Imperial Oil announces first-quarter financial and operating results
Toronto, April 21, 2005— Imperial Oil today announced net income for the first quarter of 2005 of $393 million or $1.12 a share, versus $466 million or $1.29 a share for the first quarter of 2004.
Lower earnings were mainly due to the negative impact of about $130 million from lower volumes and higher maintenance costs associated with a major coker turnaround at Syncrude. The company’s excellent 2004 operating performance continued into the first quarter of 2005 with strong performances at Cold Lake, downstream and chemical facilities more than offsetting the natural decline in conventional crude oil and natural gas operations.
Strong light crude oil and natural gas prices and industry refining and petrochemical margins totalling about $250 million were favourable compared to the first quarter of 2004, but their positive impact on earnings were moderated by lower Cold Lake bitumen realizations of about $50 million and the impact of a higher Canadian dollar of about $80 million. The lower earnings were also due to higher stock-related compensation expenses of about $80 million primarily as a result of the significant increase in the company’s share price. Recognizing stock-related compensation expenses in earnings, on the basis of market prices of the company’s shares, has been a long-standing, transparent accounting practice of the company.
Total revenues were $5,958 million in the first quarter, versus $5,067 million in the corresponding period of 2004. Capital and exploration expenditures were $325 million, compared with $353 million a year earlier. During the first quarter the company repurchased 3.7 million shares for $323 million. At March 31, 2005 the company’s balance of cash and marketable securities was $537 million, compared with $1,279 million at the end of 2004.
Imperial’s chairman, president and chief executive officer Tim Hearn said the company continued to achieve improvements in the controllable aspects of the business, such as cost management, volume performance and operating reliability. “Our strategy is to consistently deliver solid operating and financial performance over the long term, which is the key to success irrespective of market conditions or commodity prices,” Hearn said.
Imperial Oil is one of Canada’s largest corporations and has been a leading member of the country’s petroleum industry for 125 years. It is one of Canada’s largest producers of crude oil and natural gas liquids and a major producer of natural gas. It is also Canada’s largest producer and marketer of petroleum products, sold primarily under the Esso brand, and a major producer of petrochemicals.
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| | | |
| For further information: |
| Investor relations | | Media relations |
| Susan Swan | | Richard O’Farrell |
| (416) 968-4262 | | (416) 968-4875 |
Highlights
Cold Lake production increased
Bitumen production at Imperial’s Cold Lake, Alta., facility averaged more than 150,000 barrels a day during the first quarter of 2005, compared with about 120,000 barrels a day in the first quarter of 2004. The increase was due to steaming cycles from existing wells and additional production from about 200 new wells that were completed in 2004. Also, drilling is expected to begin in 2005 in one of two new expansion areas for which regulatory approval was received in 2004.
Kearl drilling confirms high-quality resource
Completion of a second phase of delineation drilling at Imperial’s oil-sands property at Kearl, Alta., which began last December, confirmed a high-quality resource, with the potential to produce up to 300,000 barrels a day over a 40-plus year lifespan. Regulatory applications for development of the resource are expected to be filed in 2005. If the project proceeds, Imperial will hold a 70-percent interest and will act as operator in a joint project with ExxonMobil Canada.
Refinery and chemicals operations continue strong performance
Operating performance in Imperial’s refining and chemicals businesses remained strong through the first quarter of 2005. Refinery utilization was 96 percent and total refinery throughput was more than 76 million litres a day, both close to record levels. In chemicals, strong industry demand resulted in higher production volumes for polyethylene and benzene.
IMPERIAL OIL LIMITED
FINANCIAL HIGHLIGHTS
| | | | | | | | | |
| | | Three months | |
| | | to March 31 | |
| | | 2005 | | | 2004 | |
| | | |
| Net income (U.S. GAAP, million of dollars) | | | | | | | | |
| Natural resources | | | 242 | | | | 319 | |
| Petroleum products | | | 112 | | | | 135 | |
| Chemicals | | | 34 | | | | 12 | |
| Corporate and other | | | 5 | | | | — | |
| | | |
| Net income (U.S. GAAP) | | | 393 | | | | 466 | |
| | | |
| Cash flow from (used in) operating activities | | | (57 | ) | | | 398 | |
| Capital and exploration expenditures | | | 325 | | | | 353 | |
| | | | | | | | | |
| Per-share information (dollars) | | | | | | | | |
| Net income — basic | | | 1.13 | | | | 1.29 | |
| Net income — diluted | | | 1.12 | | | | 1.29 | |
| Dividends | | | 0.22 | | | | 0.22 | |
| | | | | | | | | |
| Share prices — close at March 31 Toronto Stock Exchange (Canadian dollars) | | | 92.02 | | | | 58.87 | |
| American Stock Exchange (U.S. dollars) | | | 76.14 | | | | 44.84 | |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Beginning in the fourth quarter of 2004, the company reported its financial results based on generally accepted accounting principles (GAAP) in the United States of America. The financial results of the three previous quarters in 2004 have been recompiled and refiled under U.S. GAAP in accordance with Canadian regulatory requirements. The comparative numbers in the MD&A are presented under U.S. 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 consolidated financial statements.
OPERATING RESULTS
The company’s net income for the first quarter of 2005 was $393 million or $1.12 a share on a diluted basis, versus $466 million or $1.29 a share for the same period last year.
Lower earnings were mainly due to the negative impact of about $130 million from lower volumes and higher maintenance costs associated with a major coker turnaround at Syncrude. The company’s excellent 2004 operating performance continued into the first quarter of 2005 with strong performances at Cold Lake, downstream and chemical facilities more than offsetting the natural decline in conventional crude oil and natural gas operations.
Strong light crude oil and natural gas prices and industry refining and petrochemical margins totalling about $250 million were favourable compared to the first quarter of 2004, but their positive impact on earnings were moderated by lower Cold Lake bitumen realizations of about $50 million and the impact of a higher Canadian dollar of about $80 million. The lower earnings were also due to higher stock-related compensation expenses of about $80 million primarily as a result of the significant increase in the company’s share price. Recognizing stock-related compensation expenses in earnings, on the basis of market prices of the company’s shares, has been a long-standing, transparent accounting practice of the company.
IMPERIAL OIL LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued …)
Total revenues were $5,958 million in the first quarter versus $5,067 million in the corresponding period last year.
Natural resources
During the first quarter of 2005, net income from natural resources was $242 million compared with $319 million in the same period last year. Earnings decreased due to lower production and higher maintenance costs at Syncrude, lower Cold Lake bitumen realizations, lower conventional crude oil and natural gas liquids (NGLs) volumes and the negative impact of a higher Canadian dollar totalling $270 million. These factors were partly offset by higher realizations for light crude oil and natural gas, and higher Cold Lake bitumen volumes totalling $220 million. Increased stock-related compensation expenses also contributed to the decline.
While U.S. dollar Brent crude oil prices averaged about 50 percent higher in the first quarter, the company’s Canadian dollar realizations for conventional crude oil at $58.28 a barrel, compared with $42.70 a barrel in the same period last year, were 36 percent higher mainly because of a stronger Canadian dollar. Average realizations for Cold Lake bitumen in the first quarter of 2005 were about 25 percent lower than those of the same period in 2004, reflecting a significant widening of price spread between light crude oil and Cold Lake bitumen. The company’s realizations for natural gas were slightly higher, averaging $7.02 a thousand cubic feet in the first quarter of 2005, compared with $6.58 during the same period last year.
In the first quarter, total gross production of crude oil and natural gas liquids (NGLs) was 260 thousand barrels a day versus 263 thousand barrels in the same period last year.
Gross production of Cold Lake bitumen was higher, averaging 152 thousand barrels a day during the first quarter of 2005 versus 121 thousand barrels in the first quarter of 2004, due to the cyclic nature of production at Cold Lake.
Gross production from the company’s share of Syncrude decreased to 39 thousand barrels a day from 63 thousand barrels in the first quarter of 2004. Advancing the originally planned second-quarter coker turnaround into the first quarter and higher unplanned maintenance to other processing units were the main reasons for lower production volumes. The turnaround was completed in early April and all processing units returned to normal operation.
During the first three months this year, gross production of conventional crude oil averaged 40 thousand barrels a day versus 44 thousand barrels a day in the first quarter of 2004. Natural reservoir decline in the Western Canadian Basin was the main reason for the reduced production.
Gross production of NGLs available for sale decreased to 29 thousand barrels a day in the first quarter of 2005 from 35 thousand barrels last year, mainly due to declining NGL content of Wizard Lake gas production.
For the first quarter, gross production of natural gas averaged 585 million cubic feet a day, essentially flat compared to last year.
Effective April 1, 2005, the company and an affiliate of Exxon Mobil Corporation in Canada have agreed to combine their respective Western Canada production organizations into one single organization. Under the consolidation, Imperial will operate all Western Canada properties. There are no asset ownership changes. The consolidation is expected to result in efficiencies from a streamlined organization.
IMPERIAL OIL LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued …)
Petroleum products
The net income from petroleum products was $112 million in the first quarter of 2005, compared with $135 million during the same period a year ago. Lower earnings were mainly due to the unfavourable impact of a higher Canadian dollar, higher stock-related compensation expenses, partly offset by stronger industry refining margins.
Operating performance in the company’s refining businesses remained strong through the first quarter of 2005. Refinery utilization was 96 percent and total refinery throughput was more than 76 million litres a day.
Chemicals
Net income in the first quarter of 2005 from chemical operations was $34 million, compared with $12 million during the same period last year. Earnings increased because of higher margins and volumes for polyethylene and benzene as a result of increased industry demand.
Corporate and other
Net income from corporate and other operations was positive $5 million in the first quarter of 2005, compared with nil in the same period last year. Earnings increased mainly due to interest income on a higher average cash balance.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was negative $57 million during the first quarter of 2005, compared with $398 million in the same period last year. The decrease in cash inflow was mainly due to the timing of scheduled income tax payments, additional funding contribution to the employee pension plan and lower net income.
During the first quarter of 2005, capital and exploration expenditures were $325 million, compared with $353 million during the corresponding period a year ago. For the resources segment, capital and exploration expenditures were used mainly at Syncrude to maintain and expand production capacity. Capital expenditures for the products segment were used on the project to reduce sulphur content in diesel fuels.
During the first quarter, the company continued its share-purchase program and bought 3.7 million shares for $323 million under a normal course issuer bid that began on June 23, 2004, which has an allowable maximum purchase of 17.9 million shares. The maximum number of shares that may yet be purchased under the current program is about six million.
Total cash dividends of $77 million were paid in the first quarter of 2005, down from $80 million paid in the same period last year as a result of the company’s share-purchase program. Per-share dividends paid in the first quarter were $0.22, unchanged from the same quarter last year.
The above factors led to a decrease in the company’s balance of cash and marketable securities to $537 million at March 31, 2005, from $1,279 million at the end of 2004.
IMPERIAL OIL LIMITED
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information about market risks for the three months ended March 31, 2005 does not differ materially from that discussed on page 32 in the company’s annual report to shareholders for the year ended December 31, 2004, except for the following sensitivity:
| | | | | | | | | | | |
| | | |
| | Earnings sensitivity (a)
millions of dollars after tax | | | | | | | | | |
| | | |
| | Eight cents decrease (increase) in the value of the Canadian dollar versus the U.S. dollar | | | + (- | ) | | | 400 | | |
| | | |
The sensitivity of net income to changes in the Canadian dollar versus the U.S. dollar increased from 2004 year-end by about $18 million (after tax) for each one-cent difference. This is primarily due to the increase in crude oil prices and industry refining margins.
| (a) | The amount quoted to illustrate the impact of the sensitivity represents a change of about 10 percent in the value of the commodity at the end of the first quarter 2005. The sensitivity calculation shows the impact on annual net income that results from a change in one factor, after tax and royalties and holding all other factors constant. While the sensitivity is applicable under current conditions, it may not apply proportionately to larger fluctuations. |
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.
IMPERIAL OIL LIMITED
| | | | | | | | | |
| CONSOLIDATED STATEMENT OF INCOME | | | |
| (U.S. GAAP, unaudited) | | Three months | |
| | | to March 31 | |
| millions of Canadian dollars | | 2005 | | | 2004 | |
| |
| | | | | | | | | |
| REVENUES | | | | | | | | |
| Operating revenues (a) | | | 5,940 | | | | 5,056 | |
| Investment and other income (4) | | | 18 | | | | 11 | |
| | | |
| TOTAL REVENUES | | | 5,958 | | | | 5,067 | |
| | | |
| | | | | | | | | |
| EXPENSES | | | | | | | | |
| Exploration | | | 21 | | | | 16 | |
| Purchases of crude oil and products | | | 3,639 | | | | 2,833 | |
| Production and manufacturing (5) | | | 817 | | | | 683 | |
| Selling and general (5)(6) | | | 346 | | | | 293 | |
| Federal excise tax (a) | | | 307 | | | | 304 | |
| Depreciation and depletion | | | 238 | | | | 216 | |
| Financing costs (7) | | | 2 | | | | 2 | |
| | | |
| TOTAL EXPENSES | | | 5,370 | | | | 4,347 | |
| | | |
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 588 | | | | 720 | |
| INCOME TAXES | | | 195 | | | | 254 | |
| | | |
| NET INCOME (3) | | | 393 | | | | 466 | |
| | | |
| | | | | | | | | |
| NET INCOME PER COMMON SHARE — BASIC (dollars) (10) | | | 1.13 | | | | 1.29 | |
| NET INCOME PER COMMON SHARE — DILUTED (dollars) (10) | | | 1.12 | | | | 1.29 | |
| DIVIDENDS PER COMMON SHARE | | | 0.22 | | | | 0.22 | |
| | | | | | | | | |
| (a) Federal excise tax included in operating revenues | | | 307 | | | | 304 | |
Certain figures for the prior year have been reclassified in the financial statements to conform with the current year’s presentation.
IMPERIAL OIL LIMITED
| | | | | | | | | |
| CONSOLIDATED STATEMENT OF CASH FLOWS | | | |
| (U.S. GAAP, unaudited) | | Three months | |
| inflow/(outflow) | | to March 31 | |
| millions of Canadian dollars | | 2005 | | | 2004 | |
| |
| | | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | | | 393 | | | | 466 | |
| Adjustment for non-cash items: | | | | | | | | |
| Depreciation and depletion | | | 238 | | | | 216 | |
| (Gain)/loss on asset sales, after income tax (4) | | | (2 | ) | | | (1 | ) |
| Deferred income taxes and other | | | (63 | ) | | | (39 | ) |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (209 | ) | | | (179 | ) |
| Inventories and prepaids | | | (324 | ) | | | (295 | ) |
| Income taxes payable | | | (312 | ) | | | 39 | |
| Accounts payable | | | 502 | | | | 151 | |
| All other items — net (a) | | | (280 | ) | | | 40 | |
| | | |
| CASH FROM (USED IN) OPERATING ACTIVITIES | | | (57 | ) | | | 398 | |
| | | |
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Additions to property, plant and equipment and intangibles | | | (304 | ) | | | (327 | ) |
| Proceeds from asset sales | | | 7 | | | | 13 | |
| | | |
| CASH FROM (USED IN) INVESTING ACTIVITIES | | | (297 | ) | | | (314 | ) |
| | | |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Repayment of long-term debt | | | (1 | ) | | | — | |
| Issuance of common shares under stock option plan | | | 13 | | | | 6 | |
| Common shares purchased (10) | | | (323 | ) | | | (147 | ) |
| Dividends paid | | | (77 | ) | | | (80 | ) |
| | | |
| CASH FROM (USED IN) FINANCING ACTIVITIES | | | (388 | ) | | | (221 | ) |
| | | |
| | | | | | | | | |
| INCREASE (DECREASE) IN CASH | | | (742 | ) | | | (137 | ) |
| CASH AT BEGINNING OF PERIOD | | | 1,279 | | | | 448 | |
| | | |
| | | | | | | | | |
| CASH AT END OF PERIOD | | | 537 | | | | 311 | |
| | | |
| (a) | Includes contribution to registered pension plan of $339 million (2004 — $2 million). |
Certain figures for the prior year have been reclassified in the financial statements to conform with the current year’s presentation.
IMPERIAL OIL LIMITED
| | | | | | | | | |
| CONSOLIDATED BALANCE SHEET | | | | | | |
| (U.S. GAAP, unaudited) | | As at | | | As at | |
| | | Mar. 31 | | | Dec. 31 | |
| millions of Canadian dollars | | 2005 | | | 2004 | |
| |
| | | | | | | | | |
| ASSETS | | | | | | | | |
| Current assets | | | | | | | | |
| Cash | | | 537 | | | | 1,279 | |
| Accounts receivable, less estimated doubtful accounts | | | 1,835 | | | | 1,626 | |
| Inventories of crude oil and products | | | 669 | | | | 432 | |
| Materials, supplies and prepaid expenses | | | 198 | | | | 112 | |
| Deferred income tax assets | | | 576 | | | | 448 | |
| | | |
| Total current assets | | | 3,815 | | | | 3,897 | |
| |
| Investments and other long-term assets | | | 127 | | | | 130 | |
| Property, plant and equipment, less accumulated depreciation and depletion | | | 9,709 | | | | 9,647 | |
| Goodwill | | | 204 | | | | 204 | |
| Other intangible assets, net | | | 149 | | | | 149 | |
| | | |
| TOTAL ASSETS | | | 14,004 | | | | 14,027 | |
| | | |
| | | | | | | | | |
| LIABILITIES | | | | | | | | |
| Current liabilities | | | | | | | | |
| Short-term debt | | | 81 | | | | 81 | |
| Accounts payable and accrued liabilities | | | 3,025 | | | | 2,525 | |
| Income taxes payable | | | 745 | | | | 1,057 | |
| Current portion of long-term debt | | | 1,313 | | | | 995 | |
| | | |
| Total current liabilities | | | 5,164 | | | | 4,658 | |
| | | | | | | | | |
| Long-term debt (8) | | | 48 | | | | 367 | |
| Other long-term obligations (9) | | | 1,241 | | | | 1,525 | |
| Deferred income tax liabilities | | | 1,222 | | | | 1,155 | |
| | | |
| TOTAL LIABILITIES | | | 7,675 | | | | 7,705 | |
| | | | | | | | | |
| SHAREHOLDERS’ EQUITY | | | | | | | | |
| Common shares at stated value (10) | | | 1,795 | | | | 1,801 | |
| Earnings reinvested (11) | | | 4,902 | | | | 4,889 | |
| Accumulated other nonowner changes in equity (12) | | | (368 | ) | | | (368 | ) |
| | | |
| TOTAL SHAREHOLDERS’ EQUITY | | | 6,329 | | | | 6,322 | |
| | | |
| | | | | | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | | 14,004 | | | | 14,027 | |
| | | |
Certain figures for the prior year have been reclassified in the financial statements to conform with the current year’s presentation.
Approved by the directors April 21, 2005
| | | |
/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
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 of America. Prior to the fourth quarter of 2004, the company’s financial statements were prepared in conformity with Canadian GAAP and refiled in U.S. GAAP in accordance with Canadian regulatory requirements. A reconciliation of the differences between GAAP in Canada and the United States of America as they apply to the company is provided in note 2. All amounts are in Canadian dollars unless otherwise indicated.
These unaudited consolidated financial statements follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements. In the opinion of the 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 income statement, consolidated statement of cash flows and consolidated balance sheet is provided below:
| | | | | | | | | | | | | | | | | |
| Consolidated income statement | | Reported | | | Increase/(decrease) due to | | | Reported | |
| | | under | | | | | | | | | | | under | |
| million of dollars | | Cdn. GAAP | | | (a) | | | (b) | | | U.S. GAAP | |
| |
| (Three months to March 31, 2005) | | | | | | | | | | | | | | | | |
| Depreciation and depletion | | | 238 | | | | — | | | | — | | | | 238 | |
| Financing costs | | | 11 | | | | (9 | ) | | | — | | | | 2 | |
| Income taxes | | | 192 | | | | 3 | | | | — | | | | 195 | |
| Net income | | | 387 | | | | 6 | | | | — | | | | 393 | |
| | | |
| | | | | | | | | | | | | | | | | |
| (Three months to March 31, 2004) | | | | | | | | | | | | | | | | |
| Depreciation and depletion | | | 215 | | | | 1 | | | | — | | | | 216 | |
| Financing costs | | | 10 | | | | (8 | ) | | | — | | | | 2 | |
| Income taxes | | | 204 | | | | 3 | | | | 47 | | | | 254 | |
| Net income | | | 509 | | | | 4 | | | | (47 | ) | | | 466 | |
| | | |
| | | | | | | | | | | | | | | | | |
| Consolidated statement of cash flows | | Reported | | | Increase/(decrease) due to | | | Reported | |
| | | under | | | | | | | | | | | under | |
| million of dollars | | Cdn. GAAP | | | (a) | | | (b) | | | U.S. GAAP | |
| |
| (Three months to March 31, 2005) | | | | | | | | | | | | | | | | |
| Net income | | | 387 | | | | 6 | | | | — | | | | 393 | |
| Depreciation and depletion | | | 238 | | | | — | | | | — | | | | 238 | |
| Deferred income taxes and other | | | (66 | ) | | | 3 | | | | — | | | | (63 | ) |
| Cash from operating activities | | | (66 | ) | | | 9 | | | | — | | | | (57 | ) |
| Additions to property, plant and equipment | | | (295 | ) | | | (9 | ) | | | — | | | | (304 | ) |
| Cash from (used in) investing activities | | | (288 | ) | | | (9 | ) | | | — | | | | (297 | ) |
| | | |
| | | | | | | | | | | | | | | | | |
| (Three months to March 31, 2004) | | | | | | | | | | | | | | | | |
| Net income | | | 509 | | | | 4 | | | | (47 | ) | | | 466 | |
| Depreciation and depletion | | | 215 | | | | 1 | | | | — | | | | 216 | |
| Deferred income taxes and other | | | (89 | ) | | | 3 | | | | 47 | | | | (39 | ) |
| Cash from operating activities | | | 390 | | | | 8 | | | | — | | | | 398 | |
| Additions to property, plant and equipment | | | (319 | ) | | | (8 | ) | | | — | | | | (327 | ) |
| Cash from (used in) investing activities | | | (306 | ) | | | (8 | ) | | | — | | | | (314 | ) |
| | | |
IMPERIAL OIL LIMITED
| | | | | | | | | | | | | | | | | |
| Consolidated balance sheet | | Reported | | | Increase/(decrease) due to | | | Reported | |
| | | under | | | | | | | | | | | under | |
| millions of dollars | | Cdn. GAAP | | | (a) | | | (c) | | | U.S. GAAP | |
| |
| (As at March 31, 2005) | | | | | | | | | | | | | | | | |
| Investments and other long-term assets | | | 573 | | | | — | | | | (446 | ) | | | 127 | |
| Property, plant and equipment, net | | | 9,622 | | | | 87 | | | | — | | | | 9,709 | |
| Other intangible assets, net | | | 52 | | | | — | | | | 97 | | | | 149 | |
| Total assets | | | 14,266 | | | | 87 | | | | (349 | ) | | | 14,004 | |
| | | | | | | | | | | | | | | | | |
| Other long-term obligations | | | 1,032 | | | | — | | | | 209 | | | | 1,241 | |
| Deferred income tax liabilities | | | 1,383 | | | | 29 | | | | (190 | ) | | | 1,222 | |
| Earnings reinvested | | | 4,844 | | | | 58 | | | | — | | | | 4,902 | |
| Accumulated other nonowner changes in equity | | | — | | | | — | | | | (368 | ) | | | (368 | ) |
| Total liabilities and shareholders’ equity | | | 14,266 | | | | 87 | | | | (349 | ) | | | 14,004 | |
| | | |
| | | | | | | | | | | | | | | | | |
| (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 | |
| | | | | | | | | | | | | | | | | |
| 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 | |
| | | |
| (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, 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. |
| |
| (c) | 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. |
IMPERIAL OIL LIMITED
| 3. | BUSINESS SEGMENTS(U.S. GAAP, unaudited) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Natural | | | Petroleum | | | | |
| Three months to March 31 | | Resources | | | Products | | | Chemicals | |
| millions of dollars | | 2005 | | | 2004 | | | 2005 | | | 2004 | | | 2005 | | | 2004 | |
| |
| REVENUES | | | | | | | | | | | | | | | | | | | | | | | | |
| External sales (a) | | | 999 | | | | 890 | | | | 4,599 | | | | 3,923 | | | | 342 | | | | 243 | |
| Intersegment sales (b) | | | 700 | | | | 639 | | | | 596 | | | | 369 | | | | 78 | | | | 65 | |
| Investment and other income | | | — | | | | — | | | | 11 | | | | 8 | | | | — | | | | — | |
| | | |
| TOTAL REVENUES | | | 1,699 | | | | 1,529 | | | | 5,206 | | | | 4,300 | | | | 420 | | | | 308 | |
| | | |
| EXPENSES | | | | | | | | | | | | | | | | | | | | | | | | |
| Exploration (c) | | | 21 | | | | 16 | | | | — | | | | — | | | | — | | | | — | |
| Purchases (b) | | | 647 | | | | 478 | | | | 4,083 | | | | 3,206 | | | | 283 | | | | 222 | |
| Production and manufacturing | | | 472 | | | | 381 | | | | 296 | | | | 258 | | | | 49 | | | | 44 | |
| Selling and general | | | 20 | | | | 4 | | | | 294 | | | | 269 | | | | 32 | | | | 20 | |
| Federal excise tax | | | — | | | | — | | | | 307 | | | | 304 | | | | — | | | | — | |
| Depreciation and depletion | | | 176 | | | | 153 | | | | 59 | | | | 59 | | | | 3 | | | | 3 | |
| Financing costs | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | |
| TOTAL EXPENSES | | | 1,336 | | | | 1,032 | | | | 5,039 | | | | 4,096 | | | | 367 | | | | 289 | |
| | | |
| INCOME BEFORE INCOME TAXES | | | 363 | | | | 497 | | | | 167 | | | | 204 | | | | 53 | | | | 19 | |
| INCOME TAXES | | | 121 | | | | 178 | | | | 55 | | | | 69 | | | | 19 | | | | 7 | |
| | | |
| NET INCOME | | | 242 | | | | 319 | | | | 112 | | | | 135 | | | | 34 | | | | 12 | |
| | | |
| EXPORT SALES TO THE UNITED STATES | | | 337 | | | | 332 | | | | 166 | | | | 254 | | | | 198 | | | | 138 | |
| CASH FLOW FROM OPERATING ACTIVITIES | | | 17 | | | | 395 | | | | (98 | ) | | | (4 | ) | | | 25 | | | | 3 | |
| CAPEX (c) | | | 243 | | | | 275 | | | | 70 | | | | 64 | | | | 3 | | | | 6 | |
| TOTAL ASSETS AS AT March 31 (b) | | | 7,002 | | | | 6,559 | | | | 6,253 | | | | 5,783 | | | | 504 | | | | 486 | |
| CAPITAL EMPLOYED AS AT March 31 | | | 4,250 | | | | 3,874 | | | | 2,703 | | | | 2,819 | | | | 208 | | | | 243 | |
| | | | | | | | | | | | | | | | | |
| | | Corporate | | | | |
| Three months to March 31 | | and Other | | | Consolidated | |
| millions of dollars | | 2005 | | | 2004 | | | 2005 | | | 2004 | |
| |
| REVENUES | | | | | | | | | | | | | | | | |
| External sales (a) | | | — | | | | — | | | | 5,940 | | | | 5,056 | |
| Intersegment sales (b) | | | — | | | | — | | | | — | | | | — | |
| Investment and other income | | | 7 | | | | 3 | | | | 18 | | | | 11 | |
| | | |
| TOTAL REVENUES | | | 7 | | | | 3 | | | | 5,958 | | | | 5,067 | |
| | | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Exploration (c) | | | — | | | | — | | | | 21 | | | | 16 | |
| Purchases (b) | | | — | | | | — | | | | 3,639 | | | | 2,833 | |
| Production and manufacturing | | | — | | | | — | | | | 817 | | | | 683 | |
| Selling and general | | | — | | | | — | | | | 346 | | | | 293 | |
| Federal excise tax | | | — | | | | — | | | | 307 | | | | 304 | |
| Depreciation and depletion | | | — | | | | 1 | | | | 238 | | | | 216 | |
| Financing costs | | | 2 | | | | 2 | | | | 2 | | | | 2 | |
| | | |
| TOTAL EXPENSES | | | 2 | | | | 3 | | | | 5,370 | | | | 4,347 | |
| | | |
| INCOME BEFORE INCOME TAXES | | | 5 | | | | — | | | | 588 | | | | 720 | |
| INCOME TAXES | | | — | | | | — | | | | 195 | | | | 254 | |
| | | |
| NET INCOME | | | 5 | | | | — | | | | 393 | | | | 466 | |
| | | |
| EXPORT SALES TO THE UNITED STATES | | | — | | | | — | | | | 701 | | | | 724 | |
| CASH FLOW FROM OPERATING ACTIVITIES | | | (1 | ) | | | 4 | | | | (57 | ) | | | 398 | |
| CAPEX (c) | | | 9 | | | | 8 | | | | 325 | | | | 353 | |
| TOTAL ASSETS AS AT March 31 (b) | | | 650 | | | | 368 | | | | 14,004 | | | | 12,826 | |
| CAPITAL EMPLOYED AS AT March 31 | | | 669 | | | | 348 | | | | 7,830 | | | | 7,284 | |
| (a) | Includes crude sales made by Products in order to optimize refining operations. |
| |
| (b) | Consolidated amounts exclude intersegment transactions, as follows: |
| | | | | | | | | |
| | | 2005 | | | 2004 | |
| | | |
| Purchases | | | 1,374 | | | | 1,073 | |
| | | |
| Total intersegment sales | | | 1,374 | | | | 1,073 | |
| | | |
| Intersegment receivables and payables | | | 405 | | | | 370 | |
| | | |
| (c) | Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant, equipment and intangibles and additions to capital leases. |
IMPERIAL OIL LIMITED
| 4. | Investment and other income |
Investment and other income includes gains and losses on asset sales as follows:
| | | | | | | | | |
| | | Three months | |
| | | to March 31 | |
| millions of dollars | | 2005 | | | 2004 | |
| |
| Proceeds from asset sales | | | 7 | | | | 13 | |
| Book value of assets sold | | | 5 | | | | 12 | |
| | | |
| Gain/(loss) on asset sales, before tax | | | 2 | | | | 1 | |
| | | |
| Gain/(loss) on asset sales, after tax | | | 2 | | | | 1 | |
| | | |
| 5. | Employee retirement benefits |
The components of net benefit cost included in total expenses in the consolidated
statement of earnings are as follows:
| | | | | | | | | |
| | | Three months | |
| | | to March 31 | |
| millions of dollars | | 2005 | | | 2004 | |
| |
| Pension benefits: | | | | | | | | |
| Current service cost | | | 22 | | | | 20 | |
| Interest cost | | | 60 | | | | 59 | |
| Expected return on plan assets | | | (64 | ) | | | (56 | ) |
| Amortization of prior service cost | | | 6 | | | | 7 | |
| Recognized actuarial loss | | | 21 | | | | 17 | |
| | | |
| Net benefit cost | | | 45 | | | | 47 | |
| | | |
| | | | | | | | | |
| Other post-retirement benefits: | | | | | | | | |
| Current service cost | | | 2 | | | | 2 | |
| Interest cost | | | 6 | | | | 6 | |
| Recognized actuarial loss | | | 2 | | | | 1 | |
| | | |
| Net benefit cost | | | 10 | | | | 9 | |
| | | |
| 6. | Headquarters relocation |
On September 29, 2004, the company announced its intention to relocate its head office from Toronto, Ontario, to Calgary, Alberta. Completion of the move is expected by August 2005.
Expenses in connection with the headquarters relocation activity are expected to total approximately $85 million ($57 million, after tax) most of which are expected to be recognized in the second and third quarter of 2005 in conjunction with employee relocations and compensation payments for employees who choose not to move.
| | | | | | | | | |
| | | Three months | |
| | | to March 31 | |
| millions of dollars | | 2005 | | | 2004 | |
| |
| Debt related interest | | | 11 | | | | 10 | |
| Capitalized interest | | | (9 | ) | | | (8 | ) |
| | | |
| Net interest expense | | | 2 | | | | 2 | |
| Other interest | | | — | | | | — | |
| | | |
| Total financing costs | | | 2 | | | | 2 | |
| | | |
IMPERIAL OIL LIMITED
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | As at | | | As at | |
| | | | | | | | | | | Mar. 31 | | | Dec. 31 | |
| | | | | | | | | | | 2005 | | | 2004 | |
| Issued | | | Maturity date | | Interest rate | | | millions of dollars | |
| |
| 2003 | | | $250 million due May 26, 2005 and $250 million due August 26, 2005 | | Variable | | | — | | | | — | |
| 2003 | | | January 19, 2006 | | Variable | | | — | | | | 318 | |
| | | | | | | | | | | |
| Long-term debt | | | | | | | — | | | | 318 | |
| Capital leases | | | | | | | 48 | | | | 49 | |
| | | | | | | | | | | |
| Total long-term debt (a) | | | | | | | 48 | | | | 367 | |
| | | | | | | | | | | |
| (a) | These amounts exclude that portion of long-term debt totalling $1,313 million (December 31, 2004 — $995 million), which matures within one year and is included in current liabilities. |
| 9. | Other long-term obligations |
| | | | | | | | | |
| | | As at | | | As at | |
| | | March 31 | | | Dec. 31 | |
| millions of dollars | | 2005 | | | 2004 | |
| |
| Employee retirement benefits (a) | | | 755 | | | | 1,052 | |
| Asset retirement obligations and other environmental liabilities (b) | | | 379 | | | | 380 | |
| Other obligations | | | 107 | | | | 93 | |
| | | |
| Total other long-term obligations | | | 1,241 | | | | 1,525 | |
| | | |
| (a) | Total recorded employee retirement benefits obligations also include $48 million in current liabilities (December 31, 2004 — $48 million). |
| |
| (b) | Total asset retirement obligations and other environmental liabilities also include $76 million in current liabilities (December 31, 2004 — $76 million). |
| | | | | | | | | |
| | | As at | | | As at | |
| | | Mar. 31 | | | Dec. 31 | |
| thousands of shares | | 2005 | | | 2004 | |
| |
| Authorized | | | 450,000 | | | | 450,000 | |
| Common shares outstanding | | | 345,887 | | | | 349,320 | |
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:
| | | | | | | | | |
| | | millions of | |
| Year | | Shares | | | Dollars | |
| |
| 1995 - 2003 | | | 218.9 | | | | 5,968 | |
| | | | | | | | | |
| 2004 - First quarter | | | 2.5 | | | | 147 | |
| Full year | | | 13.6 | | | | 872 | |
| | | | | | | | | |
| 2005 - First quarter | | | 3.7 | | | | 323 | |
| | | | | | | | | |
| Cumulative purchases to date | | | 236.2 | | | | 7,163 | |
Exxon Mobil Corporation’s participation in the above maintained its ownership interest in Imperial at 69.6 percent.
IMPERIAL OIL LIMITED
The following table provides the calculation of net income per common share:
| | | | | | | | | |
| | | Three months | |
| | | to March 31 | |
| | | 2005 | | | 2004 | |
| |
Net income per common share — basic | | | | | | | | |
| Net income (millions of dollars) | | | 393 | | | | 466 | |
| | | | | | | | | |
| Weighted average number of common shares outstanding (millions of shares) | | | 348.3 | | | | 361.7 | |
| | | | | | | | | |
| Net income per common share (dollars) | | | 1.13 | | | | 1.29 | |
| | | | | | | | | |
Net income per common share — diluted | | | | | | | | |
| Net income (millions of dollars) | | | 393 | | | | 466 | |
| | | | | | | | | |
| Weighted average number of common shares outstanding (millions of shares) | | | 348.3 | | | | 361.7 | |
| Effect of employee stock-based awards (millions of shares) | | | 1.2 | | | | 0.7 | |
| | | |
| Weighted average number of common shares outstanding, assuming dilution (millions of shares) | | | 349.5 | | | | 362.4 | |
| | | | | | | | | |
| Net income per common share (dollars) | | | 1.12 | | | | 1.29 | |
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 the first quarter in 2004 would have been negligible. All expenses for employee stock options would have been recognized in net income as of December 31, 2004.
| | | | | | | | | |
| | | Three months | |
| | | to March 31 | |
| millions of dollars | | 2005 | | | 2004 | |
| |
| Earnings reinvested at beginning of period | | | 4,889 | | | | 3,952 | |
| Net income for the period | | | 393 | | | | 466 | |
| Share purchases in excess of stated value | | | (304 | ) | | | (134 | ) |
| Dividends | | | (76 | ) | | | (80 | ) |
| | | |
| Earnings reinvested at end of period | | | 4,902 | | | | 4,204 | |
| | | |
| 12. | Nonowner changes in shareholders’ equity |
| | | | | | | | | |
| | | Three months | |
| | | to March 31 | |
| millions of dollars | | 2005 | | | 2004 | |
| |
| Net income | | | 393 | | | | 466 | |
| Other nonowner changes in equity (a) | | | — | | | | — | |
| | | |
| Total nonowner changes in shareholders’ equity | | | 393 | | | | 466 | |
| | | |
| (a) | Minimum pension liability adjustmemt. |
IMPERIAL OIL LIMITED
| | | | | | | | | |
| OPERATING STATISTICS | | | |
| (unaudited) | | Three months | |
| | | to March 31 | |
| | | 2005 | | | 2004 | |
| |
| | | | | | | | | |
| GROSS CRUDE OIL AND NGL PRODUCTION (thousands of barrels a day) | | | | | | | | |
| Conventional | | | 40 | | | | 44 | |
| Cold Lake | | | 152 | | | | 121 | |
| Syncrude | | | 39 | | | | 63 | |
| | | |
| Total crude oil production | | | 231 | | | | 228 | |
| Natural gas liquids (NGLs) available for sale | | | 29 | | | | 35 | |
| | | |
| Total crude oil and NGL production | | | 260 | | | | 263 | |
| | | |
| | | | | | | | | |
| NET CRUDE OIL AND NGL PRODUCTION (thousands of barrels a day) | | | | | | | | |
| Conventional | | | 31 | | | | 34 | |
| Cold Lake | | | 139 | | | | 112 | |
| Syncrude | | | 39 | | | | 62 | |
| | | |
| Total crude oil production | | | 209 | | | | 208 | |
| Natural gas liquids (NGLs) available for sale | | | 24 | | | | 28 | |
| | | |
| Total crude oil and NGL production | | | 233 | | | | 236 | |
| | | |
| | | | | | | | | |
| COLD LAKE BLEND SALES (thousands of barrels a day) | | | 205 | | | | 164 | |
| NGL SALES (thousands of barrels a day) | | | 46 | | | | 48 | |
| | | | | | | | | |
| NATURAL GAS (millions of cubic feet a day) | | | | | | | | |
| Production (gross) | | | 585 | | | | 581 | |
| Production (net) | | | 522 | | | | 522 | |
| Sales | | | 522 | | | | 511 | |
| | | | | | | | | |
| AVERAGE PRICES (Canadian dollars) | | | | | | | | |
| Conventional crude oil sales (a barrel) | | | 58.28 | | | | 42.70 | |
| Par crude oil price at Edmonton (a barrel) | | | 62.63 | | | | 46.81 | |
| Heavy crude oil at Hardisty (Bow River, a barrel) | | | 39.49 | | | | 35.50 | |
| NGL sales (a barrel) | | | 35.27 | | | | 31.87 | |
| Natural gas sales (a thousand cubic feet) | | | 7.02 | | | | 6.58 | |
| | | | | | | | | |
| PETROLEUM PRODUCTS SALES (millions of litres a day) | | | | | | | | |
| Gasolines | | | 32.2 | | | | 31.9 | |
| Heating, diesel and jet fuels | | | 30.2 | | | | 29.7 | |
| Heavy fuel oils | | | 5.3 | | | | 5.2 | |
| Lube oils and other products | | | 5.5 | | | | 4.6 | |
| | | |
| Net petroleum products sales | | | 73.2 | | | | 71.4 | |
| Sales under purchase and sale agreements | | | 15.0 | | | | 15.1 | |
| | | |
| Total petroleum products sales | | | 88.2 | | | | 86.5 | |
| | | |
| | | | | | | | | |
| TOTAL REFINERY THROUGHPUT (millions of litres a day) | | | 76.5 | | | | 75.9 | |
| REFINERY CAPACITY UTILIZATION (percent) | | | 96 | | | | 95 | |
| | | | | | | | | |
| PETROCHEMICAL SALES (thousands of tonnes a day) | | | 3.3 | | | | 3.0 | |
IMPERIAL OIL LIMITED
| | | | | | | | | |
| SHARE OWNERSHIP, TRADING AND PERFORMANCE | | | |
| (unaudited) | | Three months | |
| | | to March 31 | |
| | | 2005 | | | 2004 | |
| |
| | | | | | | | | |
| RETURN ON AVERAGE CAPITAL EMPLOYED (a) | | | | | | | | |
| (rolling 4 quarters, percent) | | | 25.7 | | | | 23.1 | |
| | | | | | | | | |
| RETURN ON AVERAGE SHAREHOLDERS’ EQUITY | | | | | | | | |
| (rolling 4 quarters, percent) | | | 31.8 | | | | 29.2 | |
| | | | | | | | | |
| INTEREST COVERAGE RATIO — EARNINGS BASIS | | | | | | | | |
| (rolling 4 quarters, times covered) | | | 77.2 | | | | 58.9 | |
| | | | | | | | | |
| SHARE OWNERSHIP | | | | | | | | |
| Outstanding shares (thousands) | | | | | | | | |
| Monthly weighted average | | | 348,291 | | | | 361,699 | |
| At March 31 | | | 345,887 | | | | 360,297 | |
| Number of shareholders | | | | | | | | |
| At March 31 | | | 14,773 | | | | 15,381 | |
| | | | | | | | | |
| SHARE PRICES | | | | | | | | |
| Toronto Stock Exchange (Canadian dollars) | | | | | | | | |
| High | | | 94.33 | | | | 64.45 | |
| Low | | | 67.51 | | | | 56.42 | |
| Close at March 31 | | | 92.02 | | | | 58.87 | |
| | | | | | | | | |
| American Stock Exchange (U.S. dollars) | | | | | | | | |
| High | | | 77.20 | | | | 48.70 | |
| Low | | | 54.80 | | | | 42.34 | |
| Close at March 31 | | | 76.14 | | | | 44.84 | |
| (a) | Return on capital employed is the rolling four quarters’ net income excluding the after-tax cost of financing, divided by the average rolling four quarters’ capital employed. |
