controls and procedures

As indicated in the certifications in Exhibit 31 of this report, the company’s principal executive officer and principal financial officer have evaluated the company’s disclosure controls and procedures as of September 30, 2017.March 31, 2023. Based on that evaluation, these officers have concluded that the company’s 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 Commission’s rules and forms.

There has not been any change in the company’s internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

IMPERIAL OIL LIMITED

22

IMPERIAL OIL LIMITED
PART II. OTHER INFORMATION

Item 1. Legal proceedings
Imperial has elected to use a US $1 million threshold for disclosing environmental proceedings.

Item 2. Unregistered sales of equity securities and use of proceeds

Issuer purchases of equity securities

    

  Total number of
      shares purchased    

  

    Average price    
  paid per share    
(dollars)

  

Total number of
  shares purchased    
  as part of publicly    
  announced plans    
or programs

  

    Maximum number    
of shares that may
  yet be purchased  
under the plans or
programs(a)

July 2017

(Jul 1 – Jul 31)

  -  -  -  25,395,927

August 2017

(Aug 1 – Aug 31)

  3,876,648  36.42  3,876,648  21,519,279

September 2017

(Sept 1 – Sept 30)

  2,855,022  38.10  2,855,022      18,664,257 (b)
(a)On June 22, 2017, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid and will continue its existing share purchase program. The program enables the company to purchase up to a maximum
Total number of 25,395,927 common shares during the period June 27, 2017 to June 26, 2018, which includes
shares purchased
Average price paid
per share
(Canadian dollars)
Total number of
shares purchased
as part of publicly
announced plans
or programs
Maximum number
of shares that may
yet be purchased
under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the past, Exxon Mobil Corporation has advised the company that it intends to participate to maintain its ownership percentage at approximately 69.6 percent. The program will end should the company purchase the maximum allowable number of shares,plans or on June 26, 2018.
programs (a)
January 2023
(January 1 - January 31)————
February 2023
(February 1 - February 28)————
March 2023
(March 1 - March 31)————
(b)In its most recent quarterly earnings release,
(a)On June 27, 2022, the company stated that fourth quarter 2017 share purchases are anticipated to equal approximately $250 million. Purchase plans may be modified at any time without prior notice.

The company willannounced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid and to continue to evaluate its existing share purchase program. The program enabled the company to purchase up to a maximum of 31,833,809 common shares during the period June 29, 2022 to June 28, 2023. This maximum included shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. As in the contextpast, Exxon Mobil Corporation advised the company that it intended to participate to maintain its ownership percentage at approximately 69.6 percent. The program ended on October 21, 2022 as a result of its overall capital activities.

IMPERIAL OIL LIMITED

the company purchasing the maximum allowable number of shares under the program.

23

IMPERIAL OIL LIMITED
Item 6.Exhibits

Item 6. Exhibits
(31.1) Certification by the principal executive officer of the company pursuant to Rule13a-14(a).

(31.2) Certification by the principal financial officer of the company pursuant to Rule13a-14(a).

(32.1) Certification by the chief executive officer of the company pursuant to Rule13a-14(b) and 18 U.S.C. Section 1350.

(32.2) Certification by the chief financial officer of the company pursuant to Rule13a-14(b) and 18 U.S.C. Section 1350.

IMPERIAL OIL LIMITED

(101) Interactive Data Files (formatted as Inline XBRL).
(104) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
24

IMPERIAL OIL LIMITED
SIGNATURES

Pursuant to the requirements of theSecurities 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)

(Registrant)
Date:May 2, 2023/s/ Daniel E. Lyons
Date: October 31, 2017

/s/ Beverley A. Babcock

(Signature)
(Signature)Daniel E. Lyons
Beverley A. BabcockSenior vice-president, finance and
administration, and controller
Senior Vice-President, Finance and Administration and Controller
(Principal Accounting Officer)
(Principal accounting officer)
Date: October 31, 2017

Date:May 2, 2023/s/ Cathryn Walker

(Signature)(Signature)
Cathryn Walker
Assistant Corporate SecretaryAssistant corporate secretary

24

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