EX-99.1 3 t11771exv99w1.htm EX-99.1 exv99w1
 

(IMPERIAL OIL LOGO)


Exhibit 99.1

Imperial Oil Limited
111 St Clair Avenue West
Toronto, Ontario
Canada M5W 1K3

     News Release

Imperial Oil’s twelve-month earnings highest in company’s history

Toronto, January 27, 2004 — Imperial Oil Limited today announced its highest annual earnings on record with 2003 net earnings of $1,682 million or $4.52 a share, compared with $1,224 million or $3.23 a share in 2002.

Net earnings for 2003 increased from the previous year as a result of higher prices for natural gas and crude oil and higher industry margins for petroleum products, partly offset by the negative impact of a higher Canadian dollar.

Fourth-quarter net earnings were $255 million or $0.71 a share in 2003, compared with $457 million or $1.21 a share for the same quarter last year. Earnings decreased primarily as a result of the negative impact of a higher Canadian dollar on resource prices and product margins, which accounted for approximately 70 percent of the decrease, lower industry margins for petroleum products, and the unplanned maintenance at Syncrude. Partly offsetting these factors was an increase in upstream oil and gas production volumes. Fourth-quarter earnings were also affected by increased expenses from stock-related compensation programs due to the share price increase. This is consistent with the long-term practice of recognizing stock-related compensation expense in earnings.

Total revenues were $19,208 million in 2003, compared with $17,042 million in 2002. Fourth-quarter revenues were $4,594 million in 2003, compared with $4,830 million in 2002.

Capital and exploration expenditures were $1.5 billion in 2003, compared with $1.6 billion during 2002.

The balance of cash and marketable securities was $448 million at the end of 2003, compared with $766 million at the end of the previous year.

“Imperial had a very good year with the highest earnings and best safety performance in the company’s history,” said Tim Hearn, chairman, president and chief executive officer. He added, “While the fourth-quarter results were significantly impacted by the higher Canadian dollar, the underlying performance of the business was sound and the opportunity for long-term earnings growth remains excellent.”

Imperial is one of the largest producers of crude oil in Canada and a major producer of natural gas. The company is the largest refiner and marketer of petroleum products — sold primarily under the Esso brand name — and a major producer of petrochemicals.

- 30 -

For further information:

     
Investor relations   Media relations
Jean Côté   Richard O’Farrell
(416) 968-4262   (416) 968-4875

 


 

(IMPERIAL OIL LOGO)


Highlights

Record earnings ... growth in shareholder value

The company announced its highest annual earnings on record in 2003 with net earnings of $1,682 million or $4.52 a share, compared with $1,224 million or $3.23 a share in 2002. It is the ninth consecutive year that the company has increased its per-share dividend payment to shareholders. During the fourth quarter, the company repurchased more than five million shares for about $280 million, bringing the total number of shares repurchased in 2003 to more than 16 million for about $799 million.

Best-ever safety results and strong environmental performance

Improvements continued in the company’s safety and environmental performance. In particular, employees are to be congratulated for achieving a best-ever safety performance in 2003 and for moving Imperial towards its goal of “nobody gets hurt.”

Major growth opportunities advanced

During the fourth quarter, Imperial successfully advanced a number of growth projects:

  A Declaration for Commercial Discovery for the Taglu field was filed with the National Energy Board. Extensive consultations and negotiations on access and benefits agreements continued with northern communities. Filing of the regulatory application is anticipated in 2004.

  Resource delineation drilling began on Imperial’s Kearl Leases with 57 of a 200 core hole program complete. Additional public consultation and data collection continued in support of the potential filing of a regulatory application in 2005.

  In December, Imperial acquired a 25-percent interest in exploration rights for eight deepwater parcels offshore Newfoundland in a region know as the Orphan Basin. These parcels are a significant addition to Imperial’s unexplored acreage position.

  Production from a fourth Sable field began in November with the startup of the Alma platform.

  Commissioning of the second Syncrude Aurora mine was completed in November. Upgrader expansion construction continues and is about 35-percent complete with start-up anticipated in 2005.

Esso gasolines now among the cleanest in the world

The efforts of more than 2,000 people, an investment of more than $600 million and 18 months of construction have enabled the company’s refineries to produce gasolines with a sulphur content of 30 parts per million. This was achieved more than a year ahead of government regulations and in time for the new low-emissions equipment on 2004 model-year cars.

 


 

IMPERIAL OIL LIMITED

FINANCIAL HIGHLIGHTS

                                   
                      Twelve months
      Fourth quarter   to December 31
     
 
      2003   2002   2003   2002
     
 
 
 
Earnings (million of dollars)
                               
 
Natural resources
    192       315       1,139       1,056  
 
Petroleum products
    51       128       407       127  
 
Chemicals
    16       10       37       52  
 
Corporate and other
    (4 )     4       99       (11 )
 
   
     
     
     
 
Net earnings
    255       457       1,682       1,224  
 
   
     
     
     
 
Cash flow from earnings
    631       726       2,354       1,781  
Cash flow from operating activities
    337       938       2,194       1,676  
Capital and exploration expenditures
    421       570       1,526       1,600  
Per-share information (dollars)
                               
 
Net earnings — basic and diluted
    0.71       1.21       4.52       3.23  
 
Dividends
    0.22       0.21       0.87       0.84  
 
Share prices — close at December 31
                               
 
Toronto Stock Exchange (Canadian dollars)
                    57.53       44.86  
 
American Stock Exchange (U.S. dollars)
                    44.42       28.70  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OPERATING RESULTS

Net earnings for 2003 were $1,682 million or $4.52 a share, the highest annual earnings on record, versus $1,224 million or $3.23 a share in 2002. Earnings for the year increased mainly because of higher prices for natural gas and crude oil and higher industry margins for petroleum products, partly offset by the negative impact of a higher Canadian dollar.

The company’s net earnings for the fourth quarter of 2003 were $255 million or $0.71 a share, compared with $457 million or $1.21 a share for the same quarter last year. Fourth quarter earnings decreased primarily as a result of the negative impact of a higher Canadian dollar on resource prices and product margins, which accounted for approximately 70 percent of the decrease, lower industry margins for petroleum products, and the unplanned maintenance at Syncrude. Partly offsetting these factors was an increase in upstream oil and gas production volumes. Fourth quarter earnings were also affected by increased expenses from stock-related compensation programs due to the share price increase. This is consistent with the long-term mark-to-market practice of recognizing stock-related compensation expense in earnings.

Total revenues were $4,594 million in the fourth quarter and $19,208 million in 2003, versus $4,830 million and $17,042 million in the prior year.

 


 

IMPERIAL OIL LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued .....)

Natural resources

During the fourth quarter of 2003, net earnings from natural resources were $192 million, compared with $315 million in the same quarter in 2002. Despite higher production of bitumen, natural gas liquids (NGLs) and natural gas, earnings decreased primarily due to the negative effects of a higher Canadian dollar on prices for crude oil and natural gas and the unplanned maintenance at Syncrude.

Net earnings in 2003 were $1,139 million versus $1,056 million in 2002. Higher realizations for natural gas and crude oil and higher Cold Lake bitumen production were largely offset by the negative impact of a higher Canadian dollar.

In the fourth quarter of 2003, realizations for conventional crude oil decreased due to the unfavourable impact of a higher Canadian dollar, averaging $36.47 a barrel, compared with $39.82 a barrel a year earlier. Realizations for conventional crude oil for the full year increased in 2003, averaging $40.10 a barrel compared with $36.81 a barrel in 2002. Average realizations for Cold Lake bitumen in the fourth quarter of 2003 were about 17 percent lower than the average fourth quarter realizations of 2002, with average realizations for the full year 2003 about two percent lower than 2002. Prices for natural gas averaged $5.54 a thousand cubic feet in the fourth quarter, up slightly from $5.32 a thousand cubic feet during the same period in 2002. Natural gas prices averaged $6.60 a thousand cubic feet in 2003, compared with $4.02 a thousand cubic feet in 2002.

During the fourth quarter and the year 2003, total production of crude oil and NGLs was 253 thousand barrels a day compared with 255 thousand barrels a day a year earlier. Total production of crude oil and NGLs increased in 2003 to 256 thousand barrels a day from 247 thousand barrels a day in 2002.

Gross production of conventional crude oil in the fourth quarter and the year 2003 averaged 46 thousand barrels a day, compared with 49 thousand barrels a day and 51 thousand barrels a day during the corresponding periods in 2002. Natural reservoir decline in the Western Canadian Basin was the main reason for the reduced production. Production of NGLs available for sale increased to 33 thousand barrels a day in the fourth quarter from 28 thousand barrels a day a year earlier. The increase in NGLs corresponds with the initiation of Wizard Lake, Alberta, gas cap production during the last half of 2003. Total production of NGLs averaged 28 thousand barrels a day during 2003, compared with 27 thousand barrels a day in 2002.

Gross production of Cold Lake bitumen averaged 123 thousand barrels a day during the fourth quarter, compared with 116 thousand barrels a day during the same period in 2002. Full year production of bitumen averaged 129 thousand barrels a day in 2003, versus 112 thousand barrels a day last year. Higher volume was a result of the initial production cycles from phases 11 to 13, which began operation in December 2002. This was offset in part by lower production from existing operations due to the cyclic nature of production at Cold Lake.

The company’s share of Syncrude’s gross production averaged 51 thousand barrels a day in the fourth quarter of 2003, compared with 62 thousand barrels a day during the same period in 2002. An unscheduled turnaround on a primary upgrading unit during October negatively impacted the 2003 results. Total Syncrude production fell in 2003, averaging 53 thousand barrels a day, compared with 57 thousand barrels a day last year, as increased unplanned maintenance affected Syncrude production through much of 2003.

 


 

IMPERIAL OIL LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued .....)

Gross production of natural gas during the fourth quarter of 2003 was 557 million cubic feet a day, compared with 507 million cubic feet a day during the same quarter of 2002. The increased volumes were mainly due to higher production from the new facilities at Wizard Lake, which were completed in the third quarter of 2003. Gross production in 2003 averaged 513 million cubic feet a day versus 530 million cubic feet a day last year. Lower production as a result of reservoir decline was partly offset by increased volumes from the new Wizard Lake facilities.

In December, the company along with two co-venturers successfully acquired exploration rights for eight deepwater parcels offshore Newfoundland, in a region known as the Orphan Basin. The company’s 25 percent share of the proposed exploration spending would be $168 million with a minimum commitment of $42 million.

Petroleum products

Net earnings from petroleum products were $51 million in the fourth quarter and a record $407 million in the year 2003, compared with net earnings of $128 million and $127 million during the corresponding periods in the previous year. Fourth quarter earnings decreased mainly due to lower industry petroleum product margins and higher expenses. Earnings in 2003 improved mainly as a result of the strengthening of industry petroleum product margins.

All of the company’s refineries are now producing gasoline with sulphur content generally averaging 30 parts per million. This project was completed more than a year in advance of the legislated requirement and in time to meet the needs of the 2004 model-year cars.

Chemicals

Net earnings from chemical operations were $16 million in the fourth quarter of 2003, compared with $10 million in the same quarter last year. Higher earnings were mainly due to improved margins on sales of polyethylene. Net earnings for 2003 were $37 million versus $52 million for 2002. Reduced industry margins on polyethylene sales as a result of higher feedstock costs and weaker industry demand were the main reasons for the decrease in earnings.

Corporate and other

Net earnings from corporate and other operations were negative $4 million in the fourth quarter and positive $99 million in 2003, versus positive $4 million and negative $11 million in the corresponding periods last year. Favourable foreign-exchange effects on the company’s U.S.-dollar-denominated debt contributed to the improvement in 2003.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operating activities decreased to $337 million during the fourth quarter of 2003 from $938 million in the same period a year ago. Additional funding contributions to the employee pension plan in 2003, timing of scheduled income-tax payments and lower earnings were the main reasons for the decrease. Cash flow from operating activities was $2,194 million in 2003, versus $1,676 million last year. The increased cash inflow was mainly due to higher earnings, timing of scheduled income-tax payments, and the effects of commodity prices on receivable and payable balances partly offset by additional funding contributions to the employee pension plan.

 


 

IMPERIAL OIL LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued .....)

Total investing activities used $382 million of cash in the fourth quarter for a total of $1,393 million in the year 2003, compared with $546 million and $1,491 million during the corresponding periods a year ago. Total capital and exploration expenditures were $421 million in the fourth quarter and $1,526 million in the year 2003, versus $570 million and $1,600 million in the corresponding periods a year ago. Funds were used to maintain and expand crude oil and natural gas production capacity mainly on Syncrude expansion and the Mackenzie Gas Project, to upgrade refineries to meet low-sulphur gasoline requirements and to enhance the company’s retail network.

During the fourth quarter, the company repurchased more than five million shares for $280 million, bringing the total number of shares repurchased in 2003 to more than 16 million shares for $799 million.

Following completion of an independent actuarial valuation of the registered pension plan, the company contributed $500 million to reduce pension liabilities from operating cash flows. This had no effect on 2003 earnings. Future funding requirements are not expected to affect the company’s existing capital investment plans or its ability to pursue new investment opportunities.

Cash dividends of $322 million were paid in 2003, compared with dividends of $319 million in the previous year. The increase in the per-share dividend payment since the second quarter was partly offset by the lower number of outstanding shares resulting from the company’s share repurchase program. Per-share dividend increased for the ninth consecutive year.

The above factors led to a decrease in the company’s balance of cash and marketable securities to $448 million at December 31, 2003, from $766 million at the same time a year ago.


This report may contain forward-looking information. Actual results could differ materially due to market conditions, changes in law or government policy, changes in operating conditions and costs, changes in project schedules, operating performance, demand for oil and gas, commercial negotiations or other technical and economic factors.


 


 

IMPERIAL OIL LIMITED

CONSOLIDATED STATEMENT OF EARNINGS
(unaudited)

                                   
                      Twelve months
      Fourth quarter   to December 31
     
 
millions of dollars   2003   2002   2003   2002

 
 
 
 
REVENUES
                               
 
Operating revenues
    4,568       4,778       19,094       16,890  
 
Investment and other income
    26       52       114       152  
 
 
   
     
     
     
 
TOTAL REVENUES
    4,594       4,830       19,208       17,042  
 
 
   
     
     
     
 
EXPENSES
                               
 
Exploration
    11       10       55       30  
 
Purchases of crude oil and products
    2,789       2,879       11,580       10,155  
 
Operating
    517       456       2,025       1,865  
 
Selling and general
    348       310       1,269       1,222  
 
Federal excise tax
    312       307       1,254       1,231  
 
Depreciation and depletion
    208       177       750       705  
 
Financing costs (4)
    12       4       (87 )     32  
 
 
   
     
     
     
 
TOTAL EXPENSES
    4,197       4,143       16,846       15,240  
 
 
   
     
     
     
 
EARNINGS BEFORE INCOME TAXES
    397       687       2,362       1,802  
INCOME TAXES
    142       230       680       578  
 
 
   
     
     
     
 
NET EARNINGS
    255       457       1,682       1,224  
 
 
   
     
     
     
 
PER-SHARE INFORMATION — dollars
                               
 
Net earnings — basic and diluted (6)
    0.71       1.21       4.52       3.23  
 
Dividends
    0.22       0.21       0.87       0.84  

CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(unaudited)

                                   
                      Twelve months
      Fourth quarter   to December 31
     
 
millions of dollars   2003   2002   2003   2002

 
 
 
 
RETAINED EARNINGS AT BEGINNING OF PERIOD
    3,997       2,900       3,277       2,382  
 
Net earnings for the period
    255       457       1,682       1,224  
 
Share purchases (6)
    (253 )           (717 )     (11 )
 
Dividends
    (80 )     (80 )     (323 )     (318 )
 
   
     
     
     
 
RETAINED EARNINGS AT END OF PERIOD
    3,919       3,277       3,919       3,277  
 
   
     
     
     
 

Certain figures for the prior year have been reclassified in the financial statements to conform with the current year’s presentation.

 


 

IMPERIAL OIL LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)

                                   
                      Twelve months
      Fourth quarter   to December 31
inflow/(outflow)  
 
millions of dollars   2003   2002   2003   2002

 
 
 
 
OPERATING ACTIVITIES
                               
 
Net earnings
    255       457       1,682       1,224  
 
Depreciation and depletion
    208       177       750       705  
 
(Gain)/loss on asset sales, after tax
    (11 )     (1 )     (10 )     (4 )
 
Future income taxes and other
    179       93       (68 )     (144 )
 
 
   
     
     
     
 
 
Cash flow from earnings
    631       726       2,354       1,781  
 
Accounts receivable
    (42 )     (127 )     33       (356 )
 
Inventories and prepaids
    230       252       31       51  
 
Income taxes payable
    (150 )     30       38       (225 )
 
Accounts payable and other (a)
    (332 )     57       (262 )     425  
 
 
   
     
     
     
 
 
Change in operating assets and liabilities
    (294 )     212       (160 )     (105 )
 
 
   
     
     
     
 
CASH FROM OPERATING ACTIVITIES
    337       938       2,194       1,676  
 
 
   
     
     
     
 
INVESTING ACTIVITIES
                               
 
Additions to property, plant and equipment and intangibles
    (400 )     (557 )     (1,449 )     (1,552 )
 
Proceeds from asset sales
    18       11       56       61  
 
 
   
     
     
     
 
CASH FROM (USED IN) INVESTING ACTIVITIES
    (382 )     (546 )     (1,393 )     (1,491 )
 
 
   
     
     
     
 
CASH FLOW BEFORE FINANCING ACTIVITIES
    (45 )     392       801       185  
FINANCING ACTIVITIES
                               
 
Short-term debt — net
          72             (388 )
 
Long-term debt issued
                818       500  
 
Repayment of long-term debt
          (71 )     (818 )     (71 )
 
Issuance of common shares under stock option plan
    2             2        
 
Common shares purchased (6)
    (280 )           (799 )     (13 )
 
Dividends paid
    (81 )     (80 )     (322 )     (319 )
 
 
   
     
     
     
 
CASH FROM (USED IN) FINANCING ACTIVITIES
    (359 )     (79 )     (1,119 )     (291 )
 
 
   
     
     
     
 
INCREASE (DECREASE) IN CASH
    (404 )     313       (318 )     (106 )
CASH AT BEGINNING OF PERIOD
    852       453       766       872  
 
 
   
     
     
     
 
CASH AT END OF PERIOD
    448       766       448       766  
 
 
   
     
     
     
 

(a)   Includes the $500 million contribution to the registered pension plan.

Certain figures for the prior year have been reclassified in the financial statements to conform with the current year’s presentation.

 


 

IMPERIAL OIL LIMITED

CONSOLIDATED BALANCE SHEET
(unaudited)

                     
        As at   As at
        Dec. 31   Dec. 31
millions of dollars   2003   2002

 
 
ASSETS
               
 
Current assets
               
   
Cash
    448       766  
   
Accounts receivable
    1,315       1,348  
   
Inventories of crude oil and products
    407       433  
   
Materials, supplies and prepaid expenses
    105       110  
   
Future income tax assets
    353       323  
   
 
   
     
 
 
Total current assets
    2,628       2,980  
 
Investments and other long-term assets
    259       134  
 
Property, plant and equipment
    9,218       8,525  
 
Goodwill
    204       204  
 
Other intangible assets
    52       51  
   
 
   
     
 
TOTAL ASSETS
    12,361       11,894  
   
 
   
     
 
LIABILITIES
               
 
Current liabilities
               
   
Short-term debt
    72       72  
   
Accounts payable and accrued liabilities
    2,222       2,114  
   
Income taxes payable
    595       557  
   
Current portion of long-term debt
    501        
   
 
   
     
 
 
Total current liabilities
    3,390       2,743  
 
Long-term debt (5)
    859       1,466  
 
Other long-term obligations
    972       1,207  
 
Future income tax liabilities
    1,362       1,262  
   
 
   
     
 
TOTAL LIABILITIES
    6,583       6,678  
SHAREHOLDERS’ EQUITY
    5,778       5,216  
   
 
   
     
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
    12,361       11,894  
   
 
   
     
 

Certain figures for the prior year have been reclassified in the financial statements to conform with the current year’s presentation.


Approved by the directors January 27, 2004
     
/s/ T.J. Hearn   /s/ P.A. Smith
Chairman, president and   Controller and
chief executive officer   senior vice-president,
    finance and administration

     


 


 

IMPERIAL OIL LIMITED

BUSINESS SEGMENTS (unaudited)

                                                   
      Resources   Products   Chemicals
Fourth quarter  
 
 
millions of dollars   2003   2002   2003   2002   2003   2002

 
 
 
 
 
 
REVENUES
                                               
 
Operating revenues (a)
    798       785       3,533       3,754       237       239  
 
Intersegment sales (b)
    473       591       301       294       56       57  
 
Investment and other income
          31       21       16              
 
 
   
     
     
     
     
     
 
TOTAL REVENUES
    1,271       1,407       3,855       4,064       293       296  
 
 
   
     
     
     
     
     
 
EXPENSES
                                               
 
Exploration (c)
    11       10                          
 
Purchases (b)
    519       560       2,896       3,045       203       216  
 
Operating (b)
    271       225       218       202       29       29  
 
Selling and general
    12       12       305       266       31       30  
 
Federal excise tax
                312       307              
 
Depreciation and depletion
    147       121       57       50       4       6  
 
Financing costs
                1                    
 
 
   
     
     
     
     
     
 
TOTAL EXPENSES
    960       928       3,789       3,870       267       281  
 
 
   
     
     
     
     
     
 
EARNINGS BEFORE INCOME TAXES
    311       479       66       194       26       15  
INCOME TAXES
    119       164       15       66       10       5  
 
 
   
     
     
     
     
     
 
NET EARNINGS
    192       315       51       128       16       10  
 
 
   
     
     
     
     
     
 
EXPORT SALES TO THE UNITED STATES
    310       291       201       253       138       134  
CASH FLOW FROM EARNINGS
    401       541       178       181       36       9  
CAPEX (c)
    298       337       112       225       11       8  
                                   
      Corporate   Consolidated
Fourth quarter  
 
millions of dollars   2003   2002   2003   2002

 
 
 
 
REVENUES
                               
 
Operating revenues (a)
                4,568       4,778  
 
Intersegment sales (b)
                       
 
Investment and other income
    5       5       26       52  
 
 
   
     
     
     
 
TOTAL REVENUES
    5       5       4,594       4,830  
 
 
   
     
     
     
 
EXPENSES
                               
 
Exploration (c)
                11       10  
 
Purchases (b)
                2,789       2,879  
 
Operating (b)
                517       456  
 
Selling and general
          2       348       310  
 
Federal excise tax
                312       307  
 
Depreciation and depletion
                208       177  
 
Financing costs
    11       4       12       4  
 
 
   
     
     
     
 
TOTAL EXPENSES
    11       6       4,197       4,143  
 
 
   
     
     
     
 
EARNINGS BEFORE INCOME TAXES
    (6 )     (1 )     397       687  
INCOME TAXES
    (2 )     (5 )     142       230  
 
 
   
     
     
     
 
NET EARNINGS
    (4 )     4       255       457  
 
 
   
     
     
     
 
EXPORT SALES TO THE UNITED STATES
                649       678  
CASH FLOW FROM EARNINGS
    16       (5 )     631       726  
CAPEX (c)
                421       570  

(a)   Includes crude sales made by Products in order to optimize refining operations.

(b)   Consolidated amounts exclude intersegment transactions, as follows:

                 
    2003   2002
   
 
Purchases
    829       942  
Operating expense
    1        
 
   
     
 
Total intersegment sales
    830       942  
 
   
     
 

(c)   Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment and additions to capital leases.

 


 

IMPERIAL OIL LIMITED

BUSINESS SEGMENTS (unaudited)

                                                   
      Resources   Products   Chemicals
Twelve months to December 31  
 
 
millions of dollars   2003   2002   2003   2002   2003   2002

 
 
 
 
 
 
REVENUES
                                               
 
Operating revenues (a)
    3,390       2,573       14,710       13,362       994       955  
 
Intersegment sales (b)
    2,224       2,217       1,294       1,038       238       209  
 
Investment and other income
    34       104       54       34              
 
   
     
     
     
     
     
 
TOTAL REVENUES
    5,648       4,894       16,058       14,434       1,232       1,164  
 
   
     
     
     
     
     
 
EXPENSES
                                               
 
Exploration (c)
    55       30                          
 
Purchases (b)
    2,357       1,814       12,066       10,974       911       830  
 
Operating (b)
    1,093       990       810       761       124       115  
 
Selling and general
    28       21       1,123       1,076       118       115  
 
Federal excise tax
                1,254       1,231              
 
Depreciation and depletion
    517       479       211       203       22       23  
 
Financing costs
    1       1       2       1              
 
   
     
     
     
     
     
 
TOTAL EXPENSES
    4,051       3,335       15,466       14,246       1,175       1,083  
 
   
     
     
     
     
     
 
EARNINGS BEFORE INCOME TAXES
    1,597       1,559       592       188       57       81  
INCOME TAXES
    458       503       185       61       20       29  
 
   
     
     
     
     
     
 
NET EARNINGS
    1,139       1,056       407       127       37       52  
 
   
     
     
     
     
     
 
EXPORT SALES TO THE UNITED STATES
    1,304       942       792       723       567       520  
CASH FLOW FROM EARNINGS
    1,576       1,526       719       216       66       63  
CAPEX (c)
    1,007       986       478       589       41       25  
TOTAL ASSETS AS AT Dec. 31 (b)
    6,434       6,014       5,341       5,048       446       418  
CAPITAL EMPLOYED AS AT Dec. 31
    3,784       3,325       2,784       2,484       246       178  
                                   
      Corporate   Consolidated
Twelve months to December 31  
 
millions of dollars   2003   2002   2003   2002

 
 
 
 
REVENUES
                               
 
Operating revenues (a)
                19,094       16,890  
 
Intersegment sales (b)
                       
 
Investment and other income
    26       14       114       152  
 
   
     
     
     
 
TOTAL REVENUES
    26       14       19,208       17,042  
 
   
     
     
     
 
EXPENSES
                               
 
Exploration (c)
                55       30  
 
Purchases (b)
                11,580       10,155  
 
Operating (b)
                2,025       1,865  
 
Selling and general
          10       1,269       1,222  
 
Federal excise tax
                1,254       1,231  
 
Depreciation and depletion
                750       705  
 
Financing costs
    (90 )     30       (87 )     32  
 
   
     
     
     
 
TOTAL EXPENSES
    (90 )     40       16,846       15,240  
 
   
     
     
     
 
EARNINGS BEFORE INCOME TAXES
    116       (26 )     2,362       1,802  
INCOME TAXES
    17       (15 )     680       578  
 
   
     
     
     
 
NET EARNINGS
    99       (11 )     1,682       1,224  
 
   
     
     
     
 
EXPORT SALES TO THE UNITED STATES
                2,663       2,185  
CASH FLOW FROM EARNINGS
    (7 )     (24 )     2,354       1,781  
CAPEX (c)
                1,526       1,600  
TOTAL ASSETS AS AT Dec. 31 (b)
    448       766       12,361       11,894  
CAPITAL EMPLOYED AS AT Dec. 31
    448       816       7,262       6,803  

(a)   Includes crude sales made by Products in order to optimize refining operations.
(b)   Consolidated amounts exclude intersegment transactions, as follows:

                 
    2003   2002
   
 
Purchases
    3,754       3,463  
Operating expense
    2       1  
 
   
     
 
Total intersegment sales
    3,756       3,464  
 
   
     
 
Intersegment receivables and payables
    308       352  
 
   
     
 

(c)   Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment and additions to capital leases.

 


 

IMPERIAL OIL LIMITED

OPERATING STATISTICS
(unaudited)

                                   
                      Twelve months
      Fourth quarter   to December 31
     
 
      2003   2002   2003   2002
     
 
 
 
GROSS CRUDE OIL AND NGL PRODUCTION
(thousands of barrels a day)
                               
 
Conventional
    46       49       46       51  
 
Cold Lake
    123       116       129       112  
 
Syncrude
    51       62       53       57  
 
   
     
     
     
 
 
Total crude oil production
    220       227       228       220  
 
Natural gas liquids (NGLs) available for sale
    33       28       28       27  
 
   
     
     
     
 
 
Total crude oil and NGL production
    253       255       256       247  
 
   
     
     
     
 
NGL SALES (thousands of barrels a day)
    52       51       39       40  
NATURAL GAS
(millions of cubic feet a day)
                               
 
Production (gross)
    557       507       513       530  
 
Production available for sale (gross)
    470       440       446       463  
 
Sales
    481       475       460       499  
AVERAGE PRICES (dollars)
                               
 
Conventional crude oil sales (a barrel)
    36.47       39.82       40.10       36.81  
 
Par crude oil price at Edmonton (a barrel)
    40.09       43.51       43.93       40.44  
 
Heavy crude oil at Hardisty (Bow River, a barrel)
    28.92       32.41       33.00       31.85  
 
Natural gas sales (a thousand cubic feet)
    5.54       5.32       6.60       4.02  
PETROLEUM PRODUCTS SALES
(millions of litres a day)
                               
 
Gasolines
    32.7       34.0       33.0       32.9  
 
Heating, diesel and jet fuels
    26.1       26.7       26.2       25.0  
 
Heavy fuel oils
    7.3       5.6       5.4       4.9  
 
Lube oils and other products
    5.9       6.2       5.8       6.4  
 
   
     
     
     
 
 
Net petroleum products sales
    72.0       72.5       70.4       69.2  
 
Sales under purchase and sale agreements
    15.1       14.7       14.6       13.9  
 
   
     
     
     
 
 
Total petroleum products sales
    87.1       87.2       85.0       83.1  
 
   
     
     
     
 
TOTAL REFINERY THROUGHPUT (millions of litres a day)
    70.8       70.9       71.6       71.2  
REFINERY CAPACITY UTILIZATION (percent)
    89       89       90       90  
PETROCHEMICAL SALES (thousands of tonnes a day)
    3.2       3.3       3.3       3.5  

 


 

IMPERIAL OIL LIMITED

SHARE OWNERSHIP, TRADING AND PERFORMANCE
(unaudited)
                                     
                        Twelve months
        Fourth quarter   to December 31
       
 
        2003   2002   2003   2002
       
 
 
 
RETURN ON AVERAGE CAPITAL EMPLOYED (a) (percent)
                    24.3       19.7  
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY (percent)
                    30.6       25.7  
INTEREST COVERAGE RATIO — EARNINGS BASIS (times covered)
                    63.2       46.1  
SHARE OWNERSHIP
                               
 
Outstanding shares (thousands)
                               
   
Monthly weighted average
    365,540       378,863       372,011       378,875  
   
At December 31
                    362,653       378,863  
 
Number of shareholders
   
At December 31
                    15,516       15,988  
SHARE PRICES
                               
 
Toronto Stock Exchange (Canadian dollars)
                               
 
High
    58.22       46.10       58.22       49.38  
 
Low
    50.16       41.55       43.20       38.51  
 
Close at December 31
                    57.53       44.86  
 
American Stock Exchange (U.S. dollars)
                               
 
High
    44.75       29.31       44.75       31.85  
 
Low
    37.24       26.61       28.25       24.00  
 
Close at December 31
                    44.42       28.70  

(a) Capital employed is defined as short- and long-term debt and shareholders’ equity.

 


 

IMPERIAL OIL LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.      Accounting principles

These consolidated financial statements follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements, except for those changes implemented January 1, 2003 to reflect new accounting standards of the Canadian Institute of Chartered Accountants (CICA). The impact of the new CICA standard dealing with accounting for asset retirement obligations is discussed in note 2.

2.      Reporting change

The new CICA standard dealing with accounting for asset retirement obligations changes the method of accruing for certain site-restoration costs. Under the new standard, the fair values of asset retirement obligations are recorded as liabilities on a discounted basis when they are incurred, which is typically at the time the related assets are installed. Amounts recorded for the related assets are increased by the amount of these obligations. Over time the liabilities will be accreted for the change in their present value and the initial capitalized costs will be depreciated over the useful lives of the related assets. There are no asset retirement liabilities set up for those assets which have an indeterminate useful life.

Estimated cash flows have been discounted at six percent. Implementation of the new standard has reduced site-restoration liabilities by $28 million to $462 million as of December 31, 2003. The total undiscounted amount of the estimated cash flows required to settle the obligations is $895 million. Payments to settle the obligations occur on an ongoing basis and will continue over the lives of the operating assets, which can exceed more than 25 years. This change in accounting standard has no impact on the cash flow profile of the company. The new standard has been applied retroactively, and the financial statements of prior periods have been restated.

The impact of adopting the new accounting for asset retirement obligations standard on the consolidated balance sheet and statement of earnings is:

Change in consolidated balance sheet

                 
    As at Dec.31
   
millions of dollars - increase/(decrease)   2003   2002

 
 
Property, plant and equipment
    24       26  
 
   
     
 
Total assets
    24       26  
 
   
     
 
Other long-term obligations
    (28 )     20  
Future income tax liabilities
    18       2  
Retained earnings
    34       4  
 
   
     
 
Total liabilities and shareholders’ equity
    24       26  
 
   
     
 

Change in consolidated statement of earnings

                                 
                    Twelve months
    Fourth quarter   to December 31
   
 
millions of dollars - increase/(decrease)   2003   2002   2003   2002

 
 
 
 
Operating expense
    (12 )     (4 )     (48 )     (23 )
Depreciation and depletion expense
                2       2  
 
   
     
     
     
 
Total expenses
    (12 )     (4 )     (46 )     (21 )
Income taxes
    5       1       16       7  
 
   
     
     
     
 
Net earnings
    7       3       30       14  
 
   
     
     
     
 
Earnings per share — basic and diluted (dollars)
    0.02       0.01       0.08       0.04  

 


 

IMPERIAL OIL LIMITED

3.      Incentive compensation programs

The company accounts for its incentive compensation programs, except for the incentive stock option plan issued prior to January 1, 2003, by using the fair-value-based method. Under this method, compensation expense related to the units of these programs is recorded in the consolidated statement of earnings over the vesting period. The company accounts for its incentive stock option plan by using the intrinsic-value-based method and does not recognize compensation expense on the issuance of stock options because the exercise price is equal to the market value at the date of grant. If the fair-value-based method of accounting had been adopted to account for the incentive stock option plan, the impact on net earnings and earnings per share would have been negligible.

The company purchased shares on the market to fully offset the dilutive effects from the exercise of incentive stock options. The company does not plan to issue stock options in the future.

4.      Financing costs

                                 
                    Twelve months
    Fourth quarter   to December 31
   
 
millions of dollars   2003   2002   2003   2002

 
 
 
 
Debt related interest
    11       11       38       40  
Other interest
    1             4       2  
 
   
     
     
     
 
Total interest expense
    12       11       42       42  
Foreign exchange expense (gain) on long-term debt
          (7 )     (129 )     (10 )
 
   
     
     
     
 
Total financing costs
    12       4       (87 )     32  
 
   
     
     
     
 

5.      Long-term debt

                                         
                            As at   As at
                    Interest   Dec. 31   Dec. 31
Issued   Maturity date           rate   2003   2002

 
         
 
 
1989     September 1, 2004 (2002 - $600 million (U.S.))           Variable           946  
2002     May 7, 2004 (a)           Variable           500  
2003     $250 million due May 26, 2005 and
$250 million due August 26, 2005
          Variable     500        
2003     January 19, 2006           Variable     318        
       
 
                   
     
 
Long-term debt (at period-end exchange rate)
                    818       1,446  
Capital leases
                    41       20  
       
 
                   
     
 
Total long-term debt
                    859       1,466  
       
 
                   
     
 

(a) Medium-term notes of $500 million have been reclassified to the current portion of long-term debt in the balance sheet. The company intends to extend the maturity date of these notes under the existing Medium Term Notes Program.

 


 

IMPERIAL OIL LIMITED

6.      Common shares

                 
    As at   As at
    Dec. 31   Dec. 31
thousands of shares   2003   2002

 
 
Authorized
    450,000       450,000  
Common shares outstanding
    362,653       378,863  

In 1995 through 2002, the company purchased shares under eight 12-month normal course share purchase programs, as well as an auction tender. On June 23, 2003, another 12-month normal course program was implemented with an allowable purchase up to 18.6 million shares (five percent of the total on June 19, 2003), less any shares purchased by the employee savings plan and company pension fund. The results of these activities are as shown below:

                   
      millions of
     
Year   Shares   Dollars

 
 
 
1995 — 2001
    202.4       5,156  
 
2002 — Fourth quarter
           
 
   Full year
    0.3       13  
 
2003 — Fourth quarter
    5.3       280  
 
   Full year
    16.3       799  
Cumulative purchases to date
    219.0       5,968  

Exxon Mobil Corporation’s participation in the above maintained its ownership interest in Imperial at 69.6 percent.

The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of retained earnings.

The following table provides the calculation of basic and diluted earnings per share:

                                 
                    Twelve months
    Fourth quarter   to December 31
   
 
    2003   2002   2003   2002
   
 
 
 
Net earnings (millions of dollars)
    255       457       1,682       1,224  
(thousands of shares)
                               
Average number of common shares outstanding, weighted monthly
    365,540       378,863       372,011       378,875  
Plus: average number of shares issued on assumed exercise of stock options
    400             143       1  
 
   
     
     
     
 
Weighted average number of diluted common shares
    365,940       378,863       372,154       378,876  
 
   
     
     
     
 
Earnings per share — basic (dollars)
    0.71       1.21       4.52       3.23  
Earnings per share — diluted (dollars)
    0.71       1.21       4.52       3.23