Imperial announces third quarter 2023 financial and operating results
- Quarterly net income of $1,601 million and cash flow from operating activities of $2,359 million
- Upstream production of 423,000 gross oil-equivalent barrels per day
- Highest ever quarterly production at Kearl of 295,000 total gross oil-equivalent barrels per day (209,000 barrels Imperial’s share)
- Strong Downstream operating performance with refinery capacity utilization of 96%
- Completed accelerated normal course issuer bid program in October, returning more than $2.3 billion in total to shareholders through the entire program
- Announced intention to initiate a substantial issuer bid to purchase up to $1.5 billion of its common shares
- Declared fourth quarter dividend of 50 cents per share
- Released annual Advancing Climate Solutions report, outlining the company’s progress and ongoing commitment to lowering greenhouse gas emissions
CALGARY, Alberta–(BUSINESS WIRE)–Imperial (TSE: IMO, NYSE American: IMO):
|
|
Third quarter |
Nine months |
||||
|
millions of Canadian dollars, unless noted |
2023 |
2022 |
∆ |
2023 |
2022 |
∆ |
|
Net income (loss) (U.S. GAAP) |
1,601 |
2,031 |
(430) |
3,524 |
5,613 |
(2,089) |
|
Net income (loss) per common share, assuming dilution (dollars) |
2.76 |
3.24 |
(0.48) |
6.04 |
8.58 |
(2.54) |
|
Capital and exploration expenditures |
387 |
392 |
(5) |
1,309 |
1,002 |
+307 |
Imperial reported estimated net income in the third quarter of $1,601 million, up from net income of $675 million in the second quarter of 2023, driven by strong operating performance and higher commodity prices. Quarterly cash flow from operating activities was $2,359 million, up from $885 million in the second quarter of 2023.
“Imperial delivered strong financial results in the third quarter, highlighted by record quarterly production at Kearl and strong utilization across our refining network,” said Brad Corson, chairman, president and chief executive officer. “As we look to close out 2023, we remain focused on maximizing the value of our existing assets, progressing select growth opportunities, continuing to reduce our carbon intensity and returning surplus cash to shareholders.”
Upstream production in the third quarter averaged 423,000 gross oil-equivalent barrels per day. At Kearl, quarterly total gross production averaged 295,000 barrels per day (209,000 barrels Imperial’s share), the highest quarterly production in the asset’s history, and also established a new single month production record in September of 322,000 barrels per day (228,000 barrels Imperial’s share). In August, Kearl completed its multiyear program to convert its 81 haul trucks to autonomous operation. Imperial is now one of the largest autonomous mine fleet operators in the world and continues to capture productivity improvements while also reducing costs and further enhancing operational safety. At Cold Lake, quarterly gross production averaged 128,000 barrels per day, impacted by steam cycle timing and planned turnaround activity. As part of the turnaround scope, key equipment tie-ins for the Grand Rapids Phase 1 (GRP1) project were successfully completed. The project is nearing completion and remains on track for accelerated start-up by year-end 2023. When fully operational the project is expected to average 15,000 barrels per day of advantaged production using low carbon solvent-assisted steam-assisted gravity drainage (SA-SAGD) technology.
In the Downstream, throughput in the quarter averaged 416,000 barrels per day with refinery capacity utilization of 96 percent, which includes impacts associated with the planned refinery and chemical plant turnaround at the company’s Sarnia site. The turnaround began in September and is progressing on plan. Petroleum product sales in the quarter were 478,000 barrels per day, capturing value from strong fuel margins.
During the quarter, Imperial returned to shareholders $292 million in dividends paid and $1,342 million through accelerated share repurchases under the company’s normal course issuer bid (NCIB) program. The company completed its NCIB program in October with an additional $958 million in share repurchases.
“Our company’s strong operating performance and portfolio of capital efficient investments continue to generate substantial value for our shareholders,” said Corson. “Through October this year, our company has returned over $3.4 billion to shareholders, and I am pleased to announce our intention to initiate a substantial issuer bid to return up to a further $1.5 billion to shareholders in the fourth quarter of 2023.”
Throughout the quarter, Imperial continued to advance key projects that support lowering greenhouse gas emissions, including startup of the final Kearl boiler flue gas unit, ongoing construction of Strathcona renewable diesel facility and successful completion of a co-processing trial at Strathcona refinery. In September, Imperial released its annual Advancing Climate Solutions report outlining the company’s progress and ongoing commitment to lowering greenhouse gas emissions intensity.
“Our company has worked diligently on emission reduction roadmaps and business plans to lower greenhouse gas emissions intensity in our operations and provide lower life-cycle product solutions to our customers,” said Corson. “As we move forward, I am very excited about our opportunities to advance next-generation technologies as well as the world-scale Pathways carbon capture infrastructure in support of a net-zero future.”
Third quarter highlights
- Net income of $1,601 million or $2.76 per share on a diluted basis, compared to $2,031 million or $3.24 per share in the third quarter of 2022. Net income excluding identified items1 was $1,601 million in the third quarter of 2023, compared to $1,823 million in the same period of 2022. Lower net income was primarily driven by lower commodity prices.
- Cash flows from operating activities of $2,359 million, compared to cash flows from operating activities of $3,089 million in the same period of 2022. Cash flows from operating activities excluding working capital1 of $1,946 million, compared to $2,543 million in the same period of 2022.
- Capital and exploration expenditures totalled $387 million, compared to $392 million in the third quarter of 2022.
- The company returned $1,634 million to shareholders in the third quarter of 2023, including $292 million in dividends paid and $1,342 million in accelerated share repurchases. Subsequent to the end of the third quarter, the company completed its NCIB program with an additional $958 million in share repurchases.
- Announced intention to initiate a substantial issuer bid to purchase for cancellation up to $1.5 billion of its common shares. The company anticipates terms and pricing will be determined and the offer will commence during the next two weeks.
- Production averaged 423,000 gross oil-equivalent barrels per day, compared to 430,000 gross oil-equivalent barrels per day in the same period of 2022. Adjusting for the sale of XTO Energy Canada, which closed in the third quarter of 2022, production increased by about 5,000 gross oil-equivalent barrels per day.
- Total gross bitumen production at Kearl averaged 295,000 barrels per day (209,000 barrels Imperial’s share), the highest quarterly production in the asset’s history, up from 271,000 barrels per day (193,000 barrels Imperial’s share) in the third quarter of 2022, and also established a new single month production record in September of 322,000 barrels per day (228,000 barrels Imperial’s share).
- Completed conversion of last remaining haul trucks at Kearl to autonomous operation. With 81 fully autonomous haul trucks now in service, Imperial is one of the largest autonomous mine fleet operators in the world. The company expects to capture significant improvements to truck productivity and workforce safety while also reducing operating costs.
- Achieved successful start-up of final boiler flue gas unit at Kearl. This technology recovers waste heat from a boiler’s combustion exhaust to preheat process water, and combined, the six units have the potential to reduce greenhouse gas emissions by up to 220,000 tonnes per year.
- Ongoing monitoring and assessment of expanded seepage interception system at Kearl, including additional delineation work in the area to determine if any further mitigations are required. Imperial continues to engage with local Indigenous communities, and is providing site tours and access for independent testing. To date, there is no indication of adverse impacts to fish and wildlife populations or risks to drinking water for local communities.
- Gross bitumen production at Cold Lake averaged 128,000 barrels per day, compared to 150,000 barrels per day in the third quarter of 2022. Production in the third quarter was impacted by steam cycle timing and planned turnaround activities.
- Completed critical equipment tie-ins for the Grand Rapids Phase 1 (GRP1) project in conjunction with planned turnaround activities at Cold Lake in the third quarter. GRP1 will be the first SA-SAGD project in the industry and is expected to reduce greenhouse gas emissions intensity by up to 40% compared to existing cyclic steam stimulation technology. The project is nearing completion and remains on track to achieve accelerated start-up with steam injection anticipated by year-end 2023.
- The company’s share of gross production from Syncrude averaged 75,000 barrels per day, up from 62,000 barrels per day in the third quarter of 2022, primarily driven by planned turnaround activity.
- Refinery throughput averaged 416,000 barrels per day, compared to 426,000 barrels per day in the third quarter of 2022. Capacity utilization was 96 percent, compared to 100 percent in the third quarter of 2022. Third quarter 2023 results include impacts from the planned turnaround in Sarnia, which began in September and is progressing on plan.
- Petroleum product sales were 478,000 barrels per day, compared to 484,000 barrels per day in the third quarter of 2022.
- Successful completion of refinery co-processing trial at Strathcona. Trials have now been completed across all company refineries. This technology has the potential to reduce carbon intensity of fuel and plastic products by co-processing vegetable oil and ethanol alongside conventional feedstock.
- Chemical net income of $23 million in the quarter, compared to $54 million in the third quarter of 2022. Lower net income was primarily driven by the impact of planned turnaround activities.
- Released annual Advancing Climate Solutions report outlining the company’s progress and ongoing commitment to lowering GHG emissions. Imperial is committed to providing energy solutions in a way that helps protect people, the environment and the communities where it operates, including mitigating the risks of climate change.
- Established Low Carbon Solutions organization, focused on leveraging our unique capabilities to bring lower-emission technologies like renewable fuels, hydrogen and carbon capture and storage to market, helping customers meet their sustainability goals.
- Celebrating 20 years of support for Indspire, an organization that invests in the education of First Nations, Inuit and Métis people in Canada. Through this support, Indspire has provided scholarships to more than 500 Indigenous students.
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|
|
|
1 non-GAAP financial measure – see Attachment VI for definition and reconciliation |
|
Recent business environment
During the first quarter of 2023, the price of crude oil declined, impacted by higher inventory levels, and the price of crude oil remained relatively flat during the second quarter. In the third quarter, crude oil prices increased as demand exceeded supply after OPEC+ oil producers further reduced oil output. In addition, the Canadian WTI/WCS spread continued to recover in the third quarter, but remains weaker than 2022 on an annual basis. Similarly, 2023 refining margins remain strong but fall short of 2022 levels on an annual basis.
Operating results
Third quarter 2023 vs. third quarter 2022
|
|
Third Quarter |
|
|
millions of Canadian dollars, unless noted |
2023 |
2022 |
|
Net income (loss) (U.S. GAAP) |
1,601 |
2,031 |
|
Net income (loss) per common share, assuming dilution (dollars) |
2.76 |
3.24 |
|
Net income (loss) excluding identified items1 |
1,601 |
1,823 |
Prior year third quarter results included favourable identified items1 of $208 million related to the company’s gain on the sale of interests in XTO Energy Canada.
Upstream
Net income (loss) factor analysis
millions of Canadian dollars
|
2022 |
Price |
Volumes |
Royalty |
Identified Items1 |
Other |
2023 |
|
986 |
(10) |
20 |
20 |
(208) |
220 |
1,028 |
Price – Synthetic crude oil realizations decreased by $11.82 per barrel, generally in line with WTI. Average bitumen realizations increased by $4.47 per barrel. Higher bitumen realizations were primarily driven by the narrowing of the WTI/WCS spread, partially offset by lower marker prices.
Volumes – Higher volumes were primarily driven by increased plant capacity utilization and mine equipment productivity at Kearl, and annual turnaround timing and duration at Syncrude, partially offset by steam cycle timing and planned turnaround activity at Cold Lake.
Identified Items1 – Prior year third quarter results included favourable identified items1 related to the company’s gain on the sale of interests in XTO Energy Canada.
Other – Includes lower operating expenses of about $160 million, and favourable foreign exchange impacts of about $80 million.
|
|
|
|
1 non-GAAP financial measure – see Attachment VI for definition and reconciliation |
|
Marker prices and average realizations
|
|
Third Quarter |
|
|
Canadian dollars, unless noted |
2023 |
2022 |
|
West Texas Intermediate (US$ per barrel) |
82.32 |
91.43 |
|
Western Canada Select (US$ per barrel) |
69.39 |
71.53 |
|
WTI/WCS Spread (US$ per barrel) |
12.93 |
19.90 |
|
Bitumen (per barrel) |
86.05 |
81.58 |
|
Synthetic crude oil (per barrel) |
112.98 |
124.80 |
|
Average foreign exchange rate (US$) |
0.75 |
0.77 |
Production
|
|
Third Quarter |
|
|
thousands of barrels per day |
2023 |
2022 |
|
Kearl (Imperial’s share) |
209 |
193 |
|
Cold Lake |
128 |
150 |
|
Syncrude (a) |
75 |
62 |
|
|
|
|
|
Kearl total gross production (thousands of barrels per day) |
295 |
271 |
|
(a) |
In the third quarter of 2023, Syncrude gross production included about 0 thousand barrels per day of bitumen and other products (2022 – 7 thousand barrels per day) that were exported to the operator’s facilities using an existing interconnect pipeline. |
Higher production at Kearl was primarily driven by increased plant capacity utilization and mine equipment productivity.
Lower production at Cold Lake was primarily driven by steam cycle timing and planned turnaround activity.
Higher production at Syncrude was primarily driven by annual turnaround timing and duration.
Downstream
Net income (loss) factor analysis
millions of Canadian dollars
|
2022 |
Margins |
Other |
2023 |
|
1,012 |
(440) |
14 |
586 |
Margins – Lower margins primarily reflect weaker market conditions.
Other – Includes favourable foreign exchange impacts of about $50 million, partially offset by higher turnaround impacts of about $50 million, reflecting the planned turnaround activities at Sarnia refinery.
Refinery utilization and petroleum product sales
|
|
Third Quarter |
|
|
thousands of barrels per day, unless noted |
2023 |
2022 |
|
Refinery throughput |
416 |
426 |
|
Refinery capacity utilization (percent) |
96 |
100 |
|
Petroleum product sales |
478 |
484 |
Lower refinery throughput in the third quarter of 2023 reflects the impact of planned turnaround activities at Sarnia refinery.
Chemicals
Net income (loss) factor analysis
millions of Canadian dollars
|
2022 |
Margins |
Other |
2023 |
|
54 |
(20) |
(11) |
23 |
Corporate and other
|
|
Third Quarter |
|
|
millions of Canadian dollars |
2023 |
2022 |
|
Net income (loss) (U.S. GAAP) |
(36) |
(21) |
Liquidity and capital resources
|
|
Third Quarter |
|
|
millions of Canadian dollars |
2023 |
2022 |
|
Cash flows from (used in): |
|
|
|
Operating activities |
2,359 |
3,089 |
|
Investing activities |
(380) |
364 |
|
Financing activities |
(1,639) |
(2,744) |
|
Increase (decrease) in cash and cash equivalents |
340 |
709 |
|
|
|
|
|
Cash and cash equivalents at period end |
2,716 |
3,576 |
Cash flows from operating activities primarily reflect lower Downstream margins.
Cash flows used in investing activities primarily reflect the absence of proceeds from the sale of interests in XTO Energy Canada.
Cash flows used in financing activities primarily reflect:
|
|
Third Quarter |
|
|
millions of Canadian dollars, unless noted |
2023 |
2022 |
|
Dividends paid |
292 |
227 |
|
Per share dividend paid (dollars) |
0.50 |
0.34 |
|
Share repurchases (a) |
1,342 |
1,512 |
|
Number of shares purchased (millions) (a) |
17.5 |
25.2 |
|
(a) |
Share repurchases were made under the company’s normal course issuer bid program, and include shares purchased from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid. |
Nine months 2023 vs. nine months 2022
|
|
Nine Months |
|
|
millions of Canadian dollars, unless noted |
2023 |
2022 |
|
Net income (loss) (U.S. GAAP) |
3,524 |
5,613 |
|
Net income (loss) per common share, assuming dilution (dollars) |
6.04 |
8.58 |
|
Net income (loss) excluding identified items1 |
3,524 |
5,405 |
Prior year results included favourable identified items1 of $208 million related to the company’s gain on the sale of interests in XTO Energy Canada.
Upstream
Net income (loss) factor analysis
millions of Canadian dollars
|
2022 |
Price |
Volumes |
Royalty |
Identified Items1 |
Other |
2023 |
|
3,114 |
(2,370) |
(120) |
670 |
(208) |
656 |
1,742 |
Price – Lower bitumen realizations were primarily driven by lower marker prices and the widening WTI/WCS spread. Average bitumen realizations decreased by $25.31 per barrel, generally in line with WCS, and synthetic crude oil realizations decreased by $23.87 per barrel, generally in line with WTI.
Volumes – Lower volumes were primarily driven by steam cycle timing at Cold Lake, and the absence of XTO Energy Canada production, partially offset by improved reliability and absence of extreme cold weather at Kearl.
Royalty – Lower royalties were primarily driven by weakened commodity prices.
Identified Items1 – Prior year results included favourable identified items1 related to the company’s gain on the sale of interests in XTO Energy Canada.
Other – Includes favourable foreign exchange impacts of about $400 million, and lower operating expenses of about $220 million, primarily due to lower energy prices.
Marker prices and average realizations
|
|
Nine Months |
|
|
Canadian dollars, unless noted |
2023 |
2022 |
|
West Texas Intermediate (US$ per barrel) |
77.29 |
98.25 |
|
Western Canada Select (US$ per barrel) |
59.67 |
82.60 |
|
WTI/WCS Spread (US$ per barrel) |
17.62 |
15.65 |
|
Bitumen (per barrel) |
68.70 |
94.01 |
|
Synthetic crude oil (per barrel) |
105.65 |
129.52 |
|
Average foreign exchange rate (US$) |
0.74 |
0.78 |
|
|
|
|
1 non-GAAP financial measure – see Attachment VI for definition and reconciliation |
|
Production
|
|
Nine Months |
|
|
thousands of barrels per day |
2023 |
2022 |
|
Kearl (Imperial’s share) |
182 |
162 |
|
Cold Lake |
134 |
145 |
|
Syncrude (a) |
72 |
74 |
|
|
|
|
|
Kearl total gross production (thousands of barrels per day) |
257 |
228 |
|
(a) |
In 2023, Syncrude gross production included about 1 thousand barrels per day of bitumen and other products (2022 – 4 thousand barrels per day) that were exported to the operator’s facilities using an existing interconnect pipeline. |
Higher production at Kearl was primarily driven by improved reliability as a result of the successful rollout of the winterization strategy, the absence of extreme cold weather, increased plant capacity utilization, and mine equipment productivity.
Lower production at Cold Lake was primarily driven by steam cycle timing.
Downstream
Net income (loss) factor analysis
millions of Canadian dollars
|
2022 |
Margins |
Other |
2023 |
|
2,434 |
(840) |
112 |
1,706 |
Margins – Lower margins primarily reflect weaker market conditions.
Other – Favourable foreign exchange impacts of about $240 million and improved volumes of about $140 million, partially offset by higher turnaround impacts of about $300 million, associated with the planned turnaround activities at the Strathcona and Sarnia refineries.
Refinery utilization and petroleum product sales
|
|
Nine Months |
|
|
thousands of barrels per day, unless noted |
2023 |
2022 |
|
Refinery throughput |
407 |
413 |
|
Refinery capacity utilization (percent) |
94 |
96 |
|
Petroleum product sales |
469 |
471 |
Chemicals
Net income (loss) factor analysis
millions of Canadian dollars
|
2022 |
Margins |
Other |
2023 |
|
163 |
(20) |
4 |
147 |
Corporate and other
|
|
Nine Months |
|
|
millions of Canadian dollars |
2023 |
2022 |
|
Net income (loss) (U.S. GAAP) |
(71) |
(98) |
Liquidity and capital resources
|
|
Nine Months |
|
|
millions of Canadian dollars |
2023 |
2022 |
|
Cash flows from (used in): |
|
|
|
Operating activities |
2,423 |
7,685 |
|
Investing activities |
(1,283) |
(145) |
|
Financing activities |
(2,173) |
(6,117) |
|
Increase (decrease) in cash and cash equivalents |
(1,033) |
1,423 |
Cash flows from operating activities primarily reflect unfavourable working capital impacts, including an income tax catch-up payment of $2.1 billion, as well as lower Upstream realizations and Downstream margins.
Cash flows used in investing activities primarily reflect the absence of proceeds from the sale of interests in XTO Energy Canada, and higher additions to property, plant and equipment.
Cash flows used in financing activities primarily reflect:
|
|
Nine Months |
|
|
millions of Canadian dollars, unless noted |
2023 |
2022 |
|
Dividends paid |
815 |
640 |
|
Per share dividend paid (dollars) |
1.38 |
0.95 |
|
Share repurchases (a) |
1,342 |
4,461 |
|
Number of shares purchased (millions) (a) |
17.5 |
66.6 |
|
(a) |
Share repurchases were made under the company’s normal course issuer bid program. In the second quarter of 2022, share repurchases were made under the company’s substantial issuer bid that commenced on May 6, 2022 and expired on June 10, 2022. Includes shares purchased from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid, and by way of a proportionate tender under the company’s substantial issuer bid. |
On June 27, 2023, the company announced by news release that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid to continue its then existing share purchase program. The program enabled the company to purchase up to a maximum of 29,207,635 common shares during the period June 29, 2023 to June 28, 2024. This maximum included shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of, the normal course issuer bid. As in the past, Exxon Mobil Corporation advised the company that it intended to participate to maintain its ownership percentage at approximately 69.6 percent. Imperial accelerated share purchases under the normal course issuer bid program during the third quarter and, subsequent to the end of the third quarter, the program completed on October 19, 2023 as a result of the company purchasing the maximum allowable number of shares under the program.
On October 27, 2023, the company announced its intention to launch a substantial issuer bid pursuant to which the company will offer to purchase for cancellation up to $1.5 billion of its common shares. The substantial issuer bid will be made through a modified Dutch auction, with a tender price range to be determined by the company at the time of commencement of the offer. Shares may also be tendered by way of a proportionate tender, which will result in a shareholder maintaining their proportionate share ownership. ExxonMobil has advised Imperial that it intends to make a proportionate tender in connection with the offer in order to maintain its proportionate share ownership at approximately 69.6 percent following completion of the offer. Nothing in this report shall constitute an offer to purchase or a solicitation of an offer to sell any shares.
Key financial and operating data follow.
Additional information regarding the tender offer
The tender offer described in this communication (the “Offer”) has not yet commenced.
Contacts
Investor Relations
(587) 962-4401
Media relations
(587) 476-7010
