Imperial Oil announces estimated third quarter financial and operating results
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
CALGARY, Oct. 27, 2011 /CNW/ -
Thirdquarter Ninemonths
(millions of dollars, unless noted) 2011 2010 % 2011 2010 %
Net income (U.S. GAAP) 859 418 106 2,366 1,411 68
Net income per common share
- assuming dilution (dollars) 1.01 0.49 106 2.77 1.65 68
Capital and exploration expenditures 1,104 1,199 (8) 2,888 2,980 (3)
Bruce March, chairman, president and chief executive officer of Imperial Oil, commented:
'Imperial Oil's earnings in the third quarter of 2011 were $859 million, up 106 percent or $441 million from 2010. Strong market conditions were captured by our solid operating performance in the Upstream, Downstream and Chemical sectors. Another record quarterly production at Cold Lake and higher production at Syncrude contributed to an oil-equivalent production increase of five percent over the third quarter of 2010. Less scheduled refinery downtime contributed to a significant improvement in Downstream earnings in the third quarter compared to the second quarter of 2011. Our consistent focus on operations excellence and production reliability in all areas of our business allows us to continue to advance our growth plans while sustaining performance in our base business.
Our company growth program remains robust with capital and exploration expenditures of $2,888 million year-to-date as we continue to invest at a record level to develop new supplies of energy to meet growing world demand. The capital spending was primarily directed to the construction of the Kearl project and also includes activity to advance the Nabiye expansion at Cold Lake. Our continued strong business performance allowed us to finance these investments largely by cash flow from operations.'
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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, a key petrochemical producer 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 $859 million, compared with $418 million for the
third quarter of 2010, an increase of 106 percent or $441
million.
-- Net income per common share on a diluted basis was $1.01, up
106 percent from the third quarter of 2010.
-- Cash generated from operating activities was $1,658 million, up
$693 million from the same period last year.
-- Capital and exploration expenditures of $1,104 million were
directed towards the Kearl oil sands and other growth projects
and compared with $1,199 million in the third quarter of 2010.
-- Gross oil-equivalent barrels of production averaged 296,000
barrels a day, up five percent versus 281,000 barrels in the
same period last year. Significantly higher Cold Lake
production was partially offset by lower conventional crude oil
production, mainly as a result of unplanned third-party
pipeline downtime.
-- Cold Lake achieves record quarterly production - Cold Lake
established a production record in the third quarter, averaging
162,000 barrels a day, compared to the previous quarterly
record of 160,000 barrels a day in Q3 2007. The increase is due
to contributions from new wells steamed in 2010 and 2011,
increased recovery as a result of technology applications and
the cyclic nature of production at Cold Lake.
-- Cold Lake technology and innovation - Imperial continues to
progress development of the Cyclic Solvent Process technology,
which has the potential to significantly reduce water use and
GHG emissions for in-situ oil sands operations. The technology
will also test recovery of heavy oil that is challenging to
develop with current thermal processes. A three-horizontal-well
pilot was sanctioned and is expected to start up in late 2013.
-- Kearl oil sands project update - The Kearl initial development
is 79 percent complete, and is progressing on schedule with
expected start-up in late 2012. In response to delays in
obtaining U.S. states' transportation permits for certain
modules, modules have been reduced in size and permits for
additional interstate highway routes have been received.
Transport increased through the quarter and reassembly is
underway.
-- Horn River pilot project update - Drilling was completed on the
production pilot of an eight-horizontal-well pad to evaluate
well productivity and cost performance. Construction activities
are underway for the pilot gas processing and transmission
facilities. The program is proceeding on schedule with proposed
start up in late 2012.
-- Norman Wells production update - Norman Wells operations
resumed normal production at the end of the quarter following
restrictions due to third-party pipeline reliability issues in
the second and third quarter of 2011.
-- Sarnia chemical plant - Imperial signed a long-term supply
agreement for ethane from the Marcellus shale formation to use
as cost advantaged feedstock for the Sarnia chemical plant.
Third quarter 2011 vs. third quarter 2010
The company's net income for the third quarter of 2011 was $859 million or $1.01 a share on a diluted basis, compared with $418 million or $0.49 a share for the same period last year.
Earnings in the third quarter were higher than the same quarter in 2010 primarily due to stronger industry refining margins of about $270 million, higher crude oil commodity prices of about $190 million, increased Cold Lake bitumen production of about $90 million and higher Syncrude volumes of about $45 million. These factors were partially offset by the unfavourable impacts of the foreign exchange effects of the stronger Canadian dollar of about $65 million, higher royalty costs of about $60 million and lower conventional crude oil volumes of about $35 million due to third-party pipeline reliability issues.
Upstream net income in the third quarter was $534 million, $186 million higher than the same period of 2010. Earnings benefited from higher crude oil commodity prices of about $190 million, increased Cold Lake bitumen production of about $90 million and higher Syncrude volumes of about $45 million. These factors were partially offset by higher royalty costs due to higher commodity prices of about $60 million, the foreign exchange effects of the stronger Canadian dollar of about $45 million and lower conventional crude oil volumes of about $35 million due to third-party pipeline reliability issues.
The average price of Brent crude oil in U.S. dollars, a common benchmark for Atlantic Basin oil markets, was $113.46 a barrel in the third quarter of 2011, up about 48 percent from the corresponding period last year. Increase in the average price of West Texas Intermediate (WTI) crude oil, a common benchmark for mid-continent North American oil markets, was limited to 17 percent due to the continued weakness in WTI crude oil markets. Increases in the company's average realizations on sales of Canadian conventional crude oil and synthetic crude oil were in line with that of WTI. Increase in the company's average bitumen realizations in Canadian dollars in the third quarter was two percent to $58.23 a barrel as the price spread between light crude oil and Cold Lake bitumen widened.
Gross production of Cold Lake bitumen averaged 162 thousand barrels a day and established a new production record in the third quarter. Cold Lake production was up 17 percent from 139 thousand barrels in the same quarter last year. Increased volumes were due to contributions from new wells steamed in 2010 and 2011, increased recoveries and the cyclic nature of production at Cold Lake.
The company's share of Syncrude's gross production in the third quarter was 75 thousand barrels a day, versus 66 thousand barrels in the third quarter of 2010. Higher production was primarily the result of improved operating reliability partially offset by planned maintenance activities which began in September 2011 and will be complete in the fourth quarter of 2011.
Gross production of conventional crude oil averaged 12 thousand barrels a day in the third quarter, down from 22 thousand barrels in the third quarter of 2010. Lower volumes were primarily due to the third-party pipeline unplanned downtime which caused significantly reduced production at the Norman Wells field.
Gross production of natural gas during the third quarter of 2011 was 252 million cubic feet a day, down from 284 million cubic feet in the same period last year. The lower production volume was primarily a result of natural reservoir decline.
Downstream net income was $272 million in the third quarter of 2011, compared with $69 million in the same period a year ago. Earnings increased primarily due to stronger industry refining margins of about $270 million partially offset by higher expenses of about $40 million mainly due to higher maintenance activities and the unfavourable effects of the stronger Canadian dollar of about $20 million. Refinery crude runs increased by 39 thousand barrels a day in the third quarter, following completion of planned maintenance activities in the prior quarter.
Chemical net income was $37 million in the third quarter, $14 million higher than the same quarter last year. Improved industry margins for intermediate products and lower costs due to lower planned maintenance activities were the main contributors to the increase.
Net income effects from Corporate and other were $16 million in the third quarter, compared with negative $22 million in the same period of 2010. Favourable effects were primarily due to lower share-based compensation charges.
Cash flow generated from operating activities was $1,658 million in the third quarter of 2011, an increase of $693 million from corresponding period in 2010. Higher cash flow was primarily due to higher earnings along with working capital effects.
Investing activities used net cash of $1,061 million in the third quarter, compared with $1,113 million in the same period of 2010. Additions to property, plant and equipment were $1,087 million in the third quarter, compared with $1,147 million during the same quarter 2010. For the Upstream segment, expenditures during the quarter were primarily directed towards the advancement of the Kearl initial development and Kearl expansion oil sands project. Other investments included advancing the Nabiye expansion project at Cold Lake, environmental and efficiency projects at Syncrude, as well as exploration drilling and the advancement of the production pilot at Horn River. The Downstream segment's capital expenditures were focused mainly on refinery projects to improve reliability, feedstock flexibility, energy efficiency and environmental performance.
The company's cash balance was $920 million at September 30, 2011, up $653 million from $267 million at the end of 2010.
Nine months highlights
-- Net income was $2,366 million, up from $1,411 million in the
nine months of 2010.
-- Net income per common share on a diluted basis increased to
$2.77 compared to $1.65 in the same period of 2010.
-- Cash generated from operations was $3,273 million, $1,070
million higher than the nine months last year.
-- Capital and exploration expenditures were $2,888 million,
versus $2,980 million in the nine months of 2010, supporting
the Kearl oil sands and other growth projects.
-- Gross oil-equivalent barrels of production averaged
299,000barrels a day, compared to 291,000 barrels a day in the
nine months of 2010.
-- Per-share dividends declared in the first three quarters of
2011 totalled $0.33, up from $0.32 in the same period of 2010.
-- Cost management remained a key focus with production and
manufacturing expenses of $3,054 million, in line with the nine
month period amount of $3,003 million in 2010.
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Nine months 2011 vs. nine months 2010
Net income for the first nine months of 2011 was $2,366 million or $2.77 a share on a diluted basis, versus $1,411 million or $1.65 a share for the nine months of 2010.
For the nine months, increased earnings were primarily attributable to higher crude oil commodity prices of about $650 million, stronger industry refining margins of about $525 million, increased Cold Lake bitumen production of about $190 million and higher Syncrude volumes of about $70 million. These factors were partially offset by the unfavourable impact of the stronger Canadian dollar of about $205 million, higher royalty costs of about $190 million and lower conventional crude oil volumes of about $80 million due to third party pipeline reliability issues.
Upstream net income for the nine months of 2011 was $1,686 million, up $448 million from 2010. Earnings increased primarily due to the impacts of higher crude oil commodity prices of about $650 million, increased Cold Lake bitumen production of about $190 million and higher Syncrude volumes of about $70 million. These factors were partially offset by the unfavourable effects of higher royalty costs of about $190 million, the stronger Canadian dollar of about $150 million and lower conventional crude oil volumes of about $120 million, of which about $80 million was a result of the second and third quarter 2011 third-party pipeline issues.
The average price of Brent crude oil in U.S. dollars, a common benchmark for Atlantic Basin oil markets, was $111.96 a barrel in the nine months of 2011, up about 45 percent from the corresponding period last year. Increase in the average price of West Texas Intermediate (WTI) crude oil, a common benchmark for mid-continent North American oil markets, was limited to 23 percent due to the continued weakness in WTI crude oil markets. Increases in the company's average realizations on sales of Canadian conventional crude oil and synthetic crude oil were in line with that of WTI. Increase in the company's average bitumen realizations in Canadian dollars in the first nine months of 2011 was five percent to $60.90 a barrel as the price spread between light crude oil and Cold Lake bitumen widened.
Gross production of Cold Lake bitumen for the nine months was 159 thousand barrels a day this year, compared with 143 thousand barrels in the same period of 2010. Increased volumes were due to contributions from new wells steamed in 2010 and 2011, increased recovery and the cyclic nature of production at Cold Lake.
During the first nine months of the year, the company's share of gross production from Syncrude averaged 75 thousand barrels a day, up from 71 thousand barrels in 2010. Increased production was due to improved operating reliability.
In the first nine months of the year, gross production of conventional crude oil was 17 thousand barrels a day, compared with 23 thousand barrels in 2010. Lower volumes were primarily due to third-party pipeline downtime, which reduced production at the Norman Wells field along with natural reservoir decline.
Gross production of natural gas during the nine months of 2011 was 259 million cubic feet a day, down from 282 million cubic feet in the nine months of 2010. The lower production volume was primarily a result of natural reservoir decline.
Nine months Downstream net income was $612 million, an increase of $436 million over 2010. Higher earnings were primarily due to favourable impacts of stronger industry refining margins of about $525 million and $40 million associated with improved refinery operations. These factors were partially offset by the unfavourable impacts of the stronger Canadian dollar of about $55 million and higher expenses of about $40 million mainly due to higher maintenance activities. Earnings in 2010 included a gain of about $25 million from sale of non-operating assets.
Chemical net income in the first nine months of 2011 was $111 million, up $67 million from 2010. Earnings were positively impacted by improved industry margins across all product channels, lower costs due to lower planned maintenance activities and higher polyethylene sales volumes.
For the nine months of 2011, net income effects from Corporate and other were negative $43 million, in line with the negative $47 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
THIRDQUARTER 2011
Third Quarter Nine Months
millions of Canadian dollars, unless 2011 2010 2011 2010
noted
Net Income (U.S. GAAP)
Total revenues 7,945 5,851 22,590 18,156
and other income
Total expenses 6,813 5,283 19,448 16,255
Income before 1,132 568 3,142 1,901
income taxes
Income taxes 273 150 776 490
Net income 859 418 2,366 1,411
Net income per common share 1.01 0.49 2.79 1.66
(dollars)
Net income per common share - 1.01 0.49 2.77 1.65
assuming dilution (dollars)
Other Financial Data
Federal excise tax included in 345 345 985 971
operating revenues
Gain/(loss) on asset sales, after 15 10 19 50
tax
Total assets at September 30 24,194 19,398
Total debt at September 30 1,208 457
Interest coverage ratio - earnings
basis
(rolling 4 280.7 331.8
quarters, times
covered)
Other long-term obligations at 2,737 2,443
September 30
Shareholders' 13,163 10,746
equity at
September 30
Capital employed 14,399 11,238
at September 30
Return on average capital employed
(a)
(rolling 4 24.1 18.7
quarters, percent)
Dividends on common stock
Total 93 93 280 271
Per common share (dollars) 0.11 0.11 0.33 0.32
Millions of common shares outstanding
At September 30 847.6 847.6
Average - assuming dilution 853.8 854.7 854.0 854.5
(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 2011
Third Quarter Nine Months
millions of Canadian 2011 2010 2011 2010
dollars
Total cash and cash 920 51 920 51
equivalents at period end
Net income 859 418 2,366 1,411
Adjustment for non-cash
items:
Depreciation and 192 187 570 561
depletion
(Gain)/loss on asset (17) (12) (23) (58)
sales
Deferred income taxes and 59 (17) (27) 55
other
Changes in operating assets 565 (a) 389 387 234
and liabilities
Cash flows from (used in) 1,658 965 3,273 2,203
operating activities
Cash flows from (used in) (1,061) (1,113) (2,760) (2,717)
investing activities
Proceeds from asset sales 24 35 44 95
Cash flows from (used in) (96) 135 140 52
financing activities
(a) Third quarter 2011 cash flows from operating activities were
positively impacted by the timing of scheduled income tax
payments and other working capital effects.
IMPERIAL OIL LIMITED
THIRD QUARTER 2011
Third Quarter Nine Months
millions of Canadian dollars 2011 2010 2011 2010
Net income (U.S. GAAP)
Upstream 534 348 1,686 1,238
Downstream 272 69 612 176
Chemical 37 23 111 44
Corporate and other 16 (22) (43) (47)
Net income 859 418 2,366 1,411
Revenues and other income
Upstream 2,258 1,792 7,140 5,985
Downstream 6,956 5,088 19,781 15,592
Chemical 416 344 1,281 1,028
Eliminations/Other (1,685) (1,373) (5,612) (4,449)
Total 7,945 5,851 22,590 18,156
Purchases of crude oil and
products
Upstream 781 545 2,605 1,985
Downstream 5,596 4,047 16,012 12,471
Chemical 304 244 940 754
Eliminations (1,688) (1,374) (5,618) (4,451)
Purchases of crude oil and 4,993 3,462 13,939 10,759
products
Production and manufacturing
expenses
Upstream 627 592 1,822 1,767
Downstream 347 320 1,099 1,079
Chemical 43 49 133 157
Production and manufacturing 1,017 961 3,054 3,003
expenses
Capital and exploration
expenditures
Upstream 1,051 1,151 2,753 2,838
Downstream 48 45 120 129
Chemical - 1 3 9
Corporate and other 5 2 12 4
Capital and exploration 1,104 1,199 2,888 2,980
expenditures
Exploration expenses charged 17 54 76 171
to income included above
IMPERIAL OIL LIMITED
THIRD QUARTER 2011
Operating statistics Third Quarter Nine Months
2011 2010 2011 2010
Gross crude oil and Natural Gas
Liquids (NGL) production
(thousands of barrels a day)
Cold Lake 162 139 159 143
Syncrude 75 66 75 71
Conventional 12 22 17 23
Total crude oil 249 227 251 237
production
NGLs available for sale 5 7 5 7
Total crude oil and NGL 254 234 256 244
production
Gross natural gas production (millions 252 284 259 282
of cubic feet a day)
Gross oil-equivalent production (a)
(thousands of oil-equivalent barrels a 296 281 299 291
day)
Net crude oil and NGL production
(thousands of barrels a day)
Cold Lake 124 112 119 114
Syncrude 70 61 70 65
Conventional 9 17 12 17
Total crude oil 203 190 201 196
production
NGLs available for sale 4 5 4 5
Total crude oil and NGL 207 195 205 201
production
- -
Net natural gas production (millions 211 263 229 255
of cubic feet a day)
Net oil-equivalent production (a)
(thousands of oil-equivalent barrels a 242 239 243 244
day)
Cold Lake blend sales (thousands of 205 176 208 187
barrels a day)
NGL Sales (thousands of 9 13 9 11
barrels a day)
Natural gas sales (millions 230 259 241 262
of cubic feet a day)
Average realizations (Canadian
dollars)
Conventional crude oil 74.31 67.93 83.64 70.76
realizations (a barrel)
NGL realizations (a 54.31 44.22 58.67 48.15
barrel)
Natural gas realizations 3.56 3.58 3.70 4.19
(a thousand cubic feet)
Synthetic oil 97.89 77.83 100.48 79.26
realizations (a barrel)
Bitumen realizations (a 58.23 57.04 60.90 58.17
barrel)
Refinery throughput (thousands of 436 453 429 437
barrels a day)
Refinery capacity utilization 86 90 85 87
(percent)
Petroleum product sales (thousands of
barrels a day)
Gasolines (Mogas) 230 227 218 215
Heating, diesel and jet 160 151 158 145
fuels (Distilates)
Heavy fuel oils (HFO) 26 20 27 28
Lube oils and other 48 46 43 44
products (Other)
Net petroleum products 464 444 446 432
sales
Petrochemical Sales (thousands of 257 252 778 736
tonnes)
IMPERIAL OIL LIMITED
THIRD QUARTER 2011
Net income
Net income (U.S. GAAP) per common share
(millions of Canadian dollars) (dollars)
2007
First Quarter 774 0.82
Second Quarter 712 0.76
Third Quarter 816 0.88
Fourth Quarter 886 0.97
Year 3,188 3.43
2008
First Quarter 681 0.76
Second Quarter 1,148 1.29
Third Quarter 1,389 1.57
Fourth Quarter 660 0.77
Year 3,878 4.39
2009
First Quarter 289 0.34
Second Quarter 209 0.25
Third Quarter 547 0.64
Fourth Quarter 534 0.63
Year 1,579 1.86
2010
First Quarter 476 0.56
Second Quarter 517 0.61
Third Quarter 418 0.49
Fourth Quarter 799 0.95
Year 2,210 2.61
2011
First Quarter 781 0.92
Second Quarter 726 0.86
Third Quarter 859 1.01
Imperial Oil Limited
CONTACT: 403-237-2710
