• Net income of $392 million in the first quarter of 2021
• Cash flows from operating activities of over $1 billion in the first quarter
• Improved financial performance across all business segments compared to the fourth quarter
• Highest first quarter Upstream production in 30 years, driven by record gross production at Kearl
• Imperial reinstates significant share purchase program with plans to purchase up to four percent of outstanding common shares by June 28, 2021
• Quarterly dividend raised by almost 23% from 22 cents to 27 cents per share

Imperial reported estimated net income of $392 million for the first quarter of 2021, driven by improved crude prices, strong operating performance and continued cost discipline across all business segments, and bolstered by improved product and chemical margins compared to the fourth quarter.

During the first quarter of 2021, the company generated cash flow from operating activities of $1,045 million, up from $423 million in the same period of 2020. Cash flows from operating activities excluding working capital1 were $1,068 million, up from $611 million in the same period of 2020.

“Imperial took decisive actions to weather the economic storm throughout 2020, including making fundamental improvements to its cost structure and continuing to progress key projects to ensure the company was well positioned to take full advantage of market conditions as they began to improve,” said Brad Corson, chairman, president and chief executive officer. “The benefits of this approach underpin our strong performance this quarter. I am extremely proud of our ability to deliver these results while also meeting our commitments to the care of our people, communities, and the environment.”

Upstream production for the first quarter averaged 432,000 gross oil-equivalent barrels per day, the highest first quarter production in 30 years. Kearl total gross production averaged 251,000 barrels per day, establishing a new production record for each month of the first quarter.

Downstream throughput averaged 364,000 barrels per day in the first quarter, with utilization at 85 percent, up from 359,000 barrels per day in the fourth quarter of 2020. Petroleum product sales were 414,000 barrels per day, compared to 416,000 barrels per day in the fourth quarter of 2020. Despite continuing weak demand, Downstream generated net income of $292 million in the first quarter, an increase of $186 million from the fourth quarter of 2020, primarily driven by stronger product margins.

Consistent with the company’s long-standing commitment to shareholders, Imperial amended its current share purchase program and plans to purchase up to four percent of outstanding common shares (as of June 15, 2020) by June 28, 2021. Additionally, Imperial declared a second quarter dividend of 27 cents per share, an increase of almost 23 percent. “These actions reflect the company’s strong financial performance and confidence in its future, and demonstrate our ongoing commitment to return cash to shareholders,” Corson added.

First quarter highlights

• Net income of $392 million or $0.53 per share on a diluted basis, compared to net loss of $188 million or $0.25 per share in the first quarter of 2020. Net income excluding identified items1 of $392 million in the first quarter of 2021, up from $93 million in the same period of 2020.
• Cash flows from operating activities of $1,045 million, up from $423 million in the same period of 2020. Cash flows from operating activities excluding working capital of $1,068 million, up from $611 million in the same period of 2020.
• Capital and exploration expenditures totalled $163 million, compared to $331 million in the first quarter of 2020. The company continues to anticipate full-year capital and exploration expenditures of $1.2 billion in 2021.
• Dividends paid totalled $162 million or $0.22 per share, compared to $164 million or $0.22 per share in the first quarter of 2020.
• Increased share purchase program underpinned by strong financial position. In April, the program was amended to allow Imperial to purchase up to four percent of its common shares outstanding (as of June 15, 2020), approximately 29,363,070 shares, during a 2-month period ending June 28, 2021. Consistent with the company’s balance sheet strength, low capital requirements and strong cash generation, this amendment reflects the company’s priority and capacity to return cash to shareholders.
• Production averaged 432,000 gross oil-equivalent barrels per day, up from 419,000 barrels per day in the same period of 2020.
• Total gross production at Kearl averaged 251,000 barrels per day (178,000 barrels Imperial's share), up from 226,000 barrels per day (160,000 barrels Imperial's share) in the first quarter of 2020. The asset established new production records for each month of the first quarter, with higher production primarily driven by supplemental crushing facilities.
• Gross bitumen production at Cold Lake averaged 140,000 barrels per day, in line with 140,000 barrels per day in the first quarter of 2020.
• The company's share of gross production from Syncrude averaged 79,000 barrels per day, up from 73,000 barrels per day in the first quarter of 2020.
• Refinery throughput averaged 364,000 barrels per day, compared to 383,000 barrels per day in the first quarter of 2020. Capacity utilization was 85 percent, compared to 91 percent in the first quarter of 2020. Lower refinery throughput was primarily driven by lower market demand due to the COVID-19 pandemic.
• Petroleum product sales were 414,000 barrels per day, compared to 462,000 barrels per day in the first quarter of 2020. Lower petroleum product sales were primarily driven by reduced demand due to the COVID-19 pandemic.
• Chemical net income of $67 million in the quarter, up from $21 million in the first quarter of 2020.
• The Liquid Addition to Steam for Enhanced Recovery (LASER) Project at Cold Lake's Mahkeses plant successfully started up. This latest deployment of Imperial’s enhanced recovery solvent technology improves productivity and is expected to enable up to a 25% greenhouse gas intensity reduction for the associated production.
• Imperial released its updated Corporate Sustainability Report. The update highlights the company’s actions and results across key dimensions of sustainability. The report’s expanded climate section includes scope 3 emissions estimates and outlines Imperial's efforts to develop pathways in support of a net-zero future.
• Imperial provided an additional $2.5 million in free fuel to 100,000 frontline health care workers in recognition of their tireless service. This is the second Health Care Heroes campaign initiated by Imperial during the pandemic; $2 million in free fuel cards were provided to 80,000 health care workers in 2020.

First quarter 2021 vs. first quarter 2020

In early 2020, the balance of supply and demand for petroleum and petrochemical products experienced two significant disruptive effects. On the demand side, the COVID-19 pandemic spread rapidly through most areas of the world resulting in substantial reductions in consumer and business activity and significantly reduced demand for crude oil, natural gas, and petroleum products. This reduction in demand coincided with announcements of increased production in certain key oil-producing countries which led to increases in inventory levels and sharp declines in prices for crude oil, natural gas, and petroleum products.

While demand has rebounded considerably, the lingering effects of the weak 2020 business environment has continued to have a negative impact on financial results in 2021 when compared to periods prior to the pandemic. Signs of improvement are emerging including higher crude and gas prices through the quarter and stronger Downstream and Chemical margins.

The company recorded net income of $392 million or $0.53 per share on a diluted basis in the first quarter of 2021, compared to a net loss of $188 million or $0.25 per share in the same period of 2020. First quarter 2020 results included non-cash charges of $281 million relating to the revaluation of the company's inventory.

Upstream recorded net income of $79 million in the first quarter of 2021, compared to a net loss of $608 million in the same period of 2020. Improved results reflect higher realizations of about $700 million and the absence of the prior year non-cash charge of $229 million, related to the revaluation of the company's inventory. These items were partially offset by higher royalties of about $100 million, unfavourable foreign exchange effects of about $70 million, and higher operating expenses of about $60 million.

West Texas Intermediate (WTI) averaged US$58.14 per barrel in the first quarter of 2021, up from US$45.78 per barrel in the same quarter of 2020. Western Canada Select (WCS) averaged US$45.64 per barrel and US$25.60 per barrel for the same periods. The WTI / WCS differential averaged approximately US$13 per barrel for the first quarter of 2021, compared to around US$20 in the same period of 2020.

The Canadian dollar averaged US$0.79 in the first quarter of 2021, an increase of US$0.05 from the first quarter of 2020.

Imperial’s average Canadian dollar realizations for bitumen increased in the quarter, primarily due to an increase in WCS. Bitumen realizations averaged $47.19 per barrel in the first quarter of 2021, up from $18.08 per barrel in the first quarter of 2020. The company’s average Canadian dollar realizations for synthetic crude increased generally in line with WTI, adjusted for changes in exchange rates and transportation costs. Synthetic crude realizations averaged $67.41 per barrel in the first quarter of 2021, up from $58.94 per barrel in the same period of 2020.

Total gross production of Kearl bitumen averaged 251,000 barrels per day in the first quarter (178,000 barrels Imperial’s share), up from 226,000 barrels per day (160,000 barrels Imperial’s share) in the first quarter of 2020. Higher production was primarily driven by the supplemental crushing facilities.

Gross production of Cold Lake bitumen averaged 140,000 barrels per day in the first quarter, in line with 140,000 barrels per day in the same period of 2020.

The company's share of gross production from Syncrude averaged 79,000 barrels per day, up from 73,000 barrels per day in the first quarter of 2020.

Downstream recorded net income of $292 million in the first quarter of 2021, compared to net income of $402 million in the same period of 2020. Results were negatively impacted by lower margins of about $150 million and lower sales volumes of about $60 million. These items were partially offset by the absence of the prior year non-cash charge of $52 million, related to the revaluation of the company's inventory and lower operating expenses of about $50 million.

Refinery throughput averaged 364,000 barrels per day, compared to 383,000 barrels per day in the first quarter of 2020. Capacity utilization was 85 percent, compared to 91 percent in the first quarter of 2020. Lower refinery throughput was primarily driven by lower market demand due to the COVID-19 pandemic.

Petroleum product sales were 414,000 barrels per day, compared to 462,000 barrels per day in the first quarter of 2020. Lower petroleum product sales were primarily driven by reduced demand due to the COVID-19 pandemic.

Chemical net income was $67 million in the first quarter, up from net income of $21 million in the same quarter of 2020.

Corporate and other expenses were $46 million in the first quarter, up from $3 million in the same period of 2020, mainly due to higher share-based compensation costs.

Cash flow generated from operating activities was $1,045 million in the first quarter, up from $423 million in the corresponding period in 2020, primarily reflecting higher Upstream realizations.

Investing activities used net cash of $147 million in the first quarter, compared with $308 million used in the same period of 2020, primarily reflecting lower additions to property, plant and equipment.

Cash used in financing activities was $202 million in the first quarter, compared with $445 million used in the first quarter of 2020. Dividends paid in the first quarter of 2021 were $162 million. The per share dividend paid in the first quarter was $0.22, consistent with the same period of 2020. The company did not purchase shares during the first quarter. In the first quarter of 2020, the company purchased about 9.8 million shares for $274 million, including shares purchased from Exxon Mobil Corporation.

The company’s cash balance was $1,467 million at March 31, 2021, versus $1,388 million at the end of first quarter 2020.

At March 31, 2021, due to the termination of transportation services agreements related to a third-party pipeline project, the company recognized a liability of $62 million, previously reported as a contingent liability in Note 10 of Imperial’s Form 10-K. In connection with the same project, commitments under “Other long-term purchase agreements” as reported in Imperial’s Form 10-K decreased by approximately $2.9 billion. The majority of these commitments related to years 2026 and beyond.

On April 30, 2021, the company announced an amendment to its normal course issuer bid to increase the number of common shares that it may purchase. Under the amendment, the number of common shares that may be purchased will increase to a maximum of 29,363,070 common shares during the period June 29, 2020 to June 28, 2021, which includes shares purchased under the normal course issuer bid and from Exxon Mobil Corporation concurrent with, but outside of the normal course issuer bid. No other provisions of the normal course issuer bid have changed. The company currently anticipates maximizing its share purchases under the program. Purchase plans may be modified at any time without prior notice.

KeyFacts Energy: Imperial Oil Canada Onshore country profile