Imperial announces first quarter 2021 financial and operating results

Source Press Release
Company Imperial Oil Limited 
Tags Production/Development, Exploration, Upstream Activities, Strategy - Upstream, Capital Spending, Strategy - Corporate, Financial & Operating Data
Date April 30, 2021

Imperial Oil Limited (TSX, NYSEAM: IMO):

  • Net income of $392 million in the first quarter of 2021
  • Cash flows from operating activities of over $1 billion in the first quarter
  • Improved financial performance across all business segments compared to the fourth quarter
  • Highest first quarter Upstream production in 30 years, driven by record gross production at Kearl
  • Imperial reinstates significant share purchase program with plans to purchase up to four percent of outstanding common shares by June 28, 2021
  • Quarterly dividend raised by almost 23% from 22 cents to 27 cents per share

    First quarter 
millions of Canadian dollars, unless noted    2021    2020    ∆ 
Net Income (loss) (U.S. GAAP)    392    (188)    +580 
Net Income (loss) per common share, assuming dilution (dollars)    0.53    (0.25)    +0.78 
Capital and exploration expenditures    163    331    -168 

Imperial reported estimated net income of $392 million for the first quarter of 2021, driven by improved crude prices, strong operating performance and continued cost discipline across all business segments, and bolstered by improved product and chemical margins compared to the fourth quarter.

During the first quarter of 2021, the company generated cash flow from operating activities of $1,045 million, up from $423 million in the same period of 2020. Cash flows from operating activities excluding working capital1 were $1,068 million, up from $611 million in the same period of 2020.

“Imperial took decisive actions to weather the economic storm throughout 2020, including making fundamental improvements to its cost structure and continuing to progress key projects to ensure the company was well positioned to take full advantage of market conditions as they began to improve,” said Brad Corson, chairman, president and chief executive officer. “The benefits of this approach underpin our strong performance this quarter. I am extremely proud of our ability to deliver these results while also meeting our commitments to the care of our people, communities, and the environment.”

Upstream production for the first quarter averaged 432,000 gross oil-equivalent barrels per day, the highest first quarter production in 30 years. Kearl total gross production averaged 251,000 barrels per day, establishing a new production record for each month of the first quarter.

Downstream throughput averaged 364,000 barrels per day in the first quarter, with utilization at 85 percent, up from 359,000 barrels per day in the fourth quarter of 2020. Petroleum product sales were 414,000 barrels per day, compared to 416,000 barrels per day in the fourth quarter of 2020. Despite continuing weak demand, Downstream generated net income of $292 million in the first quarter, an increase of $186 million from the fourth quarter of 2020, primarily driven by stronger product margins.

Consistent with the company’s long-standing commitment to shareholders, Imperial amended its current share purchase program and plans to purchase up to four percent of outstanding common shares (as of June 15, 2020) by June 28, 2021. Additionally, Imperial declared a second quarter dividend of 27 cents per share, an increase of almost 23 percent. “These actions reflect the company’s strong financial performance and confidence in its future, and demonstrate our ongoing commitment to return cash to shareholders,” Corson added.

First quarter highlights

  • Net income of $392 million or $0.53 per share on a diluted basis, compared to net loss of $188 million or $0.25 per share in the first quarter of 2020. Net income excluding identified items1 of $392 million in the first quarter of 2021, up from $93 million in the same period of 2020.
  • Cash flows from operating activities of $1,045 million, up from $423 million in the same period of 2020. Cash flows from operating activities excluding working capital1 of $1,068 million, up from $611 million in the same period of 2020.
  • Capital and exploration expenditures totalled $163 million, compared to $331 million in the first quarter of 2020. The company continues to anticipate full-year capital and exploration expenditures of $1.2 billion in 2021.
  • Dividends paid totalled $162 million or $0.22 per share, compared to $164 million or $0.22 per share in the first quarter of 2020.
  • Increased share purchase program underpinned by strong financial position. In April, the program was amended to allow Imperial to purchase up to four percent of its common shares outstanding (as of June 15, 2020), approximately 29,363,070 shares, during a 2-month period ending June 28, 2021. Consistent with the company’s balance sheet strength, low capital requirements and strong cash generation, this amendment reflects the company’s priority and capacity to return cash to shareholders.
  • Production averaged 432,000 gross oil-equivalent barrels per day, up from 419,000 barrels per day in the same period of 2020.
  • Total gross production at Kearl averaged 251,000 barrels per day (178,000 barrels Imperial's share), up from 226,000 barrels per day (160,000 barrels Imperial's share) in the first quarter of 2020. The asset established new production records for each month of the first quarter, with higher production primarily driven by supplemental crushing facilities.
  • Gross bitumen production at Cold Lake averaged 140,000 barrels per day, in line with 140,000 barrels per day in the first quarter of 2020.
  • The company's share of gross production from Syncrude averaged 79,000 barrels per day, up from 73,000 barrels per day in the first quarter of 2020.
  • Refinery throughput averaged 364,000 barrels per day, compared to 383,000 barrels per day in the first quarter of 2020. Capacity utilization was 85 percent, compared to 91 percent in the first quarter of 2020. Lower refinery throughput was primarily driven by lower market demand due to the COVID-19 pandemic.
  • Petroleum product sales were 414,000 barrels per day, compared to 462,000 barrels per day in the first quarter of 2020. Lower petroleum product sales were primarily driven by reduced demand due to the COVID-19 pandemic.
  • Chemical net income of $67 million in the quarter, up from $21 million in the first quarter of 2020.
  • The Liquid Addition to Steam for Enhanced Recovery (LASER) Project at Cold Lake's Mahkeses plant successfully started up. This latest deployment of Imperial’s enhanced recovery solvent technology improves productivity and is expected to enable up to a 25% greenhouse gas intensity reduction for the associated production.
  • Imperial released its updated Corporate Sustainability Report. The update highlights the company’s actions and results across key dimensions of sustainability. The report’s expanded climate section includes scope 3 emissions estimates and outlines Imperial's efforts to develop pathways in support of a net-zero future.
  • Imperial provided an additional $2.5 million in free fuel to 100,000 frontline health care workers in recognition of their tireless service. This is the second Health Care Heroes campaign initiated by Imperial during the pandemic; $2 million in free fuel cards were provided to 80,000 health care workers in 2020.

1 non-GAAP measure - See Attachment VI for definition and reconciliation 

First quarter 2021 vs. first quarter 2020

In early 2020, the balance of supply and demand for petroleum and petrochemical products experienced two significant disruptive effects. On the demand side, the COVID-19 pandemic spread rapidly through most areas of the world resulting in substantial reductions in consumer and business activity and significantly reduced demand for crude oil, natural gas, and petroleum products. This reduction in demand coincided with announcements of increased production in certain key oil-producing countries which led to increases in inventory levels and sharp declines in prices for crude oil, natural gas, and petroleum products.

While demand has rebounded considerably, the lingering effects of the weak 2020 business environment has continued to have a negative impact on financial results in 2021 when compared to periods prior to the pandemic. Signs of improvement are emerging including higher crude and gas prices through the quarter and stronger Downstream and Chemical margins.

The company recorded net income of $392 million or $0.53 per share on a diluted basis in the first quarter of 2021, compared to a net loss of $188 million or $0.25 per share in the same period of 2020. First quarter 2020 results included non-cash charges of $281 million relating to the revaluation of the company's inventory.

Upstream recorded net income of $79 million in the first quarter of 2021, compared to a net loss of $608 million in the same period of 2020. Improved results reflect higher realizations of about $700 million and the absence of the prior year non-cash charge of $229 million, related to the revaluation of the company's inventory. These items were partially offset by higher royalties of about $100 million, unfavourable foreign exchange effects of about $70 million, and higher operating expenses of about $60 million.

West Texas Intermediate (WTI) averaged US$58.14 per barrel in the first quarter of 2021, up from US$45.78 per barrel in the same quarter of 2020. Western Canada Select (WCS) averaged US$45.64 per barrel and US$25.60 per barrel for the same periods. The WTI / WCS differential averaged approximately US$13 per barrel for the first quarter of 2021, compared to around US$20 in the same period of 2020.

The Canadian dollar averaged US$0.79 in the first quarter of 2021, an increase of US$0.05 from the first quarter of 2020.

Imperial’s average Canadian dollar realizations for bitumen increased in the quarter, primarily due to an increase in WCS. Bitumen realizations averaged $47.19 per barrel in the first quarter of 2021, up from $18.08 per barrel in the first quarter of 2020. The company’s average Canadian dollar realizations for synthetic crude increased generally in line with WTI, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $67.41 per barrel in the first quarter of 2021, up from $58.94 per barrel in the same period of 2020.

Total gross production of Kearl bitumen averaged 251,000 barrels per day in the first quarter (178,000 barrels Imperial’s share), up from 226,000 barrels per day (160,000 barrels Imperial’s share) in the first quarter of 2020. Higher production was primarily driven by the supplemental crushing facilities.

Gross production of Cold Lake bitumen averaged 140,000 barrels per day in the first quarter, in line with 140,000 barrels per day in the same period of 2020.

The company's share of gross production from Syncrude averaged 79,000 barrels per day, up from 73,000 barrels per day in the first quarter of 2020.

Downstream recorded net income of $292 million in the first quarter of 2021, compared to net income of $402 million in the same period of 2020. Results were negatively impacted by lower margins of about $150 million and lower sales volumes of about $60 million. These items were partially offset by the absence of the prior year non-cash charge of $52 million, related to the revaluation of the company's inventory and lower operating expenses of about $50 million.

Refinery throughput averaged 364,000 barrels per day, compared to 383,000 barrels per day in the first quarter of 2020. Capacity utilization was 85 percent, compared to 91 percent in the first quarter of 2020. Lower refinery throughput was primarily driven by lower market demand due to the COVID-19 pandemic.

Petroleum product sales were 414,000 barrels per day, compared to 462,000 barrels per day in the first quarter of 2020. Lower petroleum product sales were primarily driven by reduced demand due to the COVID-19 pandemic.

Chemical net income was $67 million in the first quarter, up from net income of $21 million in the same quarter of 2020.

Corporate and other expenses were $46 million in the first quarter, up from $3 million in the same period of 2020, mainly due to higher share-based compensation costs.

Cash flow generated from operating activities was $1,045 million in the first quarter, up from $423 million in the corresponding period in 2020, primarily reflecting higher Upstream realizations.

Investing activities used net cash of $147 million in the first quarter, compared with $308 million used in the same period of 2020, primarily reflecting lower additions to property, plant and equipment.

Cash used in financing activities was $202 million in the first quarter, compared with $445 million used in the first quarter of 2020. Dividends paid in the first quarter of 2021 were $162 million. The per share dividend paid in the first quarter was $0.22, consistent with the same period of 2020. The company did not purchase shares during the first quarter. In the first quarter of 2020, the company purchased about 9.8 million shares for $274 million, including shares purchased from Exxon Mobil Corporation.

The company’s cash balance was $1,467 million at March 31, 2021, versus $1,388 million at the end of first quarter 2020.

At March 31, 2021, due to the termination of transportation services agreements related to a third-party pipeline project, the company recognized a liability of $62 million, previously reported as a contingent liability in Note 10 of Imperial’s Form 10-K. In connection with the same project, commitments under “Other long-term purchase agreements” as reported in Imperial’s Form 10-K decreased by approximately $2.9 billion. The majority of these commitments related to years 2026 and beyond.

On April 30, 2021, the company announced an amendment to its normal course issuer bid to increase the number of common shares that it may purchase. Under the amendment, the number of common shares that may be purchased will increase to a maximum of 29,363,070 common shares during the period June 29, 2020 to June 28, 2021, which includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. No other provisions of the normal course issuer bid have changed. The company currently anticipates maximizing its share purchases under the program. Purchase plans may be modified at any time without prior notice.

Key financial and operating data follow.

           
    Three Months 
millions of Canadian dollars, unless noted      2021    2020 
           
Net Income (loss) (U.S. GAAP)           
Total revenues and other income      6,998    6,690 
Total expenses      6,486    6,945 
Income (loss) before income taxes      512    (255) 
Income taxes      120    (67) 
Net income (loss)      392    (188) 
           
Net income (loss) per common share (dollars)      0.53    (0.25) 
Net income (loss) per common share - assuming dilution (dollars)      0.53    (0.25) 
           
Other Financial Data           
Gain (loss) on asset sales, after tax       
           
Total assets at March 31      39,007    40,413 
           
Total debt at March 31      5,144    5,198 
           
Shareholders' equity at March 31      21,736    23,570 
           
Capital employed at March 31      26,906    28,789 
           
Dividends declared on common stock           
Total      161    162 
Per common share (dollars)      0.22    0.22 
           
Millions of common shares outstanding           
At March 31      734.1    734.1 
Average - assuming dilution      735.7    738.9 
           

           
      Attachment II 
           
           
    Three Months 
millions of Canadian dollars      2021    2020 
           
Total cash and cash equivalents at period end      1,467    1,388 
           
Operating Activities           
Net income (loss)      392    (188) 
Adjustments for non-cash items:           
Depreciation and depletion      494    453 
Impairment of intangible assets        20 
(Gain) loss on asset sales      (3)    (7) 
Inventory write-down to current market value        281 
Deferred income taxes and other      60    43 
Changes in operating assets and liabilities      (23)    (188) 
All other items - net      125   
Cash flows from (used in) operating activities      1,045    423 
           
Investing Activities           
Additions to property, plant and equipment      (167)    (310) 
Proceeds from asset sales       
Loans to equity companies - net      13    (7) 
Cash flows from (used in) investing activities      (147)    (308) 
           
Cash flows from (used in) financing activities      (202)    (445) 
           

           
      Attachment III 
           
           
    Three Months 
millions of Canadian dollars      2021    2020 
           
Net income (loss) (U.S. GAAP)           
Upstream      79    (608) 
Downstream      292    402 
Chemical      67    21 
Corporate and other      (46)    (3) 
Net income (loss)      392    (188) 
           
Revenues and other income           
Upstream      3,493    2,374 
Downstream      5,305    5,379 
Chemical      376    260 
Eliminations / Corporate and other      (2,176)    (1,323) 
Revenues and other income      6,998    6,690 
           
Purchases of crude oil and products           
Upstream      1,834    1,650 
Downstream      4,020    3,769 
Chemical      209    140 
Eliminations      (2,176)    (1,333) 
Purchases of crude oil and products      3,887    4,226 
           
Production and manufacturing           
Upstream      1,109    1,108 
Downstream      326    408 
Chemical      50    63 
Eliminations       
Production and manufacturing      1,485    1,579 
           
Selling and general           
Upstream       
Downstream      133    181 
Chemical      25    25 
Eliminations / Corporate and other      31    (40) 
Selling and general      189    166 
           
Capital and exploration expenditures           
Upstream      85    231 
Downstream      68    76 
Chemical       
Corporate and other        15 
Capital and exploration expenditures      163    331 
           
Exploration expenses charged to Upstream income included above       
           

           
      Attachment IV 
           
           
Operating statistics      Three Months 
      2021    2020 
           
Gross crude oil and natural gas liquids (NGL) production           
(thousands of barrels per day)           
Kearl      178    160 
Cold Lake      140    140 
Syncrude      79    73 
Conventional      11    15 
Total crude oil production      408    388 
NGLs available for sale       
Total crude oil and NGL production      410    390 
           
Gross natural gas production (millions of cubic feet per day)      131    176 
           
Gross oil-equivalent production (a)      432    419 
(thousands of oil-equivalent barrels per day)           
           
Net crude oil and NGL production (thousands of barrels per day)           
Kearl      173    154 
Cold Lake      112    134 
Syncrude      74    71 
Conventional      11    14 
Total crude oil production      370    373 
NGLs available for sale       
Total crude oil and NGL production      372    374 
           
Net natural gas production (millions of cubic feet per day)      127    172 
           
Net oil-equivalent production (a)      393    403 
(thousands of oil-equivalent barrels per day)           
           
Kearl blend sales (thousands of barrels per day)      248    220 
Cold Lake blend sales (thousands of barrels per day)      182    191 
NGL sales (thousands of barrels per day) (b)       
           
Average realizations (Canadian dollars)           
Bitumen (per barrel)      47.19    18.08 
Synthetic oil (per barrel)      67.41    58.94 
Conventional crude oil (per barrel)      49.54    41.49 
NGL (per barrel)      31.16    9.26 
Natural gas (per thousand cubic feet)      3.24    1.77 
           
Refinery throughput (thousands of barrels per day)      364    383 
Refinery capacity utilization (percent)      85    91 
           
Petroleum product sales (thousands of barrels per day)           
Gasolines      198    232 
Heating, diesel and jet fuels      153    179 
Heavy fuel oils      20    13 
Lube oils and other products      43    38 
Net petroleum products sales      414    462 
           
Petrochemical sales (thousands of tonnes)      211    186 
           

(a)  Gas converted to oil-equivalent at six million cubic feet per one thousand barrels. 
(b)  2021 NGL sales rounds to 0. 

         
        Attachment V 
         
         
        Net income (loss) per 
    Net income (loss) (U.S. GAAP)    common share - diluted (a) 
    millions of Canadian dollars    Canadian dollars 
         
2017         
First Quarter    333    0.39 
Second Quarter    (77)    (0.09) 
Third Quarter    371    0.44 
Fourth Quarter    (137)    (0.16) 
Year    490    0.58 
         
2018         
First Quarter    516    0.62 
Second Quarter    196    0.24 
Third Quarter    749    0.94 
Fourth Quarter    853    1.08 
Year    2,314    2.86 
         
2019         
First Quarter    293    0.38 
Second Quarter    1,212    1.57 
Third Quarter    424    0.56 
Fourth Quarter    271    0.36 
Year    2,200    2.88 
         
2020         
First Quarter    (188)    (0.25) 
Second Quarter    (526)    (0.72) 
Third Quarter     
Fourth Quarter    (1,146)    (1.56) 
Year    (1,857)    (2.53) 
         
2021         
First Quarter    392    0.53 

(a)    Computed using the average number of shares outstanding during each period. The sum of the quarters presented may not add to the year total.  



Cash flows from (used in) operating activities excluding working capital

Cash flows from (used in) operating activities excluding working capital is the total cash flows from operating activities less the changes in operating assets and liabilities in the period. Management believes it is useful for investors to consider these numbers in comparing the underlying performance of the company’s business across periods when there are significant period-to-period differences in the amount of changes in working capital. Changes in working capital is equal to “Changes in operating assets and liabilities” as disclosed in the company’s Consolidated statement of cash flows and in Attachment II of this document. This measure assesses the cash flows at an operating level, and as such, does not include proceeds from asset sales as defined in Cash flows from operating activities and asset sales in the Frequently Used Terms section of the company’s annual Form 10-K.

        Three Months 
millions of Canadian dollars        2021    2020 
Cash flows from (used in) operating activities        1,045    423 
             
Less changes in working capital             
Changes in operating assets and liabilities        (23)    (188) 
Cash flows from (used in) operating activities excl. working capital        1,068    611 

Free cash flow

Free cash flow is cash flow from operating activities less additions to property, plant and equipment and equity company investments plus proceeds from asset sales. This measure is used to evaluate cash available for financing activities (including but not limited to dividends and share purchases) after investment in the business.

        Three Months 
millions of Canadian dollars        2021    2020 
Cash flows from (used in) operating activities        1,045    423 
             
Cash flows from (used in) investing activities             
Additions to property, plant and equipment        (167)    (310) 
Proceeds from asset sales         
Loans to equity companies - net        13    (7) 
Free cash flow        898    115 

Net income (loss) excluding identified items

Net income (loss) excluding identified items is total net income (loss) excluding individually significant non-operational events with an absolute corporate total earnings impact of at least $100 million in a given quarter. The net income (loss) impact of an identified item for an individual segment may be less than $100 million when the item impacts several segments. Management believes it is useful for investors to consider these figures in comparing the underlying performance of the company’s business across periods when one, or both, periods include identified items. All identified items are presented on an after-tax basis.

        Three Months 
millions of Canadian dollars        2021    2020 
Net Income (loss) (U.S. GAAP)        392    (188) 
             
Less identified items included in Net income (loss)             
Non-cash inventory valuation (lower of cost or market)          (281) 
Subtotal of identified items          (281) 
             
Net income (loss) excluding identified items        392    93 

Cash operating costs (cash costs)

Cash operating costs consist of (1) Production and manufacturing, (2) Selling and general and (3) Exploration, from the company’s Consolidated statement of income, and as disclosed in Attachment III of this document. The sum of these income statement lines serve as an indication of cash operating costs and do not reflect the total cash expenditures of the company. This measure is useful for investors to understand the company’s efforts to optimize cash through disciplined expense management.

Reconciliation of cash operating costs             
        Three Months 
millions of Canadian dollars        2021    2020 
From Imperial's Consolidated statement of Income             
Total expenses        6,486    6,945 
Less:             
Purchases of crude oil and products        3,887    4,226 
Federal excise taxes and fuel charge        404    451 
Depreciation and depletion        494    473 
Non-service pension and postretirement benefit        11    30 
Financing        14    19 
Total cash operating costs        1,676    1,746 
             
Components of cash operating costs             
        Three Months 
millions of Canadian dollars        2021    2020 
From Imperial's Consolidated statement of Income             
Production and manufacturing        1,485    1,579 
Selling and general        189    166 
Exploration         
Cash operating costs        1,676    1,746 
             
Upstream        1,111    1,109 
Downstream        459    589 
Chemicals        75    88 
Corporate/Eliminations        31    (40) 
Cash operating costs        1,676    1,746 

Unit cash operating cost (unit cash costs)

Unit cash operating costs (unit cash costs) are calculated using total gross oil-equivalent production, and are calculated for the Upstream segment, as well as the major Upstream assets. This measure is useful for investors to understand the expense management efforts of the company’s major assets as a component of the overall Upstream segment. Unit cash operating cost, as used by management, does not directly align with the definition of “Average unit production costs” as set out by the U.S. Securities and Exchange Commission (SEC), and disclosed in the company’s SEC Form 10-K.

    Three Months 
    2021    2020 
millions of Canadian dollars    Upstream
(a) 
  Kearl    Cold
Lake 
  Syncrude    Upstream
(a) 
  Kearl    Cold
Lake 
  Syncrude 
Production and manufacturing    1,109    455    260    333    1,108    490    234    308 
Selling and general                 
Exploration                 
Cash operating costs    1,111    455    260    333    1,109    490    234    308 
                                 
Gross oil-equivalent production    432    178    140    79    419    160    140    73 
(thousands of barrels per day)                                 
                                 
Unit cash operating cost ($/oeb)    28.58    28.40    20.63    46.84    29.09    33.65    18.37    46.36 
USD converted at the YTD average forex    22.57    22.44    16.30    37.00    21.52    24.90    13.59    34.31 
2021 US$0.79; 2020 US$0.74                                 

(a) Upstream includes Kearl, Cold Lake, Imperial's share of Syncrude and other. 

Source: EvaluateEnergy® ©2021 EvaluateEnergy Ltd