10-Q 1 d364768d10q.htm 10-Q 10-Q
Q20000049938--12-31falseYesYesfalsefalseCAhttp://www.imperialoil.ca/20220630#LongTermDebtAndFinanceLeaseObligationshttp://www.imperialoil.ca/20220630#LongTermDebtAndFinanceLeaseObligationsIncluded contributions to registered pension plans.(46) (42) (96) (70) Income taxes (paid) refunded. (52) 27 (275 ) 28 Interest (paid), net of capitalization.(10) (14) (22) (27)Number of common shares authorized and outstanding were 1,100 million and 637 million, respectively (2021 - 1,100 million and 678 million, respectively).Accounts receivable - net included net amounts receivable from related parties of $1,888 million (2021 - $1,031 million).Long-term debt included amounts to related parties of $4,447 million (2021 - $4,447 million). Amounts from related parties included in revenues.5,175 1,405 9,134 2,913Amounts to related parties included in production and manufacturing, and selling and general expenses.116 106 234 222Amounts to related parties included in purchases of crude oil and products.1,129 666 1,779 1,181Investments and long-term receivables included amounts from related parties of $296 million (2021 - $298 million).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.Includes approximately 11% related to revenue outside the scope of ASC 606 “Revenue from Contracts with Customers” for the six months ended June 30, 2022. Trade receivables in Accounts receivable – net reported on the Balance Sheet include both receivables within the scope of ASC 606 and those outside the scope of ASC 606. Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives. Credit quality and type of customer are generally similar between those revenues and receivables within the scope of ASC 606 and those outside it. Included export sales to the United States of $6,375 million (2021 - $3,113 million).Included export sales to the United States of $3,871 million (2021 - $1,544 million).Includes approximately 13% related to revenue outside the scope of ASC 606 “Revenue from Contracts with Customers” for the three months ended June 30, 2022. Trade receivables in Accounts receivable – net reported on the Balance Sheet include both receivables within the scope of ASC 606 and those outside the scope of ASC 606. Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives. Credit quality and type of customer are generally similar between those revenues and receivables within the scope of ASC 606 and those outside it. Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions and the company’s share of similar costs for equity companies. CAPEX excludes the purchase of carbon emission credits.Total recorded employee retirement benefits obligations also included $56 million in current liabilities (2021 - $56 million).Total asset retirement obligations and other environmental liabilities also included $102 million in current liabilities (2021 - $102 million).This accumulated other comprehensive income component is included in the computation of net benefit cost (note 4).Total operating lease liability also included $86 million in current liabilities (2021 - $102 million). In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled $11 million (2021 - $5 million).Amounts to related parties included in financing (note 5).13 10 17 21Included in the Consolidated balance sheet line: “Materials, supplies and prepaid expenses”, “Accounts receivable - net” and “Other assets, including intangibles - net”.Included in the Consolidated balance sheet line: “Accounts payable and accrued liabilities” and “Other long-term obligations”. 0000049938 2022-01-01 2022-06-30 0000049938 2022-04-01 2022-06-30 0000049938 2021-04-01 2021-06-30 0000049938 2021-01-01 2021-06-30 0000049938 2021-12-31 0000049938 2022-06-30 0000049938 2021-06-29 0000049938 2021-06-30 0000049938 2021-01-01 2021-12-31 0000049938 2021-06-29 2021-06-29 0000049938 2021-06-15 2021-06-15 0000049938 2022-05-06 2022-05-06 0000049938 2020-12-31 0000049938 2022-03-31 0000049938 2021-03-31 0000049938 us-gaap:CorporateAndOtherMember 2021-01-01 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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 June 30, 2022
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
   (I.R.S. Employer
of incorporation or organization)
   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 file
r
 
    
   
  
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 (as defined in Rule
12b-2
of the Exchange Act of 1934).
  YES  
          
  NO  
   
   
The number of common shares outstanding, as of June 30, 2022 was 636,676,182.

IMPERIAL OIL LIMITED
 
 
 
Table of contents
 
  
 
Page
 
     3  
Item 1. Financial statements      3  
     3  
     4  
     5  
     6  
     7  
     8  
Item 2. Management’s discussion and analysis of financial condition and results of operations      20  
Item 3. Quantitative and qualitative disclosures about market risk      28  
Item 4. Controls and procedures      28  
PART II. OTHER INFORMATION      29  
Item 1. Legal proceedings      29  
Item 2. Unregistered sales of equity securities and use of proceeds      29  
Item 6. Exhibits      30  
     31  
 
 
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, 2021. 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)
 
  
 
 
    
    Six Months
 
 
  
    Second Quarter
 
    
    to June 30
 
millions of Canadian dollars
  
2022
 
  
      2021
 
    
2022
 
  
2021
 
Revenues and other income
  
  
    
  
Revenues
(a)
  
 
17,285
 
    8,007     
 
29,942
 
    14,999  
Investment and other income
(note 3)
  
 
22
 
      40     
 
51
 
    46  
Total revenues and other income
  
 
17,307
 
       8,047     
 
29,993
 
       15,045  
         
Expenses
                                       
Exploration
  
 
1
 
       2     
 
3
 
       4  
Purchases of crude oil and products
(b)
  
 
11,021
 
     4,867     
 
19,371
 
     8,754  
Production and manufacturing
(c)
  
 
1,908
 
     1,569     
 
3,567
 
       3,054  
Selling and general
(c)
  
 
191
 
      200     
 
416
 
       389  
Federal excise tax and fuel charge
  
 
553
 
       465     
 
1,032
 
       869  
Depreciation and depletion
  
 
451
 
      450     
 
877
 
       944  
Non-service
pension and postretirement benefit
  
 
5
 
    10     
 
9
 
      21  
Financing
(d) (note 5)
  
 
11
 
    13     
 
18
 
      27  
Total expenses
  
 
14,141
 
       7,576     
 
25,293
 
      14,062  
         
Income (loss) before income taxes
  
 
3,166
 
      471     
 
4,700
 
      983  
         
Income taxes
  
 
757
 
     105     
 
1,118
 
       225  
         
Net income (loss)
  
 
2,409
 
     366     
 
3,582
 
       758  
       
Per share information
(Canadian dollars)
 
                              
Net income (loss) per common share - basic
(note 9)
  
 
3.63
 
     0.51     
 
5.37
 
      1.04  
Net income (loss) per common share - diluted
(note 9)
  
 
3.63
 
      0.50     
 
5.36
 
       1.04  
(a)  Amounts from related parties included in revenues.
  
 
5,175
 
       1,405     
 
9,134
 
      2,913  
(b)  Amounts to related parties included in purchases of crude oil and products.
  
 
1,129
 
     666     
 
1,779
 
      1,181  
(c)   Amounts to related parties included in production and manufacturing, and selling and general expenses.
  
 
116
 
     106     
 
234
 
    222  
(d)  Amounts to related parties included in financing (note 5).
  
 
13
 
       10     
 
17
 
    21  
The information in the notes to consolidated financial statements is an integral part of these statements.
 
3

IMPERIAL OIL LIMITED
 
 
 
 Consolidated statement of comprehensive income (U.S. GAAP, unaudited)
 
 
 
  
 
 
    
Six Months
 
 
  
Second Quarter
 
    
to June 30
 
millions of Canadian dollars
  
 
2022
 
  
 
2021
 
    
 
2022
 
  
 
2021
 
Net income (loss)
  
 
2,409
 
       366     
 
3,582
 
     758  
         
Other comprehensive income (loss), net of income taxes
                                     
Postretirement benefits liability adjustment (excluding amortization)
  
 
-
 
       -     
 
24
 
      54  
         
Amortization of postretirement benefits liability adjustment included in net benefit costs
  
 
21
 
       33     
 
42
 
     66  
Total other comprehensive income (loss)
  
 
21
 
       33     
 
66
 
       120  
                                         
Comprehensive income (loss)
  
 
2,430
 
       399     
 
3,648
 
     878  
The information in the notes to consolidated financial statements is an integral part of these statements.
 
4

IMPERIAL OIL LIMITED
 
 
 
 Consolidated balance sheet (U.S. GAAP, unaudited)
  
 
As at
 
    
 
As at
 
  
 
June 30
 
    
 
Dec 31
 
millions of Canadian dollars
  
 
2022
 
    
 
2021
 
Assets
  
    
Current assets
  
    
Cash
  
 
2,867
 
       2,153  
Accounts receivable - net
(a)
  
 
6,839
 
       3,869  
Inventories of crude oil and products
  
 
1,394
 
       1,102  
Materials, supplies and prepaid expenses
  
 
789
 
       689  
Total current assets
  
 
11,889
 
       7,813  
Investments and long-term receivables
(b)
  
 
754
 
       757  
Property, plant and equipment,
  
 
57,222
 
       56,762  
less accumulated depreciation and depletion
  
 
(26,256
       (25,522
Property, plant and equipment, net
(note 11)
  
 
30,966
 
       31,240  
Goodwill
  
 
166
 
       166  
Other assets, including intangibles - net
  
 
1,117
 
       806  
Total assets
  
 
44,892
 
       40,782  
     
Liabilities
                   
Current liabilities
                   
Notes and loans payable
  
 
122
 
       122  
Accounts payable and accrued liabilities
(a) (note 7)
  
 
7,947
 
       5,184  
Income taxes payable
  
 
2,018
 
       248  
Total current liabilities
  
 
10,087
 
       5,554  
Long-term debt
(c) (note 6)
  
 
5,044
 
       5,054  
Other long-term obligations
(note 7)
  
 
3,453
 
       3,897  
Deferred income tax liabilities
  
 
4,329
 
       4,542  
Total liabilities
  
 
22,913
 
       19,047  
     
Shareholders’ equity
                   
Common shares at stated value
(d) (note 9)
  
 
1,177
 
       1,252  
Earnings reinvested
  
 
21,913
 
       21,660  
Accumulated other comprehensive income (loss)
(note 10)
  
 
(1,111
       (1,177
Total shareholders’ equity
  
 
21,979
 
       21,735  
     
Total liabilities and shareholders’ equity
  
 
44,892
 
       40,782  
(a)
Accounts receivable - net included net amounts receivable from related parties of $1,888 million (2021 - $1,031 million).
(b)
Investments and long-term receivables included amounts from related parties of $296 million (2021 - $298 million).
(c)
Long-term debt included amounts to related parties of $4,447 million (2021 - $4,447 million).
(d)
Number of common shares authorized and outstanding were 1,100 million and 637 million, respectively (2021 - 1,100 million and 678 million, respectively).
The information in the notes to consolidated financial statements is an integral part of these statements.
 
5
IMPERIAL OIL LIMITED
 
 
 
 Consolidated statement of shareholders’ equity (U.S. GAAP, unaudited)
        
        
        
        
  
    
 
Six Months
 
  
 
Second Quarter
 
    
 
to June 30
 
millions of Canadian dollars
  
 
2022
 
 
 
2021
 
    
 
2022
 
 
 
2021
 
Common shares at stated value
(note 9)
  
 
    
 
At beginning of period
  
 
1,237
  
    1,357    
 
1,252
  
    1,357  
Share purchases at stated value
  
 
(60
    (55  
 
(75
    (55
At end of period
  
 
1,177
 
    1,302    
 
1,177
 
    1,302  
         
Earnings reinvested
                                
At beginning of period
  
 
22,171
 
    22,281    
 
21,660
 
    22,050  
Net income (loss) for the period
  
 
2,409
 
    366    
 
3,582
 
    758  
Share purchases in excess of stated value
  
 
(2,440
    (1,116  
 
(2,874
    (1,116
Dividends declared
  
 
(227
    (195  
 
(455
    (356
At end of period
  
 
21,913
 
    21,336    
 
21,913
 
    21,336  
         
Accumulated other comprehensive income (loss)
(note 10)
                                
At beginning of period
  
 
(1,132
    (1,902  
 
(1,177
    (1,989
Other comprehensive income (loss)
  
 
21
 
    33    
 
66
 
    120  
At end of period
  
 
(1,111
    (1,869  
 
(1,111
    (1,869
         
Shareholders’ equity at end of period
  
 
21,979
 
    20,769    
 
21,979
 
    20,769  
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)
     
    
     
    
     
    
     
    
 
     
 
  
     
    
 
Six Months
 
Inflow (outflow)
  
 
Second Quarter
 
    
 
to June 30
 
millions of Canadian dollars
  
 
2022
 
 
 
2021
 
    
 
2022
 
 
 
2021
 
Operating activities
  
     
 
     
    
     
 
     
Net income (loss)
  
 
2,409
 
     366    
 
3,582
 
     758  
Adjustments for
non-cash
items:
                                  
Depreciation and depletion
  
 
451
 
     450    
 
877
 
     944  
(Gain) loss on asset sales
(note 3)
  
 
(4
     (24  
 
(24
     (27
Deferred income taxes and other
  
 
(149
     76    
 
(480
     136  
Changes in operating assets and liabilities:
                                  
Accounts receivable
  
 
(1,426
     (775  
 
(2,970
     (1,244
Inventories, materials, supplies and prepaid expenses
  
 
(27
     58    
 
(391
     (101
Income taxes payable
  
 
853
 
     21    
 
1,312
 
     42  
Accounts payable and accrued liabilities
  
 
499
 
     655    
 
2,643
 
     1,239  
All other items - net
(c)
  
 
76
 
     25    
 
47
 
     150  
Cash flows from (used in) operating activities
  
 
2,682
 
     852    
 
4,596
 
     1,897  
         
Investing activities
                                  
Additions to property, plant and equipment
  
 
(333
     (241  
 
(637
     (408
Proceeds from asset sales
(note 3) (b)
  
 
102
 
     35    
 
126
 
     42  
Loans to equity companies - net
  
 
1
 
     (1  
 
2
 
     12  
Cash flows from (used in) investing activities
  
 
(230
     (207  
 
(509
     (354
         
Financing activities
                                  
Short-term debt - net
  
 
-
 
     -    
 
-
 
     (36
Reduction in finance lease obligations
(note 6)
  
 
(6
     (4  
 
(11
     (8
Dividends paid
  
 
(228
     (161  
 
(413
     (323
Common shares purchased
(note 9)
  
 
(2,500
     (1,171  
 
(2,949
     (1,171
Cash flows from (used in) financing activities
  
 
(2,734
     (1,336  
 
(3,373
     (1,538
         
Increase (decrease) in cash
  
 
(282
     (691  
 
714
 
     5  
Cash at beginning of period
  
 
3,149
 
     1,467    
 
2,153
 
     771  
Cash at end of period
(a)
  
 
2,867
 
     776    
 
2,867
 
     776  
(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 $94 million deposit for the potential sale of XTO Energy Canada (note 11).
                                  
(c)   Included contributions to registered pension plans.
  
 
(46
     (42  
 
(96
     (70
         
Income taxes (paid) refunded.
  
 
(52
     27    
 
(275
     28  
Interest (paid), net of capitalization.
  
 
(10
     (14  
 
(22
     (27
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 2021 annual report on Form
10-K.
In the opinion 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 six months ended June 30, 2022, 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
 
     
             
     
             
     
             
     
             
     
             
     
             
 
Second Quarter
  
 
      Upstream
 
 
 
     Downstream
 
 
 
     Chemical
 
millions of Canadian dollars
  
 
2022
 
 
 
2021
 
 
 
2022
 
 
 
2021
 
 
 
2022
 
  
 
2021
 
Revenues and other income
  
     
 
     
 
     
 
     
 
     
  
     
Revenues
(a) (b)
  
 
119
 
     2,616     
 
16,752
 
     5,015     
 
414
 
     376  
Intersegment sales
  
 
5,827
 
     1,312     
 
2,024
 
     788     
 
149
 
     79  
Investment and other income
(note 3)
  
 
3
 
     6     
 
9
 
     28     
 
-
 
     1  
 
  
 
5,949
 
     3,934     
 
18,785
 
     5,831     
 
563
 
     456  
Expenses
                                                     
Exploration
  
 
1
 
     2     
 
-
 
     -     
 
-
 
     -  
Purchases of crude oil and products
  
 
2,357
 
     2,044     
 
16,261
 
     4,760     
 
401
 
     240  
Production and manufacturing
  
 
1,423
 
     1,166     
 
418
 
     357     
 
67
 
     46  
Selling and general
  
 
-
 
     -     
 
153
 
     142     
 
22
 
     22  
Federal excise tax and fuel charge
  
 
-
 
     -     
 
553
 
     465     
 
-
 
     -  
Depreciation and depletion
  
 
395
 
     399     
 
45
 
     39     
 
4
 
     5  
Non-service
pension and postretirement benefit
  
 
-
 
     -     
 
-
 
     -     
 
-
 
     -  
Financing
(note 5)
  
 
1
 
     -     
 
-
 
     -     
 
-
 
     -  
Total expenses
  
 
4,177
 
     3,611     
 
17,430
 
     5,763     
 
494
 
     313  
Income (loss) before income taxes
  
 
1,772
 
     323     
 
1,355
 
     68     
 
69
 
     143  
Income tax expense (benefit)
  
 
426
 
     76     
 
322
 
     8     
 
16
 
     34  
Net income (loss)
  
 
1,346
 
     247     
 
1,033
 
     60     
 
53
 
     109  
Cash flows from (used in) operating activities
  
 
2,087
 
     595     
 
641
 
     136     
 
64
 
     111  
Capital and exploration expenditures
(c)
  
 
233
 
     130     
 
69
 
     120     
 
2
 
     2  
     
            
     
            
     
            
     
            
     
            
     
            
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter
    
Corporate and other
     
    Eliminations
     
    Consolidated
 
millions of Canadian dollars
  
 
2022
 
    2021    
 
2022
 
    2021    
 
2022
 
     2021  
Revenues and other income
                                                 
Revenues
(a) (b)
  
 
-
 
    -    
 
-
 
    -    
 
17,285
 
     8,007  
Intersegment sales
  
 
-
 
    -    
 
(8,000
    (2,179  
 
-
 
     -  
Investment and other income
(note 3)
  
 
10
 
    5    
 
-
 
    -    
 
22
 
     40  
 
  
 
10
 
    5    
 
(8,000
    (2,179  
 
17,307
 
     8,047  
Expenses
                                                 
Exploration
  
 
-
 
    -    
 
-
 
    -    
 
1
 
     2  
Purchases of crude oil and products
  
 
-
 
    -    
 
(7,998
    (2,177  
 
11,021
 
     4,867  
Production and manufacturing
  
 
-
 
    -    
 
-
 
    -    
 
1,908
 
     1,569  
Selling and general
  
 
18
 
    38    
 
(2
    (2  
 
191
 
     200  
Federal excise tax and fuel charge
  
 
-
 
    -    
 
-
 
    -    
 
553
 
     465  
Depreciation and depletion
  
 
7
 
    7    
 
-
 
    -    
 
451
 
     450  
Non-service pension and postretirement benefit
  
 
5
 
    10    
 
-
 
    -    
 
5
 
     10  
Financing
(note 5)
  
 
10
 
    13    
 
-
 
    -    
 
11
       13  
Total expenses
  
 
40
 
    68    
 
(8,000
    (2,179  
 
14,141
 
    7,576  
Income (loss) before income taxes
  
 
(30
    (63  
 
-
 
    -    
 
3,166
 
     471  
Income tax expense (benefit)
  
 
(7
    (13  
 
-
 
    -    
 
757
 
     105  
Net income (loss)
  
 
(23
    (50  
 
-
 
    -    
 
2,409
 
     366  
Cash flows from (used in) operating activities
  
 
(110
    10    
 
-
 
    -    
 
2,682
 
     852  
Capital and exploration expenditures
(c)
  
 
10
 
    7    
 
-
 
    -    
 
314
 
     259  
 
9
IMPERIAL OIL LIMITED
 
 
 
(a)
Included export sales to the United States of $3,871 million (2021 - $1,544 million).
(b)
Includes approximately 13% related to revenue outside the scope of ASC 606 “Revenue from Contracts with Customers” for the three months ended June 30, 2022. Trade receivables in Accounts receivable – net reported on the Balance Sheet include both receivables within the scope of ASC 606 and those outside the scope of ASC 606. Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives
. Credit
quality and type of customer are generally similar
between
those revenues and receivables within the scope of ASC 606
 and those outside it
.
(c)
Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions and the company’s share of similar costs for equity companies. CAPEX excludes the purchase of carbon emission credits.
 
10

IMPERIAL OIL
LIMITED
 
 
 
     
             
     
             
     
             
     
             
     
             
     
             
 
Six Months to June 30
  
 
      Upstream
 
  
 
     Downstream
 
  
 
     Chemical
 
millions of Canadian dollars
  
 
2022
 
 
 
2021
 
  
 
2022
 
 
 
2021
 
  
 
2022
 
  
 
2021
 
Revenues and other income
  
     
 
     
  
     
 
     
  
     
  
     
Revenues
(a) (b)
  
 
218
 
     4,758     
 
28,943
 
     9,542     
 
781
 
     699  
Intersegment sales
  
 
10,258
 
     2,663     
 
3,857
 
     1,561     
 
253
 
     132  
Investment and other income
(note 3)
  
 
7
 
     6     
 
30
 
     33     
 
-
 
     1  
 
  
 
10,483
 
     7,427     
 
32,830
 
     11,136     
 
1,034
 
     832  
Expenses
                                                     
Exploration
  
 
3
 
     4     
 
-
 
     -     
 
-
 
     -  
Purchases of crude oil and products
  
 
4,247
 
     3,878     
 
28,773
 
     8,780     
 
716
 
     449  
Production and manufacturing
  
 
2,672
 
     2,275     
 
774
 
     683     
 
121
 
     96  
Selling and general
  
 
-
 
     -     
 
300
 
     275     
 
45
 
     47  
Federal excise tax and fuel charge
  
 
-
 
     -     
 
1,032
 
     869     
 
-
 
     -  
Depreciation and depletion
  
 
768
 
     844     
 
86
 
     78     
 
9
 
     9  
Non-service pension and postretirement benefit
  
 
-
 
     -     
 
-
 
     -     
 
-
 
     -  
Financing
(note 5)
  
 
1
 
     1     
 
-
 
     -     
 
-
 
     -  
Total expenses
  
 
7,691
 
     7,002     
 
30,965
 
     10,685     
 
891
 
     601  
Income (loss) before income taxes
  
 
2,792
 
     425     
 
1,865
 
     451     
 
143
 
     231  
Income tax expense (benefit)
  
 
664
 
     99     
 
443
 
     99     
 
34
 
     55  
Net income (loss)
  
 
2,128
 
     326     
 
1,422
 
     352     
 
109
 
     176  
Cash flows from (used in) operating activities
  
 
3,534
 
     1,126     
 
1,016
 
     598     
 
131
 
     173  
Capital and exploration expenditures
(c)
  
 
455
 
     215     
 
137
 
     188     
 
3
 
     4  
Total assets as at June 30
(note 11)
  
 
28,961
 
     31,931     
 
11,649
 
     5,352     
 
505
 
     481  
     
   
     
   
     
   
     
   
     
   
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months to June 30
  
 
Corporate and other
 
  
 
    Eliminations
 
  
 
    Consolidated
 
millions of Canadian dollars
 
 
2022
 
 
 
2021
 
    
 
2022
 
 
 
2021
 
    
 
2022
 
 
 
2021
 
Revenues and other income
 
     
 
     
    
     
 
     
    
     
 
     
Revenues
(a) (b)
  
 
-
 
    -    
 
-
 
    -    
 
29,942
 
     14,999  
Intersegment sales
  
 
-
 
    -    
 
(14,368
    (4,356  
 
-
 
     -  
Investment and other income
(note 3)
  
 
14
 
    6    
 
-
 
    -    
 
51
 
     46  
 
  
 
14
 
    6    
 
(14,368
    (4,356  
 
29,993
 
     15,045  
Expenses
                                                 
Exploration
  
 
-
 
    -    
 
-
 
    -    
 
3
 
     4  
Purchases of crude oil and products
  
 
-
 
    -    
 
(14,365
    (4,353  
 
19,371
 
     8,754  
Production and manufacturing
  
 
-
 
    -    
 
-
 
    -    
 
3,567
 
     3,054  
Selling and general
  
 
74
 
    70    
 
(3
    (3  
 
416
 
     389  
Federal excise tax and fuel charge
  
 
-
 
    -    
 
-
 
    -    
 
1,032
 
     869  
Depreciation and depletion
  
 
14
 
    13    
 
-
 
    -    
 
877
 
     944  
Non-service pension and postretirement benefit
  
 
9
 
    21    
 
-
 
    -    
 
9
 
     21  
Financing
(note 5)
  
 
17
 
    26    
 
-
 
    -    
 
18
 
     27  
Total expenses
  
 
114
 
    130    
 
(14,368
    (4,356  
 
25,293
 
     14,062  
Income (loss) before income taxes
  
 
(100
    (124  
 
-
 
    -    
 
4,700
 
     983  
Income tax expense (benefit)
  
 
(23
    (28  
 
-
 
    -    
 
1,118
 
     225  
Net income (loss)
  
 
(77
    (96  
 
-
 
    -    
 
3,582
 
     758  
Cash flows from (used in) operating activities
  
 
(85
    -    
 
-
 
    -    
 
4,596
 
     1,897  
Capital and exploration expenditures
(c)
  
 
15
 
    15    
 
-
 
    -    
 
610
 
     422  
Total assets as at June 30
(note 11)

  
 
4,016
 
    1,606    
 
(239
    (431  
 
44,892
 
     38,939  
 
11

IMPERIAL OIL LIMITED
 
 
 
(a)
Included export sales to the United States of $6,375 million (2021 - $3,113 million).
(b)
Includes approximately 11% related to revenue outside the scope of ASC 606 “Revenue from Contracts with Customers” for the six months ended June 30, 2022. Trade receivables in Accounts receivable – net reported on the Balance Sheet include both receivables within the scope of ASC 606 and those outside the scope of ASC 606. Revenue and receivables outside the scope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives
. Credit
quality and type of customer are generally similar
between
those revenues and receivables within the scope of ASC 606
 and those outside it
.
(c)
Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment, additions to finance leases, additional investments and acquisitions and the company’s share of similar costs for equity companies. CAPEX excludes the purchase of carbon emission credits.
 
12

IMPERIAL OIL LIMITED

 
 
3.
Investment and other income
Investment and other income included gains and losses on asset sales as follows:
 
            
            
            
            
 
  
    Second Quarter
 
    
Six Months
to June 30
 
 millions of Canadian dollars
  
2022
 
 
2021
 
    
2022
 
 
2021
 
Proceeds from asset sales
  
 
8
 
       35       
 
32
 
       42  
Book value of asset sales
  
 
4
 
       11       
 
8
 
       15  
Gain (loss) on asset sales, before tax
  
 
4
 
       24       
 
24
 
       27  
Gain (loss) on asset sales, after tax
  
 
3
 
       22       
 
19
 
       24  
 
4.
  Employee retirement benefits
The components of net benefit cost were as follows:
            
            
            
            
 
  
    Second Quarter
 
    
Six Months
to June 30
 
 millions of Canadian dollars
  
2022
 
 
2021
 
    
2022
 
 
2021
 
Pension benefits:
  
 
    
 
Service cost
  
 
70
 
       81       
 
140
 
       162  
Interest cost
  
 
74
 
       68       
 
147
 
       136  
Expected return on plan assets
  
 
(103)
 
       (107)       
 
(206)
 
       (214)  
Amortization of prior service cost
  
 
4
 
       4       
 
8
 
       8  
Amortization of actuarial loss (gain)
  
 
21
 
       36       
 
43
 
       72  
Net benefit cost
  
 
66
 
       82       
 
132
 
       164  
         
Other postretirement benefits:
                                         
Service cost
  
 
5
 
       7       
 
11
 
       14  
Interest cost
  
 
6
 
       5       
 
12
 
       11  
Amortization of actuarial loss (gain)
  
 
3
 
       4       
 
5
 
       8  
Net benefit cost
  
 
14
 
       16       
 
28
 
       33  
 
5.
  Financing costs
 
            
            
            
            
 
  
    Second Quarter
 
    
Six Months
to June 30
 
 millions of Canadian dollars
  
2022
 
 
2021
 
    
2022
 
 
2021
 
Debt-related interest
  
 
20
 
       20       
 
32
 
       41  
Capitalized interest
  
 
(10)
 
       (7)       
 
(15)
         (15)  
Net interest expense
  
 
10
 
       13       
 
17
 
       26  
Other interest
  
 
1
 
       -       
 
1
 
       1  
Total financing
  
 
11
 
       13       
 
18
 
       27  
 

In June 2022, the company reduced its existing $500 million committed long-term line of credit to $250 million and extended the maturity date to June 30, 2023. The company also extended one of its $250 million committed long-term lines of credit to June 30, 2024. The company has not drawn on any of its outstanding $750 million of available credit facilities.
 
13

 
IMPERIAL OIL LIMITED
 
 
 
6.
Long-term debt
 
 
 
 
 
 
 
 
 
     As at
June 30
       As at
Dec 31
 
  millions of Canadian dollars
  
2022
       2021  
 Long-term debt
  
 
4,447
 
       4,447  
 Finance leases
 
 
 
597
 
 
 
607
 
 Total long-term debt
  
 
5,044
 
       5,054  
 
7.
Other long-term obligations
 
 
 
 
 
 
 
 
 
     As at
June 30
       As at
Dec 31
 
  millions of Canadian dollars
  
2022
       2021  
 Employee retirement benefits
(a)
  
 
1,323
 
       1,362  
 Asset retirement obligations and other environmental liabilities
(b)
  
 
1,733
 
       1,713  
 Share-based incentive compensation liabilities
  
 
119
 
       79  
 Operating lease liability
(c)
  
 
122
 
       147  
 Other obligations
  
 
156
 
       596  
 Total other long-term obligations
  
 
3,453
 
       3,897  
(a)
Total recorded employee retirement benefits obligations also included $56 million in current liabilities (2021 - $56 million).
(b)
Total asset retirement obligations and other environmental liabilities also included $102 million in current liabilities (2021 - $102 million).
(c)
Total operating lease liability also included $86 million in current liabilities (2021 - $102 million). In addition to the total operating lease liability, additional undiscounted commitments for leases not yet commenced totalled $11 million (2021 - $5 million).
 
14

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 June 30, 2022 and December 31, 2021, 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 to generate returns from trading. 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 limits 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:
 
 
 
 
 
 
 
 
 
 
     As at
June 30
     As at
Dec 31
 
 thousands of barrels
  
2022
     2021  
Crude
  
 
8,680
 
     7,390  
Products
  
 
(930</