Mr. Brad Corson reports

IMPERIAL ANNOUNCES SECOND QUARTER 2023 FINANCIAL AND OPERATING RESULTS

Imperial Oil Ltd. has released its financial and operating results for the second quarter of 2023.

Imperial reported estimated net income in the second quarter of $675-million, compared with net income of $1,248-million in the first quarter of 2023, driven by lower refining margins and planned turnaround activity. Quarterly cash flow from operating activities was $885-million, up from $821-million used in the first quarter of 2023.

"Imperial's results in the second quarter reflect the safe and on-plan execution of significant turnaround activity across our upstream and downstream business lines," said Brad Corson, Imperial's chairman, president and chief executive officer. "With substantial turnaround activity now behind us, we anticipate strong production in the second half of 2023."

Upstream production in the second quarter averaged 363,000 gross oil equivalent barrels per day. At Kearl, quarterly total gross production averaged 217,000 barrels per day (154,000 barrels Imperial's share), primarily impacted by planned turnaround activity. In April, Kearl took delivery of its first ever shipment of renewable diesel for use in its mine fleet as part of the company's continuing efforts to reduce emissions and demonstrate suitability for use in heavy equipment applications. At Cold Lake, quarterly gross production averaged 132,000 barrels per day, impacted by the timing of production and steam cycles. At Syncrude, the company's share of quarterly production averaged 66,000 gross barrels per day, primarily impacted by its annual coker turnaround.

In the downstream, throughput in the quarter averaged 388,000 barrels per day with refinery capacity utilization of 90 per cent, reflecting the impact of the planned turnaround at the Strathcona refinery. Petroleum product sales in the quarter were 475,000 barrels per day. In May, the Strathcona renewable diesel project passed a significant milestone with key contractors being mobilized to site to commence facility construction work.

"We support Canada's vision for a lower-emission future, and I am encouraged to see the work now under way to build Canada's largest renewable diesel facility," said Mr. Corson. "The project remains on track for a 2025 start-up and is expected to produce more than one billion litres of renewable diesel annually to help meet strong demand under Canada's Clean Fuel Regulations and reduce reliance on costly imports," said Mr. Corson.

During the quarter, Imperial returned $257-million to shareholders through dividend payments and declared a third quarter dividend of 50 cents per share. In June, Imperial renewed its annual normal course issuer bid program, allowing the company to repurchase up to 5 per cent of its outstanding common shares over a 12-month period ending June 28, 2024.

"Imperial continues to demonstrate its long-standing commitment to returning surplus cash to shareholders and I am pleased to announce our plan to accelerate our NCIB share repurchases with a target of completing the program prior to year-end," said Mr. Corson.

Second quarter highlights:

• Net income of $675-million or $1.15 per share on a diluted basis, compared with $2,409-million or $3.63 per share in the second quarter of 2022. Lower net income is primarily driven by lower commodity prices and increased planned turnaround activity. Cash flows from operating activities of $885-million, compared with cash flows from operating activities of $2,682-million in the same period of 2022.
• Cash flows from operating activities excluding working capital of $1,136-million, compared with $2,783-million in the same period of 2022.
• Capital and exploration expenditures totalled $493-million, up from $314-million in the second quarter of 2022.
• The company returned $257-million to shareholders in the second quarter of 2023 through dividends paid.
• Renewed share repurchase program, enabling the purchase of up to 5 per cent of common shares outstanding, a maximum of 29,207,635 shares, during the 12-month period ending June 28, 2024. Imperial plans to accelerate its share purchases under the NCIB program and anticipates repurchasing all remaining allowable shares prior to year-end. Purchase plans may be modified at any time without prior notice.
• Production averaged 363,000 gross oil equivalent barrels per day, compared with 413,000 gross oil equivalent barrels per day in the same period of 2022. Lower production is primarily driven by the timing of planned turnaround activity at Syncrude, production and steam cycle timing at Cold Lake, and the absence of unconventional volumes following the sale of XTO Energy Canada in the third quarter of 2022.
• Total gross bitumen production at Kearl averaged 217,000 barrels per day (154,000 barrels Imperial's share), compared with 224,000 barrels per day (159,000 barrels Imperial's share) in the second quarter of 2022.
• Completed construction work on key mitigation efforts to expand the existing seepage interception system at Kearl. Additional monitoring and assessment work will occur in the coming months. Imperial continues to engage with local indigenous communities, and is providing site tours and access for independent testing. To date, there is no indication of adverse impacts to wildlife or fish populations in nearby river systems, or risks to drinking water for local communities.
• First ever delivery of renewable diesel to Kearl for use in mine fleet as part of the company's continuing effort to reduce emissions and demonstrate suitability for use in heavy equipment applications.
• Gross bitumen production at Cold Lake averaged 132,000 barrels per day, compared with 144,000 barrels per day in the second quarter of 2022. Lower production was primarily due to timing of production and steam cycles.
• Finished drilling and completion of all wells and received final unit module for the Cold Lake Grand Rapids phase 1 (GRP1) project. GRP1 will be the first solvent-assisted SAGD (steam-assisted gravity drainage) project in industry and is expected to reduce greenhouse gas emissions intensity by up to 40 per cent compared with existing cyclic steam stimulation technology. The project remains on track to achieve accelerated start-up with steam injection anticipated by year-end 2023.
• The company's share of gross production from Syncrude averaged 66,000 barrels per day, compared with 81,000 barrels per day in the second quarter of 2022, primarily driven by timing of planned turnaround activity.
• Refinery throughput averaged 388,000 barrels per day, compared with 412,000 barrels per day in the second quarter of 2022. Capacity utilization was 90 per cent, compared with 96 per cent in the second quarter of 2022, reflecting the impact of the planned Strathcona turnaround in the quarter.
• Started facility construction of the Strathcona renewable diesel project, with key contractors mobilizing to site. The project is designed to produce more than one billion litres of renewable diesel annually, primarily from locally sourced feedstocks, and could help reduce greenhouse gas emissions by about three million metric tonnes per year, as determined in accordance with Canada's Clean Fuel Regulations. Renewable diesel production is expected to start in early 2025.
• Petroleum product sales were 475,000 barrels per day, compared with 480,000 barrels per day in the second quarter of 2022.
• Chemical net income of $71-million in the quarter, up from $53-million in the second quarter of 2022.
• Early work continues on the foundational carbon storage hub project for the Pathways Alliance, which is now working to obtain a carbon sequestration agreement from the government of Alberta. Engineering and fieldwork are under way to support a regulatory application later this year. Imperial is a founding member of the alliance, which continues to work collaboratively with both the federal and Alberta governments on the policy and co-financing frameworks necessary to move the project forward.

Recent business environment

During the first half of 2023, the price of crude oil decreased as the global oil market saw higher inventory levels. In addition, the Canadian WTI/WCS spread continued to recover in the second quarter, but remains weaker than the first half of 2022. Refining margins declined on steady supply of diesel.

We seek Safe Harbor.