Imperial announces third quarter 2022 financial and operating results
- Quarterly net income of $2,031 million and cash flow from operating activities of $3,089 million
- Upstream production of 430,000 gross oil-equivalent barrels per day driven by strong production at Kearl and Cold Lake
- Sustained strong Downstream operating performance with quarterly refinery capacity utilization of 100%, highest in over 40 years
- Reduced debt by $1 billion using proceeds from the sale of interests in XTO Energy Canada
- Quarterly dividend increased by 29 percent from 34 cents to 44 cents per share
- Completed accelerated normal course issuer bid program in October, returning over $1.9 billion to shareholders
- Announced intention to initiate a substantial issuer bid to purchase up to $1.5 billion of its common shares
- Released annual Corporate Sustainability Report, outlining the company’s environmental, social and governance progress and focus areas
CALGARY, Alberta–(BUSINESS WIRE)–Imperial (TSE: IMO) (NYSE American: IMO):
|
|
Third quarter |
|
Nine months |
|||||||||
|
millions of Canadian dollars, unless noted |
2022 |
|
2021 |
|
∆ |
|
2022 |
|
2021 |
|
∆ |
|
|
Net income (loss) (U.S. GAAP) |
2,031 |
|
908 |
|
+1,123 |
|
5,613 |
|
1,666 |
|
+3,947 |
|
|
Net income (loss) per common share, assuming dilution (dollars) |
3.24 |
|
1.29 |
|
+1.95 |
|
8.58 |
|
2.31 |
|
+6.27 |
|
|
Capital and exploration expenditures |
392 |
|
277 |
|
+115 |
|
1,002 |
|
699 |
|
+303 |
|
Imperial reported estimated net income in the third quarter of $2,031 million, compared to $2,409 million in the second quarter of 2022, as strong operating performance partly offset moderating commodity prices. Cash flow from operating activities was $3,089 million, up from $2,682 million in the second quarter of 2022.
“Imperial’s business lines delivered another quarter of exceptional operating performance, increasing the supply of crude and fuel products to support Canadian and global energy needs,” said Brad Corson, chairman, president and chief executive officer. “Our on-going focus on safe and reliable operations underpins our strong financial results and positions us well to continue capturing value from the current commodity price environment.”
Upstream production in the third quarter averaged 430,000 gross oil-equivalent barrels per day. At Kearl, quarterly total gross production increased substantially from the second quarter of 2022 to an average of 271,000 barrels per day following the completion of its annual turnaround. Subsequent to the third quarter, Kearl’s October production continued to increase, achieving multiple single-day production records. At Cold Lake, quarterly production averaged 150,000 gross barrels per day, representing the fourth consecutive quarter with production at or above 140,000 barrels per day. Given the success of the company’s on-going optimization program and continued production strength at Cold Lake, Imperial is increasing its full-year guidance at Cold Lake to between 140,000 to 145,000 gross barrels per day for 2022.
In the Downstream, quarterly refining throughput averaged 426,000 barrels per day, with capacity utilization of 100 percent, the highest quarterly utilization in over 40 years, ensuring a stable supply of fuel products to meet Canadian demand. Petroleum product sales remained strong in the quarter, averaging 484,000 barrels per day. In September, Imperial signed a long-term contract with Air Products to supply low-carbon hydrogen for the company’s planned renewable diesel complex at its Strathcona refinery. A final investment decision for the renewable diesel complex is expected in the coming months.
In August, Imperial successfully completed the previously announced sale of its XTO Energy Canada assets to Whitecap Resources for a total cash consideration of approximately $0.9 billion (Imperial’s share), resulting in an after-tax gain of $208 million in the quarter. Proceeds from the sale were used to reduce debt by $1 billion, bringing the company’s outstanding debt to $4.2 billion and debt-to-capital1 ratio to 16 percent.
“The sale of Imperial’s XTO assets positions the company well to not only continue focusing Upstream resources on our core oil sands assets but also enabled us to further enhance our industry leading balance sheet and improve the company’s financial flexibility,” said Corson.
During the quarter, Imperial returned to shareholders $227 million in dividends paid and $1,512 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 $434 million in share repurchases.
“Paying a reliable and growing dividend and returning surplus cash to shareholders remain key priorities for us” said Corson. “Imperial has generated substantial value for its shareholders this year and I am pleased to announce a 29 percent increase to our quarterly dividend as well as our plans to initiate a second substantial issuer bid this year, returning up to $1.5 billion to shareholders in the fourth quarter” said Corson.
Imperial continues to advance solutions to lower emissions in its operations. The company is a founding member of the Pathways Alliance, which continues to move forward with early work to support a major carbon capture and storage network in support of Canada’s goals to achieve net zero emissions. In early October, the Government of Alberta awarded the Pathways Alliance pore space to continue exploratory work on the development of a hub to safely and permanently store CO2 from over 20 industry oil sands facilities and other interested industries in northern Alberta.
In September, Imperial released its annual Sustainability report which highlights progress and momentum in the company’s key environmental, social and governance focus areas and complements the company’s Advancing Climate Solutions report published earlier this year.
“The challenges we are facing today require collaboration across industry, governments, indigenous communities and other stakeholders,” said Corson. “It’s why we became a founding member of the Pathways Alliance to reduce oil sands emissions and to further develop and deploy game changing technology to meaningfully contribute to Canada’s energy future.”
Third quarter highlights
- Net income of $2,031 million or $3.24 per share on a diluted basis, up from $908 million or $1.29 per share in the third quarter of 2021. Net income excluding identified items1 of $1,823 million in the third quarter of 2022, up from $908 million in the same period of 2021.
- Cash flows from operating activities of $3,089 million, up from $1,947 million in the same period of 2021. Cash flows from operating activities excluding working capital1 of $2,543 million, up from $1,504 million in the same period of 2021.
- Capital and exploration expenditures totalled $392 million, up from $277 million in the third quarter of 2021.
- The company returned $1,739 million to shareholders in the third quarter of 2022, including $227 million in dividends paid and $1,512 million in share repurchases. Subsequent to the end of the third quarter, the company completed its NCIB program with an additional $434 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 430,000 gross oil-equivalent barrels per day, compared to 435,000 barrels per day in the same period of 2021.
- Total gross bitumen production at Kearl averaged 271,000 barrels per day (193,000 barrels Imperial’s share), compared to 274,000 barrels per day (194,000 barrels Imperial’s share) in the third quarter of 2021. Subsequent to the third quarter, Kearl’s October production continued to increase, achieving multiple single-day production records.
- Gross bitumen production at Cold Lake averaged 150,000 barrels per day, up from 135,000 barrels per day in the third quarter of 2021, representing the fourth consecutive quarter with production at or above 140,000 barrels per day. Consistent with this sustained production performance, Imperial is increasing its 2022 production guidance at Cold Lake to between 140,000 – 145,000 barrels per day.
- The company’s share of gross production from Syncrude averaged 62,000 barrels per day, compared to 78,000 barrels per day in the third quarter of 2021, primarily driven by the timing of planned turnaround activities.
- Refinery throughput averaged 426,000 barrels per day, up from 404,000 barrels per day in the third quarter of 2021. Capacity utilization reached 100 percent, the highest quarterly utilization in over 40 years, up from 94 percent in the third quarter of 2021, as the company continues to maximize production to meet Canadian demand.
- Petroleum product sales were 484,000 barrels per day, compared to 485,000 barrels per day in the third quarter of 2021.
- Chemical net income of $54 million in the quarter, compared to $121 million in the third quarter of 2021. Lower income was primarily driven by lower polyethylene margins.
- Announced long-term contract with Air Products to supply low-carbon hydrogen for Imperial’s proposed renewable diesel complex near Edmonton, Alberta. The complex is expected to produce more than 1 billion litres of renewable diesel per year from locally sourced feedstock and low-carbon hydrogen. A final investment decision will be made in the coming months.
- Completed, together with ExxonMobil Canada, the previously announced sale of XTO Energy Canada to Whitecap Resources for total cash consideration of approximately $1.9 billion ($0.9 billion Imperial’s share). As a result of the sale, Imperial recorded an after-tax gain of approximately $208 million in the third quarter of 2022. Proceeds from the sale were used to reduce outstanding debt by $1 billion, further enhancing the company’s industry leading balance sheet and improving financial flexibility.
- As a member of the Pathways Alliance, advanced early work to support the foundational carbon capture and storage network in northern Alberta as part of Pathways’ goal to achieve net zero emissions. In early October, the Government of Alberta awarded the Pathways Alliance pore space to continue exploratory work on the development of a hub to safely and permanently store CO2 from over 20 industry oil sands facilities and other interested industries in northern Alberta.
- Released annual Corporate Sustainability Report. The report highlights key environmental, social and governance focus areas and progress, complementing the company’s previously released Advancing Climate Solutions report.
- Announced unique collaboration with FLO that will support Canada’s net zero emissions goals by expanding FLO’s charging network for electric vehicles. This collaboration will jointly develop an electric vehicle charging service option for Imperial’s Esso and Mobil branded wholesalers and includes an agreement to transfer credits to Imperial under Canada’s Clean Fuel Regulations.
Current business environment
During the COVID-19 pandemic, industry investment to maintain and increase production capacity was restrained to preserve capital, resulting in underinvestment and supply tightness as demand for petroleum and petrochemical products recovered. Across late 2021 and the first half of 2022, this dynamic, along with supply chain constraints and a continuation of demand recovery, led to a steady increase in oil and natural gas prices and refining margins. In the first half of 2022, tightness in the oil and natural gas markets was further exacerbated by Russia’s invasion of Ukraine and subsequent sanctions imposed upon business and other activities in Russia. The price of crude oil and certain regional natural gas indicators increased to levels not seen for several years. Across the third quarter of 2022, high prices and economic uncertainty led to a tempering of demand for some products, causing crude oil prices and refining margins to soften relative to first half levels. Commodity and product prices are expected to remain volatile given the current global economic and geopolitical uncertainty affecting supply and demand.
Operating results
Third quarter 2022 vs. third quarter 2021
|
|
Third Quarter |
|||
|
millions of Canadian dollars, unless noted |
2022 |
|
2021 |
|
|
Net income (loss) (U.S. GAAP) |
2,031 |
|
908 |
|
|
Net income (loss) per common share, assuming dilution (dollars) |
3.24 |
|
1.29 |
|
|
Net income (loss) excluding identified items1 |
1,823 |
|
908 |
|
|
|
|
|
|
|
Current quarter results include 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 |
||||||||||||
|
2021 |
Price |
Volumes |
Royalty |
Identified Items¹ |
Other |
2022 |
||||||
|
524 |
660 |
(100) |
(210) |
208 |
(96) |
986 |
||||||
Price – Higher realizations were generally in line with increases in marker prices, driven primarily by increased demand and supply chain constraints. Average bitumen realizations increased by $21.14 per barrel generally in line with WCS, and synthetic crude oil realizations increased by $38.86 per barrel generally in line with WTI.
Volumes – Lower volumes were the result of timing of planned turnaround activities at Syncrude, partially offset by higher volumes at Cold Lake, primarily driven by continued focus on sustained performance and production optimization.
Royalty – Higher royalties primarily driven by improved commodity prices.
Identified Items1 – Current quarter results include favourable identified items1 related to the company’s gain on the sale of interests in XTO Energy Canada.
Other – Includes higher operating expenses of about $200 million, partially offset by favourable foreign exchange impacts of about $80 million.
|
Marker prices and average realizations |
||||
|
|
Third Quarter |
|||
|
Canadian dollars, unless noted |
2022 |
|
2021 |
|
|
West Texas Intermediate (US$ per barrel) |
91.43 |
|
70.52 |
|
|
Western Canada Select (US$ per barrel) |
71.53 |
|
57.08 |
|
|
WTI/WCS Spread (US$ per barrel) |
19.90 |
|
13.44 |
|
|
Bitumen (per barrel) |
81.58 |
|
60.44 |
|
|
Synthetic crude oil (per barrel) |
124.80 |
|
85.94 |
|
|
Average foreign exchange rate (US$) |
0.77 |
|
0.79 |
|
|
Production |
||||
|
|
Third Quarter |
|||
|
thousands of barrels per day |
2022 |
|
2021 |
|
|
Kearl (Imperial’s share) |
193 |
|
194 |
|
|
Cold Lake |
150 |
|
135 |
|
|
Syncrude (a) |
62 |
|
78 |
|
|
|
|
|
|
|
|
Kearl total gross production (thousands of barrels per day) |
271 |
|
274 |
|
|
(a) |
In the third quarter of 2022, Syncrude gross production included about 7 thousand barrels per day of bitumen and other products (2021 – 1 thousand barrels per day) that was exported to the operator’s facilities using an existing interconnect pipeline. |
Higher production at Cold Lake was primarily driven by continued focus on sustained performance and production optimization.
Lower production at Syncrude was primarily a result of the timing of planned turnaround activities.
|
Downstream |
||||||
|
Net income (loss) factor analysis |
||||||
|
millions of Canadian dollars |
||||||
|
2021 |
Margins |
Other |
2022 |
|||
|
293 |
710 |
9 |
1,012 |
|||
Margins – Higher margins primarily reflect improved market conditions.
|
Refinery utilization and petroleum product sales |
||||
|
|
Third Quarter |
|||
|
thousands of barrels per day, unless noted |
2022 |
|
2021 |
|
|
Refinery throughput |
426 |
|
404 |
|
|
Refinery capacity utilization (percent) |
100 |
|
94 |
|
|
Petroleum product sales |
484 |
|
485 |
|
Improved refinery throughput in the third quarter of 2022 was primarily driven by economic optimization across the downstream supply chain.
|
Chemicals |
||||||
|
Net income (loss) factor analysis |
||||||
|
millions of Canadian dollars |
||||||
|
2021 |
Margins |
Other |
2022 |
|||
|
121 |
(60) |
(7) |
54 |
|||
Margins – Lower margins primarily reflect weaker industry polyethylene margins.
|
Corporate and other |
||||
|
|
Third Quarter |
|||
|
millions of Canadian dollars |
2022 |
|
2021 |
|
|
Net income (loss) (U.S. GAAP) |
(21) |
|
(30) |
|
|
Liquidity and capital resources |
||||
|
|
Third Quarter |
|||
|
millions of Canadian dollars |
2022 |
|
2021 |
|
|
Cash flow generated from (used in): |
|
|
|
|
|
Operating activities |
3,089 |
|
1,947 |
|
|
Investing activities |
364 |
|
(259) |
|
|
Financing activities |
(2,744) |
|
(589) |
|
|
Increase (decrease) in cash and cash equivalents |
709 |
|
1,099 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at period end |
3,576 |
|
1,875 |
|
Cash flow generated from operating activities primarily reflects higher Upstream realizations, improved Downstream margins, and favourable working capital impacts.
Cash flow generated from investing activities primarily reflects proceeds from the sale of interests in XTO Energy Canada, partially offset by higher additions to property, plant and equipment.
Cash flow used in financing activities primarily reflects:
|
|
Third Quarter |
|||
|
millions of Canadian dollars, unless noted |
2022 |
|
2021 |
|
|
Dividends paid |
227 |
|
195 |
|
|
Per share dividend paid (dollars) |
0.34 |
|
0.27 |
|
|
Share repurchases (a) |
1,512 |
|
313 |
|
|
Number of shares purchased (millions) (a) |
25.2 |
|
9.0 |
|
|
(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. |
During the third quarter of 2022, the company decreased its long-term debt by $1 billion by partially repaying an existing facility with an affiliated company of ExxonMobil.
Nine months 2022 vs. nine months 2021
|
|
Nine Months |
|||
|
millions of Canadian dollars, unless noted |
2022 |
|
2021 |
|
|
Net income (loss) (U.S. GAAP) |
5,613 |
|
1,666 |
|
|
Net income (loss) per common share, assuming dilution (dollars) |
8.58 |
|
2.31 |
|
|
Net income (loss) excluding identified items1 |
5,405 |
|
1,666 |
|
Current year results include 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 |
||||||||||||
|
2021 |
Price |
Volumes |
Royalty |
Identified Items¹ |
Other |
2022 |
||||||
|
850 |
3,320 |
(160) |
(920) |
208 |
(184) |
3,114 |
||||||
Price – Higher realizations were generally in line with increases in marker prices, driven primarily by increased demand and supply chain constraints. Average bitumen realizations increased by $38.71 per barrel generally in line with WCS, and synthetic crude oil realizations increased by $51.90 per barrel generally in line with WTI.
Volumes – Lower volumes were primarily the result of downtime at Kearl in the first half of the year.
Royalty – Higher royalties primarily driven by improved commodity prices.
Identified Items1 – Current year results include favourable identified items1 related to the company’s gain on the sale of interests in XTO Energy Canada.
Other – Includes higher operating expenses of about $430 million, primarily higher energy prices, partially offset by favourable foreign exchange impacts of about $130 million.
|
Marker prices and average realizations |
||||
|
|
Nine Months |
|||
|
Canadian dollars, unless noted |
2022 |
|
2021 |
|
|
West Texas Intermediate (US$ per barrel) |
98.25 |
|
65.04 |
|
|
Western Canada Select (US$ per barrel) |
82.60 |
|
52.45 |
|
|
WTI/WCS Spread (US$ per barrel) |
15.65 |
|
12.59 |
|
|
Bitumen (per barrel) |
94.01 |
|
55.30 |
|
|
Synthetic crude oil (per barrel) |
129.52 |
|
77.62 |
|
|
Average foreign exchange rate (US$) |
0.78 |
|
0.80 |
|
|
Production |
||||
|
|
Nine Months |
|||
|
thousands of barrels per day |
2022 |
|
2021 |
|
|
Kearl (Imperial’s share) |
162 |
|
185 |
|
|
Cold Lake |
145 |
|
139 |
|
|
Syncrude (a) |
74 |
|
68 |
|
|
|
|
|
|
|
|
Kearl total gross production (thousands of barrels per day) |
228 |
|
260 |
|
|
(a) |
In 2022, Syncrude gross production included about 4 thousand barrels per day of bitumen and other products (2021 – 1 thousand barrels per day) that was exported to the operator’s facilities using an existing interconnect pipeline. |
Lower production at Kearl was primarily a result of downtime in the first half of the year.
|
Downstream |
||||||
|
Net income (loss) factor analysis |
||||||
|
millions of Canadian dollars |
||||||
|
2021 |
Margins |
Other |
2022 |
|||
|
645 |
1,680 |
109 |
2,434 |
|||
Margins – Higher margins primarily reflect improved market conditions.
Other – Includes lower turnaround impacts of about $140 million, reflecting the absence of turnaround activities at Strathcona refinery and favourable foreign exchange impacts of about $70 million, partially offset by higher operating expenses of about $130 million, primarily from higher energy costs.
|
Refinery utilization and petroleum product sales |
||||
|
|
Nine Months |
|||
|
thousands of barrels per day, unless noted |
2022 |
|
2021 |
|
|
Refinery throughput |
413 |
|
367 |
|
|
Refinery capacity utilization (percent) |
96 |
|
86 |
|
|
Petroleum product sales |
471 |
|
442 |
|
Improved refinery throughput in 2022 was primarily driven by reduced turnaround activity and increased demand.
Improved petroleum product sales in 2022 primarily reflects increased demand.
|
Chemicals |
||||||
|
Net income (loss) factor analysis |
||||||
|
millions of Canadian dollars |
||||||
|
2021 |
Margins |
Other |
2022 |
|||
|
297 |
(90) |
(44) |
163 |
|||
Margins – Lower margins primarily reflect weaker industry polyethylene margins.
|
Corporate and other |
||||
|
|
Nine Months |
|||
|
millions of Canadian dollars |
2022 |
|
2021 |
|
|
Net income (loss) (U.S. GAAP) |
(98) |
|
(126) |
|
|
Liquidity and capital resources |
||||
|
|
Nine Months |
|||
|
millions of Canadian dollars |
2022 |
|
2021 |
|
|
Cash flow generated from (used in): |
|
|
|
|
|
Operating activities |
7,685 |
|
3,844 |
|
|
Investing activities |
(145) |
|
(613) |
|
|
Financing activities |
(6,117) |
|
(2,127) |
|
|
Increase (decrease) in cash and cash equivalents |
1,423 |
|
1,104 |
|
Cash flow generated from operating activities primarily reflects higher Upstream realizations, improved Downstream margins, and favourable working capital impacts.
Cash flow used in investing activities primarily reflects proceeds from the sale of interests in XTO Energy Canada, partially offset by higher additions to property, plant and equipment.
Cash flow used in financing activities primarily reflects:
|
|
Nine Months |
|||
|
millions of Canadian dollars, unless noted |
2022 |
|
2021 |
|
|
Dividends paid |
640 |
|
518 |
|
|
Per share dividend paid (dollars) |
0.95 |
|
0.71 |
|
|
Share repurchases (a) |
4,461 |
|
1,484 |
|
|
Number of shares purchased (millions) (a) |
66.6 |
|
38.5 |
|
|
(a) |
Share repurchases were made under the company’s normal course issuer bid program and 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. |
During the third quarter of 2022, the company decreased its long-term debt by $1 billion by partially repaying an existing facility with an affiliated company of ExxonMobil.
On May 6, 2022, the company commenced a substantial issuer bid pursuant to which it offered to purchase for cancellation up to $2.5 billion of its common shares through a modified Dutch auction and proportionate tender offer. The substantial issuer bid was completed on June 15, 2022, with the company taking up and paying for 32,467,532 common shares at a price of $77.00 per share, for an aggregate purchase of $2.5 billion and 4.9 percent of Imperial’s issued and outstanding shares at the close of business on May 2, 2022. This included 22,597,379 shares purchased from Exxon Mobil Corporation by way of a proportionate tender to maintain its ownership percentage at approximately 69.6 percent.
Subsequent to the end of the third quarter, the company completed all share repurchases under its normal course issuer bid on October 21, 2022.
On October 28, 2022 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.
Contacts
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(587) 476-4743
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(587) 476-7010
