Imperial Oil 3q09 press release

“Net income for the third quarter was $547 million, down 61 percent from the third quarter of 2008, but up 162 percent from the second quarter of 2009. Earnings in the third quarter were down from the same quarter in 2008 primarily due to lower Upstream crude oil and natural gas commodity prices as a result of the global economic downturn. Downstream earnings in the third quarter of 2009 were impacted by reduced demand for products, resulting in lower overall downstream margins.

Net income for the first nine months of 2009 was $1,045 million or $1.22 a share, versus $3,218 million or $3.60 a share for the first nine months of 2008.

Continued lower commodity prices and tight downstream margins resulted in challenging business conditions for the quarter compared to the same period last year. Imperial continues to weather this economic downturn well, with earnings supporting our investments in company growth projects through the down cycle. Our proven approach of focusing on those elements of the business within our control, combined with prudent financial management and disciplined capital investment, will continue to reward our shareholders in these uncertain times. (Oil price down from last year peak at a level above US$140/bbl to only US$70-80/bbl in 3q09.)

Imperial Oil continued its long-term focus and disciplined approach to capital investment. In the third quarter, capital and exploration expenditures increased to $575 million, up 60 percent from the same period last year. For the first nine months of 2009, capital and exploration expenditures were $1,604 million, an increase of 72 percent over the first nine months of 2008. The company continues to develop its outstanding portfolio of company growth projects, delivering new energy supplies which are vital to economic growth. (Bilibala thinks the Oil price will stay at US$80/bbl on average. Once the unemployment rate reach the peak early next year and the economy start to pick up in a more stable manner, oil price should reach US$100/bbl.)

During the first nine months of 2009, the company distributed $747 million cash to shareholders through dividends of $257 million and share repurchases of $490 million."

Third quarter items of interest
􀂃 Net income was $547 million, versus $1,389 million for the third quarter of 2008, and $209 million for the second quarter of 2009.
􀂃 Net income per common share was $0.64, versus $1.57 for the third quarter of 2008.
􀂃 Cash flow from operating activities was $698 million, compared with $1,635 million in the same period last year.
􀂃 Capital and exploration expenditures were $575 million, versus $360 million for the third quarter of 2008.
􀂃 Gross oil-equivalent barrels of production averaged 304,000 barrels a day, compared with 310,000 barrels a day in the same period last year.

Project updates
􀂃 Kearl oil sands project update
Following board approval of the first phase of Kearl in May, the project has been proceeding with
detailed design, procurement and construction activities with a current workforce of about 3,000
employees and contractors. Kearl will be developed in three phases and could ultimately produce
more than 300,000 barrels of bitumen a day before royalties. The first phase of the project is
expected to start up in late 2012. Imperial holds a 71-percent interest in the project and is the
operator in this joint venture with ExxonMobil Canada.

􀂃 Cold Lake surpasses one billion barrels of production
The company's Cold Lake heavy oil operation in northeastern Alberta has surpassed one billion
barrels of cumulative production. Only three other fields in Canada have achieved this milestone, and it is the only in-situ operation to have done so. During four decades of operation at Cold Lake, technological advancements have tripled recovery rates while reducing fresh water use and surface land disturbance.

􀂃 Cold Lake expansion
In September, Imperial filed amendment applications for the previously approved Cold Lake Nabiye project (2004). The proposed changes to the project will result in improved energy efficiency, reduced greenhouse gas and sulphur dioxide emissions, and reduced surface footprint. The Nabiye expansion is continuing to be advanced, and if sanctioned, will add about 30,000 barrels a day of production from a new plant. The expansion will access 250 million barrels of previously undeveloped resource at the Cold Lake heavy oil operation.

(Our world need more and more energy, and Bilibala don't think anyone nor any source can replace oil & gas in the coming 10 years. Imperial Oil has a rich oil sand portfolio to meet continue growth need and the global demand)

Third quarter 2009 vs. third quarter 2008
Upstream net income in the third quarter was $439 million versus $999 million in the same period of 2008.

Earnings decreased primarily due to lower crude oil and natural gas commodity prices of about $950 million as a result of the global economic downturn. Lower realizations were partially offset by lower royalty costs due to lower commodity prices of about $200 million, the impact of a lower Canadian dollar of about $115 million and lower energy costs of about $95 million.

The average price of Brent crude oil in U.S. dollars, a common benchmark for world oil markets, was $68.29 a barrel in the third quarter, down about 41 percent from the corresponding period last year. The company's realizations on sales of Canadian conventional crude oil mirrored the same trend as world prices, decreasing about 43 percent in the third quarter, compared to the same period last year.

The company’s average realizations for Cold Lake heavy oil also declined about 40 percent in the third quarter of 2009, compared to the corresponding period last year. The decline was less than that of lighter crude oil, due to the narrowing price spread between light crude oil and Cold Lake heavy oil.

The company's average realizations for natural gas averaged $2.90 a thousand cubic feet in the third quarter, down from $9.20 in the same quarter last year.

Gross production of Cold Lake heavy oil averaged 145 thousand barrels a day during the third quarter, versus 143 thousand barrels in the same quarter last year. The cyclic nature of production at Cold Lake and lower maintenance activities contributed primarily to the increase in production in the third quarter of 2009.

The company's share of Syncrude's gross production in the third quarter was 78 thousand barrels a day, versus 79 thousand barrels in the third quarter of 2008. Gross production of conventional crude oil averaged 25 thousand barrels a day in the third quarter, essentially the same as the corresponding period of 2008. Gross production of natural gas during the third quarter of 2009 decreased to 291 million cubic feet a day from 309 million cubic feet in the same period last year. The lower production volume was primarily a result of natural reservoir decline.

Net income from Downstream was $62 million in the third quarter of 2009, compared with $270 million in the same period a year ago. When compared to the same period in 2008, earnings in the third quarter of 2009 were negatively impacted by reduced demand for products, resulting in lower overall downstream margins of about $160 million. North American refining margins in the third quarter of 2008 were significantly higher as a result of Hurricane Gustav in the Gulf of Mexico. Also impacting third quarter 2009 earnings were lower sales volumes due to the slowdown in the economy.

Chemical net income was $19 million in the third quarter, compared with $38 million in the same quarter last year. Earnings were lower in the quarter primarily due to lower margins for polyethylene products.

Net income effects from Corporate and other were $27 million in the third quarter, compared with $82 million in the same period of 2008. The decrease in earnings effects in the third quarter reflected changes in share-based compensation charges.

Cash flow from operations was used to fund growth projects such as Kearl. The company will continue to evaluate its share-purchase program in the context of its overall capital activities.
In the third quarter of 2009, the company built $68 million of cash while funding its higher capital program requirements from operating cash flow.

First nine months 2009 vs. first nine months 2008
Net income for the first nine months of 2009 was $1,045 million or $1.22 a share on a diluted basis, versus $3,218 million or $3.60 a share for the first nine months of 2008.

First nine months highlights
􀂃 Net income was $1,045 million, down from $3,218 million in the first nine months of 2008.
􀂃 Net income per common share decreased to $1.22 compared to $3.60 in the same period of 2008.
􀂃 Cash flow from operations was $664 million, versus $3,351 million in the same period of 2008.
􀂃 Capital and exploration expenditures were $1,604 million, up 72 percent.
􀂃 Gross oil-equivalent barrels of production averaged 292 thousands of barrels per day, compared to 309 thousands of barrels per day in the first nine months of 2008.
􀂃 Imperial distributed a total of $747 million cash to shareholders in 2009 through dividends and share repurchases, compared with $2,048 million in 2008.
􀂃 Per-share dividends declared in the first three quarters of 2009 totaled $0.30, up from $0.28 in the same period of 2008.