10-Q 1 d233523d10q.htm 10-Q 10-Q
Q30000049938--12-31falseYesYesfalsefalseCA2023-05-312022-06-30Included contributions to registered pension plans. (43) (59) (113) (159)Number of common shares authorized and outstanding were 1,100 million and 696 million, respectively (2020 - 1,100 million and 734 million, respectively).Accounts receivable - net included net amounts receivable from related parties of $1,064 million (2020 - $384 million).Notes and loans payable included amounts to related parties of $0 million (2020 - $111 million).Long-term debt included amounts to related parties of $4,447 million (2020 - $4,447 million).Investments and long-term receivables included amounts from related parties of $299 million (2020 - $313 million).Amounts from related parties included in revenues. 2,731 1,216 5,644 3,699Amounts to related parties included in production and manufacturing, and selling and general expenses. 95 107 317 428Amounts to related parties included in purchases of crude oil and products. 828 627 2,009 1,762Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all highly liquid securities with maturity of three months or less when purchased.Included export sales to the United States of $1,803 million (2020 - $1,227 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.Included export sales to the United States of $4,916 million (2020 - $3,339 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.Total recorded employee retirement benefits obligations also included $58 million in current liabilities (2020 - $58 million).Total asset retirement obligations and other environmental liabilities also included $100 million in current liabilities (2020 - $100 million).For nine months to September 30, 2020, the Net income (loss) per common share – diluted excludes the effect of 2.1 million employee share-based awards. Share-based awards have the potential to dilute basic earnings per share in the future.Amounts to related parties included in financing, (note 5). 4 12 25 50Total operating lease liability also included $114 million in current liabilities (2020 - $97 million). In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled $1 million (2020 - $27 million).In the third quarter of 2021, the Downstream segment acquired a portion of Upstream crude inventory for $444 million. There was no earnings impact and the effects of this transaction have been eliminated for consolidation purposes.Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses” and “Accounts receivable - net”.Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities”. 0000049938 2021-01-01 2021-09-30 0000049938 2021-07-01 2021-09-30 0000049938 2020-07-01 2020-09-30 0000049938 2020-01-01 2020-09-30 0000049938 2021-09-30 0000049938 2020-12-31 0000049938 2020-09-30 0000049938 2020-01-01 2020-12-31 0000049938 2021-01-01 2021-03-31 0000049938 2021-06-30 0000049938 2019-12-31 0000049938 2020-06-30 0000049938 imo:UpstreamMember 2021-07-01 2021-09-30 0000049938 imo:DownstreamMember 2021-07-01 2021-09-30 0000049938 imo:ChemicalMember 2021-07-01 2021-09-30 0000049938 us-gaap:CorporateAndOtherMember 2021-07-01 2021-09-30 0000049938 srt:ConsolidationEliminationsMember 2021-07-01 2021-09-30 0000049938 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
        
to
        
Commission file number 0-12014
IMPERIAL OIL LIMITED
(Exact name of registrant as specified in its charter)
 
   
CANADA
      
98-0017682
   
(State or other jurisdiction
of incorporation or organization)
       (I.R.S. Employer Identification No.)
       
   
505 Quarry Park Boulevard S.E. Calgary, Alberta, Canada
      
T2C 5N1
    (Address of principal executive offices)       
(Postal Code)
1-800
-567-3776
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class    Trading symbol   
Name of each exchange on
which registered
None   
 
   None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
  YES   
    
    
   NO   
          
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 
  YES   
    
    
   NO   
          
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act of 1934.
 
  Large accelerated filer   
  
  
   Smaller reporting company   
        
                      
  Non-accelerated filer
    
  
        
   Emerging growth company   
        
   
  Accelerated filer   
        
   .         
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
        
Indicate by check mark whether the registrant is a shell company (
a
s defined in Rule 12b-2 of the Exchange Act of 1934)
.
 
  YES  
          
   NO   
    
    
The number of common shares outstanding, as of September 30, 2021 was
 
695,611,336.

IMPERIAL OIL LIMITED
 
 
Table of contents
Page
 
  
 
3
 
  
 
3
 
  
 
3
 
  
 
4
 
  
 
5
 
  
 
6
 
  
 
7
 
  
 
8
 
  
 
19
 
  
 
24
 
  
 
24
 
  
 
25
 
  
 
25
 
  
 
25
 
  
 
26
 
  
 
27
 
 
 
In this report all dollar amounts are expressed in Canadian dollars unless otherwise stated. This report should be read in conjunction with the company’s annual report on Form 10-K for the year ended December 31, 2020. Note that numbers may not add due to rounding.
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.
In this report, unless the context otherwise indicates, reference to “the company” or “Imperial” includes Imperial Oil Limited and its subsidiaries.
 
2

IMPERIAL OIL LIMITED
 
 
 
PART I. FINANCIAL INFORMATION
 
Item 1.
Financial statements
Consolidated statement of income (U.S. GAAP, unaudited)
 
                                                                                   
    
          Third Quarter
    
           Nine Months
           to September 30
 
millions of Canadian dollars
  
2021
    
2020
    
2021
    
2020
 
Revenues and other income
           
Revenues
(a)
  
 
10,214
 
     5,937     
 
25,213
 
     16,267  
Investment and other income
(note 3)
  
 
19
 
     18     
 
65
 
     88  
Total revenues and other income
  
 
10,233
 
     5,955     
 
25,278
 
     16,355  
Expenses
           
Exploration
  
 
2
 
     2     
 
6
 
     6  
Purchases of crude oil and products
(b)
  
 
6,298
 
     3,634     
 
15,052
 
     9,975  
Production and manufacturing
(c) (note 11)
  
 
1,525
 
     1,246     
 
4,579
 
     4,098  
Selling and general
(c)
  
 
180
 
     150     
 
569
 
     499  
Federal excise tax and fuel charge
  
 
535
 
     470     
 
1,404
 
     1,290  
Depreciation and depletion
(note 11)
  
 
488
 
     409     
 
1,432
 
     1,295  
Non-service pension and postretirement benefit
  
 
11
 
     31     
 
32
 
     91  
Financing
(d) (note 5)
  
 
5
 
     10     
 
32
 
     46  
Total expenses
  
 
9,044
 
     5,952     
 
23,106
 
     17,300  
Income (loss) before income taxes
  
 
1,189
 
     3     
 
2,172
 
     (945
Income taxes
  
 
281
 
     -     
 
506
 
     (234
Net income (loss)
  
 
908
 
     3     
 
1,666
 
     (711
Per share information
(Canadian dollars)
           
Net income (loss) per common share - basic
(note 9)
  
 
1.30
 
     -     
 
2.32
 
     (0.97
Net income (loss) per common share - diluted
(note 9)
  
 
1.29
 
     -     
 
2.31
 
     (0.97
(a)  Amounts from related parties included in revenues.
  
 
2,731
 
     1,216     
 
5,644
 
     3,699  
(b)  Amounts to related parties included in purchases of crude oil and products.
  
 
828
 
     627     
 
2,009
 
     1,762  
(c)   Amounts to related parties included in production and manufacturing, and selling and general expenses.
  
 
95
 
     107     
 
317
 
     428  
(d)  Amounts to related parties included in financing, (note 5).
  
 
4
 
     12     
 
25
 
     50  
The information in the notes to consolidated financi
a
l statements is an integral part of these statements.
 
3
IMPERIAL OIL LIMITED
 
 
 
Consolidated statement of comprehensive income (U.S. GAAP, unaudited)
 
                                                       
    
    Third Quarter
    
        Nine Months
        to September 30
 
millions of Canadian dollars
  
2021
    
2020
    
2021
    
2020
 
Net income (loss)
  
 
908
 
     3     
 
1,666
 
     (711
Other comprehensive income (loss), net of income taxes
           
Postretirement benefits liability adjustment (excluding amortization)
  
 
-
 
     -     
 
54
 
     (114
Amortization of postretirement benefits liability adjustment included in net periodic benefit costs
  
 
33
 
     34     
 
99
 
     102  
Total other comprehensive income (loss)
  
 
33
 
     34     
 
153
 
     (12
                                     
Comprehensive income (loss)
  
 
941
 
     37       
1,819
       (723
The information in the notes to cons
o
lidated financial statements is an integral part of these statements.
 
4

IMPERIAL OIL LIMITED
 
 
 
Consolidated balance sheet (U.S. GAAP, unaudited)
 
 
 
  
As at
Sept 30
 
 
As at
Dec 31
 
millions of Canadian dollars
  
2021
 
 
2020
 
Assets
  
     
 
     
Current assets
  
     
 
     
Cash
  
 
1,875
 
     771  
Accounts receivable - net
(a)
  
 
3,871
 
     1,919  
Inventories of crude oil and products
  
 
1,405
 
     1,161  
Materials, supplies and prepaid expenses
  
 
729
 
     673  
Total current assets
  
 
7,880
 
     4,524  
Investments and long-term receivables
(b)
  
 
753
 
     781  
Property, plant and equipment,
  
 
56,512
 
     55,771  
less accumulated depreciation and depletion
  
 
(25,134
     (23,737
Property, plant and equipment, net
  
 
31,378
 
     32,034  
Goodwill
(note 11)
  
 
166
 
     166  
Other assets, including intangibles - net
  
 
698
 
     526  
Total assets
  
 
40,875
 
     38,031  
     
Liabilities
                 
Current liabilities
                 
Notes and loans payable
(c)
  
 
122
 
     227  
Accounts payable and accrued liabilities
(a) (note 7)
  
 
5,558
 
     3,153  
Income taxes payable
  
 
269
 
     -  
Total current liabilities
  
 
5,949
 
     3,380  
Long-term debt
(d) (note 6)
  
 
5,060
 
     4,957  
Other long-term obligations
(note 7)
  
 
4,352
 
     4,100  
Deferred income tax liabilities
  
 
4,305
 
     4,176  
Total liabilities
  
 
19,666
 
     16,613  
     
Shareholders’ equity
                 
Common shares at stated value
(e) (note 9)
  
 
1,286
 
     1,357  
Earnings reinvested
  
 
21,759
 
     22,050  
Accumulated other comprehensive income (loss)
(note 10)
  
 
(1,836
     (1,989
Total shareholders’ equity
  
 
21,209
 
     21,418  
     
Total liabilities and shareholders’ equity
  
 
40,875
 
     38,031  
(a)
Accounts receivable - net included net amounts receivable from related parties of $1,064 million (2020 - $384 million).
(b)
Investments and long-term receivables included amounts from related parties of $299 million (2020 - $313 million).
(c)
Notes and loans payable included amounts to related parties of $0 million (2020 - $111 million).
(d)
Long-term debt included amounts to related parties of $4,447 million (2020 - $4,447 million).
(e)
Number of common shares authorized and outstanding were 1,100 million and 696
 
million, respectively (2020 - 1,100 million and 734 million, respectively).
The information in the notes to consolidated financial statements is an int
e
gral part of these statements.
 
5

IMPERIAL OIL LIMITED
 
 
 
Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)
 
 
  
Third Quarter
 
 
    Nine Months
    to September 30
 
millions of Canadian dollars
  
2021
 
 
2020
 
 
2021
 
 
2020
 
Common shares at stated value
(note 9)
  
     
 
     
 
     
 
     
At beginning of p
e
riod
  
 
1,302
 
    1,357    
 
1,357
 
    1,375  
Share purchases at stated value
  
 
(16
    -    
 
(71
    (18
At end of period
  
 
1,286
 
    1,357    
 
1,286
 
    1,357  
 
 
 
 
 
Earnings reinvested
      
 
             
 
       
At beginning of period
  
 
21,336
 
    23,516    
 
22,050
 
    24,812  
Net income (loss) for the period
  
 
908
 
    3    
 
1,666
 
    (711
Share purchases in excess of stated value
  
 
(297
)
    -    
 
(1,413
)
    (256
Dividends declared
  
 
(188
)
    (161  
 
(544
)
    (485
Cumulative effect of accounting change
  
 
-
 
    -    
 
-
 
    (2
At end of period
  
 
21,759
 
    23,358    
 
21,759
 
    23,358  
 
 
 
 
 
Accumulated other comprehensive income (loss)
(note 10)
      
 
             
 
       
At beginning of period
  
 
(1,869
)
    (1,957  
 
(1,989
)
    (1,911
Other comprehensive income (loss)
  
 
33
 
    34    
 
153
 
    (12
At end of period
  
 
(1,836
)
    (1,923  
 
(1,836
)
    (1,923
 
 
 
 
 
Shareholders’ equity at end of period
  
 
21,209
 
    22,792    
 
21,209
 
    22,792  
The information in the notes to consolidated financial statements is an integral part of these statements.
 
6

IMPERIAL OIL LIMITED
 
 
 
Consolidated statement of cash flows (U.S. GAAP, unaudited)
 
                  
                  
                  
                  
Inflow (outflow)
  
         Third Quarter
   
        Nine Months
        to September 30
 
millions of Canadian dollars
  
2021
   
2020
   
2021
   
2020
 
Operating activities
        
Net income (loss)
  
 
908
 
     3    
 
1,666
 
    (711
Adjustments for non-cash items:
                       
 
       
Depreciation and depletion
  
 
488
 
     409    
 
1,432
 
    1,275  
Impairment of int
a
ngible assets
(note 11)
  
 
-
 
     -    
 
-
 
    20  
(Gain) loss on asset sales
(note 3)
  
 
(12
)
 
  
  (11  
 
(39
    (28
Deferred income taxes and other
  
 
(120
)
  
  (11  
 
16
 
    (210
Changes in operating assets and liabilities:
      
 
  
           
 
       
Accounts receivable
  
 
(708
)
  
  134    
 
(1,952
)
    967  
Inventories, materials, supplies and prepaid expenses
  
 
(199
)
  
  142    
 
(300
)
    60  
Income taxes payable
  
 
227
 
  
  -    
 
269
 
    (106
Accounts payable and accrued liabilities
  
 
1,123
 
  
  66    
 
2,362
 
    (1,008
All other items - net
(b)
  
 
240
 
  
  143    
 
390
 
    223  
Cash flows from (used in) operating activities
  
 
1,947
 
  
  875    
 
3,844
 
    482  
 
 
 
 
 
Investing activities
      
 
  
           
 
       
Additions to property, plant and equipment
  
 
(276
)
  
  (142  
 
(684
)
    (657
Proceeds from asset sales
(note 3)
  
 
15
 
  
  19    
 
57
 
    68  
Loans to equity companies - net
  
 
2
 
  
  (2  
 
14
 
    (16
Cash flows from (used in) investing activities
  
 
(259
)
  
  (125  
 
(613
)
    (605
 
 
 
 
 
Financing activities
      
 
  
           
 
       
Short-term debt - net
  
 
(75
)
  
  -    
 
(111
)
    -  
Reduction in finance lease obligations
(note 6)
  
 
(6
)
  
  (4  
 
(14
)
    (16
Dividends paid
  
 
(195
)
  
  (162  
 
(518
)
    (488
Common shares purchased
(note 9)
  
 
(313
)
  
  -    
 
(1,484
)
    (274
Cash flows from (used in) financing activities
  
 
(589
)
  
  (166  
 
(2,127
)
    (778
 
 
 
 
 
Increase (decrease) in cash
  
 
1,099
 
  
  584    
 
1,104
 
    (901
Cash at beginning of period
  
 
776
 
  
  233    
 
771
 
    1,718  
Cash at end of period
(a)
  
 
1,875
 
  
  817    
 
1,875
 
    817  
(a)  Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all highly liquid securities with maturity of three months or less when purchased.
 
(b)  Included contributions to registered pension plans.
  
 
(43
 
 
(59
 
 
       (113
)
  
 
 
      (159
         
Income taxes (paid) refunded.
  
 
32
 
 
 
   107
 
 
 
60
 
 
 
         (45
Interest (paid), net of capitalization.
  
 
(5
 
 
(10
 
 
(32
)
 
 
 
 
(46
The information in the notes to consolidated financial statements is an integral part of these statements.
 
7

IMPERIAL OIL LIMITED
 
 
 
Notes to consolidated financial statements (unaudited)
1.  Basis of financial statement preparation
These unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) and follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC) in the company’s 2020 annual report on Form 10-K. In the
o
pinion of the company, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature.
The company’s exploration and production activities are accounted for under the “successful efforts” method.
The results for the nine months ended September 30, 2021, are not necessarily indicative of the operations to be expected for the full year.
All amounts are in Canadian dollars unless otherwise indicated.
 
8

IMPERIAL OIL LIMITED
 
 
 
2.  Business segments
 
Third Quarter
  
Upstream         
  
Downstream       
  
Chemical          
millions of Canadian dollars
  
2021 
  
2020 
  
2021 
  
2020 
  
2021
  
2020 
Revenues and other income
  
 
  
 
  
 
  
 
  
 
  
 
Revenues
(a)
  
1,015 
   1,651    
8,813 
   4,061    
386
   225 
Intersegment sales
(b)
  
3,137 
   658    
366 
   321    
91
   43 
Investment and other income
(note 3)
  
   (6)   
18 
   24    
-
  
 
  
4,152 
   2,303    
9,197 
   4,406    
477
   268 
Expenses
                             
Exploration
  
2 
   2    
     
-
  
Purchases of crude oil and products
(b)
  
1,902 
   1,176    
7,745 
   3,322    
244
   157 
Production and manufacturing
(note 11)
  
1,120 
   863    
356 
   335    
49
   48 
Selling and general
  
     
141 
   140    
21
   23 
Federal excise tax and fuel charge
  
     
535 
   470    
-
  
Depreciation and depletion
(note 11)
  
439 
   361    
39 
   37    
4
   5 
Non-service pension and postretirement benefit
  
     
     
-
  
Financing
(note 5)
  
     
     
-
  
Total expenses
  
3,463 
   2,402    
8,816 
   4,304    
318
   233 
Income (loss) before income taxes
  
689 
   (99)   
381 
   102    
159
   35 
Income taxes
  
165 
   (25)   
88 
   25    
38
   8 
Net income (loss)
(b)
  
524 
   (74)   
293 
   77    
121
   27 
Cash flows from (used in) operating activities
(b)
  
2,508 
   526    
(733)
   333    
157
   32 
Capital and exploration expenditures
(c)
  
151 
   78    
120 
   50    
2
   4 
 
Third Quarter
  
Corporate and other 
  
Eliminations        
  
Consolidated      
millions of Canadian dollars
  
2021 
  
2020 
  
2021 
  
2020 
  
2021
  
2020 
Revenues and other income
  
 
  
 
  
 
  
 
  
 
  
 
Revenues
(a)
  
     
-
 
     
10,214
   5,937 
Intersegment sales
(b)
  
     
(3,594)
   (1,022)   
-
  
Investment and other income
(note 3)
  
1 
     
- 
     
19
   18 
 
  
1 
     
(3,594)
   (1,022)   
10,233
   5,955 
Expenses
                             
Exploration
  
     
     
2
   2 
Purchases of crude oil and products
(b)
  
     
(3,593)
   (1,021)   
6,298
   3,634 
Production and manufacturing
(note 11)
  
     
     
1,525
   1,246 
Selling and general
  
19 
   (12)   
(1)
   (1)  
180
   150 
Federal excise tax and fuel charge
  
     
     
535
   470 
Depreciation and depletion
(note 11)
  
6 
   6    
     
488
   409 
Non-service pension and postretirement benefit
  
11 
   31    
     
11
   31 
Financing
(note 5)
  
5 
   10    
     
5
   10 
Total expenses
  
41 
   35    
(3,594)
   (1,022)   
9,044
   5,952 
Income (loss) before income taxes
  
(40)
   (35)   
     
1,189
   3 
Income taxes
  
(10)
   (8)   
     
281
  
Net income (loss)
(b)
  
(30)
   (27)   
     
908
   3 
Cash flows from (used in) operating activities
(b)
  
15 
   (16)   
     
1,947
   875 
Capital and exploration expenditures
(c)
  
4 
   9    
     
277
   141 
 
9

IMPERIAL OIL LIMITED
 
 
 
(a)
Included export sales to the United States of $1,803 million (2020 - $1,227 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b)
In the third quarter of 2021,
 the Downstream segment acquired
 
a
portion of Upstream crude inventory 
for
$444 million.
There
was no
 
earnings impact
and t
he effects of this transaction have been eliminated for consolidation purp
o
ses.
(c)
Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.
 
10

IMPERIAL OIL LIMITED
 
 
 
 
Nine Months to September 30
  
Upstream         
  
Downstream       
  
Chemical          
millions of Canadian dollars
  
2021 
  
2020 
  
2021 
  
2020 
  
2021 
  
2020 
Revenues and other inco
m
e
  
 
  
 
  
 
  
 
  
 
  
 
Revenues
(a)
  
5,773
 
  
4,211
 
  
18,355
 
  
11,444
 
  
1,085
  
612
 
Intersegment sales
(b)
  
5,800 
   1,642    
1,927 
   1,013    
223
   114 
Investment and other income
(note 3)
  
6 
   4    
51 
   66    
1
   1 
 
  
11,579 
   5,857    
20,333 
   12,523    
1,309
   727 
Expenses
                             
Exploration
  
6 
   6    
     
-
  
Purchases of crude oil and products
(b)
  
5,780 
   3,338    
16,525 
   8,987    
693
   416 
Production and manufacturing
(note 11)
  
3,395 
   2,855    
1,039 
   1,086    
145
   157 
Selling and general
  
     
416 
   456    
68
   69 
Federal excise tax and fuel charge
  
     
1,404 
   1,290    
-
  
Depreciation and depletion
(note 11)
  
1,283 
   1,141    
117 
   123    
13
   13 
Non-service pension and postretirement benefit
  
     
     
-
  
Financing
(note 5)
  
1 
     
     
-
  
Total expenses
  
10,465 
   7,340    
19,501 
   11,942    
919
   655 
Income (loss) before income taxes
  
1,114 
   (1,483)   
832 
   581    
390
   72 
Income tax expense (benefit)
  
264 
   (357)   
187 
   134    
93
   17 
Net income (loss)
(b)
  
850 
   (1,126)  
645 
   447    
297
   55 
Cash flows from (used in) operating activities
(b)
  
3,634 
   22    
(135)
   443    
330
   75 
Capital and exploration expenditures
(c)
  
366 
   454    
308 
   177    
6
   15 
Total assets as at September 30
(b)
 
(note 11)
  
29,540 
   32,941    
8,239 
   4,590    
488
   417 
 
Nine Months to September 30
  
Corporate and other 
  
Eliminations       
  
Consolidated      
millions of Canadian dollars
  
2021 
  
2020 
  
2021 
  
2020 
  
2021 
  
2020 
Revenues and other income
  
 
  
 
  
 
  
 
  
 
  
 
Revenues
(a)
  
     
     
25,213
   16,267 
Intersegment sales
(b)
  
     
(7,950)
  (2,769)  
-
  
Investment and other income
(note 3)
  
7 
   17    
     
65
   88 
 
  
7 
   17    
(7,950)
  (2,769)  
25,278
   16,355 
Expenses
                             
Exploration
  
     
     
6
   6 
Purchases of crude oil and products
(b)
  
     
(7,946)
  (2,766)  
15
,
052
   9,975 
Production and manufacturing
(note 11)
  
     
     
4,579
   4,098 
Selling and general
  
89 
   (23)  
(4)
  (3)  
569
   499 
Federal excise tax and fuel charge
  
     
     
1,404
   1,290 
Depreciation and depletion
(note 11)
  
19 
   18    
     
1,432
   1,295 
Non-service pension and postretirement benefit
  
32 
   91    
     
32
   91 
Financing
(note 5)
  
31 
   46    
     
32
   46 
Total expenses
  
171 
   132    
(7,950)
  (2,769)  
23,106
   17,300 
Income (loss) before income taxes
  
(164)
  (115)  
     
2,172
   (945)
Income tax expense (benefit)
  
(38)
   (28)   
     
506
   (234)
Net income (loss)
(b)
  
(126)
   (87)   
     
1,666
   (711)
Cash flows from (used in) operating activities
(b)
  
15 
   (58)   
     
3,844
   482 
Capital and exploration expenditures
(c)
  
19 
   33    
     
699
   679 
Total assets as at September 30
(b) (note 11)
  
2,778 
   1,679    
(170)
   (245)   
40,875
   39,382 
 
1
1

IMPERIAL OIL LIMITED
 
 
 
(a)
Included export sales to the United States of $4,916 million (2020 - $3,339 million). Export sales to the United States were recorded in all operating segments, with the largest effects in the Upstream segment.
(b)
In the third quarter of 2021,
 the Downstream segment acquired
a portion of Upstream crude inventory 
for
$444 million.
There
was no
earnings impact
and t
he effects of this transaction have been eliminated for consolidation purposes.
(c)
Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions. CAPEX excludes the purchase of carbon emission credits.
 
1
2

IMPERIAL OIL LIMITED
 
 
 
3.  Investment and other income
Investment and other income included gains and losses on asset sales as follows: 
 
             
             
             
             
                  
Nine Months     
 
    
Third Quarter  
    
to September 30 
 
millions of Canadian dollars
  
2021
    
2020
    
2021
    
2020
 
Proceeds from asset sales
  
 
15
 
     19     
 
57
 
     68   
Book value of asset sales
  
 
3
 
     8     
 
18
 
     40  
Gain (loss) on asset sales, before tax
  
 
12
 
     11     
 
39
 
     28  
Gain (loss) on asset sales, after tax
  
 
 
       10
 
         
 
    10
    
 
 
 
             34
 
    
 
 
           25
 
4.  Employee retirement benefits
The components of net benefit cost were as follows:
 
                                                       
                
Nine Months     
 
    
Third Quarter  
   
to September 30 
 
millions of Canadian dollars
  
2021
   
2020
   
2021
   
2020
 
Pension benefits:
        
Current service cost
  
 
81
 
     76    
 
243
 
     229  
Interest cost
  
 
68
 
     77    
 
204
 
     231  
Expected return on plan assets
  
 
(107
     (97  
 
(321
     (293
Amortization of prior service cost
  
 
4
 
     4    
 
12
 
     11  
Amortization of actuarial loss (gain)
  
 
36
 
     38    
 
108
 
     115  
Net periodic benefit cost
  
 
82
 
     98    
 
246
 
     293  
         
Other postretirement benefits:
                                  
Current service cost
  
 
7
 
     6    
 
21
 
     18  
Interest cost
  
 
6
 
     6    
 
17
 
     18  
Amortization of actuarial loss (gain)
  
 
4
 
     3    
 
12
 
     9  
Net periodic benefit cost
  
 
 
 
 
 
 
 
 
17
 
    
 
 
 
 
 
 
 
 
15
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50
 
    
 
 
 
 
 
 
 
 
 
 
 
45
 
5.  Financing costs 
 
                                                       
                
Nine Months     
 
    
Third Quarter  
   
to September 30 
 
millions of Canadian dollars
  
2021
   
2020
   
2021
   
2020
 
Debt-related interest
  
 
9
 
     19    
 
50
 
     79  
Capitalized interest
  
 
(4
)
 
     (9  
 
(19
)
 
     (33
Net interest expense
  
 
5
 
     10    
 
31
 
     46  
Other interest
  
 
-
 
     -    
 
1
 
     -  
Total financing
  
 
 
 
 
 
 
 
 
5
 
    
 
 
 
 
 
 
 
 
10
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32
 
    
 
 
 
 
 
 
 
 
 
 
 
46
 
During the second quarter of 2021, the company extended the maturity dates of two of its short-term lines of credit, totalling $750 million, to May 2023 and extended its $300 million committed short-term line of credit to June 2022. The company has not drawn on any of its $1,300 million of available credit facilities.
During the third quarter of 2021, the c
o
mpany repaid the $75 million, non-interest bearing, revolving demand loan originally issued in 2016 under an arrangement with an affiliate company of ExxonMobil.
 
1
3

IMPERIAL OIL LIMITED
 
 
 
6.  Long-term debt
 
     As at
Sept 30
     As at
Dec 31
 
millions of Canadian dollars
  
2021
     2020  
Long-term debt
  
 
4,447
 
     4,447  
Finance leases
  
 
613
 
     510  
Total long-term debt
  
 
5,060
 
     4,957  
7.  Other long-term obligations 
 
     As at
Sept 30
     As at
Dec 31
 
millions of Canadian dollars
  
2021
     2020  
Employee retirement benefits
(a)
  
 
2,013
 
     2,105  
Asset retirement obligations and other environmental liabilities
(b)
  
 
1,711
 
     1,676  
Share-based incentive compensation liabilities
  
 
94
 
     45  
Operating lease liability
(c)
  
 
164
 
     95  
Other obligations
  
 
370
 
     179  
Total other long-term obligations
  
 
4,352
 
     4,100  
(a)
Total recorded employee retirement benefits obligations also included $58 million in current liabilities (2020 - $58 million).
(b)
Total asset retirement obligations and other environmental liabilities also included $100 million in current liabilities (2020 - $100 million).
(c)
Total operating lease liability also included $114 million in current liabilities (2020 - $97 million). In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled $1 million (2020 - $27 million).
 
1
4

IMPERIAL OIL LIMITED
 
 
 
8.  Financial and derivative instruments
Financial instruments
The fair value of the company’s financial instruments is determined by reference to various market data and other appropriate valuation techniques. There are no material differences between the fair value of the company’s financial instruments and the recorded carrying value. At September 30, 2021 and December 31, 2020, the fair value of long-term debt ($4,447 million, excluding finance lease obligations) was primarily a level 2 measurement.
Derivative instruments
The company’s size, strong capital structure and the complementary nature of the Upstream, Downstream and Chemical businesses reduce the company’s enterprise-wide risk from changes in commodity prices and currency exchange rates. In addition, the company uses commodity-based contracts, including derivative instruments to manage commodity price risk and for trading purposes. Commodity contracts held for trading purposes are presented in the Consolidated statement of income on a net basis in the line “Revenues”. The company does not designate derivative instruments as a hedge for hedge accounting purposes.
Credit risk associated with the company’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial l
i
mits placed on derivative counterparties. The company maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity.
The net notional long/(short) position of derivative instruments was: 
 
 
(thousands of barrels)
  
As at
Sept 30
2021
 
 
As at
Dec 31
2020
 
Crude
  
 
(6,410
     (800
Products
  
 
(1,070
)
     (390
Realized and unrealized gain or (loss) on derivative instruments recognized in the Consolidated statement of income is included in the following lines on a before-tax basis: 
 
                           
    
Third Quarter
    
    Nine Months
    to September 30
 
millions of Canadian dollars
  
2021
   
2020
    
2021
   
2020
 
Revenues
  
 
(21
)
 
     1  
  
 
(30
)
 
    (7
Purchases of crude oil and products
  
 
-
 
    -     
 
(33
)
    (18
Total
  
 
(21
)
     1     
 
(63
)
    (25
 
1
5

IMPERIAL OIL LIMITED
 
 
 
The estimated fair value of derivative instruments, and the related hierarchy level for the fair value measurement is a
s
 follows:
 
millions of Canadian dollars
At September 30, 2021
 
 
  
Fair value
 
 
Effect of
counterparty
netting
 
 
Effect of
collateral
netting
 
 
Net
carrying
value
 
  
  
Level 1
 
 
Level 2
 
  
Level 3
 
  
Total
 
Assets
  
     
 
     
  
     
  
     
 
     
 
     
 
     
Derivative assets
(a)
  
 
8
  
 
 
16
 
  
 
-
 
  
 
24
  
 
 
(14
)   
 
 
-
  
 
 
10
 
               
Liabilities
  
     
 
     
  
 
           
 
  
 
          
 
 
     
 
     
 
     
Derivative liabilities
(b)
  
 
29
 
 
 
7
 
  
 
-
 
  
 
36
 
 
 
(14
)
 
 
(21
)
 
 
1
 
(a)
Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses” and “Accounts receivable - net”.
(b)
Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities”.
 
millions of Canadian dollars
At December 31, 2020
 
     Fair value     
Effect of
counterparty
netting
   
Effect of
collateral
netting
   
Net
carrying
value
 
      Level 1      Level 2      Level 3      Total  
Assets
                                                            
Derivative assets
(a)
     2        -        -        2        (2     -       -  
               
Liabilities
                                                            
Derivative liabilities
(b)
     12        -        -        12        (2     (10     -  
(a)
Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses” and “Accounts receivable - net”.