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Imperial Oil Limited | | |
| 111 St Clair Avenue West | | |
| Toronto, Ontario | | |
| Canada M5W 1K3 | | News Release |
Exhibit 99.1
Imperial Oil’s 2004 earnings highest in company’s history
Toronto, January 25, 2005— Imperial Oil Limited today announced net income for 2004 of $2,052 million, or $5.74 per share. This was the highest net income in the company’s history, surpassing the previous record of $1,705 million, or $4.58 a share, in 2003. Fourth-quarter earnings were $538 million, or $1.53 a share, in 2004, compared with $321 million, or $0.88 a share, in the fourth quarter of 2003.
Higher realizations for crude oil, stronger industry refining and petrochemical margins and higher volumes of Syncrude production, natural gas and petroleum products contributed positively to net income for 2004, partly offset by lower marketing margins and the negative impact of a higher Canadian dollar on resource and product prices. Operating performance was also strong throughout the year. Fourth-quarter net income was further positively affected by stronger natural gas prices and increased bitumen production at the company’s Cold Lake facility.
Total revenues were $6,113 million in the fourth quarter of 2004 and $22,460 million for the year, versus $4,594 million and $19,208 million in the corresponding periods of 2003. Capital and exploration expenditures were $418 million in the fourth quarter and $1,445 million for the year, compared with $432 million and $1,559 million respectively in 2003. The company’s balance of cash and marketable securities at the end of 2004 was $1,279 million, versus $448 million at the end of 2003.
“Strong operating performance and favourable market conditions enabled Imperial to achieve record earnings in 2004,” said Tim Hearn, the company’s chairman, president and chief executive officer. “We had best-ever safety performance, operating reliability improved and record volume performance was achieved in several areas.”
“Looking ahead, Imperial remains focused on continuously improving base operations, executing capital projects efficiently, controlling costs and achieving volume targets,” Hearn added. “With a strong portfolio of natural resources opportunities, financial strength and industry-leading technology and expertise, Imperial is well positioned for long-term growth in shareholder value.”
Imperial Oil is one of Canada’s largest corporations and has been a leading member of the country’s petroleum industry for almost 125 years. It is among Canada’s largest producers of crude oil and natural gas and is also the country’s largest refiner and marketer of petroleum products, which are sold primarily under the Esso and Mobil brand names through a coast-to-coast supply network that includes 2,100 retail outlets.
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| For further information: | | |
| Investor relations | | Media relations |
| Susan Swan | | Richard O’Farrell |
| (416) 968-4262 | | (416) 968-4875 |
Highlights
Best ever safety record in 2004
The company’s relentless focus on ensuring that “nobody gets hurt” resulted in a best-on-record safety performance for 2004. The rates of workplace related incidents and illnesses for both company employees and contractors were lower than in any prior year.
Cold Lake production increases
Bitumen production at Imperial’s Cold Lake, Alta., facility averaged 144,000 barrels a day in the fourth quarter of 2004, which was 23,000 barrels a day higher than in the third quarter. This was due to production from new drilling pads and the timing of steaming cycles at existing wells.
Winter drilling begins at Kearl
The planned second phase of an extensive corehole delineation drilling program at Imperial’s Kearl oil-sands property near Fort McMurray, Alta., began in the fourth quarter of 2004, in order to further define the resource potential. The company plans to drill 230 wells over the winter, with a view to filing regulatory applications in 2005.
Refining and chemicals operations continue strong performance
Operating performance in Imperial’s refining and chemicals business remained strong through the fourth quarter of 2004, resulting in record production of petroleum products, polyethylene and benzene. The company’s refineries also continued to reduce raw material costs by maximizing the processing of heavy crude oil in an industry environment of wide price spreads between light and heavy varieties of crude oil.
Progress on Mackenzie Gas Project
In October, a major milestone towards completion of the Mackenzie Gas Project was passed when Imperial and its co-venturers in the Mackenzie Gas Project filed applications for the main regulatory approvals required for the project. If it proceeds, the project will include development of an estimated six trillion cubic feet (tcf) of natural gas in the Mackenzie Delta, including 2.8 tcf at Imperial’s Taglu field, and construction of associated pipelines and facilities.
Other highlights
| • | Imperial announced that it will contribute $10 million over five years to the University of Alberta to support research into new ways of developing Canada’s oil sands that are both economic and environmentally responsible. |
| • | Work began on a $500 million program that will enable Imperial’s refineries to produce ultra-low-sulphur diesel fuel (15 parts per million) by June, 2006. This will dramatically reduce emissions of smog-forming substances from on-road vehicles that use diesel fuel. |
| • | Since October, consumers have been able to earn Aeroplan Miles by purchasing eligible products and services at Esso-branded retail outlets. Details and enrolment information are available atwww.aeroplan.com. |
IMPERIAL OIL LIMITED
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| | | | | | | | | | | Twelve months | |
| | | | | | | | | | | to | |
| | | Fourth quarter | | | December 31 | |
| | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
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| Net Income (U.S. GAAP, millions of dollars) | | | | | | | | | | | | | | | | |
| Natural resources | | | 389 | | | | 251 | | | | 1,487 | | | | 1,143 | |
| Petroleum products | | | 158 | | | | 51 | | | | 500 | | | | 407 | |
| Chemicals | | | 28 | | | | 16 | | | | 100 | | | | 37 | |
| Corporate and other | | | (37 | ) | | | 3 | | | | (35 | ) | | | 118 | |
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| Net income (U.S. GAAP) | | | 538 | | | | 321 | | | | 2,052 | | | | 1,705 | |
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| | | | | | | | | | | | | | | | | |
| Cash flow from operating activities | | | 1,115 | | | | 348 | | | | 3,280 | | | | 2,227 | |
| Capital and exploration expenditures | | | 418 | | | | 432 | | | | 1,445 | | | | 1,559 | |
| | | | | | | | | | | | | | | | | |
| Per-share information (dollars) | | | | | | | | | | | | | | | | |
| Net income - basic | | | 1.53 | | | | 0.88 | | | | 5.75 | | | | 4.58 | |
| Net income - diluted | | | 1.53 | | | | 0.88 | | | | 5.74 | | | | 4.58 | |
| Dividends | | | 0.22 | | | | 0.22 | | | | 0.88 | | | | 0.87 | |
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| Share prices - - close at December 31 | | | | | | | | | | | | | | | | |
| Toronto Stock Exchange (Canadian dollars) | | | | | | | | | | | 71.15 | | | | 57.53 | |
| American Stock Exchange (U.S. dollars) | | | | | | | | | | | 59.38 | | | | 44.42 | |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS | | |
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Beginning in the fourth quarter of 2004, the company reported its financial results based on United States generally accepted accounting principles (GAAP). The differences between U.S. and Canadian GAAP are small for Imperial and an explanation of them as they apply to the company including a tabular reconciliation between net income reported under U.S. GAAP and under Canadian GAAP is included in note 2 to the unaudited financial statements.
OPERATING RESULTS
The company’s net income for the fourth quarter was $538 million or $1.53 a share, compared with $321 million or $0.88 a share for the same quarter of 2003. Net income for the year of 2004 was a record $2,052 million or $5.74 a share, versus $1,705 million or $4.58 a share for 2003.
Net income in the fourth quarter was positively impacted by higher realizations for crude oil and natural gas, stronger industry refining and petrochemical margins, and higher Cold Lake bitumen, Syncrude and natural gas volumes. The higher Canadian dollar continued to have a negative earnings impact of about $70 million versus the same quarter last year. Higher net income was also partially offset by the absence of tax rate reductions totalling about $60 million reported in the fourth quarter of 2003 and a non-recurring write-down of $42 million on a northern Toronto property, which was acquired in 1991 to be the company’s future Toronto headquarters site. The company’s operating performance remained solid through the fourth quarter of 2004.
IMPERIAL OIL LIMITED
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued .....) | | |
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For the year of 2004, higher realizations for crude oil, stronger industry refining and petrochemical margins, and higher volumes of Syncrude, natural gas and petroleum products contributed positively to net income, partly offset by lower marketing margins. Compared with 2003, these favourable operating results were partly offset by the combined negative effects of a higher Canadian dollar on resource and product prices of about $260 million, the absence of favourable foreign exchange effects on the company’s U.S.-dollar denominated debt of about $110 million, and lower benefits from tax matters of about $100 million.
Total revenues were $6,113 million in the fourth quarter and $22,460 million in the year of 2004, versus $4,594 million and $19,208 million in the same periods last year.
Natural resources
During the fourth quarter of 2004, net income from natural resources was $389 million compared with $251 million in the same period last year. Higher net income was attributable to higher crude oil and natural gas realizations and higher Cold Lake bitumen, Syncrude and natural gas volumes. Higher realizations were dampened by the negative effect of a stronger Canadian dollar on resource prices and the steep decline of Cold Lake bitumen prices in the second half of the fourth quarter. Higher net income was also partially offset by the absence of benefits from federal and provincial tax rate reductions reported in the fourth quarter of 2003.
Net income for the year, the best on record, was $1,487 million versus $1,143 million last year. The positive earnings effects of improved realizations for crude oil and natural gas, combined with higher Syncrude, natural gas and natural gas liquids (NGLs) volumes were partly offset by lower Cold Lake bitumen production, lower benefits from tax matters and the negative effects of a higher Canadian dollar.
U.S.-dollar world oil prices were considerably higher in 2004 than the previous year. However, increases in the company’s Canadian-dollar realizations for conventional crude oil were dampened by the effects of a higher Canadian dollar. Brent crude oil prices in U.S. dollars averaged 50 percent higher in the fourth quarter and 33 percent higher in the twelve months, compared with the same periods last year. Realizations in Canadian dollars for the company’s conventional crude oil averaged 46 percent higher in the fourth quarter and 22 percent higher in year of 2004 than the realizations of the corresponding periods last year.
Cold Lake bitumen sales are priced in U.S. dollars and averaged 20 percent higher in the fourth quarter, and 19 percent in 2004 than that of the same periods in 2003. However, the effect of a stronger Canadian dollar has reduced these improvements to 10 percent for both the fourth quarter and the year. These percentages of change, compared with those of Brent crude oil and the company’s conventional crude oil prices, also indicated a significant widening of the price spread between light crude oil and Cold Lake bitumen during the fourth quarter of 2004. The unusually low bitumen prices towards the end of the year were a result of industry upgrader operating issues in western Canada and a general surplus supply of heavy crude.
Realizations for natural gas averaged $7.12 a thousand cubic feet in the fourth quarter, compared with $5.54 a thousand cubic feet in the same quarter last year. For the full year, realizations for natural gas averaged $6.78 a thousand cubic feet in 2004, slightly higher than $6.60 a thousand cubic feet in 2003.
IMPERIAL OIL LIMITED
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued .....) | | |
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Gross production of Cold Lake bitumen averaged 144 thousand barrels a day during the fourth quarter, up from 123 thousand barrels a day in the same quarter last year. The increase was due to production from new facilities and the timing of steaming cycles from existing wells. For the twelve-month period, gross production was 126 thousand barrels a day in 2004, versus 129 thousand barrels a day in 2003.
The company’s share of Syncrude’s gross production was 57 thousand barrels a day in the final quarter of 2004, up from 51 thousand barrels in the same period a year ago. For the full year, the company’s share of gross production from Syncrude averaged a record 60 thousand barrels a day in 2004, up from 53 thousand barrels a day in 2003. Higher volumes were attributable to reduced turnaround activities in 2004.
In the fourth quarter of this year, gross production of conventional crude oil averaged 41 thousand barrels a day, compared with 46 thousand barrels a day during the same period in 2003. Production for the twelve months averaged 43 thousand barrels a day, compared with 46 thousand barrels a day during the year 2003. Natural reservoir decline in the Western Canadian Basin was the main reason for the reduced production.
Gross production of NGLs available for sale was 32 thousand barrels a day in the fourth quarter, down slightly from 33 thousand barrels a day in the same quarter last year. During 2004, gross production of NGLs available for sale averaged 33 thousand barrels a day, up from 28 thousand barrels a day in the same period of 2003.
Gross production of natural gas during the fourth quarter of 2004 increased to 578 million cubic feet a day from 557 million cubic feet a day in the same period last year. During the twelve-month period, gross production was 569 million cubic feet a day in 2004, up from 513 million cubic feet a day in 2003.
The increased natural gas and NGLs volumes were mainly due to higher production from the Wizard Lake field in Alberta.
Construction on the upgrader expansion project at Syncrude made good progress since the first quarter of 2004 and is tracking to the revised construction schedule and cost target released in March 2004.
Petroleum products
Net income from petroleum products was $158 million in the fourth quarter, up from $51 million in the same quarter of 2003. Net income for 2004 was $500 million, compared with $407 million in 2003. Both the fourth quarter and twelve-month net income for 2004 are the best on record. Improved earnings were mainly due to stronger international refining margins in both periods. Fuels marketing margins recovered to some extent in the fourth quarter when compared to the same quarter in 2003 but were overall lower in 2004 than 2003. Sales volumes of petroleum products were higher, due in part to higher industry demand.
Operating performance of the company’s four refineries was solid in the fourth quarter and during the year. Throughput at the refineries has increased with refinery capacity utilization averaging 94 percent in the fourth quarter and a record 93 percent during the year of 2004, compared with 89 and 90 percent in the corresponding periods in 2003.
IMPERIAL OIL LIMITED
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued .....) | | |
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Chemicals
Net income from chemical operations was $28 million in the fourth quarter, up from $16 million in the same quarter last year due mainly to higher benzene and polyethylene margins. For the year of 2004, net income was $100 million, compared with $37 million in 2003. Strong polyethylene and benzene margins were the main factors contributing to the improvement.
Corporate and other
Net income from corporate and other operations was negative $37 million in the fourth quarter compared with positive $3 million in the same period of 2003. Net income for 2004 was negative $35 million versus positive $118 million for 2003.
Net income for the fourth quarter and the year included a non-recurring after-tax write-down of $42 million on a northern Toronto property, which was acquired in 1991 to be the company’s future Toronto headquarters site. The remeasurement at fair value of this property reflected a change in intended use of the property and management’s commitment to sell following the announcement of the relocation of the company’s headquarters to Calgary.
Lower net income in 2004 was also due to the absence of the favourable foreign exchange effects on the company’s U.S.-dollar-denominated debt, which was replaced with Canadian-dollar denominated debt in June and July of 2003.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $1,115 million during the final quarter of 2004, up from $348 million in the same period of 2003. For the year 2004, cash flow from operating activities was $3,280 million, versus $2,227 million during last year. The increased cash inflow was mainly due to higher net income, the timing of income tax payments and the additional funding contributions to the employee pension plan in 2003.
Capital and exploration expenditures were $418 million in the fourth quarter, compared with $432 million during the same quarter of 2003, and $1,445 million in 2004, versus $1,559 million a year ago. For the resources segment, capital and exploration expenditures were used to invest in growth opportunities in the oilsands and Mackenzie gas. The petroleum products segment spent its capital expenditures mainly on projects to reduce the sulphur content of diesel fuel and to improve operating efficiency.
During 2004, the company repurchased about 14 million shares for $872 million. Under the current share-repurchase program, which began on June 23, 2004, the company has purchased about eight million shares, and can purchase up to an additional 10 million shares before June 22, 2005 when the current program expires.
Cash dividends of $317 million were paid in 2004, compared with dividends of $322 million paid in the same period of 2003. Lower dividends paid were attributable to the effects of the company’s share-purchase program partly offset by the higher per-share dividends in 2004.
The above factors led to an increase in the company’s balance of cash and marketable securities to $1,279 million at December 31, 2004, from $448 million at the end of 2003.
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| This report may contain forward-looking information. Actual results could differ materially due to market conditions, changes in law or government policy, changes in operating conditions and costs, changes in project schedules, operating performance, demand for oil and gas, commercial negotiations or other technical and economic factors. | | |
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IMPERIAL OIL LIMITED
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CONSOLIDATED STATEMENT OF INCOME | | |
| (U.S. GAAP, unaudited) | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | Twelve months | |
| | | Fourth quarter | | | to December 31 | |
| millions of Canadian dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
| |
| REVENUES | | | | | | | | | | | | | | | | |
| Operating revenues (a) | | | 6,142 | | | | 4,568 | | | | 22,408 | | | | 19,094 | |
| Investment and other income (4) | | | (29 | ) | | | 26 | | | | 52 | | | | 114 | |
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| TOTAL REVENUES | | | 6,113 | | | | 4,594 | | | | 22,460 | | | | 19,208 | |
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| EXPENSES | | | | | | | | | | | | | | | | |
| Exploration | | | 7 | | | | 11 | | | | 59 | | | | 55 | |
| Purchases of crude oil and products (3) | | | 3,682 | | | | 2,622 | | | | 13,094 | | | | 10,823 | |
| Production and manufacturing (3) (5) | | | 751 | | | | 684 | | | | 2,883 | | | | 2,782 | |
| Selling and general (5) | | | 322 | | | | 348 | | | | 1,218 | | | | 1,269 | |
| Federal excise tax (a) | | | 318 | | | | 312 | | | | 1,264 | | | | 1,254 | |
| Depreciation and depletion | | | 252 | | | | 209 | | | | 908 | | | | 755 | |
| Financing costs (6) | | | 1 | | | | 1 | | | | 7 | | | | (120 | ) |
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| TOTAL EXPENSES | | | 5,333 | | | | 4,187 | | | | 19,433 | | | | 16,818 | |
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| INCOME BEFORE INCOME TAXES | | | 780 | | | | 407 | | | | 3,027 | | | | 2,390 | |
| INCOME TAXES | | | 242 | | | | 86 | | | | 975 | | | | 689 | |
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| INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE | | | 538 | | | | 321 | | | | 2,052 | | | | 1,701 | |
| Cumulative effect of accounting change, after income tax | | | — | | | | — | | | | — | | | | 4 | |
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| NET INCOME | | | 538 | | | | 321 | | | | 2,052 | | | | 1,705 | |
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| NET INCOME PER COMMON SHARE - BASIC (dollars) (9) | | | | | | | | | | | | | | | | |
| Income before cumulative effect of accounting change | | | 1.53 | | | | 0.88 | | | | 5.75 | | | | 4.57 | |
| Cumulative effect of accounting change, after income tax | | | — | | | | — | | | | — | | | | 0.01 | |
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| Net income - basic | | | 1.53 | | | | 0.88 | | | | 5.75 | | | | 4.58 | |
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| NET INCOME PER COMMON SHARE - DILUTED (dollars) (9) | | | | | | | | | | | | | | | | |
| Income before cumulative effect of accounting change | | | 1.53 | | | | 0.88 | | | | 5.74 | | | | 4.57 | |
| Cumulative effect of accounting change, after income tax | | | — | | | | — | | | | — | | | | 0.01 | |
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| Net income - diluted | | | 1.53 | | | | 0.88 | | | | 5.74 | | | | 4.58 | |
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| DIVIDENDS PER COMMON SHARE | | | 0.22 | | | | 0.22 | | | | 0.88 | | | | 0.87 | |
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| (a) Federal excise tax included in operating revenues | | | 318 | | | | 312 | | | | 1,264 | | | | 1,254 | |
Certain figures for the prior year have been reclassified in the financial statements to conform with the current year’s presentation.
IMPERIAL OIL LIMITED
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CONSOLIDATED STATEMENT OF CASH FLOWS | | |
| (U.S. GAAP, unaudited) | | |
| inflow/(outflow) | | |
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| | | | | | | | | | | Twelve months | |
| | | Fourth quarter | | | to December 31 | |
| millions of Canadian dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
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| OPERATING ACTIVITIES | | | | | | | | | | | | | | | | |
| Net income | | | 538 | | | | 321 | | | | 2,052 | | | | 1,705 | |
| Cumulative effect of accounting change, after income tax | | | — | | | | — | | | | — | | | | (4 | ) |
| Adjustment for non-cash items: | | | | | | | | | | | | | | | | |
| Depreciation and depletion | | | 252 | | | | 209 | | | | 908 | | | | 755 | |
| (Gain)/loss on asset sales, after income tax | | | (3 | ) | | | (11 | ) | | | (32 | ) | | | (10 | ) |
| Deferred income taxes and other | | | 119 | | | | 123 | | | | (90 | ) | | | (59 | ) |
| Changes in operating assets and liabilities: | | | | | | | | | | | | | | | | |
| Accounts receivable | | | (3 | ) | | | (42 | ) | | | (311 | ) | | | 33 | |
| Inventories and prepaids | | | 185 | | | | 230 | | | | (32 | ) | | | 31 | |
| Income taxes payable | | | 30 | | | | (150 | ) | | | 462 | | | | 38 | |
| Accounts payable | | | 25 | | | | 22 | | | | 308 | | | | 74 | |
| All other items - net | | | (28 | ) | | | (354 | ) | | | 15 | | | | (336 | ) |
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| CASH FROM OPERATING ACTIVITIES | | | 1,115 | | | | 348 | | | | 3,280 | | | | 2,227 | |
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| INVESTING ACTIVITIES | | | | | | | | | | | | | | | | |
| Additions to property, plant and equipment and intangibles | | | (411 | ) | | | (411 | ) | | | (1,376 | ) | | | (1,482 | ) |
| Proceeds from asset sales | | | 8 | | | | 18 | | | | 102 | | | | 56 | |
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| CASH FROM (USED IN) INVESTING ACTIVITIES | | | (403 | ) | | | (393 | ) | | | (1,274 | ) | | | (1,426 | ) |
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| FINANCING ACTIVITIES | | | | | | | | | | | | | | | | |
| Short-term debt - net | | | — | | | | — | | | | 9 | | | | — | |
| Long-term debt issued | | | — | | | | — | | | | — | | | | 818 | |
| Repayment of long-term debt | | | — | | | | — | | | | (8 | ) | | | (818 | ) |
| Issuance of common shares under stock option plan (9) | | | 5 | | | | 2 | | | | 13 | | | | 2 | |
| Common shares purchased (9) | | | (292 | ) | | | (280 | ) | | | (872 | ) | | | (799 | ) |
| Dividends paid | | | (79 | ) | | | (81 | ) | | | (317 | ) | | | (322 | ) |
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| CASH FROM (USED IN) FINANCING ACTIVITIES | | | (366 | ) | | | (359 | ) | | | (1,175 | ) | | | (1,119 | ) |
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| INCREASE (DECREASE) IN CASH | | | 346 | | | | (404 | ) | | | 831 | | | | (318 | ) |
| CASH AT BEGINNING OF PERIOD | | | 933 | | | | 852 | | | | 448 | | | | 766 | |
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| CASH AT END OF PERIOD | | | 1,279 | | | | 448 | | | | 1,279 | | | | 448 | |
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Certain figures for the prior year have been reclassified in the financial statements to conform with the current year’s presentation.
IMPERIAL OIL LIMITED
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CONSOLIDATED BALANCE SHEET | | |
| (U.S. GAAP, unaudited) | | |
| | | | | | | | |
| | | As at | | | As at | |
| | | Dec.31 | | | Dec.31 | |
| millions of Canadian dollars | | 2004 | | | 2003 | |
| |
| ASSETS | | | | | | | | |
| Current assets | | | | | | | | |
| Cash | | | 1,279 | | | | 448 | |
| Accounts receivable, less estimated doubtful accounts | | | 1,626 | | | | 1,315 | |
| Inventories of crude oil and products | | | 432 | | | | 407 | |
| Materials, supplies and prepaid expenses | | | 112 | | | | 105 | |
| Deferred income tax assets | | | 448 | | | | 353 | |
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| Total current assets | | | 3,897 | | | | 2,628 | |
| | | | | | | | | |
| Investments and other long-term assets | | | 130 | | | | 97 | |
| Property, plant and equipment, less accumulated depreciation and depletion | | | 9,647 | | | | 9,267 | |
| Goodwill | | | 204 | | | | 204 | |
| Other intangible assets, net | | | 149 | | | | 141 | |
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| TOTAL ASSETS | | | 14,027 | | | | 12,337 | |
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| LIABILITIES | | | | | | | | |
| Current liabilities | | | | | | | | |
| Short-term debt | | | 81 | | | | 72 | |
| Accounts payable and accrued liabilities | | | 2,525 | | | | 2,222 | |
| Income taxes payable | | | 1,057 | | | | 595 | |
| Current portion of long-term debt | | | 995 | | | | 501 | |
| | | |
| Total current liabilities | | | 4,658 | | | | 3,390 | |
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| | | | | | | | | |
| Long-term debt (7) | | | 367 | | | | 859 | |
| Other long-term obligations (8) | | | 1,525 | | | | 1,314 | |
| Deferred income tax liabilities | | | 1,155 | | | | 1,229 | |
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| TOTAL LIABILITIES | | | 7,705 | | | | 6,792 | |
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| SHAREHOLDERS’ EQUITY | | | | | | | | |
| Common shares at stated value (9) | | | 1,801 | | | | 1,859 | |
| Earnings reinvested (10) | | | 4,889 | | | | 3,952 | |
| Accumulated other nonowner changes in equity (11) | | | (368 | ) | | | (266 | ) |
| | | |
| TOTAL SHAREHOLDERS’ EQUITY | | | 6,322 | | | | 5,545 | |
| | | | | | | | | |
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| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | | 14,027 | | | | 12,337 | |
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Certain figures for the prior year have been reclassified in the financial statements to conform with the current year’s presentation.
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| Approved by the directors January 25, 2005 | | |
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/s/ T.J. Hearn | | /s/ P.A. Smith |
| | | |
| Chairman, president and | | Controller and |
| chief executive officer | | senior vice-president, |
| | finance and administration |
| |
IMPERIAL OIL LIMITED
| | | |
| |
BUSINESS SEGMENTS(U.S. GAAP, unaudited) | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Fourth quarter | | Resources | | | Products | | | Chemicals | |
| millions of dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
| |
| REVENUES | | | | | | | | | | | | | | | | | | | | | | | | |
| External sales (a) | | | 1,043 | | | | 798 | | | | 4,784 | | | | 3,533 | | | | 315 | | | | 237 | |
| Intersegment sales (b) | | | 759 | | | | 464 | | | | 501 | | | | 301 | | | | 79 | | | | 56 | |
| Investment and other income | | | 4 | | | | — | | | | 12 | | | | 21 | | | | — | | | | — | |
| | | | | | | |
| TOTAL REVENUES | | | 1,806 | | | | 1,262 | | | | 5,297 | | | | 3,855 | | | | 394 | | | | 293 | |
| | | | | | | |
| EXPENSES | | | | | | | | | | | | | | | | | | | | | | | | |
| Exploration | | | 7 | | | | 11 | | | | — | | | | — | | | | — | | | | — | |
| Purchases (b) | | | 638 | | | | 414 | | | | 4,105 | | | | 2,842 | | | | 278 | | | | 195 | |
| Production and manufacturing (b) | | | 418 | | | | 367 | | | | 287 | | | | 272 | | | | 46 | | | | 37 | |
| Selling and general | | | 10 | | | | 12 | | | | 289 | | | | 305 | | | | 23 | | | | 31 | |
| Federal excise tax | | | — | | | | — | | | | 318 | | | | 312 | | | | — | | | | — | |
| Depreciation and depletion | | | 165 | | | | 147 | | | | 82 | | | | 57 | | | | 4 | | | | 4 | |
| Financing costs | | | 1 | | | | — | | | | — | | | | 1 | | | | — | | | | — | |
| | | | | | | |
| TOTAL EXPENSES | | | 1,239 | | | | 951 | | | | 5,081 | | | | 3,789 | | | | 351 | | | | 267 | |
| | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 567 | | | | 311 | | | | 216 | | | | 66 | | | | 43 | | | | 26 | |
| INCOME TAXES | | | 178 | | | | 60 | | | | 58 | | | | 15 | | | | 15 | | | | 10 | |
| | | | | | | |
| INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE | | | 389 | | | | 251 | | | | 158 | | | | 51 | | | | 28 | | | | 16 | |
| CUMULATIVE EFFECT OF ACCOUNTING CHANGE, AFTER INCOME TAX | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | |
| NET INCOME | | | 389 | | | | 251 | | | | 158 | | | | 51 | | | | 28 | | | | 16 | |
| | | | | | | |
| EXPORT SALES TO THE UNITED STATES | | | 383 | | | | 310 | | | | 340 | | | | 201 | | | | 171 | | | | 138 | |
| CAPEX (c) | | | 303 | | | | 298 | | | | 100 | | | | 112 | | | | 4 | | | | 11 | |
| | | | | | | | | | | | | | | | | |
| Fourth quarter | | Corporate | | | Consolidated | |
| millions of dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
| |
| REVENUES | | | | | | | | | | | | | | | | |
| External sales (a) | | | — | | | | — | | | | 6,142 | | | | 4,568 | |
| Intersegment sales (b) | | | — | | | | — | | | | — | | | | — | |
| Investment and other income | | | (45 | ) | | | 5 | | | | (29 | ) | | | 26 | |
| | | | | |
| TOTAL REVENUES | | | (45 | ) | | | 5 | | | | 6,113 | | | | 4,594 | |
| | | | | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Exploration | | | — | | | | — | | | | 7 | | | | 11 | |
| Purchases (b) | | | — | | | | — | | | | 3,682 | | | | 2,622 | |
| Production and manufacturing (b) | | | — | | | | — | | | | 751 | | | | 684 | |
| Selling and general | | | — | | | | — | | | | 322 | | | | 348 | |
| Federal excise tax | | | — | | | | — | | | | 318 | | | | 312 | |
| Depreciation and depletion | | | 1 | | | | 1 | | | | 252 | | | | 209 | |
| Financing costs | | | — | | | | — | | | | 1 | | | | 1 | |
| | | | | |
| TOTAL EXPENSES | | | 1 | | | | 1 | | | | 5,333 | | | | 4,187 | |
| | | | | |
| INCOME BEFORE INCOME TAXES | | | (46 | ) | | | 4 | | | | 780 | | | | 407 | |
| INCOME TAXES | | | (9 | ) | | | 1 | | | | 242 | | | | 86 | |
| | | | | |
| INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE | | | (37 | ) | | | 3 | | | | 538 | | | | 321 | |
| CUMULATIVE EFFECT OF ACCOUNTING CHANGE, AFTER INCOME TAX | | | — | | | | — | | | | — | | | | — | |
| | | | | |
| NET INCOME | | | (37 | ) | | | 3 | | | | 538 | | | | 321 | |
| | | | | |
| EXPORT SALES TO THE UNITED STATES | | | — | | | | — | | | | 894 | | | | 649 | |
| CAPEX (c) | | | 11 | | | | 11 | | | | 418 | | | | 432 | |
| (a) | Includes crude sales made by Products in order to optimize refining operations. |
| |
| (b) | Consolidated amounts exclude intersegment transactions, as follows: |
| | | | | | | | | |
| | | 2004 | | | 2003 | |
| | | |
| Purchases | | | 1,339 | | | | 829 | |
| Production and manufacturing expenses | | | — | | | | (8 | ) |
| | | |
| Total intersegment sales | | | 1,339 | | | | 821 | |
| | | |
| (c) | Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant, equipment and intangibles and additions to capital leases. |
IMPERIAL OIL LIMITED
| | | |
| |
BUSINESS SEGMENTS(U.S. GAAP, unaudited) | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Twelve months to December 31 | | Resources | | | Products | | | Chemicals | |
| millions of dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
| |
| REVENUES | | | | | | | | | | | | | | | | | | | | | | | | |
| External sales (a) | | | 3,689 | | | | 3,390 | | | | 17,503 | | | | 14,710 | | | | 1,216 | | | | 994 | |
| Intersegment sales (b) | | | 2,891 | | | | 2,224 | | | | 1,666 | | | | 1,294 | | | | 293 | | | | 238 | |
| Investment and other income | | | 45 | | | | 34 | | | | 42 | | | | 54 | | | | — | | | | — | |
| | | | | | | |
| TOTAL REVENUES | | | 6,625 | | | | 5,648 | | | | 19,211 | | | | 16,058 | | | | 1,509 | | | | 1,232 | |
| | | | | | | |
| EXPENSES | | | | | | | | | | | | | | | | | | | | | | | | |
| Exploration | | | 59 | | | | 55 | | | | — | | | | — | | | | — | | | | — | |
| Purchases (b) | | | 2,110 | | | | 1,873 | | | | 14,769 | | | | 11,822 | | | | 1,064 | | | | 882 | |
| Production and manufacturing (b) | | | 1,608 | | | | 1,577 | | | | 1,092 | | | | 1,054 | | | | 184 | | | | 153 | |
| Selling and general | | | 27 | | | | 28 | | | | 1,098 | | | | 1,123 | | | | 93 | | | | 118 | |
| Federal excise tax | | | — | | | | — | | | | 1,264 | | | | 1,254 | | | | — | | | | — | |
| Depreciation and depletion | | | 633 | | | | 517 | | | | 257 | | | | 211 | | | | 13 | | | | 22 | |
| Financing costs | | | 1 | | | | 1 | | | | 2 | | | | 2 | | | | — | | | | — | |
| | | | | | | |
| TOTAL EXPENSES | | | 4,438 | | | | 4,051 | | | | 18,482 | | | | 15,466 | | | | 1,354 | | | | 1,175 | |
| | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 2,187 | | | | 1,597 | | | | 729 | | | | 592 | | | | 155 | | | | 57 | |
| INCOME TAXES | | | 700 | | | | 458 | | | | 229 | | | | 185 | | | | 55 | | | | 20 | |
| | | | | | | |
| INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE | | | 1,487 | | | | 1,139 | | | | 500 | | | | 407 | | | | 100 | | | | 37 | |
| CUMULATIVE EFFECT OF ACCOUNTING CHANGE, AFTER INCOME TAX | | | — | | | | 4 | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | |
| NET INCOME | | | 1,487 | | | | 1,143 | | | | 500 | | | | 407 | | | | 100 | | | | 37 | |
| | | | | | | |
| EXPORT SALES TO THE UNITED STATES | | | 1,360 | | | | 1,304 | | | | 1,074 | | | | 792 | | | | 678 | | | | 567 | |
| CAPEX (c) | | | 1,113 | | | | 1,007 | | | | 283 | | | | 478 | | | | 15 | | | | 41 | |
| TOTAL ASSETS AS AT Dec.31 (b) (d) | | | 6,875 | | | | 6,418 | | | | 5,570 | | | | 5,290 | | | | 498 | | | | 440 | |
| CAPITAL EMPLOYED AS AT Dec.31 | | | 3,839 | | | | 3,725 | | | | 2,410 | | | | 2,601 | | | | 205 | | | | 222 | |
| | | | | | | | | | | | | | | | | |
| Twelve months to December 31 | | Corporate | | | Consolidated | |
| millions of dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
| |
| REVENUES | | | | | | | | | | | | | | | | |
| External sales (a) | | | — | | | | — | | | | 22,408 | | | | 19,094 | |
| Intersegment sales (b) | | | — | | | | — | | | | — | | | | — | |
| Investment and other income | | | (35 | ) | | | 26 | | | | 52 | | | | 114 | |
| | | | | |
| TOTAL REVENUES | | | (35 | ) | | | 26 | | | | 22,460 | | | | 19,208 | |
| | | | | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Exploration | | | — | | | | — | | | | 59 | | | | 55 | |
| Purchases (b) | | | — | | | | — | | | | 13,094 | | | | 10,823 | |
| Production and manufacturing (b) | | | — | | | | — | | | | 2,883 | | | | 2,782 | |
| Selling and general | | | — | | | | — | | | | 1,218 | | | | 1,269 | |
| Federal excise tax | | | — | | | | — | | | | 1,264 | | | | 1,254 | |
| Depreciation and depletion | | | 5 | | | | 5 | | | | 908 | | | | 755 | |
| Financing costs | | | 4 | | | | (123 | ) | | | 7 | | | | (120 | ) |
| | | | | |
| TOTAL EXPENSES | | | 9 | | | | (118 | ) | | | 19,433 | | | | 16,818 | |
| | | | | |
| INCOME BEFORE INCOME TAXES | | | (44 | ) | | | 144 | | | | 3,027 | | | | 2,390 | |
| INCOME TAXES | | | (9 | ) | | | 26 | | | | 975 | | | | 689 | |
| | | | | |
| INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE | | | (35 | ) | | | 118 | | | | 2,052 | | | | 1,701 | |
| CUMULATIVE EFFECT OF ACCOUNTING CHANGE, AFTER INCOME TAX | | | — | | | | — | | | | — | | | | 4 | |
| | | | | |
| NET INCOME | | | (35 | ) | | | 118 | | | | 2,052 | | | | 1,705 | |
| | | | | |
| EXPORT SALES TO THE UNITED STATES | | | — | | | | — | | | | 3,112 | | | | 2,663 | |
| CAPEX (c) | | | 34 | | | | 33 | | | | 1,445 | | | | 1,559 | |
| TOTAL ASSETS AS AT Dec.31 (b) (d) | | | 1,382 | | | | 497 | | | | 14,027 | | | | 12,337 | |
| CAPITAL EMPLOYED AS AT Dec.31 | | | 1,367 | | | | 481 | | | | 7,821 | | | | 7,029 | |
| (a) | Includes crude sales made by Products in order to optimize refining operations. |
| (b) | Consolidated amounts exclude intersegment transactions, as follows: |
| | | | | | | | | |
| | | 2004 | | | 2003 | |
| | | |
| Purchases | | | 4,849 | | | | 3,754 | |
| Production and manufacturing expenses | | | 1 | | | | 2 | |
| | | |
| Total intersegment sales | | | 4,850 | | | | 3,756 | |
| | | |
| Intersegment receivables and payables | | | 298 | | | | 308 | |
| | | |
| (c) | Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant, equipment and intangibles and additions to capital leases. |
| |
| (d) | With the announcement of the relocation of the company’s headquarters to Calgary, management has committed to a plan to sell a piece of property in northern Toronto, Ontario, acquired in 1991 to be the future Toronto headquarters site. Consistent with the commitment to sell and considering its unique nature, this property, previously reported in the petroleum products segment, is now shown in the corporate and other segment. This change is effective in 2004. Prior periods have not been revised. |
Certain figures for the prior year have been reclassified in the financial statements to conform with the current year’s presentation.
IMPERIAL OIL LIMITED
| (unaudited) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Twelve months | |
| | | Fourth quarter | | | to December 31 | |
| | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
| |
| GROSS CRUDE OIL AND NGL PRODUCTION (thousands of barrels a day) | | | | | | | | | | | | | | | | |
| Conventional | | | 41 | | | | 46 | | | | 43 | | | | 46 | |
| Cold Lake | | | 144 | | | | 123 | | | | 126 | | | | 129 | |
| Syncrude | | | 57 | | | | 51 | | | | 60 | | | | 53 | |
| | | | | |
| Total crude oil production | | | 242 | | | | 220 | | | | 229 | | | | 228 | |
| Natural gas liquids (NGLs) available for sale | | | 32 | | | | 33 | | | | 33 | | | | 28 | |
| | | | | |
| Total crude oil and NGL production | | | 274 | | | | 253 | | | | 262 | | | | 256 | |
| | | | | |
| | | | | | | | | | | | | | | | | |
| NET CRUDE OIL AND NGL PRODUCTION (thousands of barrels a day) | | | | | | | | | | | | | | | | |
| Conventional | | | 32 | | | | 35 | | | | 33 | | | | 35 | |
| Cold Lake | | | 128 | | | | 117 | | | | 112 | | | | 116 | |
| Syncrude | | | 56 | | | | 50 | | | | 59 | | | | 52 | |
| | | | | |
| Total crude oil production | | | 216 | | | | 202 | | | | 204 | | | | 203 | |
| Natural gas liquids (NGLs) available for sale | | | 26 | | | | 26 | | | | 26 | | | | 22 | |
| | | | | |
| Total crude oil and NGL production | | | 242 | | | | 228 | | | | 230 | | | | 225 | |
| | | | | |
| | | | | | | | | | | | | | | | | |
| COLD LAKE BLEND SALES (thousands of barrels a day) | | | 190 | | | | 163 | | | | 167 | | | | 170 | |
| NGL SALES (thousands of barrels a day) | | | 51 | | | | 52 | | | | 42 | | | | 39 | |
| | | | | | | | | | | | | | | | | |
| NATURAL GAS (millions of cubic feet a day) | | | | | | | | | | | | | | | | |
| Production (gross) | | | 578 | | | | 557 | | | | 569 | | | | 513 | |
| Production (net) | | | 524 | | | | 506 | | | | 518 | | | | 457 | |
| Sales | | | 536 | | | | 481 | | | | 520 | | | | 460 | |
| | | | | | | | | | | | | | | | | |
| AVERAGE PRICES (Canadian dollars) | | | | | | | | | | | | | | | | |
| Conventional crude oil sales (a barrel) | | | 53.22 | | | | 36.47 | | | | 48.96 | | | | 40.10 | |
| Par crude oil price at Edmonton (a barrel) | | | 58.19 | | | | 40.09 | | | | 53.26 | | | | 43.93 | |
| Heavy crude oil at Hardisty (Bow River, a barrel) | | | 36.42 | | | | 28.92 | | | | 37.98 | | | | 33.00 | |
| NGL sales (a barrel) | | | 38.01 | | | | 29.39 | | | | 33.78 | | | | 32.09 | |
| Natural gas sales (a thousand cubic feet) | | | 7.12 | | | | 5.54 | | | | 6.78 | | | | 6.60 | |
| | | | | | | | | | | | | | | | | |
| PETROLEUM PRODUCTS SALES (millions of litres a day) | | | | | | | | | | | | | | | | |
| Gasolines | | | 33.5 | | | | 32.7 | | | | 33.2 | | | | 33.0 | |
| Heating, diesel and jet fuels | | | 28.3 | | | | 26.1 | | | | 27.3 | | | | 26.2 | |
| Heavy fuel oils | | | 6.4 | | | | 7.3 | | | | 5.9 | | | | 5.4 | |
| Lube oils and other products | | | 7.3 | | | | 5.9 | | | | 7.0 | | | | 5.8 | |
| | | | | |
| Net petroleum products sales | | | 75.5 | | | | 72.0 | | | | 73.4 | | | | 70.4 | |
| Sales under purchase and sale agreements | | | 15.6 | | | | 15.1 | | | | 14.2 | | | | 14.6 | |
| | | | | |
| Total petroleum products sales | | | 91.1 | | | | 87.1 | | | | 87.6 | | | | 85.0 | |
| | | | | |
| | | | | | | | | | | | | | | | | |
| TOTAL REFINERY THROUGHPUT (millions of litres a day) | | | 74.7 | | | | 70.8 | | | | 74.3 | | | | 71.6 | |
| REFINERY CAPACITY UTILIZATION (percent) | | | 94 | | | | 89 | | | | 93 | | | | 90 | |
| | | | | | | | | | | | | | | | | |
| PETROCHEMICAL SALES (thousands of tonnes a day) | | | 3.3 | | | | 3.2 | | | | 3.3 | | | | 3.3 | |
IMPERIAL OIL LIMITED
| | | |
| |
SHARE OWNERSHIP, TRADING AND PERFORMANCE
(unaudited) | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | Twelve months | |
| | | Fourth quarter | | | to December 31 | |
| | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
| |
| RETURN ON AVERAGE CAPITAL EMPLOYED (a) (percent) | | | | | | | | | | | 27.7 | | | | 25.3 | |
| | | | | | | | | | | | | | | | | |
| RETURN ON AVERAGE SHAREHOLDERS’ EQUITY (percent) | | | | | | | | | | | 34.6 | | | | 32.6 | |
| | | | | | | | | | | | | | | | | |
| INTEREST COVERAGE RATIO - EARNINGS BASIS (times covered) | | | | | | | | | | | 82.8 | | | | 64.0 | |
| | | | | | | | | | | | | | | | | |
| SHARE OWNERSHIP | | | | | | | | | | | | | | | | |
| Outstanding shares (thousands) | | | | | | | | | | | | | | | | |
| Monthly weighted average | | | 351,468 | | | | 365,540 | | | | 356,834 | | | | 372,011 | |
| At December 31 | | | | | | | | | | | 349,320 | | | | 362,653 | |
| Number of shareholders | | | | | | | | | | | | | | | | |
| At December 31 | | | | | | | | | | | 14,953 | | | | 15,516 | |
| | | | | | | | | | | | | | | | | |
| SHARE PRICES | | | | | | | | | | | | | | | | |
| Toronto Stock Exchange (Canadian dollars) | | | | | | | | | | | | | | | | |
| High | | | 73.65 | | | | 58.22 | | | | 73.65 | | | | 58.22 | |
| Low | | | 65.28 | | | | 50.16 | | | | 56.42 | | | | 43.20 | |
| Close at December 31 | | | | | | | | | | | 71.15 | | | | 57.53 | |
| | | | | | | | | | | | | | | | | |
| American Stock Exchange (U.S. dollars) | | | | | | | | | | | | | | | | |
| High | | | 62.45 | | | | 44.75 | | | | 62.45 | | | | 44.75 | |
| Low | | | 51.43 | | | | 37.24 | | | | 42.34 | | | | 28.25 | |
| Close at December 31 | | | | | | | | | | | 59.38 | | | | 44.42 | |
| | |
| (a) Return on capital employed is the net income excluding the after-tax cost of financing divided by the average of beginning and ending capital employed. |
| | | |
IMPERIAL OIL LIMITED
| | | |
| |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | | |
| |
1. Basis of financial statement presentation
Effective the fourth quarter of 2004, the company prepares its financial statements in accordance with the generally accepted accounting principles (GAAP) of the United States. Prior to the fourth quarter of 2004, the company’s financial statements were prepared in conformity with Canadian GAAP. A reconciliation of the differences between GAAP in Canada and the United States as they apply to the company is provided in note 2.
These unaudited consolidated financial statements should be read in the context of the consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in the company’s 2003 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.
2. Differences between United States and Canadian generally accepted accounting principles
Reconciliation of the line items of the consolidated statement of income and consolidated balance sheet is provided below:
Consolidated statement of income
| | | | | | | | | | | | | | | | | | | | |
| | | Reported | | | | | | | | | | | | | | | Reported | |
| | | under | | | Increase/(decrease) due to | | | under | |
| millions of dollars | | Cdn.GAAP | | | (a) | | | (b) | | | (c) | | | U.S.GAAP | |
| |
| (Fourth quarter, 2004) | | | | | | | | | | | | | | | | | | | | |
| Depreciation and depletion | | | 251 | | | | 1 | | | | — | | | | — | | | | 252 | |
| Financing costs | | | 12 | | | | (11 | ) | | | — | | | | — | | | | 1 | |
| Income taxes | | | 239 | | | | 3 | | | | — | | | | — | | | | 242 | |
| Net income | | | 531 | | | | 7 | | | | — | | | | — | | | | 538 | |
| | | |
| |
| (Twelve months to December 31, 2004) | | | | | | | | | | | | | | | | | | | | |
| Depreciation and depletion | | | 903 | | | | 5 | | | | — | | | | — | | | | 908 | |
| Financing costs | | | 41 | | | | (34 | ) | | | — | | | | — | | | | 7 | |
| Income taxes | | | 965 | | | | 10 | | | | — | | | | — | | | | 975 | |
| Net income | | | 2,033 | | | | 19 | | | | — | | | | — | | | | 2,052 | |
| | | |
| |
| (Fourth quarter, 2003) | | | | | | | | | | | | | | | | | | | | |
| Depreciation and depletion | | | 208 | | | | 1 | | | | — | | | | — | | | | 209 | |
| Financing costs | | | 12 | | | | (11 | ) | | | — | | | | — | | | | 1 | |
| Income taxes | | | 142 | | | | 3 | | | | — | | | | (59 | ) | | | 86 | |
| Net income | | | 255 | | | | 7 | | | | — | | | | 59 | | | | 321 | |
| | | |
| |
| (Twelve months to December 31, 2003) | | | | | | | | | | | | | | | | | | | | |
| Depreciation and depletion | | | 750 | | | | 5 | | | | — | | | | — | | | | 755 | |
| Financing costs | | | (87 | ) | | | (33 | ) | | | — | | | | — | | | | (120 | ) |
| Income taxes | | | 680 | | | | 9 | | | | — | | | | — | | | | 689 | |
| Cumulative effect of accounting change, after income tax | | | — | | | | — | | | | 4 | | | | — | | | | 4 | |
| Net income | | | 1,682 | | | | 19 | | | | 4 | | | | — | | | | 1,705 | |
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IMPERIAL OIL LIMITED
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Consolidated balance sheet
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| | | Reported | | | | | | Reported | |
| | | under | | | Increase/(decrease) due to | | | under | |
| millions of dollars | | Cdn.GAAP | | | (a) | | | (d) | | | U.S.GAAP | |
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| (As at December 31, 2004) | | | | | | | | | | | | | | | | |
| Investments and other long-term assets | | | 270 | | | | — | | | | (140 | ) | | | 130 | |
| Property, plant and equipment, net | | | 9,569 | | | | 78 | | | | — | | | | 9,647 | |
| Other intangible assets, net | | | 52 | | | | — | | | | 97 | | | | 149 | |
| Total assets | | | 13,992 | | | | 78 | | | | (43 | ) | | | 14,027 | |
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| Other long-term obligations | | | 1,010 | | | | — | | | | 515 | | | | 1,525 | |
| Deferred income tax liabilities | | | 1,319 | | | | 26 | | | | (190 | ) | | | 1,155 | |
| Earnings reinvested | | | 4,837 | | | | 52 | | | | — | | | | 4,889 | |
| Accumulated other nonowner changes in equity | | | — | | | | — | | | | (368 | ) | | | (368 | ) |
| Total liabilities and shareholders’ equity | | | 13,992 | | | | 78 | | | | (43 | ) | | | 14,027 | |
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| (As at December 31, 2003) | | | | | | | | | | | | | | | | |
| Investments and other long-term assets | | | 259 | | | | — | | | | (162 | ) | | | 97 | |
| Property, plant and equipment, net | | | 9,218 | | | | 49 | | | | — | | | | 9,267 | |
| Other intangible assets, net | | | 52 | | | | — | | | | 89 | | | | 141 | |
| Total assets | | | 12,361 | | | | 49 | | | | (73 | ) | | | 12,337 | |
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| Other long-term obligations | | | 972 | | | | — | | | | 342 | | | | 1,314 | |
| Deferred income tax liabilities | | | 1,362 | | | | 16 | | | | (149 | ) | | | 1,229 | |
| Earnings reinvested | | | 3,919 | | | | 33 | | | | — | | | | 3,952 | |
| Accumulated other nonowner changes in equity | | | — | | | | — | | | | (266 | ) | | | (266 | ) |
| Total liabilities and shareholders’ equity | | | 12,361 | | | | 49 | | | | (73 | ) | | | 12,337 | |
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(a) Under U.S. GAAP, interest costs related to major capital projects under construction are required to be capitalized as part of property, plant and equipment. Under Canadian GAAP, the company did not capitalize interest costs for the same projects.
(b) Under U.S. GAAP, the cumulative effect of change for the adoption of the standard on accounting for asset retirement obligations in 2003 was reflected in the consolidated net income for 2003. Under Canadian GAAP, financial statements of prior periods were restated to reflect the effect of the same accounting change.
(c) Under U.S. GAAP, income tax liabilities and assets are adjusted for the effect of a change in tax laws or rates. Under Canadian GAAP, the use of a substantially enacted income law or rate to adjust income tax liabilities and assets is allowed under certain circumstances.
(d) Under U.S. GAAP, the accumulated benefit obligation (ABO) is the actuarial present value of benefits attributed to employee service rendered up to the end of the year and is based on current compensation levels. Since the amount by which the ABO less the fair value of plan assets was greater than the liability previously recognized in the consolidated balance sheet, an additional minimum pension liability was required. The minimum pension liability has no impact on net income and because this adjustment was non-cash, its effect has been excluded from the accompanying consolidated statement of cash flows. No such adjustment is required under Canadian GAAP.
3. Reporting of fuel consumed in operations
Beginning in 2004, fuel consumed in operations, previously included in purchases of crude oil and products, is reclassified as operating expenses in the consolidated statement of income. Prior period amounts have been reclassified for comparative purposes. This reclassification has no impact on total expenses and net income or on the cash flow profile of the company.
IMPERIAL OIL LIMITED
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4. Investment and other income
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Investment and other income includes gains and losses on asset sales as follows:
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| | | | | | | | | | | Twelve months | |
| | | Fourth quarter | | | to December 31 | |
| millions of dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
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| Proceeds from asset sales | | | 8 | | | | 18 | | | | 102 | | | | 56 | |
| Book value of assets sold | | | 5 | | | | 7 | | | | 59 | | | | 44 | |
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| Gain/(loss) on asset sales, before tax | | | 3 | | | | 11 | | | | 43 | | | | 12 | |
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| Gain/(loss) on asset sales, after tax | | | 3 | | | | 11 | | | | 32 | | | | 10 | |
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Investment and other income also include a non-recurring loss of $53 million ($42 million after income taxes) from the remeasurement at fair value of the northern Toronto, Ontario property which was acquired in 1991 to be the future Toronto headquarters site. With the announcement in September 2004 of the relocation of the company’s headquarters to Calgary, Alberta, management has committed to a plan to sell the Toronto property. The change in intended use of the property together with management’s commitment to sell led to the remeasurement. The fair value of the property was determined using valuation techniques consistent with a market approach, adjusted as appropriate for differences.
5. Employee retirement benefits
The components of net benefit cost included in total expenses in the consolidated statement of income are as follows:
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| | | | | | | | | | | Twelve months | |
| | | Fourth quarter | | | to December 31 | |
| millions of dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
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| Pension benefits: | | | | | | | | | | | | | | | | |
| Current service cost | | | 19 | | | | 17 | | | | 77 | | | | 71 | |
| Interest cost | | | 59 | | | | 54 | | | | 236 | | | | 219 | |
| Expected return on plan assets | | | (55 | ) | | | (44 | ) | | | (223 | ) | | | (179 | ) |
| Amortization of prior service cost | | | 6 | | | | 6 | | | | 27 | | | | 25 | |
| Recognized actuarial loss | | | 17 | | | | 18 | | | | 68 | | | | 69 | |
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| Net benefit cost | | | 46 | | | | 51 | | | | 185 | | | | 205 | |
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| Other post-retirement benefits: | | | | | | | | | | | | | | | | |
| Current service cost | | | 1 | | | | 1 | | | | 6 | | | | 5 | |
| Interest cost | | | 6 | | | | 5 | | | | 24 | | | | 22 | |
| Recognized actuarial loss | | | 1 | | | | 1 | | | | 4 | | | | 3 | |
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| Net benefit cost | | | 8 | | | | 7 | | | | 34 | | | | 30 | |
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6. Financing costs
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| | | | | | | | | | | Twelve months | |
| | | Fourth quarter | | | to December 31 | |
| millions of dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
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| Debt related interest | | | 11 | | | | 11 | | | | 37 | | | | 38 | |
| Capitalized interest | | | (11 | ) | | | (11 | ) | | | (34 | ) | | | (33 | ) |
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| Net interest expense | | | — | | | | — | | | | 3 | | | | 5 | |
| Other interest | | | 1 | | | | 1 | | | | 4 | | | | 4 | |
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| Total interest expense | | | 1 | | | | 1 | | | | 7 | | | | 9 | |
| Foreign exchange expense (gain) on long-term debt | | | — | | | | — | | | | — | | | | (129 | ) |
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| Total financing costs | | | 1 | | | | 1 | | | | 7 | | | | (120 | ) |
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IMPERIAL OIL LIMITED
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| | | | | | | As at | | | As at | |
| | | | | | | Dec.31 | | | Dec.31 | |
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| Issued | | Maturity date | | Interest rate | | millions of dollars | |
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| 2003 | | $250 million due May 26, 2005 and $250 million due August 26, 2005 | | Variable | | | — | | | | 500 | |
| 2003 | | January 19, 2006 | | Variable | | | 318 | | | | 318 | |
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| Long-term debt | | | | | | | 318 | | | | 818 | |
| Capital leases | | | | | | | 49 | | | | 41 | |
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| Total long-term debt (a) | | | | | 367 | | | | 859 | |
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(a) These amounts exclude that portion of long-term debt totalling $995 million (2003 - $501 million), which matures within one year and is included in current liabilities.
8. Other long-term obligations
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| | | As at | | | As at | |
| | | Dec.31 | | | Dec.31 | |
| millions of dollars | | 2004 | | | 2003 | |
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| Employee retirement benefits (a) | | | 1,052 | | | | 847 | |
| Asset retirement obligations and other environmental liabilities (b) | | | 380 | | | | 393 | |
| Other obligations | | | 93 | | | | 74 | |
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| Total other long-term obligations | | | 1,525 | | | | 1,314 | |
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(a) Total recorded employee retirement benefits obligations also include $48 million in current liabilities (2003 - $44 million).
(b) Total asset retirement obligations and other environmental liabilities also include $76 million in current liabilities (2003 - $69 million).
9. Common shares
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| | | As at | | | As at | |
| | | Dec.31 | | | Dec.31 | |
| thousands of shares | | 2004 | | | 2003 | |
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| Authorized | | | 450,000 | | | | 450,000 | |
| Common shares outstanding | | | 349,320 | | | | 362,653 | |
In 1995 through 2003, the company purchased shares under nine 12-month normal course share purchase programs, as well as an auction tender. On June 23, 2004, another 12-month normal course program was implemented with an allowable purchase of up to 17.9 million shares (five percent of the total on June 21, 2004), less any shares purchased by the employee savings plan and company pension fund. The results of these activities are as shown below:
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| | | millions of | |
| Year | | Shares | | | Dollars | |
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| 1995 - 2002 | | | 202.7 | | | | 5,169 | |
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| 2003 - Fourth quarter | | | 5.3 | | | | 280 | |
| Full year | | | 16.3 | | | | 799 | |
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| 2004 - Fourth quarter | | | 4.1 | | | | 292 | |
| Full year | | | 13.6 | | | | 872 | |
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| Cumulative purchases to date | | | 232.6 | | | | 6,840 | |
Exxon Mobil Corporation’s participation in the above maintained its ownership interest in Imperial at 69.6 percent.
IMPERIAL OIL LIMITED
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The following table provides the calculation of net income per common share: | | |
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| | | | | | | | | | | Twelve months | |
| | | Fourth quarter | | | to December 31 | |
| | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
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Net income per common share - basic | | | | | | | | | | | | | | | | |
| Income before cumulative effect of accounting change (millions of dollars) | | | 538 | | | | 321 | | | | 2,052 | | | | 1,701 | |
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| Net income (millions of dollars) | | | 538 | | | | 321 | | | | 2,052 | | | | 1,705 | |
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| Weighted average number of common shares outstanding (millions of shares) | | | 351.5 | | | | 365.5 | | | | 356.8 | | | | 372.0 | |
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| Net income per common share (dollars) | | | | | | | | | | | | | | | | |
| Income before cumulative effect of accounting change (millions of dollars) | | | 1.53 | | | | 0.88 | | | | 5.75 | | | | 4.57 | |
| Cumulative effect of accounting change, net of income tax | | | — | | | | — | | | | — | | | | 0.01 | |
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| Net income | | | 1.53 | | | | 0.88 | | | | 5.75 | | | | 4.58 | |
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Net income per common share - diluted | | | | | | | | | | | | | | | | |
| Income before cumulative effect of accounting change (millions of dollars) | | | 538 | | | | 321 | | | | 2,052 | | | | 1,701 | |
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| Net income (millions of dollars) | | | 538 | | | | 321 | | | | 2,052 | | | | 1,705 | |
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| Weighted average number of common shares outstanding (millions of shares) | | | 351.5 | | | | 365.5 | | | | 356.8 | | | | 372.0 | |
| Effect of employee stock-based awards | | | 1.0 | | | | 0.4 | | | | 0.8 | | | | 0.1 | |
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| Weighted average number of common shares outstanding, assuming dilution | | | 352.5 | | | | 365.9 | | | | 357.6 | | | | 372.1 | |
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| Net income per common share (dollars) | | | | | | | | | | | | | | | | |
| Income before cumulative effect of accounting change (millions of dollars) | | | 1.53 | | | | 0.88 | | | | 5.74 | | | | 4.57 | |
| Cumulative effect of accounting change, net of income tax | | | — | | | | — | | | | — | | | | 0.01 | |
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| Net income | | | 1.53 | | | | 0.88 | | | | 5.74 | | | | 4.58 | |
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If the provisions for expensing the value of employee stock options of Financial Accounting Standard No.123, “Accounting for Stock-Based Compensation” had been adopted prior to January 1, 2003, the impact on compensation expense, net income and net income per share for periods in 2003 and 2004 would have been negligible.
10. Earnings reinvested
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| | | | | | | | | | | Twelve months | |
| | | Fourth quarter | | | to December 31 | |
| millions of dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
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| Earnings reinvested at beginning of period | | | 4,699 | | | | 3,964 | | | | 3,952 | | | | 3,287 | |
| Net income for the period | | | 538 | | | | 321 | | | | 2,052 | | | | 1,705 | |
| Share purchases in excess of stated value | | | (270 | ) | | | (253 | ) | | | (801 | ) | | | (717 | ) |
| Dividends | | | (78 | ) | | | (80 | ) | | | (314 | ) | | | (323 | ) |
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| Earnings reinvested at end of period | | | 4,889 | | | | 3,952 | | | | 4,889 | | | | 3,952 | |
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IMPERIAL OIL LIMITED
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11. Nonowner changes in shareholders’ equity
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| | | | | | | | | | | Twelve months | |
| | | Fourth quarter | | | to December 31 | |
| millions of dollars | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
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| Net income | | | 538 | | | | 321 | | | | 2,052 | | | | 1,705 | |
| Other nonowner changes in equity (a) | | | (102 | ) | | | 49 | | | | (102 | ) | | | 49 | |
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| Total nonowner changes in shareholders’ equity | | | 436 | | | | 370 | | | | 1,950 | | | | 1,754 | |
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| (a) Minimum pension liability adjustmemt. | | | | | | | | | | | | | | | | |
