Operating results
First quarter 2021 vs. first quarter 2020
In early 2020, the balance of supply and demand for petroleum and petrochemical
products experienced two significant disruptive effects. On the demand side, the
COVID-19
pandemic spread rapidly through most areas of the world resulting in substantial
reductions in consumer and business activity and significantly reduced demand
for crude oil, natural gas, and petroleum products. This reduction in demand
coincided with announcements of increased production in certain key
oil-producing
countries which led to increases in inventory levels and sharp declines in
prices for crude oil, natural gas, and petroleum products.
While demand has rebounded considerably, the lingering effects of the weak 2020
business environment has continued to have a negative impact on financial
results in 2021 when compared to periods prior to the pandemic. Signs of
improvement are emerging including higher crude and gas prices through the
quarter and stronger Downstream and Chemical margins.
The company recorded net income of $392 million or $0.53 per share on a diluted
basis in the first quarter of 2021, compared to a net loss of $188 million or
$0.25 per share in the same period of 2020. First quarter 2020 results included
non-cash
charges of $281 million relating to the revaluation of the company's inventory.
Upstream recorded net income of $79 million in the first quarter of 2021,
compared to a net loss of $608 million in the same period of 2020. Improved
results reflect higher realizations of about $700 million and the absence of the
prior year
non-cash
charge of $229 million, related to the revaluation of the company's inventory.
These items were partially offset by higher royalties of about $100 million,
unfavourable foreign exchange effects of about $70 million, and higher operating
expenses of about $60 million.
West Texas Intermediate (WTI) averaged US$58.14 per barrel in the first quarter
of 2021, up from US$45.78 per barrel in the same quarter of 2020. Western Canada
Select (WCS) averaged US$45.64 per barrel and US$25.60 per barrel for the same
periods. The WTI / WCS differential averaged approximately US$13 per barrel for
the first quarter of 2021, compared to around US$20 in the same period of 2020.
The Canadian dollar averaged US$0.79 in the first quarter of 2021, an increase
of US$0.05 from the first quarter of 2020.
Imperial's average Canadian dollar realizations for bitumen increased in the
quarter, primarily due to an increase in WCS. Bitumen realizations averaged
$47.19 per barrel in the first quarter of 2021, up from $18.08 per barrel in the
first quarter of 2020. The company's average Canadian dollar realizations for
synthetic crude increased generally in line with WTI, adjusted for changes in
exchange rates and transportation costs. Synthetic crude realizations averaged
$67.41 per barrel in the first quarter of 2021, up from $58.94 per barrel in the
same period of 2020.
Total gross production of Kearl bitumen averaged 251,000 barrels per day in the
first quarter (178,000 barrels Imperial's share), up from 226,000 barrels per
day (160,000 barrels Imperial's share) in the first quarter of 2020. Higher
production was primarily driven by the supplemental crushing facilities.
Gross production of Cold Lake bitumen averaged 140,000 barrels per day in the
first quarter, in line with 140,000 barrels per day in the same period of 2020.
The company's share of gross production from Syncrude averaged 79,000 barrels
per day, up from 73,000 barrels per day in the first quarter of 2020.
Downstream recorded net income of $292 million in the first quarter of 2021,
compared to net income of $402 million in the same period of 2020. Results were
negatively impacted by lower margins of about $150 million and lower sales
volumes of about $60 million. These items were partially offset by the absence
of the prior year
non-cash
charge of $52 million, related to the revaluation of the company's inventory and
lower operating expenses of about $50 million.

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Refinery throughput averaged 364,000 barrels per day, compared to 383,000
barrels per day in the first quarter of 2020. Capacity utilization was
85 percent, compared to 91 percent in the first quarter of 2020. Lower refinery
throughput was primarily driven by lower market demand due to the
COVID-19
pandemic.
Petroleum product sales were 414,000 barrels per day, compared to 462,000
barrels per day in the first quarter of 2020. Lower petroleum product sales were
primarily driven by reduced demand due to the
COVID-19
pandemic.
Chemical net income was $67 million in the first quarter, up from net income of
$21 million in the same quarter of 2020.
Corporate and other expenses were $46 million in the first quarter, up from
$3 million in the same period of 2020, mainly due to higher share-based
compensation costs.
Liquidity and capital resources
Cash flow generated from operating activities was $1,045 million in the first
quarter, up from $423 million in the corresponding period in 2020, primarily
reflecting higher Upstream realizations.
Investing activities used net cash of $147 million in the first quarter,
compared with $308 million used in the same period of 2020, primarily reflecting
lower additions to property, plant and equipment.
Cash used in financing activities was $202 million in the first quarter,
compared with $445 million used in the first quarter of 2020. Dividends paid in
the first quarter of 2021 were $162 million. The per share dividend paid in the
first quarter was $0.22, consistent with the same period of 2020. The company
did not purchase shares during the first quarter. In the first quarter of 2020,
the company purchased about 9.8 million shares for $274 million, including
shares purchased from Exxon Mobil Corporation.
The company's cash balance was $1,467 million at March 31, 2021, versus
$1,388 million at the end of first quarter 2020.
At March 31, 2021, due to the termination of transportation services agreements
related to a third-party pipeline project, the company recognized a liability of
$62 million, previously reported as a contingent liability in Note 10 of
Imperial's Form
10-K.
In connection with the same project, commitments under "Other long-term purchase
agreements" as reported in Imperial's Form
10-K
decreased by approximately $2.9 billion. The majority of these commitments
related to years 2026 and beyond.
On April 30, 2021, the company announced an amendment to its normal course
issuer bid to increase the number of common shares that it may purchase. Under
the amendment, the number of common shares that may be purchased will increase
to a maximum of 29,363,070 common shares during the period June 29, 2020 to June
28, 2021, which includes shares purchased under the normal course issuer bid and
from Exxon Mobil Corporation concurrent with, but outside of the normal course
issuer bid. No other provisions of the normal course issuer bid have changed.
The company currently anticipates maximizing its share purchases under the
program. Purchase plans may be modified at any time without prior notice.

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Forward-looking statements

Statements of future events or conditions in this report, including projections,
targets, expectations, estimates, and business plans are forward-looking
statements. Forward-looking statements can be identified by words such as
believe, anticipate, intend, propose, plan, goal, seek, project, predict,
target, estimate, expect, strategy, outlook, schedule, future, continue, likely,
may, should, will and similar references to future periods. Forward-looking
statements in this release include, but are not limited to, references to the
use of derivative instruments and effectiveness of risk mitigation; signs of
improvement emerging in the business environment through higher crude and gas
prices and stronger downstream and chemical margins; and plans for purchases
under the amended share purchase program.
Forward-looking statements are based on the company's current expectations,
estimates, projections and assumptions at the time the statements are made.
Actual future financial and operating results, including expectations and
assumptions concerning demand growth and energy source, supply and mix;
commodity prices, foreign exchange rates and general market conditions;
production rates, growth and mix; project plans, timing, costs, technical
evaluations and capacities and the company's ability to effectively execute on
these plans and operate its assets; progression of
COVID-19
and its impacts on Imperial's ability to operate its assets, including the
possible shutdown of facilities due to
COVID-19
outbreaks; cash generation, financing sources and capital structure; and capital
and environmental expenditures could differ materially depending on a number of
factors. These factors include global, regional or local changes in supply and
demand for oil, natural gas, and petroleum and petrochemical products and
resulting price, differential and margin impacts, including foreign government
action with respect to supply levels and prices and the impact of
COVID-19
on demand; availability and allocation of capital; political or regulatory
events, including changes in law or government policy such as tax laws,
production curtailment and actions in response to
COVID-19;
management effectiveness and disaster response preparedness, including business
continuity plans in response to
COVID-19;
unanticipated technical or operational difficulties; project management and
schedules and timely completion of projects; operational hazards and risks;
currency exchange rates; general economic conditions; and other factors
discussed in Item 1A risk factors and Item 7 management's discussion and
analysis of financial condition and results of operations of Imperial Oil
Limited's most recent annual report on Form
10-K.
Forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties, some that are similar to other oil and gas
companies and some that are unique to Imperial. Imperial's actual results may
differ materially from those expressed or implied by its forward-looking
statements and readers are cautioned not to place undue reliance on them.
Imperial undertakes no obligation to update any forward-looking statements
contained herein, except as required by applicable law.
The term "project" as used in this report can refer to a variety of different
activities and does not necessarily have the same meaning as in any government
payment transparency reports.

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