Imperial Oil announces estimated third-quarter financial and operating
results
CALGARY, Nov. 1 /CNW/ -
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Third quarter Nine months
(millions of dollars, -------------------- --------------------
unless noted) 2010 2009 % 2010 2009 %
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Net income (U.S. GAAP) 418 547 (24) 1,411 1,045 35
Net income per common share
- assuming dilution (dollars) 0.49 0.64 (23) 1.65 1.22 35
Capital and exploration
expenditures 1,199 575 109 2,980 1,604 86
Bruce March, chairman, president and chief executive officer of Imperial Oil, commented:
"Imperial Oil achieved solid results with third quarter earnings of $418 million or $0.49 per share. Our earnings were down from $547 million in the third quarter of 2009 due to lower upstream volumes primarily from a planned downtime at Syncrude, unfavourable foreign exchange effects of a stronger Canadian dollar, and third-party pipeline reliability issues that negatively impacted heavy crude oil industry sales and realizations. Strong operating performance in downstream business segments offset continued weak industry margins.
Earnings for the first nine months of 2010 were $1,411 million or $1.65 per share, up from $1,045 million in the first nine months of 2009, an increase of 35 percent.
Imperial Oil's proven approach of taking a long-term view and focusing on disciplined capital investment and financial management will continue to reward our shareholders. Strong cash flow from operating activities continued to substantially fund our record capital investment program. Capital and exploration expenditures were $1,199 million in the third quarter, about double the third quarter of 2009. These expenditures were directed primarily to the development of our Kearl oil sands company growth project."
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Imperial Oil is one of Canada's largest corporations and a leading member
of the country's petroleum industry. The company is a major producer of
crude oil and natural gas, Canada's largest petroleum refiner and a
leading marketer with a coast-to-coast supply network that includes about
1,850 retail service stations.
Third quarter items of interest
- Net income was $418 million, compared with $547 million for the third
quarter of 2009, a decrease of 24% or $129 million.
- Net income per common share was $0.49, a decrease of 23% from the
third quarter of 2009.
- Cash generated from operating activities was $965 million, compared
with $698 million in the same period last year.
- Capital and exploration expenditures were $1,199 million, up 109%
from the third quarter of 2009, supporting the Kearl oil sands and
other growth projects.
- Gross oil-equivalent barrels of production averaged 281,000 barrels a
day, compared with 304,000 barrels a day in the same period last
year. Lower production volumes in the third quarter were primarily
due to planned maintenance activities at Syncrude and the cyclic
nature of production at Cold Lake.
- Kearl oil sands project update:
- The company is currently reconfiguring its Kearl project
development plan to include a combination of debottlenecking and
expansion to minimize facility requirements and to reduce the
plant footprint. The approach will leverage our execution
learnings, take advantage of the investments in infrastructure
that would not need to be duplicated in the future and will
utilize our successful "design one, build many" approach to
replicate facilities. The overall production profile and total
resource developed at Kearl remain relatively unchanged for the
reconfigured project. It is expected that the capital
investments' spending profile of the first phase of the project
will be higher based on the adjustments mentioned above.
- The Kearl project's tailings management plan was approved by
Alberta's Energy Resources Conservation Board (ERCB) on August 11,
2010.
- Nabiye project update - The regulatory approval process for
Imperial's Nabiye expansion project advanced with the recent ERCB
Cold Lake scheme amendment and Alberta Utilities Commission
approvals. The expansion will add new producing well pads, a
processing plant, cogeneration facilities and about 30,000 barrels a
day to Cold Lake's production. Current activities include plant site
clearing, grading and road construction.
- Horn River update - Imperial is planning to drill a horizontal multi-
well pad pilot development to evaluate longer-term well productivity
this winter season. The company also added an additional 11,000
acres, bringing its joint venture holdings to 321,000 net acres - one
of industry's largest acreage positions in the area.
- Beaufort Sea - Imperial and ExxonMobil Canada signed a joint operator
agreement with BP to share exploration and potential development work
on their exploration licenses in the Beaufort Sea. Imperial or
ExxonMobil Canada will be the operator and further exploration
activities will only proceed with proper regulatory approval.
- Tim Hortons alliance - Imperial Oil and Tim Hortons signed a 10-year
agreement to extend their existing alliance. The agreement includes a
commitment to add 175 Tim Hortons locations at Esso sites across
Canada over the next 10 years. Tim Hortons began opening kiosks
inside Esso gas stations in 1994 and there are now more than 350 of
these sites across Canada.
Third quarter 2010 vs. third quarter 2009
The company's net income for the third quarter of 2010 was $418 million or $0.49 a share on a diluted basis, compared with $547 million or $0.64 a share for the same period last year.
Although third quarter earnings were lower, underlying business operations remained strong across all segments of the company. The lower third quarter earnings were primarily attributable to planned maintenance activities at Syncrude, impacting earnings by about $90 million, and the unfavourable foreign exchange effects of a stronger Canadian dollar of about $70 million. These factors were partially offset by the combined impacts of upstream commodity prices and downstream margins totaling about $75 million. The company estimates that third-party pipeline reliability issues negatively impacted third quarter earnings by about $60 million; this effect, which will carry-over in fourth quarter results, has been reflected in the overall commodity price and margins factor above.
Upstream net income in the third quarter was $348 million versus $439 million in the same period of 2009. Earnings decreased primarily due to higher costs and lower volumes at Syncrude, mainly a result of planned maintenance activities, totaling about $90 million. Earnings were also negatively impacted by the unfavourable foreign exchange effects of a stronger Canadian dollar of about $65 million and lower Cold Lake bitumen production and lower conventional volumes totaling about $25 million. These factors were partially offset by higher crude oil and natural gas commodity prices in the third quarter of 2010 which contributed to higher earnings of about $95 million. Third-party pipeline reliability issues in the third quarter negatively impacted the transportation of western crude oil. The company estimates the negative impact on earnings of about $45 million from lower realizations, the effect of which has been reflected in the commodity price factor above.
The average price of Brent crude oil in U.S. dollars, a common benchmark for world oil markets, was $76.85 a barrel in the third quarter, up about 13 percent from the corresponding period last year. The company's average realizations on sales of Canadian conventional crude oil and synthetic crude oil from Syncrude production also increased. The company's average bitumen realizations were also higher in the third quarter, but by less than the relative increase in light crude oil prices, reflecting a widened price spread between the lighter crude oils and Cold Lake bitumen, attributable to third-party pipeline outages.
Gross production of Cold Lake bitumen averaged 139 thousand barrels a day during the third quarter, versus 145 thousand barrels in the same quarter last year. Lower volumes were due to the cyclic nature of production at Cold Lake.
The company's share of Syncrude's gross production in the third quarter was 66 thousand barrels a day, versus 78 thousand barrels in the third quarter of 2009. Lower volumes were the result of planned maintenance activities, which began in September 2010 and will complete in late October 2010.
Gross production of conventional crude oil averaged 22 thousand barrels a day in the third quarter, down from 25 thousand barrels in the third quarter of 2009. Planned maintenance activities at the Norman Wells field and natural reservoir decline were the main contributors to the lower production.
Gross production of natural gas during the third quarter of 2010 was 284 million cubic feet a day, down slightly from 291 million cubic feet in the same period last year. The lower production volume was primarily a result of maintenance activities and natural reservoir decline.
Downstream net income was $69 million in the third quarter of 2010, compared with $62 million in the same period a year ago. Improved refinery operations as well as improved sales volumes when compared to the low levels in the third quarter of 2009 contributed about $25 million to the earnings increase. These factors were partially offset by lower overall margins of about $20 million, which included the negative impact of the third-party pipeline outages.
Chemical net income was $23 million in the third quarter, $4 million higher than the same quarter last year. Improved industry margins for polyethylene and intermediate products were partially offset by lower sales volumes for polyethylene products.
Net income effects from Corporate and other were negative $22 million in the third quarter, compared with $27 million in the same period of 2009. The change in earnings effects was primarily due to changes in share-based compensation charges in the third quarter of 2010.
Cash flow generated from operating activities was $965 million during the third quarter of 2010, compared with $698 million in the same period last year. Higher cash flow was primarily driven by working capital effects partially offset by lower earnings.
Investing activities used net cash of $1,113 million in the third quarter, an increase of $568 million from the corresponding period in 2009. Capital and exploration expenditures were $1,199 million in the third quarter, compared with $575 million during the same quarter 2009. Expenditures during the quarter were primarily directed towards the advancement of the Kearl oil sands project. Other investments included development drilling at Cold Lake, exploration drilling at Horn River as well as environmental and other projects at Syncrude.
In the third quarter, the company increased its debt level by $228 million by drawing on existing facilities.
The company's balance of cash was $51 million at September 30, 2010, compared with $513 million at the end of 2009.
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Nine months highlights
- Net income was $1,411 million, up from $1,045 million in the nine
months of 2009.
- Net income per common share increased to $1.65 compared to $1.22 in
the same period of 2009.
- Cash generated from operations was $2,203 million, versus $664
million in the nine months of 2009.
- Capital and exploration expenditures were $2,980 million, up 86
percent, supporting the Kearl oil sands and other growth projects.
- Gross oil-equivalent barrels of production averaged 291 thousands of
barrels per day, compared to 292 thousands of barrels per day in the
nine months of 2009.
- Per-share dividends declared in the first three quarters of 2010
totaled $0.32, up from $0.30 in the same period of 2009.
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Nine months 2010 vs. nine months 2009
Net income for the first nine months of 2010 was $1,411 million or $1.65 a share on a diluted basis, versus $1,045 million or $1.22 a share for the nine months of 2009.
For the nine months, earnings increased primarily due to the impacts of higher upstream commodity prices of about $800 million, higher Syncrude volumes of about $90 million and improved refinery operations and lower refinery maintenance activities totaling about $75 million. These factors were partially offset by the unfavourable effects of a stronger Canadian dollar of about $330 million, higher royalty costs due to higher commodity prices of about $240 million, and lower overall downstream margins of about $110 million. Earnings in the nine months of 2010 also included higher gain of about $25 million from sale of non-operating assets.
Upstream net income for the nine months was $1,238 million versus $833 million during the same period last year. Higher crude oil and natural gas commodity prices in 2010 increased revenues, contributing to higher earnings of about $800 million. Earnings were also positively impacted by higher Syncrude volumes, reflecting improved reliability, of about $90 million. These factors were partially offset by the impact of a stronger Canadian dollar of about $265 million and higher royalty costs due to higher commodity prices of about $240 million.
The average price of Brent crude oil in U.S. dollars, a common benchmark for world oil markets, was $77.15 a barrel in the nine months of 2010, up about 35 percent from the corresponding period last year. The company's average realizations on sales of Canadian conventional crude oil and synthetic crude oil from Syncrude production also increased. The company's average bitumen realizations were also higher in the first nine months of 2010, but by less than the relative increase in light crude oil prices, reflecting widened price spread between the lighter crude oils and Cold Lake bitumen, attributable to third-party pipeline outages.
For the nine months, gross production of Cold Lake bitumen was 143 thousand barrels a day this year, compared with 144 thousand barrels in the same period of 2009.
During the nine months of the year, the company's share of gross production from Syncrude averaged 71 thousand barrels a day, up from 66 thousand barrels in 2009. Increased production in the nine months of 2010 was due to improved operational reliability.
Gross production of conventional crude oil in the first nine months of the year was 23 thousand barrels a day, compared with 25 thousand barrels in 2009. Planned maintenance activities at the Norman Wells field and natural reservoir decline were the main contributors to the lower production.
In the nine months of the year, gross production of natural gas was 282 million cubic feet a day, down from 294 million cubic feet in the nine months of 2009. The lower production volume was primarily a result of maintenance activities and natural reservoir decline.
Nine-month net income from Downstream was $176 million, compared with $226 million in 2009. Lower earnings were primarily due to lower overall margins of about $110 million and the unfavourable effects of a stronger Canadian dollar of about $60 million. These factors were partially offset by the favourable impacts of about $75 million associated with improved refinery operations and lower refinery maintenance activities and $35 million gain from sale of non-operating assets.
Chemical net income for the first nine months was $44 million, up $14 million from the same period in 2009. Improved industry margins were partially offset by lower sales volumes for polyethylene products and higher costs due to planned maintenance activities.
For the nine months of 2010, net income from Corporate and other was negative $47 million, in line with negative $44 million reported last year.
Key financial and operating data follow.
Forward-Looking Statements
Statements in this report relating to future plans, projections, events or conditions are forward-looking statements. Actual future results, including project plans, costs, timing and capacities; financing sources; the resolution of contingencies and uncertain tax positions; the effect of changes in prices and other market conditions; and environmental and capital expenditures could differ materially depending on a number of factors, such as the outcome of commercial negotiations; changes in the supply of and demand for crude oil, natural gas, and petroleum and petrochemical products; political or regulatory events; and other factors discussed in Item 1A of the company's 2010 Form 10K.
IMPERIAL OIL LIMITED
THIRD QUARTER 2010
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millions of Canadian dollars, Third Quarter Nine Months
unless noted 2010 2009 2010 2009
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Net income (U.S. GAAP)
Total revenues and other income 5,851 5,561 18,156 15,534
Total expenses 5,283 4,802 16,255 14,079
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Income before income taxes 568 759 1,901 1,455
Income taxes 150 212 490 410
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Net income 418 547 1,411 1,045
Net income per common share
(dollars) 0.49 0.64 1.66 1.23
Net income per common share
- assuming dilution (dollars) 0.49 0.64 1.65 1.22
Gain/(loss) on asset sales,
after tax 10 - 50 26
Total assets at September 30 19,398 16,822
Total debt at September 30 457 140
Interest coverage ratio -
earnings basis
(rolling 4 quarters, times
covered) 331.8 248.3
Other long-term obligations at
September 30 2,443 2,219
Shareholders' equity at
September 30 10,746 9,410
Capital employed at September 30 11,238 9,587
Return on average capital employed (a)
(rolling 4 quarters, percent) 18.7 18.5
Dividends on common stock
Total 93 85 178 255
Per common share (dollars) 0.11 0.10 0.32 0.30
Millions of common shares outstanding
At September 30 847.6 847.6
Average - assuming dilution 854.7 854.9 854.5 857.5
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(a) Return on capital employed is net income excluding after-tax cost of
financing divided by the average rolling four quarters' capital
employed.
IMPERIAL OIL LIMITED
THIRD QUARTER 2010
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Third Quarter Nine Months
millions of Canadian dollars 2010 2009 2010 2009
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Total cash and cash equivalents
at period end 51 458 51 458
Net income 418 547 1,411 1,045
Adjustment for non-cash items:
Depreciation and depletion 187 194 561 584
(Gain)/loss on asset sales (12) - (58) (32)
Deferred income taxes and other (17) (6) 55 (49)
Changes in operating assets and
liabilities 389 (a) (37) 234 (a) (884)
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Cash from (used in) operating
activities 965 698 2,203 664
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Cash from (used in) investing
activities (1,113) (545) (2,717) (1,431)
Proceeds from asset sales 35 8 95 45
Cash from (used in) financing
activities 135 (85) 52 (749)
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(a) Third quarter and the first nine months of 2010 cash flow from
operating activities were positively impacted by the timing of
scheduled income tax payments and other working capital effects.
IMPERIAL OIL LIMITED
THIRD QUARTER 2010
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Third Quarter Nine Months
millions of Canadian dollars 2010 2009 2010 2009
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Net income (U.S. GAAP)
Upstream 348 439 1,238 833
Downstream 69 62 176 226
Chemical 23 19 44 30
Corporate and other (22) 27 (47) (44)
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Net income 418 547 1,411 1,045
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Total revenues
Upstream 1,792 1,878 5,985 4,894
Downstream 5,088 4,749 15,592 13,362
Chemical 344 315 1,028 900
Eliminations/Other (1,373) (1,381) (4,449) (3,622)
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Revenues 5,851 5,561 18,156 15,534
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Purchases of crude oil and products
Upstream 545 568 1,985 1,400
Downstream 4,047 3,729 12,471 10,162
Chemical 244 218 754 650
Eliminations (1,374) (1,389) (4,451) (3,635)
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Purchases of crude oil and
products 3,462 3,126 10,759 8,577
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Production and manufacturing expenses
Upstream 592 549 1,767 1,825
Downstream 320 313 1,079 1,049
Chemical 49 47 157 142
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Production and manufacturing
expenses 961 909 3,003 3,016
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Capital and exploration expenditures
Upstream 1,151 504 2,838 1,422
Downstream 45 64 129 167
Chemical 1 6 9 12
Corporate and other 2 1 4 3
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Capital and exploration
expenditures 1,199 575 2,980 1,604
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Exploration expenses charged to
income included above 54 21 171 126
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IMPERIAL OIL LIMITED
THIRD QUARTER 2010
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Operating statistics Third Quarter Nine Months
2010 2009 2010 2009
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Gross crude oil and Natural Gas
Liquids (NGL) production
(thousands of barrels a day)
Cold Lake 139 145 143 144
Syncrude 66 78 71 66
Conventional 22 25 23 25
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Total crude oil production 227 248 237 235
NGLs available for sale 7 7 7 8
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Total crude oil and NGL production 234 255 244 243
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Gross natural gas production
(millions of cubic feet a day) 284 291 282 294
Gross oil-equivalent production (a)
(thousands of oil-equivalent barrels
a day) 281 304 291 292
Net crude oil and NGL production
(thousands of barrels a day)
Cold Lake 112 116 114 124
Syncrude 61 67 65 62
Conventional 17 19 17 21
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Total crude oil production 190 202 196 207
NGLs available for sale 5 6 5 6
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Total crude oil and NGL production 195 208 201 213
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Net natural gas production (millions
of cubic feet a day) 263 295 255 278
Net oil-equivalent production (a)
(thousands of oil-equivalent barrels
a day) 239 257 244 259
Cold Lake blend sales (thousands of
barrels a day) 176 185 187 187
NGL Sales (thousands of barrels a
day) 13 9 11 9
Natural gas sales (millions of cubic
feet a day) 259 269 262 270
Average realizations (Canadian
dollars)
Conventional crude oil real-
izations (a barrel) 67.93 65.29 70.76 57.30
NGL realizations (a barrel) 44.22 36.24 48.15 38.14
Natural gas realizations (a
thousand cubic feet) 3.58 2.90 4.19 4.07
Synthetic oil realizations (a
barrel) 77.83 73.27 79.26 65.95
Bitumen realizations (a barrel) 57.04 55.97 58.17 49.31
Refinery throughput (thousands of
barrels a day) 453 417 437 414
Refinery capacity utilization
(percent) 90 83 87 82
Petroleum product sales (thousands
of barrels a day)
Gasolines 227 204 215 200
Heating, diesel and jet fuels 151 138 145 143
Heavy fuel oils 20 22 28 26
Lube oils and other products 46 43 44 39
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Net petroleum products sales 444 407 432 408
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Petrochemical Sales (thousands of
tonnes a day) 2.7 2.8 2.7 2.8
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(a) Gas converted to oil-equivalent at 6 million cubic feet =
1 thousand barrels
IMPERIAL OIL LIMITED
THIRD QUARTER 2010
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Net income
Net income (U.S. GAAP) per common share
(millions of Canadian dollars) (dollars)
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2006
First Quarter 591 0.60
Second Quarter 837 0.85
Third Quarter 822 0.84
Fourth Quarter 794 0.83
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Year 3,044 3.12
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2007
First Quarter 774 0.82
Second Quarter 712 0.76
Third Quarter 816 0.88
Fourth Quarter 886 0.97
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Year 3,188 3.43
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2008
First Quarter 681 0.76
Second Quarter 1,148 1.29
Third Quarter 1,389 1.57
Fourth Quarter 660 0.77
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Year 3,878 4.39
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2009
First Quarter 289 0.34
Second Quarter 209 0.25
Third Quarter 547 0.64
Fourth Quarter 534 0.63
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Year 1,579 1.86
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2010
First Quarter 476 0.56
Second Quarter 517 0.61
Third Quarter 418 0.49
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To view the graph "Factors affecting net income", please visit http://files.newswire.ca/832/EssoQ3graph.jpg
For further information: Pius Rolheiser 403-237-2710
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