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Press release from CNW Group

Imperial Oil announces estimated third quarter financial and operating results

Thursday, October 27, 2011

Imperial Oil announces estimated third quarter financial and operating results09:00 EDT Thursday, October 27, 2011FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011CALGARY, Oct. 27, 2011 /CNW/ - Third quarter Nine months(millions of dollars, unless noted)20112010% 20112010%        Net income (U.S. GAAP)859418106 2,366 1,41168Net income per common share       - assuming dilution (dollars)1.010.49106 2.771.6568        Capital and exploration expenditures1,1041,199(8) 2,8882,980(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."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 2010The 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.Nine months 2011 vs. nine months 2010Net 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 StatementsStatements 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 LIMITEDTHIRD QUARTER 2011                       Third Quarter Nine Monthsmillions of Canadian dollars, unless noted 2011 2010 2011 2010          Net Income (U.S. GAAP)          Total revenues and other income  7,945  5,851 22,590  18,156  Total expenses  6,813  5,283 19,448  16,255  Income before income taxes  1,132  568 3,142  1,901  Income taxes  273 150 776  490  Net income  859  418 2,366  1,411            Net income per common share (dollars) 1.01  0.49 2.79  1.66  Net income per common share - assuming dilution (dollars) 1.01  0.49 2.77  1.65          Other Financial Data          Federal excise tax included in operating revenues  345  345 985  971            Gain/(loss) on asset sales, after tax 15  10 19  50            Total assets at September 30     24,194  19,398            Total debt at September 30     1,208  457  Interest coverage ratio - earnings basis            (rolling 4 quarters, times covered)      280.7  331.8            Other long-term obligations at September 30     2,737  2,443            Shareholders' equity at September 30      13,163  10,746  Capital employed at September 30      14,399  11,238  Return on average capital employed (a)            (rolling 4 quarters, percent)      24.1  18.7          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 LIMITEDTHIRD QUARTER 2011                       Third Quarter Nine Monthsmillions of Canadian dollars 2011 2010 2011 2010          Total cash and cash equivalents at period end 920  51 920  51          Net income 859  418 2,366  1,411Adjustment for non-cash items:         Depreciation and depletion 192  187 570  561 (Gain)/loss on asset sales (17) (12) (23) (58) Deferred income taxes and other 59  (17) (27) 55Changes in operating assets and liabilities 565  (a) 389 387  234Cash flows from (used in) operating activities 1,658  965 3,273  2,203          Cash flows from (used in) investing activities (1,061) (1,113) (2,760) (2,717) Proceeds from asset sales 24  35 44  95          Cash flows from (used in) financing activities (96) 135 140  52          (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 LIMITEDTHIRD QUARTER 2011                       Third Quarter Nine Monthsmillions 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 products 4,993  3,462 13,939  10,759          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 expenses 1,017  961 3,054  3,003          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 expenditures 1,104  1,199 2,888  2,980           Exploration expenses charged to income included above 17  54 76  171           IMPERIAL OIL LIMITEDTHIRD 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 production  249  227 251  237  NGLs available for sale  5  7 5  7  Total crude oil and NGL production  254  234 256  244          Gross natural gas production (millions of cubic feet a day) 252  284 259  282          Gross oil-equivalent production (a)        (thousands of oil-equivalent barrels a day) 296  281 299  291          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 production  203  190 201  196  NGLs available for sale  4  5 4  5  Total crude oil and NGL production  207  195 205  201   -    -   Net natural gas production (millions of cubic feet a day) 211  263 229  255          Net oil-equivalent production (a)        (thousands of oil-equivalent barrels a day) 242  239 243  244          Cold Lake blend sales (thousands of barrels a day) 205  176 208  187NGL Sales (thousands of barrels a day)  9  13 9  11Natural gas sales (millions of cubic feet a day)  230  259 241  262          Average realizations (Canadian dollars)          Conventional crude oil realizations (a barrel)  74.31  67.93 83.64  70.76  NGL realizations (a barrel)  54.31  44.22 58.67  48.15  Natural gas realizations (a thousand cubic feet)  3.56  3.58 3.70  4.19  Synthetic oil realizations (a barrel)  97.89  77.83 100.48  79.26  Bitumen realizations (a barrel)  58.23  57.04 60.90  58.17          Refinery throughput (thousands of barrels a day) 436  453 429  437Refinery capacity utilization (percent) 86  90 85  87          Petroleum product sales (thousands of barrels a day)          Gasolines (Mogas)  230  227 218  215  Heating, diesel and jet fuels (Distilates)  160  151 158  145  Heavy fuel oils (HFO)  26  20 27  28  Lube oils and other products (Other)  48  46 43  44  Net petroleum products sales  464  444 446  432          Petrochemical Sales (thousands of tonnes) 257  252 778  736           IMPERIAL OIL LIMITEDTHIRD QUARTER 2011                           Net income   Net income (U.S. GAAP)   per common share   (millions of Canadian dollars)   (dollars)          2007        First Quarter 774     0.82Second Quarter 712     0.76Third Quarter 816     0.88Fourth Quarter 886     0.97Year 3,188     3.43                    2008        First Quarter 681     0.76Second Quarter 1,148     1.29Third Quarter 1,389     1.57Fourth Quarter 660     0.77Year 3,878     4.39                    2009        First Quarter 289     0.34Second Quarter 209     0.25Third Quarter 547     0.64Fourth Quarter 534     0.63Year 1,579     1.86                    2010        First Quarter 476     0.56Second Quarter 517     0.61Third Quarter 418     0.49Fourth Quarter 799     0.95Year 2,210     2.61                    2011        First Quarter 781     0.92Second Quarter 726     0.86Third Quarter 859     1.01                 For further information: 403-237-2710