IMPERIAL OIL LIMITED

Table of contents

Page


PART I. FINANCIAL INFORMATION			3
Item 1. 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			7
Notes to the consolidated financial statements			8
Item 2. Management’s discussion and analysis of financial condition and results of operations			18 19
Item 3. Quantitative and qualitative disclosures about market risk			25 24
Item 4. Controls and procedures			25
24

PART II. OTHER INFORMATION			26 25
Item 1. Legal proceedings			26 25
~~Item 1A. Risk factors~~			26
Item 2. Unregistered sales of equity securities and use of proceeds			27 25
Item 6. Exhibits			28
26

SIGNATURES			27

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 Form

10-K

for the year ended December 31, ~~2019.~~2020. 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.

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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
2020
   2019
2020
2019
Revenues and other income

Revenues
(a)


5,937

   8,687

16,267

25,880
Investment and other income
(note 4)


18

   49

88

99
Total revenues and other income


5,955

   8,736

16,355

25,979
Expenses

Exploration


2

   4

6

42
Purchases of crude oil and products
(b)


3,634

   5,399

9,975

15,956
Production and manufacturing
(c)
(note 13)


1,246

   1,601

4,098

   4,911
Selling and general
(c)


150

   217

499

   666
Federal excise tax and fuel charge


470

   486

1,290

   1,343
Depreciation and depletion
(note 13)


409

   419

1,295

   1,201
Non-service
pension and postretirement benefit


31

   36

91

   108
Financing
(d) (note 7)


10

   20

46

   71
Total expenses


5,952

   8,182

17,300

   24,298
Income (loss) before income taxes


3

   554

(945
)

   1,681
Income taxes


0

   130

(234
)

   (248 )
Net income (loss)


3

   424

(711
)

   1,929
Per share information
(Canadian dollars)

Net income (loss) per common share - basic
(note 11)


0

   0.56

(0.97
)

   2.51
Net income (loss) per common share - diluted
(note 11)


0

   0.56

(0.97
)

   2.51
(a) Amounts from related parties included in revenues.


1,216

   2,313

3,699

   6,269
(b) Amounts to related parties included in purchases of crude oil and products.


627

   717

1,762

   2,353
(c) Amounts to related parties included in production and manufacturing, and selling and general expenses.


107

   157

428

   479
(d) Amounts to related parties included in financing, (note 7).


12

   23

50

   75


	Second Quarter					Six Months to June 30
millions of Canadian dollars	2021		2020			2021		2020
Revenues and other income
Revenues (a)		8,007		3,666			14,999		10,330
Investment and other income (note 3)		40		44			46		70
Total revenues and other income		8,047		3,710			15,045		10,400

Expenses
Exploration		2		3			4		4
Purchases of crude oil and products (b) (note 11)		4,867		2,115			8,754		6,341
Production and manufacturing (c)		1,569		1,273			3,054		2,852
Selling and general (c)		200		183			389		349
Federal excise tax and fuel charge		465		369			869		820
Depreciation and depletion (note 11)		450		413			944		886
Non-service pension and postretirement benefit		10		30			21		60
Financing (d) (note 5)		13		17			27		36
Total expenses		7,576		4,403			14,062		11,348

Income (loss) before income taxes		471		(693	)		983		(948	)

Income taxes		105		(167	)		225		(234	)

Net income (loss)		366		(526	)		758		(714	)

Per share information (Canadian dollars)

Net income (loss) per common share - basic (note 9)		0.51		(0.72	)		1.04		(0.97	)
Net income (loss) per common share - diluted (note 9)		0.50		(0.72	)		1.04		(0.97	)
(a) Amounts from related parties included in revenues.		1,405		747			2,913		2,483

(b) Amounts to related parties included in purchases of crude oil and products.		666		396			1,181		1,135

(c) Amounts to related parties included in production and manufacturing, and selling and general expenses.		106		138			222		321

(d) Amounts to related parties included in financing, (note 5).		10		14			21		38

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

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IMPERIAL OIL LIMITED

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

       Third Quarter    Nine Months
    to September 30
millions of Canadian dollars
2020
   2019
2020
2019
Net income (loss)


3

   424

(711
)
1,929
Other comprehensive income (loss), net of income taxes

Postretirement benefits liability adjustment (excluding amortization)


0

   0

(114
)
18
Amortization of postretirement benefits liability adjustment included in net periodic benefit costs


34

   28

102

83
Total other comprehensive income (loss)


34

   28

(12
)
101

Comprehensive income (loss)


37

   452    (723
)
2,030


	Second Quarter					Six Months to June 30
millions of Canadian dollars	2021		2020			2021		2020
Net income (loss)		366		(526	)		758		(714	)

Other comprehensive income (loss), net of income taxes
Postretirement benefits liability adjustment (excluding amortization)		0-		0-			54		(114	)
Amortization of postretirement benefits liability adjustment included in net periodic benefit costs		33		34			66		68
Total other comprehensive income (loss)		33		34			120		(46	)

Comprehensive income (loss)		399		(492	)		878		(760	)

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

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IMPERIAL OIL LIMITED

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

   As at
Sept 30 As at
Dec 31
millions of Canadian dollars
2020
2019
Assets

Current assets

Cash


817

   1,718
Accounts receivable, less estimated doubtful accounts
(a) (note 5)


1,732

   2,699
Inventories of crude oil and products


1,088

   1,296
Materials, supplies and prepaid expenses


764

   616
Total current assets


4,401

   6,329
Investments and long-term receivables
(b) (note 5)


771

   891
Property, plant and equipment,


55,463

   54,868
less accumulated depreciation and depletion


(21,881
)

   (20,665 )
Property, plant and equipment, net


33,582

   34,203
Goodwill
(note 13)


166

   186
Other assets, including intangibles, net


462

   578
Total assets


39,382

   42,187
Liabilities

Current liabilities

Notes and loans payable
(c)


227

   229
Accounts payable and accrued liabilities
(a) (note 9)


3,229

   4,260
Income taxes payable


0

   106
Total current liabilities


3,456

   4,595
Long-term debt
(d) (note 8)


4,962

   4,961
Other long-term obligations
(note 9)


3,713

   3,637
Deferred income tax liabilities


4,459

   4,718
Total liabilities


16,590

   17,911
Shareholders’ equity

Common shares at stated value
(e) (note 11)


1,357

   1,375
Earnings reinvested


23,358

   24,812
Accumulated other comprehensive income (loss)
(note 12)


(1,923
)

   (1,911 )
Total shareholders’ equity


22,792

   24,276
Total liabilities and shareholders’ equity


39,382

   42,187


	As at June 30			As at Dec 31
millions of Canadian dollars	2021			2020
Assets
Current assets
Cash		776			771
Accounts receivable - net (a)		3,163			1,919
Inventories of crude oil and products		1,213			1,161
Materials, supplies and prepaid expenses		722			673
Total current assets		5,874			4,524
Investments and long-term receivables (b)		748			781
Property, plant and equipment,		56,257			55,771
less accumulated depreciation and depletion		(24,664	)		(23,737	)
Property, plant and equipment, net		31,593			32,034
Goodwill (note 11)		166			166
Other assets, including intangibles - net		558			526
Total assets		38,939			38,031

Liabilities
Current liabilities
Notes and loans payable (c)		197			227
Accounts payable and accrued liabilities (a) (note 7)		4,411			3,153
Income taxes payable		42			0-
Total current liabilities		4,650			3,380
Long-term debt (d) (note 6)		5,065			4,957
Other long-term obligations (note 7)		4,061			4,100
Deferred income tax liabilities		4,394			4,176
Total liabilities		18,170			16,613

Shareholders’ equity
Common shares at stated value (e) (note 9)		1,302			1,357
Earnings reinvested		21,336			22,050
Accumulated other comprehensive income (loss) (note 10)		(1,869	)		(1,989	)
Total shareholders’ equity		20,769			21,418

Total liabilities and shareholders’ equity		38,939			38,031

(a)	Accounts receivable ~~less estimated doubtful accounts~~- net included net amounts receivable from related parties of ~~$240~~$582 million ~~(2019~~(2020 - ~~$1,007~~$384 million).

(b)	Investments and long-term receivables included amounts from related parties of ~~$313~~$301 million ~~(2019~~(2020 - ~~$296~~$313 million).

(c)	Notes and loans payable included amounts to related parties of ~~$111~~$75 million ~~(2019~~(2020 - $111 million).

(d)	Long-term debt included amounts to related parties of $4,447 million ~~(2019~~(2020 - $4,447 million).

(e)	Number of common shares authorized and outstanding were 1,100 million and ~~734~~705 million, respectively ~~(2019~~(2020 - 1,100 million and ~~744~~734 million, respectively).

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

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IMPERIAL OIL LIMITED

Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)

Third Quarter


Nine Months


to September 30

millions of Canadian dollars
2020
2019
2020
2019
Common shares at stated value
(note 11)

At beginning of period


1,357

   1,410

1,375

   1,446
Share purchases at stated value


0

   (19 )

(18
)

   (55 )
At end of period


1,357

   1,391

1,357

   1,391
Earnings reinvested

At beginning of period


23,516

   25,056

24,812

   24,560
Net income (loss) for the period


3

   424

(711
)

   1,929
Share purchases in excess of stated value


0

   (324 )

(256
)

   (1,017 )
Dividends declared


(161
)

   (166 )

(485
)

   (482 )
Cumulative effect of accounting change
(note 5)


-

   -

(2
)

   -
At end of period


23,358

   24,990

23,358

   24,990
Accumulated other comprehensive income (loss)
(note 12)

At beginning of period


(1,957
)

   (1,444 )

(1,911
)

   (1,517 )
Other comprehensive income (loss)


34

   28

(12
)

   101
At end of period


(1,923
)

   (1,416 )

(1,923
)

   (1,416 )
Shareholders’ equity at end of period


22,792

   24,965

22,792

   24,965


	Second Quarter						Six Months to June 30
millions of Canadian dollars	2021			2020			2021			2020
Common shares at stated value (note 9)
At beginning of period		1,357			1,357			1,357			1,375
Share purchases at stated value		(55	)		0-			(55	)		(18	)
At end of period		1,302			1,357			1,302			1,357

Earnings reinvested
At beginning of period		22,281			24,204			22,050			24,812
Net income (loss) for the period		366			(526	)		758			(714	)
Share purchases in excess of stated value		(1,116	)		0-			(1,116	)		(256	)
Dividends declared		(195	)		(162	)		(356	)		(324	)
Cumulative effect of accounting change		0-			-			0-			(2	)
At end of period		21,336			23,516			21,336			23,516

Accumulated other comprehensive income (loss) (note 10)
At beginning of period		(1,902	)		(1,991	)		(1,989	)		(1,911	)
Other comprehensive income (loss)		33			34			120			(46	)
At end of period		(1,869	)		(1,957	)		(1,869	)		(1,957	)

Shareholders’ equity at end of period		20,769			22,916			20,769			22,916

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

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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
2020
2019
2020
2019
Operating activities

Net income (loss)


3

   424

(711
)

   1,929
Adjustments for
non-cash
items:

Depreciation and depletion


409

   419

1,275

   1,201
Impairment of intangible assets
(note 13)


0

   0

20

   0
(Gain) loss on asset sales
(note 4)


(11
)

   (28 )

(28
)

   (34 )
Deferred income taxes and other


(11
)

   116

(210
)

   (359 )
Changes in operating assets and liabilities:

Accounts receivable


134

   250

967

   (355 )
Inventories, materials, supplies and prepaid expenses


142

   264

60

   243
Income taxes payable


0

   8

(106
)

   (29 )
Accounts payable and accrued liabilities


66

   (82 )

(1,008
)

   646
All other items - net
(b)


143

   5

223

   163
Cash flows from (used in) operating activities


875

   1,376

482

   3,405
Investing activities

Additions to property, plant and equipment


(142
)

   (417 )

(657
)

   (1,242 )
Proceeds from asset sales
(note 4)


19

   30

68

   66
Loans to equity companies - net


(2
)

   (26 )

(16
)

   (129 )
Cash flows from (used in) investing activities


(125
)

   (413 )

(605
)

   (1,305 )
Financing activities

Reduction in finance lease obligations
(note 8)


(4
)

   (7 )

(16
)

   (20 )
Dividends paid


(162
)

   (169 )

(488
)

   (465 )
Common shares purchased
(note 11)


0

   (343 )

(274
)

   (1,072 )
Cash flows from (used in) financing activities


(166
)

   (519 )

(778
)

   (1,557 )
Increase (decrease) in cash


584

   444

(901
)

   543
Cash at beginning of period


233

   1,087

1,718

   988
Cash at end of period
(a)


817

   1,531

817

   1,531
(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 when purchased.

(b)

Included contributions to registered pension plans.


(59
)

   (57 )

(159
)

   (155 )
Income taxes (paid) refunded.


107

   35

(45
)

   84
Interest (paid), net of capitalization.*

(10
)

   (20 )

(46
)

   (71 )


Inflow ( o utflow)	Second Quarter						Six Months to June 30
millions of Canadian dollars	2021			2020			2021			2020
Operating activities
Net income (loss)		366			(526	)		758			(714	)
Adjustments for non-cash items:
Depreciation and depletion		450			413			944			866
Impairment of intangible assets (note 11)		0-			0-			-			20
(Gain) loss on asset sales (note 3)		(24	)		(10	)		(27	)		(17	)
Inventory write-down to current market value (note 11)		0-			(281	)		0-			0-
Deferred income taxes and other		76			(242	)		136			(199	)
Changes in operating assets and liabilities:
Accounts receivable		(775	)		(310	)		(1,244	)		833
Inventories, materials, supplies and prepaid expenses		58			117			(101	)		(82	)
Income taxes payable		21			(2	)		42			(106	)
Accounts payable and accrued liabilities		655			(46	)		1,239			(1,074	)
All other items - net (b)		25			71			150			80
Cash flows from (used in) operating activities		852			(816	)		1,897			(393	)

Investing activities
Additions to property, plant and equipment		(241	)		(205	)		(408	)		(515	)
Proceeds from asset sales (note 3)		35			40			42			49
Loans to equity companies - net		(1	)		(7	)		12			(14	)
Cash flows from (used in) investing activities		(207	)		(172	)		(354	)		(480	)

Financing activities
Short-term debt - net		0			0			(36	)		0
Reduction in finance lease obligations (note 6)		(4	)		(5	)		(8	)		(12	)
Dividends paid		(161	)		(162	)		(323	)		(326	)
Common shares purchased (note 9)		(1,171	)		0			(1,171	)		(274	)
Cash flows from (used in) financing activities		(1,336	)		(167	)		(1,538	)		(612	)

Increase (decrease) in cash		(691	)		(1,155	)		5			(1,485	)
Cash at beginning of period		1,467			1,388			771			1,718
Cash at end of period (a)		776			233			776			233

*Note: restated 2019

(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 when purchased.


(b) Included contributions to registered pension plans.			(42	)			(41	)			(70	)			(100	)



Income taxes (paid) refunded.	27		1		28		(152	)
Interest (paid), net of capitalization.	(14	)	(17	)	(27	)	(36	)

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

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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 (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 ~~2019~~2020 annual report on Form

10-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.

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

The results for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, 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 changes~~

~~Effective January 1, 2020, Imperial adopted the Financial Accounting Standards Board’s update,~~

~~Financial Instruments - Credit Losses (Topic 326)~~

, as amended. The standard requires a valuation allowance for credit losses be recognized for certain financial assets that reflects the current expected credit loss over the asset’s contractual life. The valuation allowance considers the risk of loss, even if remote and considers past events, current conditions and expectations of the future. The standard did not have a material impact on the company’s financial statements.

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IMPERIAL OIL LIMITED

3.2. Business segments

Third Quarter
Upstream

Downstream

Chemical
millions of Canadian dollars
2020

   2019


2020
   2019
2020
   2019
Revenues and other income

Revenues
(a)

1,651
   2,185
4,061
   6,266
225
   236
Intersegment sales

658
   913
321
   314
43
   61
Investment and other income
(note 4)

(6)
   7
24
   32
0
   1

2,303
   3,105
4,406
   6,612
268
   298
Expenses

Exploration

2
   4
-
   -
-
   -
Purchases of crude oil and products

1,176
   1,376
3,322
   5,142
157
   167
Production and manufacturing
(note 13)

863
   1,087
335
   460
48
   54
Selling and general

-
   -
140
   191
23
   23
Federal excise tax and fuel charge

-
   -
470
   486
-
   -
Depreciation and depletion
(note 13)

361
   364
37
   45
5
   4
Non-service pension and postretirement benefit

-
   -
-
   -
-
   -
Financing
(note 7)

-
   -
-
   -
-
   -
Total expenses

2,402
   2,831
4,304
   6,324
233
   248
Income (loss) before income taxes

(99)
   274
102
   288
35
   50
Income taxes

(25)
   65
25
   67
8
   12
Net income (loss)

(74)
   209
77
   221
27
   38
Cash flows from (used in) operating activities

526
   392
333
   900
32
   75
Capital and exploration expenditures
(b)

78
   302
50
   124
4
   4


Third Quarter	Corporate and other		Eliminations		Consolidated
Second Quarter							Upstream		Downstream		Chemical
millions of Canadian dollars	2020	2019	2020	2019	2020	2019	2021	2020	2021	2020	2021	2020
Revenues and other income
Revenues (a)	-	-	-	-	5,937	8,687	2,616	908	5,015	2,587	376	171
Intersegment sales	-	-	(1,022)	(1,288)	-	-	1,312	262	788	124	79	27
Investment and other income (note 4)	0	9	-	-	18	49
Investment and other income (note 3)							6	10	28	27	1	1
	0	9	(1,022)	(1,288)	5,955	8,736	3,934	1,180	5,831	2,738	456	199
Expenses
Exploration	-	-	-	-	2	4	2	3	0-	0-	0-	0-
Purchases of crude oil and products	-	-	(1,021)	(1,286)	3,634	5,399
Production and manufacturing (note 13)	-	-	-	-	1,246	1,601
Purchases of crude oil and products (note 11)							2,044	512	4,760	1,896	240	119
Production and manufacturing							1,166	884	357	343	46	46
Selling and general	(12)	5	(1)	(2)	150	217	0-	0-	142	135	22	21
Federal excise tax and fuel charge	-	-	-	-	470	486	0-	0-	465	369	0-	0-
Depreciation and depletion (note 13)	6	6	-	-	409	419
Depreciation and depletion (note 11)							399	363	39	40	5	4
Non-service pension and postretirement benefit	31	36	-	-	31	36	0-	0-	0-	0-	0-	0-
Financing (note 7)	10	20	-	-	10	20
Financing (note 5)							0-	0-	0-	0-	0-	0-
Total expenses	35	67	(1,022)	(1,288)	5,952	8,182	3,611	1,762	5,763	2,783	313	190
Income (loss) before income taxes	(35)	(58)	-	-	3	554	323	(582)	68	(45)	143	9
Income taxes	(8)	(14)	-	-	-	130	76	(138)	8	(13)	34	2
Net income (loss)	(27)	(44)	-	-	3	424	247	(444)	60	(32)	109	7
Cash flows from (used in) operating activities	(16)	9	0	0	875	1,376	595	(968)	136	88	111	46
Capital and exploration expenditures (b)	9	12	0	0	141	442	130	145	120	51	2	2

Second Quarter							Corporate and other		Eliminations		Consolidated
millions of Canadian dollars							2021	2020	2021	2020	2021	2020
Revenues and other income
Revenues (a)							0-	0-	0-	0-	8,007	3,666
Intersegment sales							0-	0-	(2,179)	(413)	0-	0-
Investment and other income (note 3)							5	6	0-	0-	40	44
							5	6	(2,179)	(413)	8,047	3,710
Expenses
Exploration							0-	0-	0-	0-	2	3
Purchases of crude oil and products (note 11)							0-	0-	(2,177)	(412)	4,867	2,115
Production and manufacturing							0-	0-	0-	0-	1,569	1,273
Selling and general							38	28	(2)	(1)	200	183
Federal excise tax and fuel charge							0-	0-	0-	0-	465	369
Depreciation and depletion (note 11)							7	6	0-	0-	450	413
Non-service pension and postretirement benefit							10	30	0-	0-	10	30
Financing (note 5)							13	17	0-	0-	13	17
Total expenses							68	81	(2,179)	(413)	7,576	4,403
Income (loss) before income taxes							(63)	(75)	0-	0-	471	(693)
Income taxes							(13)	(18)	0-	0-	105	(167)
Net income (loss)							(50)	(57)	0-	0-	366	(526)
Cash flows from (used in) operating activities							10	1	0-	17	852	(816)
Capital and exploration expenditures (b)							7	9	0-	0-	259	207

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IMPERIAL OIL LIMITED

(a)	Included export sales to the United States of ~~$1,227~~$1,544 million ~~(2019~~(2020 - ~~$1,807~~$739 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 finance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.

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IMPERIAL OIL LIMITED

Nine Months to September 30    Upstream            Downstream           Chemical
millions of Canadian dollars
2020
   2019
2020
   2019
2020
   2019
Revenues and other income

Revenues
(a)

4,211
   7,012
11,444
   18,115
612
   753
Intersegment sales

1,642
   2,977
1,013
   1,249
114
   181
Investment and other income
(note 4)

4
   11
66
   61
1
   1

5,857
   10,000
12,523
   19,425
727
   935
Expenses

Exploration

6
   42
-
   -
-
   -
Purchases of crude oil and products

3,338
   4,764
8,987
   15,062
416
   531
Production and manufacturing
(note 13)

2,855
   3,414
1,086
   1,315
157
   182
Selling and general

-
   -
456
   571
69
   67
Federal excise tax and fuel charge

-
   -
1,290
   1,343
-
   -
Depreciation and depletion
(note 13)

1,141
   1,036
123
   137
13
   11
Non-service
pension and postretirement benefit

-
   -
-
   -
-
   -
Financing
(note 7)

-
   -
-
   -
-
   -
Total expenses

7,340
   9,256
11,942
   18,428
655
   791
Income (loss) before income taxes

(1,483)
   744
581
   997
72
   144
Income tax expense (benefit)

(357)
   (508)
134
   261
17
   34
Net income (loss)

(1,126)
   1,252
447
   736
55
   110
Cash flows from (used in) operating activities

22
   1,257
443
   2,055
75
   175
Capital and exploration expenditures
(b)

454
   975
177
   364
15
   27
Total assets as at September
30
(note 13)

32,941
   35,066
4,590
   4,433
417
   423


Nine Months to September 30	Corporate and other		Eliminations		Consolidated
Six Months to June 30							Upstream		Downstream		Chemical
millions of Canadian dollars	2020	2019	2020	2019	2020	2019	2021	2020	2021	2020	2021	2020
Revenues and other income
Revenues (a)	-	-	-	-	16,267	25,880	4,758	2,560	9,542	7,383	699	387
Intersegment sales	-	-	(2,769)	(4,407)	-	-	2,663	984	1,561	692	132	71
Investment and other income (note 4)	17	26	-	-	88	99
Investment and other income (note 3)							6	10	33	42	1	1
	17	26	(2,769)	(4,407)	16,355	25,979	7,427	3,554	11,136	8,117	832	459
Expenses
Exploration	-	-	-	-	6	42	4	4	0-	0-	0-	0-
Purchases of crude oil and products	-	-	(2,766)	(4,401)	9,975	15,956
Production and manufacturing (note 13)	-	-	-	-	4,098	4,911
Purchases of crude oil and products (note 11)							3,878	2,162	8,780	5,665	449	259
Production and manufacturing							2,275	1,992	683	751	96	109
Selling and general	(23)	34	(3)	(6)	499	666	0-	0-	275	316	47	46
Federal excise tax and fuel charge	-	-	-	-	1,290	1,343	0-	0-	869	820	0-	0-
Depreciation and depletion (note 13)	18	17	-	-	1,295	1,201
Depreciation and depletion (note 11)							844	780	78	86	9	8
Non-service pension and postretirement benefit	91	108	-	-	91	108	0-	0-	0-	0-	0-	0-
Financing (note 7)	46	71	-	-	46	71
Financing (note 5)							1	0-	0-	0-	0-	0-
Total expenses	132	230	(2,769)	(4,407)	17,300	24,298	7,002	4,938	10,685	7,638	601	422
Income (loss) before income taxes	(115)	(204)	-	-	(945)	1,681	425	(1,384)	451	479	231	37
Income tax expense (benefit)	(28)	(35)	-	-	(234)	(248)	99	(332)	99	109	55	9
Net income (loss)	(87)	(169)	-	-	(711)	1,929	326	(1,052)	352	370	176	28
Cash flows from (used in) operating activities	(58)	(82 )	0	0	482	3,405	1,126	(504)	598	110	173	43
Capital and exploration expenditures (b)	33	34	0	0	679	1,400	215	376	188	127	4	11
Total assets as at September 30 (note 13)	1,679	2,298	(245)	(313)	39,382	41,907
Total assets as at June 30 (note 11)							31,931	33,591	5,352	4,683	481	404

Six Months to June 30							Corporate and other		Eliminations		Consolidated
millions of Canadian dollars							2021	2020	2021	2020	2021	2020
Revenues and other income
Revenues (a)							0-	0-	0-	0-	14,999	10,330
Intersegment sales							0-	0-	(4,356)	(1,747)	0-	0-
Investment and other income (note 3)							6	17	0-	0-	46	70
							6	17	(4,356)	(1,747)	15,045	10,400
Expenses
Exploration							0-	0-	0-	0-	4	4
Purchases of crude oil and products (note 11)							0-	0-	(4,353)	(1,745)	8,754	6,341
Production and manufacturing							0-	0-	0-	0-	3,054	2,852
Selling and general							70	(11)	(3)	(2)	389	349
Federal excise tax and fuel charge							0-	0-	0-	0-	869	820
Depreciation and depletion (note 11)							13	12	0-	0-	944	886
Non-service pension and postretirement benefit							21	60	0-	0-	21	60
Financing (note 5)							26	36	0-	0-	27	36
Total expenses							130	97	(4,356)	(1,747)	14,062	11,348
Income (loss) before income taxes							(124)	(80)	0-	0-	983	(948)
Income tax expense (benefit)							(28)	(20)	0	0	225	(234)
Net income (loss)							(96)	(60)	0-	0-	758	(714)
Cash flows from (used in) operating activities							0-	(42)	0-	0-	1,897	(393)
Capital and exploration expenditures (b)							15	24	0-	0-	422	538
Total assets as at June 30 (note 11)							1,606	1,088	(431)	(266)	38,939	39,500

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IMPERIAL OIL LIMITED

(a)	Included export sales to the United States of ~~$3,339~~$3,113 million ~~(2019~~(2020 - ~~$5,623~~$2,112 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 finance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.

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IMPERIAL OIL LIMITED

4.3. Investment and other income

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


	Third Quarter				Nine Months to September 30				Second Quarter				Six Months to June 30
millions of Canadian dollars	2020		2019		2020		2019		2021		2020		2021		2020
Proceeds from asset sales		19		30		68		66		35		40		42		49
Book value of asset sales		8		2		40		32		11		30		15		32
Gain (loss) on asset sales, before tax		11		28		28		34		24		10		27		17
Gain (loss) on asset sales, after tax		10		25		25		31		22		9		24		15

~~5. Allowance for current expected credit loss (CECL)~~4. Employee retirement benefits

~~Effective January 1, 2020, the company adopted the Financial Accounting Standards Board’s update,~~

~~Financial Instruments – Credit Losses (Topic 326),~~

as amended. The standard requires a valuation allowance for credit losses be recognized for certain financial assets that reflects the current expected credit loss over the asset’s contractual life. The valuation allowance considers the risk of loss, even if remote, and considers past events, current conditions and reasonable and supportable forecasts. The standard requires this expected loss methodology for trade receivables, certain other financial assets and

~~off-balance-sheet~~

~~credit exposures. The cumulative effect adjustment related to the adoption of this standard reduced “Earnings reinvested” in Shareholders’ equity by $2 million.~~

The company is exposed to credit losses primarily through sales of petroleum products, crude oil, natural gas liquids and natural gas, as well as loans to equity companies and joint venture receivables. A counterparty’s ability to pay is assessed through a credit review process that considers payment terms, the counterparty’s established credit rating or the company’s assessment of the counterparty’s credit worthiness, contract terms, and other risks. The company can require prepayment or collateral to mitigate certain credit risks.

The ~~company groups financial assets into portfolios that share similar risk characteristics for purposes~~components of ~~determining the allowance for credit losses. Each reporting period,~~net benefit cost were as follows:


	Second Quarter						Six Months to June 30
millions of Canadian dollars	2021			2020			2021			2020
Pension benefits:
Current service cost		81			77			162			153
Interest cost		68			77			136			154
Expected return on plan assets		(107	)		(98	)		(214	)		(196	)
Amortization of prior service cost		4			3			8			7
Amortization of actuarial loss (gain)		36			39			72			77
Net periodic benefit cost		82			98			164			195

Other postretirement benefits:
Current service cost		7			6			14			12
Interest cost		5			6			11			12
Amortization of actuarial loss (gain)		4			3			8			6
Net periodic benefit cost		16			15			33			30

5. Financing costs


	Second Quarter						Six Months to June 30
millions of Canadian dollars	2021			2020			2021			2020
Debt-related interest		20			26			41			60
Capitalized interest		(7	)		(9	)		(15	)		(24	)
Net interest expense		13			17			26			36
Other interest		0			0			1			0
Total financing		13			17			27			36

In May 2021, the company ~~assesses whether a significant change in~~extended the maturity date of two of its existing committed short-term lines of credit ~~loss or risk has occurred. Among~~to May 2023, totalling $750 million. In June 2021, the ~~quantitative and qualitative factors considered are historical financial data, current conditions, industry and country risk, current~~ company extended the maturity date of one of its existing $300 million committed short-term lines of credit ratings and the quality of third-party guarantees secured from the counterparty. Financial assets are written off in whole, or in part, when practical recovery efforts have been exhausted and no reasonable expectation of recovery exists. Subsequent recoveries of amounts previously written off are recognized in earnings. The company manages receivable portfolios using past due balances as a key credit quality indicator.

~~The company recognizes a credit allowance for~~

~~off-balance-sheet~~

~~credit exposures as a liability on the balance sheet, separate from the allowance for credit losses related~~ to ~~recognized financial assets. These exposures could include unfunded loans to equity companies and financial guarantees that cannot be cancelled unilaterally by the company.~~

~~In 2020, the~~

~~COVID-19~~

~~pandemic spread rapidly through most areas of the world resulting in economic uncertainty, global financial market volatility, and negative effects in the credit markets.~~June 2022. The company has ~~considered these effects, along with the significantly lower balances~~not drawn on any of ~~trade receivables at the end of the quarter, in~~ its ~~estimate of credit losses and concluded no material adjustment to credit allowances in the quarter was required. At September 30, 2020, the company’s evaluation of financial assets under~~

~~Financial Instruments – Credit Losses (Topic 326)~~

~~, as amended included $1,400~~$1,300 million of ~~accounts receivable, net of allowances of $4 million, and investments and long-term receivables of $327 million. The company has determined that, at this time, 0~~available credit ~~allowance is required for investments and long-term receivables, and for~~

~~off-balance-sheet~~facilities.

~~credit exposures.~~

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IMPERIAL OIL LIMITED

6. ~~Employee retirement benefits~~

~~The components of net benefit cost were as follows:~~

    Third Quarter

    Nine Months
     to September 30

millions of Canadian dollars
2020
   2019
2020
   2019
Pension benefits:

Current service cost


76

   57

229

   171
Interest cost


77

   81

231

   243
Expected return on plan assets


(97
)

   (87 )

(293
)

   (262 )
Amortization of prior service cost


4

   0

11

   0
Amortization of actuarial loss (gain)


38

   37

115

   112
Net periodic benefit cost


98

   88

293

   264
Other postretirement benefits:

Current service cost


6

   4

18

   12
Interest cost


6

   5

18

   16
Amortization of actuarial loss (gain)


3

   0

9

   (1 )
Net periodic benefit cost


15

   9

45

   27

~~7. Financing costs~~

       Third Quarter

    Nine Months
     to September 30

millions of Canadian dollars
2020
   2019
2020
   2019
Debt-related interest


19

   32

79

   105
Capitalized interest


(9
)

   (12 )

(33
)

   (34 )
Net interest expense


10

   20

46

   71
Other interest


0

   0

0

   0
Total financing


10

   20

46

   71

During the second quarter of 2020, in addition to existing credit facilities of $500 million, the company entered into a $500 million committed short-term line of credit to May 2021, and a $300 million committed short-term line of credit to June 2021. The company has not drawn on any of its credit facilities.

8. Long-term debt

   As at
Sept 30    As at
Dec 31
millions of Canadian dollars
2020
   2019
Long-term debt


4,447

   4,447
Finance leases


515

   514
Total long-term debt


4,962

   4,961

~~Table of Contents~~


millions of Canadian dollars	As at June 30 2021		As at Dec 31 2020
Long-term debt	4,447		4,447
Finance leases		618		510
Total long-term debt		5,065		4,957

~~IMPERIAL OIL LIMITED~~

7. Other long-term obligations

~~9. Other long-term obligation~~

   As at    As at
   Sept 30    Dec 31
millions of Canadian dollars
2020
   2019
Employee retirement benefits
(a)


1,965

   1,822
Asset retirement obligations and other environmental liabilities
(b)


1,388

   1,388
Share-based incentive compensation liabilities


33

   65
Operating lease liability
(c)


95

   143
Other obligations


232

   219
Total other long-term obligations


3,713

   3,637


millions of Canadian dollars	As at June 30 2021		As at Dec 31 2020
Employee retirement benefits (a)		2,023		2,105
Asset retirement obligations and other environmental liabilities (b)		1,699		1,676
Share-based incentive compensation liabilities		84		45
Operating lease liability (c)		96		95
Other obligations		159		179
Total other long-term obligations		4,061		4,100

(a)	Total recorded employee retirement benefits obligations also included $58 million in current liabilities ~~(2019~~(2020 - $58 million).

(b)	Total asset retirement obligations and other environmental liabilities also included ~~$124~~$100 million in current liabilities ~~(2019~~(2020 - ~~$124~~$100 million).

(c)

Total operating lease liability also included ~~$95~~$82 million in current liabilities ~~(2019~~(2020 - ~~$115~~$97 million). In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled ~~$27~~$4 million ~~(2019~~(2020 - $6$27 million).

~~10.~~

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IMPERIAL OIL LIMITED

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 ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, the fair value of long-term debt ($4,447 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 the Upstream, Downstream and Chemical businesses 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 derivative instruments to manage commodity price risk. 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.

At September 30, 2020, the carrying values of derivative instruments on the Consolidated balance sheet were gross assets of $2 million, gross liabilities of $3 million and collateral receivable of $6 million, with the net effects reflected in “Accounts receivable, less estimated doubtful accounts” on the Consolidated balance sheet. At December 31, 2019 the carrying values of derivative instruments on the Consolidated balance sheet were gross assets of $0 million, gross liabilities of $2 million and collateral receivable of $6 million.

~~At September 30, 2020, the~~The net notional ~~forward long /~~ long/(short) position of derivative instruments ~~was 200,000 barrels for crude and~~

(

~~780,000~~

)

~~barrels for products. At December 31, 2019, the net notional forward long / (short) position of derivative instruments was~~

(

~~590,000~~

)

~~barrels for crude and 0 barrels for products.~~was:


(thousands of barrels)	As at June 30 2021			As at Dec 31 2020
Crude		(710	)		(800	)
Products		(160	)		(390	)

Realized and unrealized gain or (loss) on

derivative

instruments

recognized onin the Consolidated statement of income is included in the following lines on a

before-tax

basis:


	Third Quarter				Nine Months to September 30						Second Quarter						Six Months to June 30
millions of Canadian dollars	2020		2019		2020			2019			2021			2020			2021			2020
Revenues		1		0		(7	)		(2	)		(9	)		(9	)		(9	)		(8	)
Purchases of crude oil and products		0		1		(18	)		(5	)		(19	)		(52	)		(33	)		(18	)
Total		1		1		(25	)		(7	)		(28	)		(61	)		(42	)		(26	)

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IMPERIAL OIL LIMITED

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

~~11.~~


millions of Canadian dollars
At June 30, 2021
	Fair value								Effect of counterparty netting			Effect of collateral netting			Net carrying value
	Level 1		Level 2		Level 3		Total		Effect of counterparty netting			Effect of collateral netting			Net carrying value
Assets
Derivative assets (a)		6		0-		0-		6		(6	)		0-			-

Liabilities
Derivative liabilities (b)		8		0-		0-		8		(6	)		(2	)		-

(a)	Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”.

(b)	Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities”.


millions of Canadian dollars
At December 31, 2020
	Fair value								Effect of counterparty netting			Effect of collateral netting			Net carrying value
	Level 1		Level 2		Level 3		Total		Effect of counterparty netting			Effect of collateral netting			Net carrying value
Assets
Derivative assets (a)		2		0-		0-		2		(2	)		0-			-

Liabilities
Derivative liabilities (b)		12		0-		0-		12		(2	)		(10	)		-

(a)	Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”.

(b)	Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities”.

At June 30, 2021 and December 31, 2020, respectively, the company had $8 million and $5 million of collateral under a master netting arrangement not offset against the derivatives on the Consolidated balance sheet in “Accounts receivable - net”, primarily related to initial margin requirements.

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IMPERIAL OIL LIMITED

9. Common shares

thousands of shares
As of
Sept 30
2020

As of
Dec 31
2019

Authorized


1,100,000

   1,100,000
Common shares outstanding


734,077

   743,902


thousands of shares	As of June 30 2021		As of Dec 31 2020
Authorized		1,100,000		1,100,000
Common shares outstanding		704,578		734,077

The

12-month

limited normal course issuer bid program that was in place throughout the second quarter of 2021 came into effect on June 29, 2020 and was amended on April 30, 2021. The program enabled the company to purchase up to a maximum of 29,363,070 common shares (4 percent of the total shares on June 15, 2020), which included shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. Exxon Mobil Corporation participated to maintain its ownership percentage at approximately 69.6 percent.

The current

12-month

~~limited~~ normal course issuer bid program came into effect on June 29, ~~2020 and is used primarily to eliminate dilution from shares issued in conjunction with Imperial’s restricted stock unit plan.~~2021, under which Imperial will continue its existing share purchase program. The program enables the company to purchase up to a maximum of ~~50,000~~35,583,671 common shares (5 percent of the total shares on June 15, 2021) 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 excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of earnings reinvested.

The company’s common share activities are

summarized

below:


	Thousands of shares			Millions of dollars			Thousands of shares			Millions of dollars
Balance as at December 31, 2018		782,565			1,446
Issued under employee share-based awards		1			0
Purchases at stated value		(38,664	)		(71	)
Balance as at December 31, 2019		743,902			1,375			743,902			1,375
Issued under employee share-based awards		0			0			7			0-
Purchases at stated value		(9,825	)		(18	)		(9,832	)		(18	)
Balance as at September 30, 2020		734,077			1,357
Balance as at December 31, 2020								734,077			1,357
Issued under employee share-based awards								0-			0-
Purchases at stated value								(29,499	)		(55	)
Balance as at June 30, 2021								704,578			1,302

The following table provides the calculation of basic and diluted

earnings

per common share and the dividends declared by the company on its outstanding common shares:

       Third Quarter        Nine Months
    to September 30


    2020
       2019
    2020
       2019
Net income (loss) per common share - basic

Net income (loss)
(millions of Canadian dollars)


3
   424

(711
)

   1,929
Weighted average number of common shares outstanding
(millions of shares)


734.1
   757.8

735.7

   767.6
Net income (loss) per common share
(dollars)


0
   0.56

(0.97
)

   2.51
Net income (loss) per common share - diluted

Net income (loss)
(millions of Canadian dollars)


3
   424

(711
)

   1,929
Weighted average number of common shares outstanding
(millions of shares)


734.1
   757.8

735.7

   767.6
Effect of employee share-based awards
(millions of shares) (a)


2.2
   2.5

0

   2.4
Weighted average number of common shares outstanding, assuming dilution
(millions of shares)


736.3
   760.3

735.7

   770.0
Net income (loss) per common share
(dollars)


0
   0.56

(0.97
)

   2.51
Dividends per common share - declared
(dollars)


0.22
   0.22

0.66

   0.63


	Second Quarter					Six Months to June 30
	2021		2020			2021		2020
Net income (loss) per common share - basic
Net income (loss) (millions of Canadian dollars)		366		(526	)		758		(714	)
Weighted average number of common shares outstanding (millions of shares)		724.1		734.1			729.1		736.5
Net income (loss) per common share (dollars)		0.51		(0.72	)		1.04		(0.97	)

Net income (loss) per common share - diluted
Net income (loss) (millions of Canadian dollars)		366		(526	)		758		(714	)
Weighted average number of common shares outstanding (millions of shares)		724.1		734.1			729.1		736.5
Effect of employee share-based awards (millions of shares) (a)		1.7		0-			1.7		0-
Weighted average number of common shares outstanding, assuming dilution (millions of shares)		725.8		734.1			730.8		736.5
Net income (loss) per common share (dollars)		0.50		(0.72	)		1.04		(0.97	)

Dividends per common share - declared (dollars)		0.27		0.22			0.49		0.44

(a)	For ~~Nine~~Second Quarter 2020 and Six Months to ~~September~~June 30, 2020, the Net income (loss) per common share – diluted excludes the effect of ~~2.1~~2.0 million employee share-based awards. Share-based awards have the potential to dilute basic earnings per share in the future.

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~~12.~~10. Other comprehensive income (loss) information

Changes in accumulated other comprehensive income (loss):


millions of Canadian dollars	2020			2019			2021			2020
Balance at January 1		(1,911	)		(1,517	)		(1,989	)		(1,911	)
Postretirement benefits liability adjustment:
Current period change excluding amounts reclassified from accumulated other comprehensive income		(114	)		18			54			(114	)
Amounts reclassified from accumulated other comprehensive income		102			83			66			68
Balance at September 30		(1,923	)		(1,416	)
Balance at June 30								(1,869	)		(1,957	)

Amounts reclassified out of accumulated other comprehensive income (loss) -

before-tax

income (expense):


	Third Quarter					Nine Months to September 30					Second Quarter						Six Months to June 30
millions of Canadian dollars	2020		2019			2020		2019			2021			2020			2021			2020
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost (a)		(45)		(37	)		(135)		(111	)		(44	)		(45	)		(88	)		(90	)

~~(a) This accumulated other comprehensive income component is included in the computation of net periodic benefit cost, (note 6)~~

(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					Second Quarter				Six Months to June 30
millions of Canadian dollars	2020		2019		2020			2019		2021		2020		2021		2020
Postretirement benefits liability adjustments:
Postretirement benefits liability adjustment (excluding amortization)		0		0		(37	)		7		0-		0-		17		(37	)
Amortization of postretirement benefits liability adjustment included in net periodic benefit cost		11		9		33			28		11		11		22		22
Total		11		9		(4	)		35		11		11		39		(15	)

~~13.~~11. Miscellaneous financial information

At March 31, 2021, due to the termination of transportation services agreements related to a third-party pipeline project, the company recognized a liability of $62 million, previously reported as a contingent liability in Note 10 of Imperial’s Form

10-K.

In connection with the same project, commitments under “Other long-term purchase agreements” as reported in Imperial’s Form

10-K

decreased by approximately $2.9 billion. The majority of these commitments related to years 2026 and beyond.

In the first quarter of 2020, a

non-cash

charge of $281 million after tax (Upstream - $229 million; Downstream - $52 million) was recorded associated with the carrying value of crude oil inventory exceeding the current market value. In the second quarter of 2020, the Government of Canada implemented the Canada Emergency Wage Subsidy (CEWS) as part of its COVID-19 Economic Response Plan. The program’s intent is to help sustain employment levels by providing expense relief to companies during the pandemic. The company qualified for these wage subsidies which are recognized throughout the year when received. The relief provided under this program, about $120 million (before tax) year-to-date, including the company’s proportionate share of a joint venture, is recognized as a reduction to expense and is included in the Consolidated statement of income, primarily as part of “Production and manufacturing”.first quarter’s temporary

non-cash

inventory charge was reversed.

~~As disclosed in Imperial’s 2019 Form~~

~~10-K,~~

~~goodwill is tested for impairment annually or more frequently if events or circumstances indicate it might be impaired.~~ In the first quarter of 2020, with the change in economic conditions and the reduction in the company’s market capitalization, the company assessed its goodwill balances for impairment and recognized a

non-cash

goodwill impairment charge of $20 million in the company’s Upstream segment. The goodwill impairment is reflected in “Depreciation and depletion” on the Consolidated statement of income and “Goodwill” on the Consolidated balance sheet. The remaining balance of goodwill is associated with the Downstream segment.

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IMPERIAL OIL LIMITED

Item 2.

Management’s discussion and analysis of financial condition and results of operations

~~Current economic conditions~~

Operating results

In early 2020, the balance of supply and demand for petroleum and petrochemical products experienced two significant disruptive effects. On the demand side, the

COVID-19

pandemic spread rapidly ~~across Canada and~~through most areas of the world resulting in substantial reductions in consumer and business activity and significantly reduced ~~local and global~~ demand for crude oil, natural gas, and petroleum products. This reduction in demand coincided with announcements of increased production in certain key

oil-producing

countries which led to increases in inventory levels and sharp declines in prices for crude oil, natural gas, and petroleum products. ~~Throughout~~

Through 2021, demand for petroleum and petrochemical products has continued to improve leading to stronger prices and margins across all segments. Some lingering effects of the ~~second and third quarters, the effects of~~

~~COVID-19~~

weak 2020 business environment continued to have a negative impact on the world’s major economies and demand for the company’s products, and market conditions continue to reflect considerable uncertainty. In Canada, consumer and business activity has exhibited some degree of recovery, but remains lower when compared to prior periods as a result of the pandemic. Despite actions taken by key

~~oil-producing~~

countries to reduce oversupply in the near-term, and improved credit market conditions providing sufficient liquidity to credit-worthy companies, the unfavourable economic impacts appear increasingly likely to persist to some extent well into 2021.

In late March, the company announced significant reductions in 2020 capital and operating expense spending plans. Capital and exploration expenditures in 2020 are now expected to be about $900 million, below the company’s earlier guidance of $1.1 billion to $1.2 billion. In addition,

~~year-to-date~~

~~production and manufacturing expenses are $813 million lower than the prior year, enabling the company to already surpass the full-year expense reduction target of $500 million.~~

~~The effect of~~

~~COVID-19~~

~~and the current business environment on supply and demand patterns has negatively impacted Imperial’s~~ financial ~~and operating~~ results in the first ~~nine months~~half of ~~2020. Industry conditions seen thus far in 2020 have led~~2021 when compared to ~~lower realized prices for~~periods prior to the company’s products and have resulted in substantially lower earnings and operating cash flow throughout 2020 in comparison to 2019. In response to these conditions, the company operated certain assets at reduced rates in the second and third quarters of 2020.pandemic. The company ~~advanced~~continues to closely monitor industry and ~~extended planned maintenance and turnaround activities throughout~~global economic conditions, including recovery from the

COVID-19

pandemic.

Second quarter 2021 vs. second ~~and third quarters~~quarter 2020

The company recorded net income of $366 million or $0.50 per share on a diluted basis in ~~an effort to reduce~~

~~on-site~~

staffing levels and to better balance production with demand. The turnaround activities at Kearl and Syncrude were completed in the third quarter. Refinery utilization rates and petroleum product sales were reduced through the second quarter of ~~2020, but improved~~2021, compared to a net loss of $526 million or $0.72 per share in the ~~third~~same period of 2020. Second quarter ~~due to improved product demands. There have been signs~~2020 results included a reversal of ~~economic recovery, however,~~ the ~~length and severity~~

non-cash

inventory revaluation charge of ~~decreased demand due to~~

~~COVID-19~~

~~and the current business environment are highly uncertain, with the future supply and demand patterns inherently difficult to predict.~~

The company has reviewed its near-term spending reductions, near-term production impacts and expected near-term price levels to determine whether they put its long-lived assets at risk for impairment. Despite the challenging near-term environment, the company’s view of long-term supply and demand fundamentals has not changed significantly. However, the company continues to assess its strategic plans and longer-term price views, taking into account current and developing industry and economic conditions and continued market uncertainty, as part of its annual planning process, targeted for required Board of Directors review$281 million recorded in the ~~fourth quarter. Depending on the outcome~~first quarter of ~~the planning process, including,~~2020.

Upstream recorded net income of $247 million in ~~particular, any significant future changes in the company’s strategic plans or longer-term price views, a portion of the company’s long-lived assets could be at risk for impairment.~~

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~~IMPERIAL OIL LIMITED~~

~~As disclosed in Imperial’s 2019 Form~~

~~10-K,~~

~~low crude oil and natural gas prices can impact the company’s estimates of proved reserves as reported under U.S. Securities and Exchange Commission (SEC) rules. Imperial’s average~~

~~year-to-date~~

~~realizations for crude oil have been significantly affected by low prices since the end of the first quarter. Similar to downward revisions of proved bitumen reserves at~~

~~year-end~~

~~2016 that resulted from low prices, if average prices remain near current levels, under the SEC definition of proved reserves, certain quantities that qualified as proved reserves at~~

~~year-end~~

~~2019, primarily proved bitumen reserves at Kearl (totalling approximately 60 percent of the company’s 3.5 billion~~

~~oil-equivalent~~

~~barrels of net proved reserves), will not qualify as proved reserves at~~

~~year-end~~

2020. Proved reserves estimates can be impacted by a number of factors including completion and optimization of development projects, reservoir performance, regulatory approvals, government policies, consumer preferences, changes in the amount and timing of capital investments, royalty framework, and significant changes in long-term oil and gas price levels. The company does not expect the operation of the underlying projects or its outlook for future production volumes to be affected by a possible downward revision of reported proved reserves under the SEC definition.

In the second quarter of ~~2020, Canadian federal~~2021, compared to a net loss of $444 million in the same period of 2020. Improved results reflect higher realizations of about $1,100 million and ~~provincial governments introduced plans and programs to support business and economic activities in response~~higher volumes of about $280 million. These items were partially offset by the absence of the prior year reversal of the

non-cash

charge of $229 million related to the ~~disruptive impacts from the~~

~~COVID-19~~

~~pandemic. The Government of Canada implemented the Canada Emergency Wage Subsidy (CEWS) as part of its~~

~~COVID-19~~

Economic Response Plan, and has recently announced its intent to extend the CEWS until June 2021. The company received wage subsidies under this program and, if eligible, intends to continue to apply for these wage subsidies. Additionally, the Government of Alberta announced its Recovery Plan, including a proposed accelerationrevaluation of the ~~Alberta corporate income tax rate decrease originally legislated~~company’s inventory, higher operating expenses of about $230 million, higher royalties of about $200 million and unfavourable foreign exchange impacts of about $50 million.

West Texas Intermediate (WTI) averaged US$66.17 per barrel in ~~2019. If enacted,~~ the ~~Alberta corporate income tax rate would be reduced to eight percent beginning July 1, 2020, compared with a previously legislated reduction to eight percent beginning January 1, 2022.~~second quarter of 2021, up from US$27.83 per barrel in the same quarter of 2020. Western Canada Select (WCS) averaged US$54.64 per barrel and US$16.73 per barrel for the same periods. The ~~proposed corporate income tax rate change is not expected to have a significant impact on~~WTI / WCS differential averaged approximately US$12 per barrel for the ~~company’s financial statements.~~second quarter of 2021, up from around US$11 in the same period of 2020.

The ~~company has taken steps,~~Canadian dollar averaged US$0.81 in the second quarter of 2021, an increase of US$0.09 from the second quarter of 2020.

Imperial’s average Canadian dollar realizations for bitumen increased in the quarter, primarily due to an increase in WCS. Bitumen realizations averaged $57.26 per barrel in the second quarter of 2021, up from $12.82 per barrel in the second quarter of 2020. The company’s average Canadian dollar realizations for synthetic crude increased generally in line with ~~federal~~WTI, adjusted for changes in exchange rates and ~~provincial guidelines~~transportation costs. Synthetic crude realizations averaged $80.80 per barrel in the second quarter of 2021, up from $32.20 per barrel in the same period of 2020.

Total gross production of Kearl bitumen averaged 255,000 barrels per day in the second quarter (181,000 barrels Imperial’s share), up from 190,000 barrels per day (135,000 barrels Imperial’s share) in the second quarter of 2020. Higher production was mainly due to the absence of prior year production balancing with market demands, partially offset by impacts associated with planned turnaround activities.

Gross production of Cold Lake bitumen averaged 142,000 barrels per day in the second quarter, up from 123,000 barrels per day in the same period of 2020. Higher production was primarily due to improved reliability and ~~restrictions, to limit the spread of~~

~~COVID-19~~lower scheduled downtime.

among employees, contractors and the broader community, while also maintaining operations to ensure reliable supply of products to customers as a provider of essential services. The company maintains robust business continuity plans, which have been activated to minimize the impact of

~~COVID-19~~

~~on workforce productivity.~~

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IMPERIAL OIL LIMITED

~~Operating results~~

~~Third quarter 2020 vs. third quarter 2019~~

The company recorded net income of $3 million or $0.00 per share on a diluted basis in the third quarter of 2020, compared to net income of $424 million or $0.56 per share in the same period of 2019.

Upstream recorded a net loss of $74 million in the third quarter of 2020, compared to net income of $209 million in the same period of 2019. Results were negatively impacted by lower realizations of about $490 million and lower volumes of about $110 million. These items were partially offset by lower royalties of about $150 million and lower operating expenses of about $130 million.

West Texas Intermediate (WTI) averaged US$40.93 per barrel in the third quarter of 2020, down from US$56.44 per barrel in the same quarter of 2019. Western Canada Select (WCS) averaged US$31.81 per barrel and US$44.21 per barrel for the same periods. The WTI / WCS differential averaged approximately US$9 per barrel for the third quarter of 2020, compared to around US$12 in the same period of 2019.

~~The Canadian dollar averaged US$0.75 in the third quarter of 2020, a decrease of US$0.01 from the third quarter of 2019.~~

Imperial’s average Canadian dollar realizations for bitumen decreased in the quarter, primarily due to a decrease in WCS. Bitumen realizations averaged $35.95 per barrel in the third quarter of 2020, compared to $51.12 per barrel in the third quarter of 2019. The company’s average Canadian dollar realizations for synthetic crude decreased generally in line with WTI, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $50.79 per barrel in the third quarter of 2020, compared to $77.27 per barrel in the same period of 2019.

Total gross production of Kearl bitumen averaged 189,000 barrels per day in the third quarter (134,000 barrels Imperial’s share), compared to 224,000 barrels per day (159,000 barrels Imperial’s share) in the third quarter of 2019. Lower production was due to the advancement and extension of a planned turnaround at the site and a third-party pipeline outage.

Gross production of Cold Lake bitumen averaged 131,000 barrels per day in the third quarter, compared to 142,000 barrels per day in the same period of 2019. Lower production was mainly due to production timing associated with steam management.

The company’s share of gross production from Syncrude averaged ~~67,000~~47,000 barrels per day, compared to ~~69,000~~50,000 barrels per day in the ~~third~~second quarter of ~~2019.~~2020. Lower production was primarily associated with planned turnaround activities, partially offset by the absence of prior year production balancing with market demands.

Downstream recorded net income of ~~$77~~$60 million in the ~~third~~second quarter of ~~2020,~~2021, compared to a net ~~income~~loss of ~~$221~~$32 million in the same period of ~~2019. Results were negatively impacted by lower~~2020. Improved results reflect higher margins of about ~~$230~~$200 million, ~~and lower sales volumes of about $70 million. These items were~~partially offset by ~~lower operating expenses~~unfavourable foreign exchange impacts of about $70 million and ~~improved reliability of about $50 million, primarily related to~~ the absence of the ~~Sarnia fractionation tower incident which occurred in April 2019.~~prior year reversal of the

non-cash

charge of $52 million related to the revaluation of the company’s inventory.

Refinery throughput averaged ~~341,000~~332,000 barrels per day, ~~compared to 363,000~~up from 278,000 barrels per day in the ~~third~~second quarter of ~~2019.~~2020. Capacity utilization was 8178 percent, ~~compared to 86~~up from 66 percent in the ~~third~~second quarter of ~~2019. Reduced~~2020. Higher throughput was ~~due to lower market demand,~~driven by reduced impacts associated with the

COVID-19

pandemic, partially offset by ~~reduced~~a planned ~~maintenance.~~

turnaround at Strathcona.

Petroleum product sales were ~~449,000~~429,000 barrels per day, ~~compared to 488,000~~up from 357,000 barrels per day in the ~~third~~second quarter of ~~2019. Lower~~2020. Improved petroleum product sales were mainly due to reduced ~~demand from~~impacts associated with the

COVID-19

pandemic.

Chemical net income was ~~$27~~$109 million in the ~~third~~second quarter, ~~compared to $38~~up from net income of $7 million in the same quarter of ~~2019.~~2020, primarily due to higher polyethylene margins.

Corporate and other expenses were ~~$27~~$50 million in the ~~third~~second quarter, compared to ~~$44~~$57 million in the same period of ~~2019.~~2020.

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IMPERIAL OIL LIMITED

~~Nine~~Six months ~~2020~~2021 vs. ~~nine~~six months ~~2019~~2020

Net ~~loss~~income in the first ~~nine~~six months of ~~2020~~2021 was ~~$711~~$758 million, or ~~$0.97~~$1.04 per share on a diluted basis, compared to a net ~~income~~loss of ~~$1,929~~$714 million or ~~$2.51~~$0.97 per share in the first ~~nine~~six months of ~~2019. Current year results include a favourable impact of about $90 million~~

~~after-tax,~~2020.

~~associated with the Canada Emergency Wage Subsidy (CEWS), which includes Imperial’s proportionate share of a joint venture.~~

~~Year-to-date~~

~~2019 results included a favourable impact of $662 million associated with the Alberta corporate income tax rate decrease.~~

Upstream recorded a net ~~loss~~income of ~~$1,126~~$326 million for the first ~~nine~~six months of the year, compared to a net ~~income~~loss of ~~$1,252~~$1,052 million in ~~the same period of 2019. Results were negatively impacted by lower~~2020. Improved results reflect higher realizations of about ~~$2,330~~$1,810 million ~~absence of a favourable impact of $689 million associated with the Alberta corporate income tax rate decrease in 2019,~~ and ~~lower~~higher volumes of about ~~$300~~$280 million. These items were partially offset by ~~lower~~higher royalties of about ~~$460~~$300 million, ~~lower~~higher operating expenses of about ~~$320~~$290 million, ~~favourable~~and unfavourable foreign exchange impacts of about $120 ~~million and about $60 million associated with the CEWS received by the company which includes Imperial’s proportionate share of a joint venture.~~million.

West Texas Intermediate averaged US$~~38.10~~62.22 per barrel in the first ~~nine~~six months of ~~2020, down~~2021, up from US$~~57.10~~36.66 per barrel in ~~the same period of 2019.~~2020. Western Canada Select averaged US$~~24.72~~50.14 per barrel and US$~~45.32~~21.20 per barrel for the same periods. The WTI / WCS differential ~~widened~~narrowed to ~~average~~ approximately US$1312 per barrel in the first ~~nine~~six months of ~~2020,~~2021, from around US$1215 per barrel in the same period of ~~2019.~~2020.

The Canadian dollar averaged US$~~0.74~~0.80 in the first ~~nine~~six months of ~~2020, a decrease~~2021, an increase of US$~~0.01~~0.07 from ~~the same period in 2019.~~2020.

Imperial’s average Canadian dollar realizations for bitumen ~~decreased~~increased in the first ~~nine~~six months of ~~2020~~2021 primarily due to ~~a decrease~~an increase in WCS. Bitumen realizations averaged ~~$22.24~~$52.45 per barrel, ~~compared to $52.44~~up from $15.54 per barrel ~~from~~in the same period ~~in 2019.~~of 2020. The company’s average Canadian dollar realizations for synthetic crude ~~decreased~~increased generally in line with WTI, ~~in the first nine months of 2020,~~ adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged ~~$49.06~~$72.42 per barrel, ~~compared to $74.59~~up from $48.10 per barrel ~~from~~in the same period ~~in 2019.~~of 2020.

Total gross production of Kearl bitumen averaged ~~202,000~~253,000 barrels per day in the first ~~nine~~six months of ~~2020 (143,000~~2021 (180,000 barrels Imperial’s share), ~~down~~up from ~~204,000~~208,000 barrels per day ~~(145,000~~(147,000 barrels Imperial’s share) in the same period of ~~2019. Lower~~2020. Higher production was mainly due to the absence of prior year production balancing ~~of near-term production~~ with ~~demand through the advancement and extension of planned turnaround activities and a third-party pipeline outage,~~market demands, partially offset by ~~the addition of supplemental crushing facilities in 2020.~~impacts associated with planned turnaround activities.

Gross production of Cold Lake bitumen averaged ~~131,000~~141,000 barrels per day in the first ~~nine~~six months of ~~2020, compared to 141,000~~2021, up from 131,000 barrels per day in the same period of ~~2019. Lower~~2020. Higher production was ~~mainly~~primarily due to ~~production timing associated with steam management.~~improved reliability.

During the first ~~nine~~six months of ~~2020,~~2021, the company’s share of gross production from Syncrude averaged 63,000 barrels per day, ~~compared to 76,000~~up from 61,000 barrels per day in the same period of ~~2019. Lower~~2020. Higher production was ~~mainly due to~~primarily associated with the absence of prior year production balancing ~~of near term production~~ with ~~demand.~~market demands and unplanned downtime, partially offset by planned turnaround activities.

Downstream net income was ~~$447~~$352 million for the first six months of the year, compared to ~~$736~~$370 million in the same period of ~~2019.~~2020. Results were negatively impacted by ~~lower~~unfavourable foreign exchange impacts of about $120 million, partially offset by higher margins of about ~~$460~~$50 million and lower sales volumes of about $220 million. These items were offset by improved reliability of $200 million, primarily due to the absence of the Sarnia fractionation tower incident which occurred in April 2019, lower operating expenses of ~~$140 million and lower turnaround costs of $70 million primarily related to reduced turnaround activity in the current year.~~about $50 million.

Refinery throughput averaged ~~334,000~~348,000 barrels per day in the first ~~nine~~six months of ~~2020, compared to 363,000~~2021, up from 330,000 barrels per day in the same period of ~~2019.~~2020. Capacity utilization was 7981 percent, ~~compared to 86~~up from 78 percent in the same period of ~~2019. Lower~~2020. Higher throughput was ~~primarily due to~~driven by reduced ~~demand from~~impacts associated with the

COVID-19

pandemic, partially offset by ~~the absence of impacts from the Sarnia fractionation tower incident which occurred in April 2019.~~

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~~IMPERIAL OIL LIMITED~~

a planned turnaround at Strathcona.

Petroleum product sales were ~~423,000~~421,000 barrels per day in the first ~~nine~~six months of ~~2020, compared to 481,000~~2021, up from 409,000 barrels per day in the same period of ~~2019. Lower~~2020. Improved petroleum product sales were mainly due to reduced ~~demand resulting from~~impacts associated with the

COVID-19

pandemic.

Chemical net income was ~~$55~~$176 million in the first ~~nine~~six months of ~~2020, compared to $110~~2021, up from $28 million in the same period of ~~2019. Results were negatively impacted by lower margins of about $60 million.~~2020, primarily due to higher polyethylene margins.

Corporate and other expenses were ~~$87~~$96 million in the first ~~nine~~six months of ~~2020, compared to $169~~2021, up from $60 million in the same period of ~~2019,~~2020, mainly due to ~~lower~~higher share-based compensation costs.

2221

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IMPERIAL OIL LIMITED

Liquidity and capital resources

Cash flow generated from operating activities was ~~$875~~$852 million in the ~~third~~second quarter, compared with cash flow ~~generated from~~used in operating activities of ~~$1,376~~$816 million in the corresponding period in ~~2019,~~2020, primarily reflecting ~~lower~~higher Upstream realizations ~~in the Upstream~~ and ~~lower margins in the Downstream.~~favourable working capital impacts.

Investing activities used net cash of ~~$125~~$207 million in the ~~third~~second quarter, compared with ~~$413~~$172 million used in the same period of ~~2019,~~2020.

Cash used in financing activities was $1,336 million in the second quarter, compared with $167 million used in the second quarter of 2020. Dividends paid in the second quarter of 2021 were $161 million. The per share dividend paid in the second quarter was $0.22, consistent with the same period of 2020. During the second quarter, the company, under its share purchase program, purchased about 29.5 million shares for $1,171 million, including shares purchased from ExxonMobil Corporation. In the second quarter of 2020, the company did not purchase any shares under its share purchase program.

The company’s cash balance was $776 million at June 30, 2021, versus $233 million at the end of second quarter 2020.

In May 2021, the company extended the maturity date of two of its existing committed short-term lines of credit to May 2023, totalling $750 million. In June 2021, the company extended the maturity date of one of its existing $300 million committed short-term lines of credit to June 2022. The company has not drawn on any of its $1,300 million of available credit facilities.

Cash flow generated from operating activities was $1,897 million in the first six months of 2021, compared to cash flow used in operating activities of $393 million in the same period of 2020, primarily reflecting higher Upstream realizations and favourable working capital impacts.

Investing activities used net cash of $354 million in the first six months of 2021, compared to $480 million used in the same period of 2020, primarily reflecting lower additions to property, plant and equipment.

Cash used in financing activities was $166 million in the third quarter, compared with $519 million used in the third quarter of 2019. Dividends paid in the third quarter of 2020 were $162 million. The per share dividend paid in the third quarter was $0.22, consistent with $0.22 in the same period of 2019. The company did not purchase shares during the third quarter. In the third quarter of 2019, the company purchased about 9.8 million shares for $343 million, including shares purchased from Exxon Mobil Corporation.

~~The company’s cash balance was $817 million at September 30, 2020, versus $1,531 million at the end of third quarter 2019.~~

~~Cash flow generated from operating activities was $482~~$1,538 million in the first ~~nine~~six months of ~~2020, compared with cash flow generated~~2021, up from ~~operating activities of $3,405 million in the same period of 2019, primarily reflecting lower realizations in the Upstream and unfavourable working capital impacts.~~

~~Investing activities used net cash of $605 million in the first nine months of 2020, compared with $1,305~~$612 million used in the same period of ~~2019, primarily reflecting lower additions to property, plant and equipment.~~

~~Cash used in financing activities was $778 million in the first nine months of 2020, compared with $1,557 million used in the same period of 2019.~~2020. Dividends paid in the first ~~nine~~six months of ~~2020~~2021 were ~~$488~~$323 million. The per share dividend paid in the first ~~nine~~six months of ~~2020~~2021 was ~~$0.66, up from $0.60~~$0.44, consistent with in the same period of ~~2019.~~2020. During the first ~~nine~~six months of ~~2020,~~2021, the company, under its share purchase program, purchased about 29.5 million shares for $1,171 million. In the first six months of 2020, the company purchased about 9.8 million shares for $274 million. In

At March 31, 2021, due to the ~~first nine months~~termination of ~~2019,~~transportation services agreements related to a third-party pipeline project, the company ~~purchased about 29.6~~recognized a liability of $62 million, ~~shares for $1,072 million.~~previously reported as a contingent liability in Note 10 of Imperial’s Form

10-K.

In connection with the same project, commitments under “Other long-term purchase agreements” as reported in Imperial’s Form

10-K

decreased by approximately $2.9 billion. The majority of these commitments related to years 2026 and beyond.

~~During the second quarter of 2020, in addition to existing credit facilities of $500 million,~~On April 30, 2021, the company ~~entered into~~announced an amendment to its normal course issuer bid to increase the number of common shares that were available to be purchased. Under the amendment, the number of common shares available for purchase increased to a ~~$500 million committed short-term line~~maximum of ~~credit to May 2021, and a $300 million committed short-term line of credit~~29,363,070 common shares during the period June 29, 2020 to June 28, 2021. ~~The company has not drawn on any of its credit facilities.~~

On June 23, ~~2020,~~2021, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a ~~limited~~new normal course issuer ~~bid.~~bid and will continue its existing share purchase program. The program ~~is used primarily to eliminate dilution from shares issued in conjunction with Imperial’s restricted stock unit plan, and~~ enables the company to purchase up to a maximum of ~~50,000~~35,583,671 common shares during the period June 29, ~~2020~~2021 to June 28, ~~2021.~~2022. This maximum 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 program will end should the company purchase the maximum allowable number of shares, or on June 28, ~~2021.~~2022.

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IMPERIAL OIL LIMITED

Forward-looking statements

Statements of 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; ~~market uncertainty~~earnings sensitivities; and plans for purchases under the ~~extent and length of ongoing effects of the~~

~~COVID-19~~

pandemic on economic activity; previously announced expense reduction target and the adjusted expected full year capital expenditures of about $900 million for 2020; the company’s view of long-term supply and demand fundamentals; the impacts of future reductions in long-term price outlooks, including impairment of long-lived assets; the impact of current low oil and natural gas prices on proved reserves under SEC rules, including the possible downward revision of proved bitumen reserves; the intention to continue applying for the Canada Emergency Wage Subsidy; the impact of the Government of Alberta acceleration of corporate income tax rate decrease; and the impact of measures implemented in response to

~~COVID-19.~~amended share purchase program.

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; commodity prices, foreign exchange rates and general market conditions; production rates, growth and mix; project plans, timing, costs, technical evaluations and capacities and the company’s ability to effectively execute on these plans and operate its assets; progression of

COVID-19

and its impacts on Imperial’s ability to operate its assets, including the possible shutdown of facilities due to

COVID-19

outbreaks; the company’s ability to effectively execute on its business continuity plans and pandemic response activities; the ability of the company to achieve cost savings and adjust maintenance work; the performance of third-party service providers, including diluent supply by pipeline to Kearl; the adoption and impact of new facilities or technologies, including on reductions to greenhouse gas emissions intensity; refinery utilization and product sales; applicable laws and government policies, including production curtailment and restrictions in response to

~~COVID-19;~~

~~financing sources and capital structure, including the ability to issue long-term debt;~~ and capital and environmental expenditures could differ materially depending 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 and the impact of

COVID-19

on demand; ~~general economic conditions; availability and allocation of capital; currency exchange rates; transportation for accessing markets;~~ political or regulatory events, including changes in law or government policy such as tax laws, production curtailment and actions in response to

COVID-19;

~~availability and performance of third-party service providers, including in light of restrictions related to~~

~~COVID-19;~~

management effectiveness and disaster response preparedness, including business continuity plans in response to

COVID-19;

~~environmental risks inherent in oil and gas exploration and production activities; environmental regulation, including climate change and greenhouse gas regulation and changes to such regulation;~~ unanticipated technical or operational difficulties; project management and schedules and timely completion of projects; the receipt, in a timely manner, of regulatory and third-party approvals; the results of research programs and new technologies, and ability to bring new technologies to commercial scale on a cost-competitive basis; operational hazards and risks; ~~cybersecurity incidents, including increased reliance on remote working arrangements~~availability and ~~activation~~allocation of ~~business continuity plans due to~~

~~COVID-19;~~

capital; currency exchange rates; general economic conditions; and other factors discussed in Item 1A risk factors and Item 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 on Form~~

~~10-Q.~~10-K.

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

2423

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IMPERIAL OIL LIMITED

Item 3.

Quantitative and qualitative disclosures about market risk

Information about market risks for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, does not differ materially from that discussed on page 2732 of the company’s annual report on Form

10-K

for the year ended December 31, ~~2019 and on page 26 of~~2020. The following table details those earnings sensitivities that have been updated from the ~~Form~~fiscal

~~10-Q~~year-end

~~for the quarter ended June 30, 2020.~~to reflect current market conditions.

Earnings Sensitivities

(a)

(a)	Each sensitivity calculation shows the impact on net income resulting from a change in one factor, after tax and royalties and holding all other factors constant. These sensitivities have been updated to reflect current conditions. They may not apply proportionately to larger fluctuations.

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~~June 30, ~~2020.~~2021. 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.

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IMPERIAL OIL LIMITED

PART II. OTHER INFORMATION

Item 1.

Legal proceedings

On October 20, 2020, Imperial was issued a Notice of Intention to Issue an Environmental Penalty Order by the Ontario Ministry of the Environment, Conservation and Parks under the Ontario Environmental Protection Act, R.S.O. 1990, c. E.19. The Notice of Intention contains 10 alleged contraventions at Imperial’s refinery in Sarnia, Ontario for discharging more than 225 kilograms of sulphur dioxide in a

~~24-hour~~

period from acid combustion equipment between July, 2019 and October, 2019, pursuant to section 5(1) of Ontario Regulation 530/18 Air Pollution – Discharge of Sulphur Dioxide from Petroleum Facilities. The Notice of Intention proposes a total administrative penalty amount of $977,145, and is subject to possible reductions upon review. Imperial is evaluating the possibility of an appeal of a final environmental penalty order.

~~Item 1A.~~

~~Risk factors~~

~~The risk factors that are discussed in Item 1A of the company’s annual report on Form~~

~~10-K~~

Imperial has elected to use a $1 million threshold for the year ended December 31, 2019 reference risk factors related to commodity supply and demand, and public health. These risk factors encompass, among other things, production oversupply, as a result of increased production in key producing countries as well as demand reduction due to the

~~COVID-19~~

~~pandemic that was characterized as a global pandemic in March, 2020, and have led to volatility in commodity prices.~~

~~As a result of~~

~~COVID-19,~~

~~governments in many countries have mandated quarantines, closures,~~

~~stay-at-home~~

~~orders and travel restrictions that have had a significant impact on demand for the company’s products. While these effects are expected to be temporary, a resurgence of cases of~~

~~COVID-19~~

~~leads to a highly uncertain business environment. Although there has been some movement toward~~

~~pre-pandemic~~

activity levels, the duration of the business disruptions internationally and related financial impact cannot be reasonably estimated at this time and continued or new restrictions could continue to impact the demand for products.

Imperial’s future business results, including cash flows and financing needs, will be affected by the extent and duration of these conditions and the effectiveness of responsive actions that the company and others take, including our actions to reduce capital and operating expenses and government actions to address the

~~COVID-19~~

~~pandemic. The impact of~~

~~COVID-19~~

could also have an effect on the financial markets and result in an increase to the cost of capital due to risk. The company’s results will also be affected by any resulting negative impacts on national and global economies and markets from a prolonged decrease of economic activity.

~~The company has had positive~~

~~COVID-19~~

cases at its operating sites that have not had a material impact on its operations or business. However, if the company’s mitigation and response efforts prove insufficient, large outbreaks of epidemics, pandemics or other health crises such as

~~COVID-19~~

at operating sites, particularly in remote locations and where work camps are utilized, could impact the company’s personnel and its operations. The company could also be impacted by disruption to supply chains, methods of distribution and key third-party service providers, which could impact the ability to produce or sell its products, as well as increasing the costs associated with its operations and decreasing revenues and margins.

The company has initiated numerous emergency response and business continuity plans, and a substantial portion of the company’s workforce has implemented remote working arrangements. If the company is not able to effectively operate and manage through these plans and alternative arrangements, the negative impacts could include reduced productivity and increased costs.

~~The~~

~~COVID-19~~

pandemic continues to evolve, with an increase of cases in many areas and the potential for additional public health restrictions. The evolution of the pandemic remains highly uncertain, and it is difficult to predict the ultimate impact of it or the timing of any resolution of the current supply imbalances. We continue to monitor market developments and evaluate the impacts of decreased demand on our production levels, as well as impacts on project development and future production.

~~Table of Contents~~

~~IMPERIAL OIL LIMITED~~

disclosing environmental proceedings.

Item 2.

Unregistered sales of equity securities and use of proceeds

Issuer purchases of equity securities

Total number of
shares purchased


	Total number of 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 plans or programs (a) (b)

April 2021
(April 1 - April 30)		-		-		-		29,356,095
May 2021
(May 1 - May 31)		13,905,500		38.75		13,905,500		15,450,595
June 2021
(June 1 - June 28)		15,450,595		40.58		15,450,595		-
(June 29 - June 30)		142,332		37.77		142,332		35,441,339

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 plans or
programs

~~(a)~~

~~July 2020~~

~~(July 1 - July 31)~~

~~50,000~~

~~August 2020~~

~~(August 1 - August 31)~~

~~50,000~~

~~September 2020~~

~~(September 1 - September 30)~~

~~50,000~~

(a)

On June 23, 2020, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a limited normal course issuer bid. The program iswas initially used primarily to eliminate dilution from shares issued in conjunction with Imperial’s restricted stock unit plan, and ~~enables~~enabled the company to purchase up to a maximum of 50,000 common shares during the period June 29, 2020 to June 28, 2021. 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. Exxon Mobil Corporation participated to maintain its ownership percentage at approximately 69.6 percent.

On April 30, 2021, the company announced an amendment to its normal course issuer bid to increase the number of common shares that were available to be purchased. Under the amendment, the number of common shares available to be purchased increased to a maximum of 29,363,070 common shares during the period June 29, 2020 to June 28, 2021, which included shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. No other provisions of the normal course issuer bid have changed.

The program ended on June 28, 2021. Upon expiration, the company had purchased the maximum 29,363,070 shares allowed under the program.

(b)

On June 23, 2021, 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 of 35,583,671 common shares during the period June 29, 2021 to June 28, 2022. This maximum 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 program will end should the company purchase the maximum allowable number of shares, or on June 28, ~~2021.~~2022.

The company will continue to evaluate its share purchase program in the context of its overall capital activities. Purchase plans may be modified at any time without prior notice.

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IMPERIAL OIL LIMITED

Item 6.

Exhibits

(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 of the company pursuant to Rule

13a-14(b)

and 18 U.S.C. Section 1350.

(32.2) Certification by the chief financial officer of the company pursuant to Rule

13a-14(b)

and 18 U.S.C. Section 1350.

(101) Interactive Data Files (formatted as Inline XBRL).

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

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IMPERIAL OIL LIMITED

~~Item 6.~~

~~Exhibits~~

~~(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 of the company pursuant to Rule~~

~~13a-14(b)~~

~~and 18 U.S.C. Section 1350.~~

~~(32.2)~~ ~~Certification by the chief financial officer of the company pursuant to Rule~~

~~13a-14(b)~~

~~and 18 U.S.C. Section 1350.~~

~~(101) Interactive Data Files (formatted as Inline XBRL).~~

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

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~~IMPERIAL OIL LIMITED~~

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: ~~November~~August 4, ~~2020~~2021				/s/ Daniel E. Lyons ---------------------------------------------------
				(Signature)
				Daniel E. Lyons
				Senior vice-president, finance and administration, and controller (Principal accounting officer)



Date: ~~November~~August 4, ~~2020~~2021				/s/ Cathryn Walker ---------------------------------------------------
				(Signature)
				Cathryn Walker
				Assistant corporate secretary

2927


Title of each class	Trading symbol	Name of each exchange on which registered
None		None


Large accelerated filer	✓	Smaller reporting company
Non-accelerated filer		Emerging growth company
Accelerated filer


	Third Quarter				Nine Months to September 30
millions of Canadian dollars	2020		2019		2020			2019
Revenues and other income
Revenues (a)		5,937		8,687		16,267			25,880
Investment and other income (note 4)		18		49		88			99
Total revenues and other income		5,955		8,736		16,355			25,979

Expenses
Exploration		2		4		6			42
Purchases of crude oil and products (b)		3,634		5,399		9,975			15,956
Production and manufacturing (c) (note 13)		1,246		1,601		4,098			4,911
Selling and general (c)		150		217		499			666
Federal excise tax and fuel charge		470		486		1,290			1,343
Depreciation and depletion (note 13)		409		419		1,295			1,201
Non-service pension and postretirement benefit		31		36		91			108
Financing (d) (note 7)		10		20		46			71
Total expenses		5,952		8,182		17,300			24,298

Income (loss) before income taxes		3		554		(945	)		1,681

Income taxes		0		130		(234	)		(248	)

Net income (loss)		3		424		(711	)		1,929

Per share information (Canadian dollars)

Net income (loss) per common share - basic (note 11)		0		0.56		(0.97	)		2.51
Net income (loss) per common share - diluted (note 11)		0		0.56		(0.97	)		2.51

(a) Amounts from related parties included in revenues.		1,216		2,313		3,699			6,269

(b) Amounts to related parties included in purchases of crude oil and products.		627		717		1,762			2,353

(c) Amounts to related parties included in production and manufacturing, and selling and general expenses.		107		157		428			479

(d) Amounts to related parties included in financing, (note 7).		12		23		50			75


	As at Sept 30			As at Dec 31
millions of Canadian dollars	2020			2019
Assets
Current assets
Cash		817			1,718
Accounts receivable, less estimated doubtful accounts (a) (note 5)		1,732			2,699
Inventories of crude oil and products		1,088			1,296
Materials, supplies and prepaid expenses		764			616
Total current assets		4,401			6,329
Investments and long-term receivables (b) (note 5)		771			891
Property, plant and equipment,		55,463			54,868
less accumulated depreciation and depletion		(21,881	)		(20,665	)
Property, plant and equipment, net		33,582			34,203
Goodwill (note 13)		166			186
Other assets, including intangibles, net		462			578
Total assets		39,382			42,187

Liabilities
Current liabilities
Notes and loans payable (c)		227			229
Accounts payable and accrued liabilities (a) (note 9)		3,229			4,260
Income taxes payable		0			106
Total current liabilities		3,456			4,595
Long-term debt (d) (note 8)		4,962			4,961
Other long-term obligations (note 9)		3,713			3,637
Deferred income tax liabilities		4,459			4,718
Total liabilities		16,590			17,911

Shareholders’ equity
Common shares at stated value (e) (note 11)		1,357			1,375
Earnings reinvested		23,358			24,812
Accumulated other comprehensive income (loss) (note 12)		(1,923	)		(1,911	)
Total shareholders’ equity		22,792			24,276

Total liabilities and shareholders’ equity		39,382			42,187


Inflow (outflow)	Third Quarter						Nine Months to September 30
millions of Canadian dollars	2020			2019			2020			2019
Operating activities
Net income (loss)		3			424			(711	)		1,929
Adjustments for non-cash items:
Depreciation and depletion		409			419			1,275			1,201
Impairment of intangible assets (note 13)		0			0			20			0
(Gain) loss on asset sales (note 4)		(11	)		(28	)		(28	)		(34	)
Deferred income taxes and other		(11	)		116			(210	)		(359	)
Changes in operating assets and liabilities:
Accounts receivable		134			250			967			(355	)
Inventories, materials, supplies and prepaid expenses		142			264			60			243
Income taxes payable		0			8			(106	)		(29	)
Accounts payable and accrued liabilities		66			(82	)		(1,008	)		646
All other items - net (b)		143			5			223			163
Cash flows from (used in) operating activities		875			1,376			482			3,405

Investing activities
Additions to property, plant and equipment		(142	)		(417	)		(657	)		(1,242	)
Proceeds from asset sales (note 4)		19			30			68			66
Loans to equity companies - net		(2	)		(26	)		(16	)		(129	)
Cash flows from (used in) investing activities		(125	)		(413	)		(605	)		(1,305	)

Financing activities
Reduction in finance lease obligations (note 8)		(4	)		(7	)		(16	)		(20	)
Dividends paid		(162	)		(169	)		(488	)		(465	)
Common shares purchased (note 11)		0			(343	)		(274	)		(1,072	)
Cash flows from (used in) financing activities		(166	)		(519	)		(778	)		(1,557	)

Increase (decrease) in cash		584			444			(901	)		543
Cash at beginning of period		233			1,087			1,718			988
Cash at end of period (a)		817			1,531			817			1,531
(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 when purchased.
(b) Included contributions to registered pension plans.		(59	)		(57	)		(159	)		(155	)

Income taxes (paid) refunded.		107			35			(45	)		84
Interest (paid), net of capitalization.*		(10	)		(20	)		(46	)		(71	)


	As at		As at
	Sept 30		Dec 31
millions of Canadian dollars	2020		2019
Employee retirement benefits (a)		1,965		1,822
Asset retirement obligations and other environmental liabilities (b)		1,388		1,388
Share-based incentive compensation liabilities		33		65
Operating lease liability (c)		95		143
Other obligations		232		219
Total other long-term obligations		3,713		3,637


thousands of shares	As of Sept 30 2020		As of Dec 31 2019
Authorized		1,100,000		1,100,000
Common shares outstanding		734,077		743,902

millions of Canadian dollars after tax

One dollar (U.S.) per barrel increase (decrease) in crude oil prices

One cent decrease (increase) in the value of the Canadian dollar versus the U.S. dollar