Mr. Brad Corson reports

IMPERIAL ANNOUNCES FOURTH QUARTER 2023 FINANCIAL AND OPERATING RESULTS

Imperial Oil Ltd. has released its fourth quarter and full-year 2023 financial and operating results.

Imperial Oil reported estimated net income in the fourth quarter of $1,365-million and cash flow from operating activities of $1,311-million, compared with net income of $1,601-million and cash flow from operating activities of $2,359-million in the third quarter of 2023. Excluding the impacts of working capital, cash flow from operating activities was $1,799-million, compared with $1,946-million in the third quarter. Fourth quarter results reflect strong operating performance, which was more than offset by weaker commodity prices. Full-year estimated net income was $4,889-million with cash flow from operating activities of $3,734-million. Excluding the impacts of working capital, full-year cash flow from operating activities was $6,435-million.

"Our strong 2023 financial results were underpinned by solid operational performance across all of our businesses, highlighted by record production and substantial unit cost reductions at Kearl," said Brad Corson, chairman, president and chief executive officer. "Throughout the year, we also made significant progress on strategic investments that will help lower emissions and capture value for our shareholders, including the Grand Rapids expansion at Cold Lake and the renewable diesel facility at our Strathcona refinery."

Upstream production in the fourth quarter averaged 452,000 gross oil equivalent barrels per day, the highest quarterly production in over 30 years when adjusting for the divestment of XTO Energy Canada, with full-year production of 413,000 gross oil equivalent barrels per day. At Kearl, quarterly total gross production averaged 308,000 barrels per day (218,000 barrels Imperial's share), the highest quarterly production in the asset's history. Kearl also delivered record full-year production of 270,000 total gross barrels per day (191,000 barrels Imperial's share).

Across other upstream assets, Cold Lake quarterly gross production averaged 139,000 barrels per day with annual production of 135,000 gross barrels per day. In December, the company began injecting steam at Cold Lake Grand Rapids phase 1, marking the successful start-up of what will be the industry's first-ever solvent-assisted steam-assisted gravity drainage (SA-SAGD) project. The project is expected to achieve 15,000 gross barrels per day of production at full rates and also reduce greenhouse gas emissions intensity by up to 40 per cent compared with existing steam processes. The initial steam injection phase is expected to last until the end of the first quarter of 2024, with production ramping up over the following months. At Syncrude, quarterly production increased to 85,000 gross barrels per day following the completion of its planned turnaround in the third quarter of 2023, with full-year production of 76,000 barrels per day.

In the downstream, quarterly throughput averaged 407,000 barrels per day with refinery capacity utilization of 94 per cent following the successful completion of the largest planned turnaround in Sarnia site history, which was completed under budget and ahead of schedule in October. Full-year throughput also averaged 407,000 barrels per day with capacity utilization of 94 per cent, achieving several full-year production records across the company's refineries. Petroleum product sales in the quarter averaged 476,000 barrels per day with annual sales averaging 471,000 barrels per day. Work on the company's Strathcona renewable diesel facility continues to progress, with construction of above-ground tankage nearing completion. The project remains on plan with renewable diesel production expected to begin in 2025.

During the quarter, Imperial returned $2,746-million to shareholders through dividend payments, accelerated completion of the company's annual normal course issuer bid program and successfully completed the company's $1.5-billion substantial issuer bid program in December.

"Throughout 2023 Imperial has returned over $4.9-billion to shareholders through our reliable and growing dividend and industry-leading share repurchase program," said Mr. Corson. "We remain confident of our company's ability to generate robust free cash flow over a range of business conditions and I am pleased to announce a 20-per-cent increase to our quarterly dividend."

In November, Imperial released its annual sustainability report which highlights progress and momentum in the company's key sustainability focus areas, including the previously announced company-wide net-zero goal in operations through collaboration with government and other industry partners. "Imperial is committed to advancing innovation and strategic partnerships to help address the significant challenge of supplying energy to Canadians in an affordable, secure and sustainable way," said Mr. Corson.

Fourth quarter highlights:

• Net income of $1,365-million or $2.47 per share on a diluted basis, compared with $1,727-million or $2.86 per share in the fourth quarter of 2022, primarily driven by lower commodity prices.
• Cash flows from operating activities of $1,311-million, compared with cash flows from operating activities of $2,797-million in the fourth quarter of 2022. Cash flows from operating activities excluding working capital of $1,799-million, compared with $2,452-million in the same period of 2022.
• Capital and exploration expenditures totalled $469-million, compared with $488-million in the fourth quarter of 2022.
• The company returned $2,746-million to shareholders in the fourth quarter of 2023, including $288-million in dividends paid, $958-million in share repurchases through its accelerated normal course issuer bid and successful completion of its $1.5-billion substantial issuer bid program in December.
• Production averaged 452,000 gross oil equivalent barrels per day, the highest quarterly production in over 30 years when adjusting for the divestment of XTO Energy Canada, up from 441,000 gross oil equivalent barrels per day in the same period of 2022.
• Total gross bitumen production at Kearl averaged 308,000 barrels per day (218,000 barrels Imperial's share), the highest quarterly production in the asset's history, up from 284,000 barrels per day (201,000 barrels Imperial's share) in the fourth quarter of 2022. Higher production was primarily driven by improved reliability, plant capacity utilization and increased mine equipment productivity.
• Gross bitumen production at Cold Lake averaged 139,000 barrels per day, compared with 141,000 barrels per day in the fourth quarter of 2022.
• Successfully started steam injection at the Cold Lake Grand Rapids phase 1 (GRP1) project. The initial steam injection phase is expected to last until the end of the first quarter of 2024, with production ramping up over the following months. GRP1 will be the first SA-SAGD project in industry and is expected to achieve 15,000 gross barrels per day of production at full rates while also reducing greenhouse gas emissions intensity by up to 40 per cent compared with existing cyclic steam stimulation technology.
• The company's share of gross production from Syncrude averaged 85,000 barrels per day, compared with 87,000 barrels per day in the fourth quarter of 2022.
• Refinery throughput averaged 407,000 barrels per day, compared with 433,000 barrels per day in the fourth quarter of 2022. Capacity utilization was 94 per cent, compared with 101 per cent in the fourth quarter of 2022. Fourth quarter 2023 results include impacts from the planned turnaround in Sarnia, the largest in site history, which was completed under budget and ahead of schedule in October.
• Petroleum product sales were 476,000 barrels per day, compared with 487,000 barrels per day in the fourth quarter of 2022.
• Chemical net income of $17-million in the quarter, compared with $41-million in the fourth quarter of 2022. Lower net income was primarily driven by the impact of planned turnaround activities.
• Released annual sustainability report which highlights progress and momentum in the company's key sustainability focus areas, and complements the company's advancing climate solutions report published in the third quarter of 2023.

Recent business environment

Energy markets began to normalize in 2023, down from their 2022 high. While demand for liquids set a record in 2023, supply continued to grow. During the first half of 2023, the price of crude oil declined, impacted by higher inventory levels. In the second half, crude oil prices increased as a result of strong demand, tight inventory levels and continuing actions by OPEC+ oil producers to limit supply. In addition, the Canadian WTI/WCS spread began to weaken in the fourth quarter, but remained in line with 2022 on an annual basis. Throughout 2023, strong demand for gasoline and distillate combined with low inventories kept refining margins strong, but short of 2022 levels on an annual basis. In the fourth quarter refining margins dropped due to higher inventory and lower seasonal demand.

Upstream

Price -- average bitumen realizations increased by $4.20 per barrel. Higher bitumen realizations were primarily driven by the narrowing of the WTI/WCS spread, partially offset by lower marker prices. Synthetic crude oil realizations decreased by $9.85 per barrel, generally in line with WTI.

Volumes -- higher volumes were primarily driven by improved reliability, plant capacity utilization and mine equipment productivity at Kearl.

Other -- includes lower operating expenses of about $160-million, primarily due to lower energy prices.

Higher production at Kearl was primarily driven by improved reliability, plant capacity utilization and mine equipment productivity.

Downstream

Lower refinery throughput in the fourth quarter of 2023 reflects the impact of planned turnaround activities at the Sarnia refinery.

Lower petroleum product sales in the fourth quarter of 2023 were primarily driven by lower wholesale customer volume.

The company completed share repurchases under its normal course issuer bid on Oct. 19, 2023.

Full-year 2023 versus full-year 2022

Prior-year results included favourable identified items of $208-million related to the company's gain on the sale of interests in XTO Energy Canada.

Upstream

Price -- lower bitumen realizations were primarily driven by lower marker prices. Average bitumen realizations decreased by $17.25 per barrel, generally in line with WCS, and synthetic crude oil realizations decreased by $19.89 per barrel, generally in line with WTI.

Volumes -- lower volumes were primarily driven by steam cycle timing at Cold Lake, and the absence of XTO Energy Canada production, partially offset by improved reliability, plant capacity utilization and mine equipment productivity at Kearl.

Royalty -- lower royalties were primarily driven by weakened commodity prices.

Identified items -- prior-year results included favourable identified items related to the company's gain on the sale of interests in XTO Energy Canada.

Other -- includes favourable foreign exchange impacts of about $380-million, and lower operating expenses of about $380-million, primarily due to lower energy prices.

Production

Higher production at Kearl was primarily driven by improved reliability, plant capacity utilization and mine equipment productivity.

Downstream

Margins

Lower margins primarily reflect weaker market conditions.

Other -- higher turnaround impacts of about $340-million, associated with the planned turnaround activities at the Strathcona and Sarnia refineries, partially offset by favourable foreign exchange impacts of about $210-million, improved volumes of about $50-million, and lower operating expenses of about $50-million, primarily due to lower energy prices.

On June 27, 2023, the company announced that it had received final approval from the Toronto Stock Exchange for a new normal course issuer bid to continue its then existing share purchase program. The program enabled the company to purchase up to a maximum of 29,207,635 common shares during the period June 29, 2023, to June 28, 2024. The program completed on Oct. 19, 2023, as a result of the company purchasing the maximum allowable number of shares under the program.

On Nov. 3, 2023, the company commenced a substantial issuer bid pursuant to which it offered to purchase for cancellation up to $1.5-billion of its common shares through a modified Dutch auction and proportionate tender offer. The substantial issuer bid was completed on Dec. 13, 2023, with the company taking up and paying for 19,108,280 common shares at a price of $78.50 per share, for an aggregate purchase of $1.5-billion and 3.4 per cent of Imperial's issued and outstanding shares at the close of business on Oct. 30, 2023. This included 13,299,349 shares purchased from Exxon Mobil Corp. by way of a proportionate tender to maintain its ownership percentage at approximately 69.6 per cent.

About Imperial Oil Ltd.

After more than a century, Imperial continues to be an industry leader in applying technology and innovation to responsibly develop Canada's energy resources. As Canada's largest petroleum refiner, a major producer of crude oil, a key petrochemical producer and a leading fuels marketer from coast to coast, the company remains committed to high standards across all areas of its business.

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