SUMMARY ANNUAL REPORT 2010
Upstream
Downstream
Chemical
Corporate profile
Imperial Oil Limited (Imperial) is one of Canada’s largest corporations and a leading member of
the country’s petroleum industry. The company is a major producer of crude oil and natural gas,
Canada’s largest petroleum refiner, a key petrochemical producer and a leading marketer with a
coast-to-coast supply network that includes about 1,850 retail service stations.
Imperial online
Imperial’s website provides services to investors, customers and other
interested parties. The information for investors section offers a complete
range of investor news, reports and presentations. The home page features
regular share price updates from the Toronto Stock Exchange, as well as
news highlights and easy links to a variety of other corporate information.
www.imperialoil.ca
Cover
Tom Boone, manager of oil sands recovery research, in the extraction lab at Imperial’s Calgary
Research Centre. Also illustrated on the cover are formulas and other scientific materials (no
longer proprietary or under patent) from oil sands research conducted by Imperial employees
at the centre.
Forward-looking statements
This report contains forward-looking information on future production, project start-ups and
future capital spending. Actual future results could differ materially as a result of market
conditions or changes in law, government policy, operating conditions, costs, project schedules,
operating performance, demand for oil and natural gas, commercial negotiations or other
technical and economic factors.
Contents
1 2010 year in review
2 Chairman’s letter
4
Technology and responsible
development
6 Financial highlights
7 Operating highlights
10
Operations Integrity
Management System (OIMS)
12 Upstream
16 Downstream
18 Chemical
19 Responsible Care®
20 Natural gas
22
Financial summary
27 Frequently used terms
28
Information for investors
29 Directors and officers
2010 Annual Report Imperial Oil Limited
1
2010 YEAR IN REVIEW
(cid:90)(cid:3)(cid:3)(cid:3)(cid:3)The company made excellent progress on its objectives. All three of its businesses –
Upstream, Downstream and Chemical – improved their overall results.
(cid:90)(cid:3)(cid:3)(cid:3)(cid:3)A relentless focus on safety and operational excellence delivered strong business results.
(cid:90)(cid:3) (cid:3)(cid:3)Innovative solutions were advanced to reliably deliver affordable energy from Canada’s
oil sands in a responsible manner.
(cid:90)(cid:3) (cid:3)(cid:3)Imperial continued its substantial capital and exploration investments in company growth
projects despite a challenging business environment.
CAPITAL AND EXPLORATION
EXPENDITURES
millions of dollars
TOTAL SHAREHOLDER
RETURNS
percent
5 000
4 000
3 000
2 000
1 000
0
15
10
5
0
NET INCOME
in millions of dollars
RETURN ON CAPITAL
EMPLOYED (ROCE)
percent
4 000
3 000
2 000
1 000
0
50 %
40
30
20
10
0
2007
2008
2009
2010
2011 plan
5 year
10 year
20 year
2006
2007
2008
2009
2010
Completed a $4 billion capital
and exploration program
focused on advancing major
Upstream projects.
Imperial Oil
S&P/TSX Composite Index
S&P/TSX Equity Energy Index (1)
Imperial continues to
have superior long-term
shareholder returns.
Source: Bloomberg annualized returns to
December 31, 2010
(1)
From 2002 to 2004, the S&P/TSX Composite
Energy Index was used. Prior to 2002, the
S&P/TSX Energy Index was used.
Imperial Oil ROCE
Canadian integrated oil companies ROCE
Net income
Return on capital employed
of about 21 percent continued
to lead the industry.
Source: quarterly reports
2
2010 Annual Report Imperial Oil Limited
A year of progress: Continued operational excellence, captured
CHAIRMAN’S LETTER
improved market conditions, Kearl project moves ahead
For Imperial, 2010 was a year of substantial progress that again demonstrated the
strength of our business model.
In the first half of the year, almost every industry saw weak economic recovery and
growth as consumers and businesses alike tried to limit their spending. For the oil and
gas industry, significant financial uncertainty was joined by regulatory uncertainty after
the disastrous U.S. Gulf of Mexico well blowout.
Despite this tenuous backdrop, Imperial’s earnings of $2.2 billion were up from last
year’s $1.6 billion. Return on average capital employed (ROCE) was 20.5 percent,
up from 16.8 percent in 2009 even with our large capital expenditures. Cash flow
from operations and asset sales was $3.4 billion. Over the last five years, we have
distributed more than $8.5 billion to shareholders.
The events of 2010 showed how critical it is to maintain a business model that has the
flexibility to meet ever-changing conditions. Our demonstrated abilities to respond to
change and not lose sight of our long-term goals are two of our key strengths. In 2010,
they allowed us not only to weather uncertainty but also to achieve three important
objectives that we had set for ourselves. We maintained a relentless focus on safety
and environmental excellence; advanced innovative solutions for delivering reliable
and affordable energy from the oil sands in a responsible manner; and continued our
record pace of capital and exploration investments in our company growth projects.
Safety is a core value in everything we do and is the cornerstone of our long-
term focus on operating excellence. Our relentless pursuit of a workplace where
“nobody gets hurt” has resulted in another best-ever safety performance year for
our employees and showed sustained progress for our contractor workforce. In 2010,
our environmental impacts were reduced with oil spills and environmental compliance
incidents continuing to show favourable trends.
Energy is a critical need for modern economies. Imperial Oil continued to grow and
invest during this down cycle, confident in the long-term outlook for the Canadian
economy and the return of global economic growth. Thanks to our consistent business
approach, disciplined investment strategy and balance sheet strength, we have been
able to proceed with our company growth projects in this uncertain market without
compromising our base business performance.
Our employees continued to focus on the business elements within their control.
These elements include relentlessly managing costs, continuing to improve energy
efficiency, and growing profitable sales. Cash generated by our businesses was
instrumental in funding record capital and exploration expenditures of $4.0 billion,
which includes continued investment into our Kearl oil sands project. In 2011, we are
on track to increase this spending to between $4 and 4.5 billion as we look to invest
between $35 and 40 billion over the next decade.
Our largest initiative is our Kearl project, with production expected to ultimately
reach 345,000 barrels of bitumen a day before royalties. In 2010, construction of the
project’s initial development of 110,000 barrels of bitumen a day progressed and is
on target for production start-up in late 2012. The planning and engineering of a Kearl
expansion phase is also well underway.
Responsible energy development of the oil sands remains in the global spotlight.
Plans for our Kearl project include a strong emphasis on using advanced technology
to minimize environmental impacts, particularly life cycle greenhouse gases; reduce
demand on water resources; progressively reclaim land; and actively protect
natural habitats. Our history of industry-leading technology gives us confidence
that innovation will be instrumental in continuing to develop the oil sands in an
environmentally and economically sound manner.
2010 Annual Report Imperial Oil Limited
3
We are also moving ahead with a portfolio of high-quality exploration opportunities,
including a promising shale gas play in the Horn River basin in northeast British
Columbia, where we further increased our acreage holdings in 2010. The Mackenzie
gas project achieved a significant milestone with the National Energy Board’s approval
of the project in December. We are excited about these opportunities as it is our view
that natural gas is an important fuel of the future. It is abundant and clean, and is the
logical transition toward less carbon-intensive fuels for generating electricity, the
world’s largest and fastest-growing energy demand sector.
We also continued to support a broad range of worthwhile causes, with community
investments amounting to almost $15 million in 2010. Of particular note, we launched
our support of a signature program, Indigenous Women in Community Leadership,
which is aimed at supporting First Nations, Métis and Inuit women leaders in Canada
in their pursuit of community development and economic independence.
Looking ahead to 2011, we will likely continue to face economic uncertainties both
in terms of demand for our products and price volatility. In the long term, we expect
population and economic growth – particularly in developing countries – to increase
global demand for energy by almost 35 percent in 2030 compared with 2005. New
technologies in areas such as medicine, computing, transportation and personal
communications are creating a greater demand for energy. We also expect that
hydrocarbons will continue to meet the bulk of these requirements even as new
renewable forms of energy become more accessible and affordable.
Our plan is to continue to concentrate on the strategies that have underpinned our
success for 130 years: maintaining our financial strength and flexibility; focusing on the
business elements we can control; and maximizing the value of our base businesses.
We are also positioned for growth with an excellent portfolio of opportunities to
pursue and we intend to take full advantage of it.
In addition to these strengths, a key competitive advantage for Imperial is our capable
and committed workforce. As in past years, our employees accomplished our success
through ingenuity and dedication, demonstrating ownership not only in the results
they obtained but in the way they were achieved. In the last two years, our employee
recruitment has reached record numbers and I’m very pleased with the talented
additions to our workforce. I would like to take this opportunity to recognize and thank
Imperial employees on your behalf for their tremendous efforts throughout 2010.
We look forward to our continued future success.
Original signed by
Bruce March
Chairman, President and CEO
RESOURCE DEVELOPMENT:
BUILDING PRODUCTION VOLUME
thousands of oil-equivalent barrels a day before royalties
750
600
450
300
150
0
2010
2020
New gas
Oil sands
Conventional
Imperial has the potential to
more than double production
over this decade.
What sets
us apart
Imperial is developing one of
Canada’s leading resource bases
in a safe, responsible way, through
proven strengths in technology
and operational excellence, while
continuing to improve operations
and with relentless control of
costs. Executing all of these
well is what sets us apart from
industry competition and allows
us to continue to generate superior
investment returns.
CHAIRMAN’S LETTER HIGHLIGHTS UPSTREAM DOWNSTREAM CHEMICAL FINANCIAL SUMMARY
4
2010 Annual Report Imperial Oil Limited
Investing in oil sands innovation
TECHNOLOGY AND RESPONSIBLE DEVELOPMENT
Imperial’s support of oil
sands research is focused on
improving current technologies
and developing breakthrough
innovations that will advance
productivity, economic efficiency
and environmental performance.
The oil sands are a key component of
Canada’s resource wealth. The country’s
total oil reserves of 175 billion barrels
ranks second only behind Saudi Arabia.
And, of those barrels, all but five billion
are located in the country’s oil sands.
The energy opportunity is big, but
extracting and producing oil from oil sands
remains challenging. The industry must
find new ways to unlock the resource
in a manner that is environmentally
responsible and cost competitive. This
calls on companies to constantly look
for ways to do things better. Key to this
innovation is encouraging and supporting
pioneering research.
Imperial Oil is leading the way in oil
sands innovation. Since 1961, the
company’s research centre in Calgary
has had a reputation as one of the top
oil sands research facilities in the world.
Scientists at the centre, working with
ExxonMobil and other external experts,
are focused on improving and developing
technologies to advance environmental
performance, productivity and
economic efficiency.
Their work has a particular importance
to the company, which derives about
75 percent of its Upstream production
volumes today from oil sands. Imperial’s
commitment to innovation is reflected
in its significant research expenditures.
Last year, the company invested
approximately $109 million in research,
including about $64 million at its research
facilities in Calgary and Sarnia – most of
it focused on oil sands innovation.
Each year, Imperial invests in research
because it knows first-hand the
transforming power of technology on the
oil sands resource. For instance, the long
history of success of Imperial’s heavy
oil operations at Cold Lake, Alberta, is
closely integrated with research.
(cid:90) New research at Imperial has shown that a low concentration of solvent mixed with
steam can enhance bitumen recovery and use less energy for in situ operations.
Pictured here are Solvent-Assisted Steam-Assisted Gravity Drainage (SA-SAGD)
wells at the Cold Lake operation.
2010 Annual Report Imperial Oil Limited
5
Decades ago, Imperial scientists
invented and patented both Cyclic Steam
Stimulation (CSS) and Steam-Assisted
Gravity Drainage (SAGD), two key
recovery processes used by the industry
today for in situ oil sands development.
With these technologies, Imperial began
commercial extraction of heavy oil at
Cold Lake in the 1980s, recovering
bitumen from oil-bearing sand deposits
as much as half a kilometre below the
surface. Since then, the company has
relied on technology advances to recover
more of the resource while steadily
reducing the impact on the environment.
COLD LAKE WATER USE
o
i
t
a
r
n
e
m
u
t
i
b
o
t
r
e
t
a
w
h
s
e
r
F
5
4
3
2
1
0
50
40
30
20
10
0
100
W
a
t
e
r
v
o
l
u
m
e
(
t
h
o
u
s
a
n
d
m
3
/
d
)
80
60
40
20
0
1975
1983
1991
1999
2010
Fresh
Brackish
Recycled
Fresh water to bitumen ratio
Virtually all the water used to
generate steam is recycled produced
water. Additional conservation
initiatives are now underway with
the potential to further reduce
freshwater use by up to 30 percent
over the next five years.
COLD LAKE RECOVERY
percent
1977
1987
1997
2007-12
2020+
Technology is key to redefining
oil sands recovery.
Today, a barrel of bitumen that once took
five barrels of fresh water to recover now
takes less than half a barrel. In new field
development, the surface footprint per
barrel of oil produced has been reduced
by more than 80 percent. Air emissions
have also improved. For example, with
the addition of sulphur recovery facilities
at Cold Lake’s Mahihkan and Mahkeses
plants, sulphur dioxide emissions in 2010
were 40 percent lower than 2006.
This spirit of innovation continues. New
research at Imperial has also shown that
mixing a low concentration of solvent
with steam can enhance bitumen
recovery at in situ operations. Imperial
researchers have been working on a
technology that adds solvent to SAGD
wells. Initial pilots are underway at
Cold Lake. The company has taken this
process further and is conducting a Cyclic
Solvent Process (CSP) pilot using only
solvent without any steam. If successful,
water use and greenhouse gas emissions
could be virtually eliminated where CSP
is applied.
Another process called LASER, which
stands for Liquid Addition to Steam
for Enhancing Recovery, is now in
commercial use in about 240 wells
at the Cold Lake operation. Through
extensive field pilot testing, LASER has
demonstrated the ability to increase
oil recovered in later cycle wells by
35 percent. As a result, with the same
amount of steam injected, more oil is
produced, and carbon dioxide emission
intensity is down by more than
25 percent.
These are encouraging results for a
technology that took more than a
decade to develop, test, pilot and put
into commercial production. Today it
is just one of many technologies being
pursued that could see oil recovery
rates almost double in the next decade,
and environmental performance improve
at the same time.
Lastly, Imperial is expanding the
application of a recovery process at
Cold Lake that targets the bitumen
that lies between wells and cannot be
accessed today. Called Continuous Infill
Steamflood, additional steam injector
wells are drilled between existing wells
to increase recovery.
In terms of oil sands mining, a focus
for Imperial scientists is to find
fundamentally new, more efficient and
cleaner ways of extracting the heavy
oil. Another leading-edge technology
being worked on is designed to separate
bitumen from mined oil sands with
significantly less water.
Non-aqueous bitumen extraction could
substantially reduce or eliminate tailings
ponds at an oil sands mining operation.
Efforts are being devoted to advance the
understanding of non-aqueous extraction
and to design a pilot facility to accelerate
the commercialization of this potentially
game changing technology.
In December, Imperial, along with
six other oil companies developing
Canada’s oil sands, announced that
they will collaborate on research to
improve tailings management, reflecting
the companies’ commitments to
responsible development of Alberta’s
vast oil sands resource and the timely
reclamation of tailings. The companies
agreed to share their existing tailings
technical information and to remove
all barriers to facilitate pooled research
and development, with the goal of
accelerating tailings reclamation. Industry
participants will also make past research
and technical information available to
industry members, regulators, academia
and others interested in collaborating on
tailings solutions.
In addition, Imperial supports university
research projects across Canada,
including those conducted at the Centre
for Oil Sands Innovation (COSI) at the
University of Alberta. The aim of this
Canadian centre of excellence is to
conduct breakthrough research that
reduces the use of water and energy
and decreases the footprint of oil sands
development. Its current research
portfolio includes more than 20 projects
across six Canadian universities. Since
2005, Imperial has contributed $10 million
and about $1.8 million of in-kind support
to COSI. Imperial committed an additional
$10 million commencing in 2010.
6
2010 Annual Report Imperial Oil Limited
FINANCIAL HIGHLIGHTS
(cid:90)(cid:3)(cid:3) (cid:3)Completed a capital expenditure
program of $4.0 billion, including
advancing major company
growth projects.
(cid:90)(cid:3)(cid:3) (cid:3)Capital and exploration expenditures
were funded primarily through
internally generated funds and cash
on hand. New debt of $620 million
was raised in the year, with year-end
debt of $756 million.
(cid:90)(cid:3)(cid:3) (cid:3)A strong balance sheet was
maintained. Debt as a percent of
total capital was only seven percent
with interest coverage more than
370 times earnings.
(cid:90)(cid:3)(cid:3) (cid:3)Imperial maintained a AAA rating from
Standard & Poor’s and remains the
only Canadian industrial company with
this rating.
(cid:90)(cid:3)(cid:3) (cid:3)Imperial does not hedge the price of
its production, use special purpose
financial instruments or off balance
sheet financing structures.
(cid:90)(cid:3)(cid:3) (cid:3)A strong financial position provides
confidence that the company can
deliver on its growth plans even in a
financially uncertain environment.
(cid:90)(cid:3)(cid:3) (cid:3)Capital expenditures in 2011 are
estimated to be about $4 to 4.5 billion
as the company advances its major
opportunities. These investments
will focus on growth and productivity
improvements and will continue to
be financed largely through internally
generated funds.
(cid:90)(cid:3)(cid:3) (cid:3)Proved oil and gas reserve additions
were 125 million oil-equivalent barrels,
replacing 140 percent of production.
(cid:90)(cid:3)(cid:3) (cid:3)Earnings of $2.2 billion or $2.59 per
share are up from $1.6 billion or
$1.84 per share in 2009.
(cid:90)(cid:3)(cid:3) (cid:3)Industry-leading return on capital
employed was 20.5 percent in 2010,
even with significant investments in
assets under construction.
(cid:90)(cid:3)(cid:3) (cid:3)Annual per share dividends paid
increased for the 16th consecutive year.
(cid:90)(cid:3)(cid:3) (cid:3)Shareholder distributions in 2010
totalled $364 million through
dividend payments and some share
repurchases to avoid dilution. Imperial
did not make a significant share
repurchase in 2010, consistent with
a view that the best use of cash is
to invest in quality growth projects.
(cid:90) Continued a long history of
productivity improvement and prudent
cost management. Since 2008, total
expenses excluding purchases of
crude oil and products have fallen
by 1.5 percent.
Financial highlights
(millions of dollars)
Operating revenues
Net income
Cash flow from operating activities
and asset sales (a)
Cash and cash equivalents at year-end
Total debt at year-end
Average capital employed (b)
Capital and exploration expenditures
Dividends paid
INCOME PER SHARE
Dollars per share – diluted
2010
2009
2008
2007
2006
24 946 21 292 31 240 25 069 24 505
2 210
1 579
3 878
3 188
3 044
3 351
1 658
267
756
10 791
4 045
356
513
140
9 432
2 438
341
4 535
1 974
143
8 684
1 363
330
3 905
1 208
146
8 509
978
319
3 799
2 158
1 437
8 515
1 209
315
5
4
3
2
1
0
2006
2007
2008
2009
2010
Income per share increased
40 percent over 2009.
(a) The definition of cash flow from operating activities and asset sales (page 27).
(b) The definition of average capital employed (page 27).
Key financial ratios
Net income per share – diluted (dollars) (a)
Return on average capital employed (percent) (b)
Return on average shareholders’ equity (percent) (c)
Annual shareholders’ return (percent) (d)
Debt to capital (percent) (e)
Dividends per share (dollars)
2010
2009
2008
2007
2006
2.59
20.5
21.4
0.9
7
1.84
16.8
17.1
0.2
2
4.36
44.7
45.7
(24.3)
2
3.41
37.7
41.6
28.0
2
0.43
0.40
0.38
0.35
3.11
35.9
43.4
12.5
17
0.32
(a) Calculated by reference to the average number of shares outstanding, weighted monthly (page 26).
(b) The definition of return on average capital employed (page 27).
(c) Net income divided by average shareholders’ equity (page 24).
(d) Includes share appreciation and dividends.
(e) Current and long-term portions of debt (page 24) and the company’s share of equity company debt,
divided by debt and shareholders’ equity (page 24).
2010 Annual Report Imperial Oil Limited
7
OPERATING HIGHLIGHTS
Safety and environment
(cid:90) Safety performance continued
to be in line with best in industry.
The company’s goal remains that
“nobody gets hurt.” Nothing is
more important.
(cid:90) Achieved an excellent safety
performance in 2010 with no
employee lost-time incidents.
(cid:90) Employee total recordable incident
rate (TRIR) was a best-ever
performance. Contractor TRIR was
a near best-ever performance.
(cid:90) Imperial’s Strathcona refinery
was recognized by Alberta
Employment and Immigration for
best-in-class safety performance,
and the Alberta Petro-Chemical
Safety Council honoured the facility
for achieving best-in-class contractor
safety performance.
(cid:90) Environmental management and
performance continued as a major
focus with an eye to “Protect
tomorrow. Today.”
(cid:90) Spills and environmental compliance
incidents continued to show progress.
(cid:90) Downstream flaring reduction of
16 percent compared with the
previous best-ever year. In Alberta,
Imperial’s Upstream has the lowest
solution gas flaring intensity in the
industry.
(cid:90) In early 2010, Imperial entered a
formal long-term partnership with
Ducks Unlimited Canada to
collaborate in the development of best
management practices and complete
a wetland inventory of the Cold Lake
operating area and in northeastern
British Columbia, where Imperial has
a promising shale gas play in the Horn
River basin.
(cid:90) Cold Lake’s Wildlife at Work program
was certified by the Wildlife Habitat
Council in late 2010, the first
upstream oil and gas site in Canada
to receive this recognition.
(cid:90) Lloyd’s Quality Assurance confirmed
that Imperial’s Operations Integrity
Management System continued to
meet requirements of ISO 14001.
(cid:90)(cid:3) At Kearl, the first shrub planting on-site began in August 2010. The green
alder plants, which are indigenous to the area, were grown in a northern
Alberta greenhouse from seeds harvested in the Athabasca oil sands area.
(cid:90) 176 employees, including managers
and others involved in influencing
environmental performance, received
environmental leadership training
in 2010.
(cid:90) Started up major air emissions
improvement units in Sarnia, Ontario,
and Dartmouth, Nova Scotia.
Major projects and new
opportunities advanced
(cid:90) Construction of the initial
development of the Kearl oil sands
project continued and was well
advanced toward a scheduled fourth
quarter 2012 start-up. Throughout
the development and construction
activities, Imperial Oil is focused on
the important goals of project safety
and responsible development.
(cid:90) Received regulatory amendment
approval for additional environmental
improvements to the 30,000 barrel
a day Nabiye expansion at Cold Lake.
The regulatory amendments included
technology improvements to enhance
environmental performance: reducing
land use footprint through directional
drilling application; cogeneration
technology for more efficient
production of steam and electricity;
and facilities to reduce air emissions of
sulphur. Nabiye site preparation work
has begun.
(cid:90) Exploration continued in the
Horn River basin in northeast B.C.,
a promising shale gas resource where
Imperial, together with ExxonMobil
Canada in a 50-50 joint venture, holds
one of the largest land positions in the
industry with 346,000 combined net
acres. The joint venture acquired
37,000 net acres in 2010 and
progressed a Horn River production
pilot project with proposed start-up in
late 2012 to assess well productivity
and costs.
(cid:90) Results from test wells drilled at
Horn River have met or exceeded
expectations for productivity
and resource.
(cid:90) The National Energy Board (NEB)
approved the Mackenzie gas project,
where Imperial holds about three
trillion cubic feet of gas resource.
CHAIRMAN’S LETTER HIGHLIGHTS UPSTREAM DOWNSTREAM CHEMICAL FINANCIAL SUMMARY
8
2010 Annual Report Imperial Oil Limited
OPERATING HIGHLIGHTS
(cid:90) Imperial, with ExxonMobil Canada,
signed a joint operator agreement
with BP (Imperial holds 25 percent) to
combine acreage in the Beaufort Sea
(about one million gross acres). While
Imperial views this area as promising,
further exploration work will only
proceed after the NEB completes
a review of Arctic drilling regulatory
requirements and regulatory approvals
are in place.
Reserves and volume performance
(cid:90) Average daily production of crude oil,
natural gas and natural gas liquids was
294,000 oil-equivalent barrels a day
before royalties.
(cid:90) Proved reserves at year-end totalled
2.5 billion oil-equivalent barrels, up
36 million oil-equivalent barrels from
2009. Total resource was in excess of
15 billion oil-equivalent barrels. Proved
reserves represent more than 28 years
of current production.
(cid:90) Petroleum product sales were
442,000 barrels a day. Gasoline
sales were 218,000 barrels a day.
Imperial remained Canada’s largest
petroleum refiner.
Research and development
(cid:90) In 2010, Imperial maintained a leading
industry research program at its two
research facilities in Sarnia and Calgary.
Total research expenditures in 2010
were approximately $109 million,
including $64 million spent at its
research facilities. In addition, through
its relationship with ExxonMobil,
Imperial Oil had access to more
than $1 billion of industry-leading
research worldwide.
(cid:90) The company is focusing on
advancing research on tailings
technology through:
(cid:3)
(cid:90) collaborating with others in the oil
sands mining industry in order to
promote technology sharing and to
develop better tailings management
solutions faster.
(cid:3)
(cid:90) conducting work to accelerate
tailings reclamation, reduce the
size of tailings ponds and reduce
water requirements to process
mined oil sands.
(cid:3)
(cid:90) supporting universities working on
breakthrough technologies through
an investment at the Centre for
Oil Sands Innovation (COSI) at
the University of Alberta. In 2010,
Imperial renewed its commitment
to COSI by pledging another
$10 million over the next five years.
(cid:90) At Imperial’s Calgary Research
Centre, innovative research projects
are also being pursued to improve
recovery, increase efficiency and
reduce environmental impact of oil
sands production. These include:
(cid:3)
(cid:3)
(cid:90)(cid:3) Cyclic Solvent Process (CSP), a
recovery technology that uses
solvent instead of steam and could
significantly reduce greenhouse gas
emissions and eliminate water use.
After a field trial in 2009, the
company is planning a three-well
CSP pilot. A regulatory application
was submitted in the third quarter
of 2010.
(cid:90) Solvent-Assisted Steam-Assisted
Gravity Drainage (SA-SAGD),
where solvents are added to
steaming technology to liberate
oil from oil sands. The process
improves recovery and lowers
energy and greenhouse gas
emissions intensity. In the fall of
2009, a pilot of this process started
operation at Cold Lake.
Best-ever
Employee best-ever safety
performance in total recordable
incident rate and no lost-time
incidents for the second year
in a row.
SIGNIFICANT RESOURCE
BASE
billions of oil-equivalent barrels – 2010
Conventional,
including frontier
In situ oil sands
Minable oil sands
14
12
10
8
6
4
2
0
Net production
Proved reserves (a)
Non-proved resources (b)
(cid:90)
(cid:90)
(cid:90)
Significant resource base
of more than 15 billion
oil-equivalent barrels.
Proved reserves life index
of greater than 28 years.
Non-proved resources of more
than 13 billion oil-equivalent
barrels, of which more than
11 billion barrels are oil sands.
(a) Reserves estimates based on the average first-day-of-the-month price for each month during the last 12-month period ending
December 31. For reserves calculated under National Instrument 51-101 (NI 51-101) requirements, please refer to the company’s
filing of its NI 51-101 data on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.
(b) Pursuant to National Instrument 51-101 disclosure guidelines, and using Canadian Oil and Gas Evaluation Handbook definitions,
Imperial’s non-proved resources are classified as a “contingent resource.” Such resources are a best estimate of the company’s net
interest after royalties at year-end 2010, as determined by Imperial’s internal qualified reserves evaluator. Contingent resources are
considered to be potentially recoverable from known accumulations using established technology or technology under development,
but are currently not considered to be commercially recoverable due to one or more contingencies. There is no certainty that it will
be economically viable or technically feasible to produce any portion of the resource. See discussion on pages 12-15 in the Upstream
section for additional information on components of the contingent resource base, including undeveloped oil sands acreage and the
Mackenzie gas project.
2010 Annual Report Imperial Oil Limited
9
(cid:3)
(cid:90) Continuous Infill Steamflood that
could improve resource recovery
and reduce greenhouse gas
emissions intensity in mature areas
at Cold Lake. Imperial continues
piloting this technology and is
assessing further application at its
Cold Lake operation.
(cid:3)
(cid:90) Liquid Addition to Steam for
Enhancing Recovery (LASER),
a process in which a low-
concentration solvent is added
to steam in the Cyclic Steam
Stimulation process in order to
enhance recovery. LASER
technology has been commercially
applied to about 240 wells at the
Cold Lake operation.
(cid:3)
(cid:90) Non-aqueous extraction, which
could significantly reduce water use
in oil sands mining and eliminate the
need for wet tailings ponds and
enable faster reclamation. Imperial
is putting significant efforts in pilot
planning to advance this technology.
(cid:90) Downstream research is focused on
improving energy efficiency and
mitigating environmental impacts
from its operations as well as in the
use of its products.
Community investment
(cid:90) Imperial supports communities
across Canada where it has a
presence through total community
investments of almost $15 million
in 2010.
(cid:90) This includes $6.4 million contributed
to more than 300 organizations
through the Imperial Oil Foundation.
The foundation focuses on supporting
education in math and sciences;
environmental initiatives; and
Aboriginal opportunities. These
are considered critical to Canada’s
future prosperity.
(cid:90) Special contributions in 2010 included
funding the Indigenous Women in
Community Leadership program at
the Coady International Institute at
St. Francis Xavier University in
Nova Scotia.
(cid:90) Imperial engaged employees,
contractors and retirees to raise
a record amount for United Way-
Centraide campaigns across Canada.
Its employee participation rate was
86 percent. Imperial also donated an
Arthur Lismer masterpiece from the
company’s corporate art collection,
and the auction proceeds of $118,000
were donated to the 2010 United Way
of Calgary and Area campaign.
(cid:90) Imperial continued its ongoing
recruitment program and hired
more than 250 career employees
to help advance our growth
opportunities.
(cid:90) For more information, please see
Imperial’s Corporate Citizenship
Report at www.imperialoil.ca.
(cid:90) Imperial employs more than 150 scientists, engineers and technologists at its
research centres in Calgary and Sarnia. The company has been awarded more than
900 patents since 1924.
CHAIRMAN’S LETTER HIGHLIGHTS UPSTREAM DOWNSTREAM CHEMICAL FINANCIAL SUMMARY
10
2010 Annual Report Imperial Oil Limited
Management system reinforces culture
of safety and protection
How does Imperial ensure that its
business units work harmoniously
to manage risks inherent in its
operations? The company has
found measurable success in
following a common approach
with an all-embracing set of
expectations and requirements.
Industry
leader
The value and success of OIMS has
been recognized across the industry
with many peers using the concept,
specific elements and requirements.
On March 24, 1989, an Exxon tanker –
the Exxon Valdez – ran aground on a
reef in Prince William Sound, Alaska.
This resulted in the daunting task of
responding to what was the largest
marine oil spill in U.S. history until the
April 2010 Macondo well incident in
the Gulf of Mexico.
Although a low point in Exxon’s history,
the spill was also a turning point.
Following the spill, Exxon’s senior
management created a taskforce that
searched the world for best practices
in incident prevention, both inside and
outside the petroleum industry. The
goal was to ensure that something
similar never happens again. In 1991,
Exxon created a safety, health and
environmental protection framework
called the Operations Integrity
Management System (OIMS).
Recognizing the impact that such a
comprehensive management system
would have, Imperial Oil adopted OIMS.
The goal was to wholly reorganize the
company to make safety – of people,
the environment and facilities – the
centre of everything it does. The
framework was created to put its safety
commitment into action through a single,
comprehensive management system.
Today, OIMS provides a robust
approach for managing safety, health,
environmental and security risks
throughout all aspects of Imperial’s
businesses. It is designed to identify
hazards and manage risks and achieves
a rigorous pursuit of industry-leading
operational performance through clear
roles, accountabilities and continuously
improving systems. OIMS comprises
11 separate elements that provide
guidance to ensure every operation has
the required resources, skills, facility
designs, processes, procedures and
tools to perform safely, securely and
with environmental care. OIMS guides
the activities of each of Imperial’s
employees, as well as its third-party
contractors. Over time it has become
embedded into everyday work processes
at all levels and has helped transform
the company’s culture into one that
believes improving operations integrity
and managing risks will lead to improved
business results.
OIMS sets expectations across
all aspects of operations and its
effectiveness begins with management
leadership and commitment. Included
are requirements ranging from personnel
and process safety to contractor
selection, community engagement
and communications, and emergency
response preparedness.
One of the most powerful elements of
OIMS is the final one – element 11 –
which requires every operation to carry
out regular assessments. An external
OIMS assessment is conducted every
three to five years (depending on
performance risk). A global team of
specially trained personnel from Imperial
and other parts of the ExxonMobil
network spends between one to three
weeks conducting an independent
assessment of how well an operation
is meeting its OIMS requirements.
This assessment results in a list of
opportunities to improve performance
with a primary focus on execution and
managing risk. In between external
assessments, the management
of a particular operation forms a
multidisciplinary team to conduct an
internal assessment of how well it is
meeting OIMS requirements.
Certainly, at the heart of OIMS is a
built-in emphasis on comprehensive
risk assessment and management.
Focusing on the sound management of
risks specific to a particular operation
enables OIMS to apply as effectively to
an offshore platform as it does to a heavy
oil recovery operation or a refinery. In
each case, the key to risk reduction is
to identify potential hazards, then apply
measures to control or eliminate the
hazard in order to reduce the probability
and severity of an incident.
2010 Annual Report Imperial Oil Limited
11
A refinery, for example, contains a
number of potential hazards, including
explosive, corrosive and high-pressure
materials. But through the application
of measures to mitigate those hazards,
such as properly designed vessels or
automatic detection and shutoff systems,
the risks associated with potential
hazards are well managed to prevent
serious incidents.
This attention to managing risk extends
not just to equipment but to worker
safety. Across Imperial, OIMS requires
all safety incidents and near misses to
be reported and reviewed carefully.
As part of follow-up investigations,
the company and employees look not
only at actual safety events but also at
significant near misses and the potential
consequences of what might have
happened. Learnings are incorporated
into training, facility designs and
procedures to continuously improve.
The daily concern for managing all risks
and preventing incidents has resulted
in a deeply ingrained culture of safety
and protection at the company – one
in which employees and contractors
constantly look out for themselves
as well as their fellow workers. It has
created a work environment that regularly
encourages safety awareness through
safety meetings, the use of safety tools,
employees mentoring co-workers and
contractors and site-wide safety stand
downs where workers take time to
reflect on the importance of safety.
One of these events occurred on
June 29, 2010, at the Kearl oil sands
project near Fort McMurray, Alberta.
To reinforce safety, the company told
workers to put down their tools, stop
their normal work and instead look for
anything on the site that might constitute
a safety hazard. As a result, a number
of improvements were identified. Local
management has carried out specific
actions to address all items.
Ultimately, however, the proof of any loss
management system such as OIMS is in
the results it achieves. And the numbers
show that OIMS has led to substantial
improvement at Imperial.
In 1990, the last full year before OIMS
was introduced, there were 81 employee
lost-time incidents with a rate of 0.5 per
200,000 hours worked. In 2009, there
were no employee lost-time incidents,
which was a first for Imperial. That
best-ever record was maintained
in 2010. As well, contractors in 2009
had a best-ever safety performance
year. In 2010, a total of three lost-
time incidents occurred to contractors
across company operations. Imperial’s
combined lost-time incident rate of
0.02 per 200,000 hours worked in 2010
was significantly better than Canadian
and global industry averages.
(cid:90) The proof of any loss management system such as OIMS is in the results it achieves.
For Imperial, both 2009 and 2010 were best-ever performance years for employee
lost-time incidents. Similar improvements have been achieved in environmental
performance with spills and compliance incidents showing a progressive trend.
12
2010 Annual Report Imperial Oil Limited
Preparing for growth: capital and exploration
expenditures continue at a record pace
UPSTREAM
Higher crude oil prices boost
Upstream earnings
The Upstream business continued
its record of superior operating
performance in 2010, generating
earnings of $1,764 million, compared
with $1,324 million in the previous year.
The return on capital employed was
20.9 percent. Excluding construction in
progress, the Upstream return on capital
employed was more than 42 percent.
Cash flow from operating activities and
asset sales increased to $2,529 million
from $997 million in 2009.
Higher global oil prices were the main
reason for the improvement. This was
partially offset by an unfavourable
foreign exchange effect due to a stronger
Canadian dollar, higher royalty costs and
third-party pipeline reliability issues.
The company’s total daily production of
crude oil and natural gas liquids before
royalties was 247,000 barrels, up by
3,000 barrels from 2009.
Imperial’s production from oil sands in
2010 totalled more than 217,000 barrels
a day from the company’s wholly owned
Cold Lake in situ operation and its
25 percent share of Syncrude.
Production from the Cold Lake
operation, the world’s largest in situ
heavy oil operation, averaged
144,000 barrels a day before royalties,
up from 141,000 barrels a day in 2009.
Higher production volumes were due
to improved facility reliability as well
as the cyclic nature of production.
The company’s share of production
at Syncrude, an integrated mining,
extraction and upgrading facility, rose to
73,000 barrels a day of synthetic crude oil
before royalties, up from 70,000 barrels a
day in 2009. With the completion in 2006
of the latest phase of expansion, focus
at Syncrude is on improving the reliability
and cost performance of the project
while keeping the upgrading capacity
fully utilized.
Imperial’s conventional oil and gas
producing assets in Western Canada
are mature. The key to the ongoing
success of the conventional business
rests in optimizing performance by
relentlessly controlling unit costs and
targeting opportunities for attractive
investment. In 2010, production before
royalties averaged about 30,000 barrels
a day of crude oil and natural gas liquids,
and 280 million cubic feet per day of
natural gas.
ACREAGE ACQUISITIONS
net thousands of acres
162
607
2006 to 2010
Conventional
Oil sands
Imperial continues to acquire strategic
high-quality resource acreage, totalling
almost 770 thousand net acres
since 2006.
CRUDE OIL AND NGL
PRODUCTION BY SOURCE
thousands of barrels a day before royalties
300
200
100
0
2006
2007
2008
2009
2010
Syncrude
Cold Lake
Conventional and NGLs
Declining conventional production
is being offset by oil sands growth.
At a glance
2010
2009
2008
2007
2006
Net income (millions of dollars)
1 764
1 324
2 923
2 369
2 376
Cash flow from operating activities
and asset sales (millions of dollars)
Gross crude oil and NGL production
(thousands of barrels a day)
Gross natural gas production (millions of cubic feet a day)
2 529
997
3 712
2 661
3 151
247
280
244
295
256
310
275
458
272
556
Average capital employed (millions of dollars)
8 427
5 798
4 526
4 258
3 993
Return on average capital employed (percent)
20.9
22.8
64.6
Capital and exploration expenditures (millions of dollars)
3 844
2 167
1 110
55.6
744
59.5
787
2010 Annual Report Imperial Oil Limited
13
Preparing for growth with robust
capital and exploration spending
Upstream capital and exploration
spending in 2010 totalled $3.8 billion,
with planned expenditures of $3.7 to
4.2 billion in 2011, largely for future
reserve additions and production growth.
Imperial holds a 70.96 percent interest in
the Kearl project and is acting as operator
in this joint venture with ExxonMobil
Canada. The project is expected to begin
initial production at 110,000 barrels
of bitumen a day before royalties, of
which Imperial’s share would be about
78,000 barrels a day. Initial production
is expected to start in late 2012,
as scheduled.
The Kearl project, located about
70 kilometres northeast of Fort
McMurray, will use proven technologies
such as truck-and-shovel mining and
hydro transport, as well as a new
paraffinic froth treatment technology that
will process mined bitumen on-site into
a product that can be shipped by pipeline
and sold to existing refineries without
the need for a costly new upgrader.
Processing bitumen once rather than
twice (in an upgrader and refinery)
reduces both carbon dioxide emissions
and development costs.
In 2010, Imperial advanced construction
of the initial development of the Kearl
oil sands project. All plant pilings were
completed and substantial concrete
foundations were laid. By the end of
2010, detailed engineering was more
than 95 percent complete.
Imperial also advanced plans in 2010
for the next expansion of Cold Lake in a
project called Nabiye with the potential
to produce a further 30,000 barrels a day
of bitumen. Despite obtaining regulatory
approval earlier for the expansion,
Imperial filed project amendments
that further improve the environmental
performance of the project. In 2010,
Imperial secured regulatory approvals
for these environmental improvements
as well as carried out early site works,
which included clearing and grading of
the plant site and creating access roads
into the area.
Imperial’s focus in its Upstream business
is on the long-term development of one
of Canada’s leading oil and gas resource
positions. The company has the potential,
with plans in place, to more than double
Upstream production volumes by 2020.
Volumes are targeted to be up about
40 percent by 2013.
As production from the relatively mature
conventional resources of the Western
Canadian Sedimentary Basin declines,
developing and advancing an inventory of
new major projects will be key to adding
reserves and production growth.
The company’s exploration portfolio,
which has increased significantly in
recent years, offers further opportunities
to add to this resource position. The
portfolio includes unconventional gas in
northeast British Columbia, further oil
sands mining and in situ opportunities,
as well as tight oil in Alberta and offshore
exploration in the Beaufort Sea.
(cid:90) The Kearl oil sands project has an estimated recoverable resource of about
4.6 billion barrels or more than 40 years of sustained production.
CHAIRMAN’S LETTER HIGHLIGHTS UPSTREAM DOWNSTREAM CHEMICAL FINANCIAL SUMMARY
14
2010 Annual Report Imperial Oil Limited
Company well positioned for growth
UPSTREAM
Canada’s oil sands are increasingly
being recognized as a significant
potential contributor to global oil supply,
North American energy security and
Canada’s economic prosperity. The
challenge is to bring these resources
to market efficiently, and in a safe and
environmentally responsible manner.
345,000 barrels of bitumen a day, with
an estimated recoverable resource of
about 4.6 billion barrels of bitumen. The
project has an estimated lifespan of more
than 40 years of sustained production.
Work is well underway on an expansion
that will double the initial production of
110,000 barrels of bitumen a day.
Kearl oil sands project
Horn River
The Kearl project represents one of
the best undeveloped resources in the
Athabasca region, especially in terms
of the quantity of bitumen that can be
produced for a given volume of mined
material – a key parameter in keeping
operating costs down.
The company is currently reconfiguring
the Kearl project development plan to
include a combination of debottlenecking
and expansion to minimize facility
requirements and to reduce the plant
footprint. When fully operational, the
project’s total capacity will be around
Imperial, together with ExxonMobil
Canada in a 50-50 joint venture, has
increased its acreage position in the Horn
River shale gas play in northeast British
Columbia. At Horn River, the companies
acquired an additional 37,000 net acres,
drilled 12 wells and collected 270 km2 of
seismic data. The companies now hold
an interest in about 346,000 net acres.
Imperial also advanced a production
pilot project, to start up in late 2012,
to assess productivity and improve
development costs.
Mackenzie gas project
Even with the potential for significant
growth in North American shale gas and
other unconventional gas sources, new
supplies from the Mackenzie and other
Arctic frontier sources will be needed late
in this decade to meet growing demands
for natural gas in North America.
In late 2010, the National Energy Board
(NEB) approved the Mackenzie gas
project, subject to conditions and federal
cabinet approval. Imperial will continue its
dialogue with the federal government on
a fiscal framework for the project before
making decisions on re-staffing the
project team and resuming engineering
and execution planning. The NEB permit
requires construction to begin by 2015.
The project is designed to bring to market
gas from three previously discovered,
on-shore gas fields in the Mackenzie River
delta area of Northern Canada, together
comprising about six trillion cubic feet
of estimated recoverable gas resource.
Imperial’s wholly owned Taglu field
represents about half of this resource.
Imperial is operator of the project.
(cid:90) In 2010, Imperial and ExxonMobil Canada increased their acreage position in the
Horn River shale gas play in northeast British Columbia. The companies hold one
of the industry’s largest acreage positions in the basin.
2010 Annual Report Imperial Oil Limited
15
One of Imperial’s key strengths is its
relationship with ExxonMobil and the
combined ability to take on opportunities
in such potentially promising but
technically challenging frontier areas.
After an extensive 3-D seismic survey
was completed in 2008, the companies
began collecting baseline environmental
data required for eventual well permitting.
Imperial is participating in the NEB’s
comprehensive review of offshore
Arctic drilling, and further exploratory
work will not take place until regulatory
requirements are defined.
Resource base increases by
almost 900 million barrels of
oil equivalent
Imperial’s total proved and non-proved
resource base is more than 15 billion
barrels of oil equivalent, or more than
170 years worth of production at current
levels – an industry-leading position in
terms of size, quality and diversity.
In 2010, proved reserves increased by
125 million barrels of oil equivalent,
more than offsetting production of
89 million barrels of oil equivalent in the
year. The principal increases were related
to infill drilling and additional production
performance data at Cold Lake.
Athabasca
Imperial holds extensive undeveloped
acreage with promising mining and in
situ development opportunities in the
Athabasca region of Alberta. In 2010,
the company furthered exploration in
these holdings and drilled 65 oil sands
evaluation wells and acquired 2-D and
3-D seismic data.
Beaufort exploration
In July, Imperial, ExxonMobil Canada
and BP Exploration Operating Company
Limited (BP) executed an agreement
to cross-convey interests in respective
Beaufort Sea Exploration Licences. As
a result of the cross-conveyance, Imperial
now holds a 25 percent interest in about
a million acres of attractive exploration
acreage in the Beaufort Sea area of
Northern Canada, approximately
120 kilometres north of the Mackenzie
Delta. The agreement assigns Imperial
or ExxonMobil as operator and allows for
cost sharing, optimizing efficiencies for
operating bases, seismic acquisition and
processing, and potential drilling plans.
Net proved developed and undeveloped reserves (a) (b) (c) (f)
Liquids (d)
Natural
gas
Synthetic
oil (Syncrude)
Bitumen
(Cold Lake and Kearl)
Total oil-
equivalent
basis (e)
millions of barrels
billions of cubic feet
millions of barrels
millions of barrels
millions of barrels
71
82
64
63
57
710
635
593
590
576
718
694
734
691
681
741
717
1 437
1 661
1 715
1 648
1 599
2 334
2 513
2 549
year ended
2006
2007
2008
2009
2010
(a) Net reserves are the company’s share of reserves after deducting the shares of mineral owners or
governments or both. All reported reserves are located in Canada.
(b) For reserves calculated under National Instrument 51-101 (NI 51-101) requirements, please refer to the
company’s filing of its NI 51-101 data on the System for Electronic Document Analysis and Retrieval (SEDAR)
at www.sedar.com.
(c) Prior to 2009, synthetic oil and mined bitumen reserves were reported separately as mining reserves in the
company’s Form 10-K. In 2008, the company reported for the first time 807 million barrels of mined bitumen
reserves, net share, from the Kearl project.
(d) Liquids include crude, condensate and natural gas liquids (NGLs).
(e) Gas converted to oil-equivalent at 6 million cubic feet per one thousand barrels.
(f) Reserves were calculated based upon SEC’s pricing requirement. Beginning with the 2009 year-end,
reserves were calculated based on amended SEC’s pricing requirement, which applied the average of the
first-day-of-the-month price for each month during the last 12-month period.
On track
The Kearl oil sands project is on
track for a late 2012 start-up.
CHAIRMAN’S LETTER HIGHLIGHTS UPSTREAM DOWNSTREAM CHEMICAL FINANCIAL SUMMARY
16
2010 Annual Report Imperial Oil Limited
Cost management and operational excellence
DOWNSTREAM
Imperial’s results remained
strong in the downstream
industry in Canada despite a
continued challenging economic
environment in 2010.
Imperial is the largest petroleum refiner
in Canada with a significant market
share in all major petroleum product
sectors, including retail, industrial and
wholesale, and finished lubricants.
The company’s competitive advantage
comes from having leading refining
and marketing operations in Eastern,
Central and Western Canada.
Imperial also has the refining industry’s
greatest conversion capacity (the
ability to convert less valuable crude
oil components to higher-valued
products). This enables Imperial to
take advantage of lower-valued crude
oils, which helps improve margins and
reduce overall costs.
Operational excellence
encompasses all aspects of
our activities, including:
(cid:90) ensuring safe, environmentally
responsible operations
(cid:90) high business standards and
controls – including the successful
management of credit exposure
(cid:90) improving reliability
(cid:90) increasing margins
(cid:90) energy efficiency – both to
reduce costs and greenhouse
gas emissions
(cid:90) efficient project execution
(cid:90) product quality
Although markets for refined products
in Canada are relatively mature and
are not likely to experience significant
growth as motor vehicle efficiency
continues to improve and mandates
for biofuels add to supply, Imperial
continues to stay competitive. The
company’s strategy for earnings
growth focuses on striving for best-
in-class cost and excellent operations,
while providing quality, valued products
and services at competitive prices.
are keys to competitive advantage
Imperial continued its long-standing
and effective program of upgrading
its retail network in the major urban
markets, while its dealers and distributors
continued to invest primarily in non-urban
centres. These investments provide the
customer with a premium offer, including
the latest pay-at-the-pump technology,
modern On the Run convenience stores,
food services and car washes, anchored
by strategic brand partnerships with
Tim Hortons, Aeroplan and Royal Bank.
The On the Run franchise program
continued its growth, reaching an
important milestone of 50 franchise
stores in 2010, bringing the total number
of stores in the chain to 424.
Refining and supply delivers
improved results
Improvements in refinery reliability and
lower maintenance resulted in improved
financial performance for the refining
and supply business compared with
2009. In addition, the business set best-
ever records for energy efficiency, spill
performance and flaring, with flaring
down 36 percent from 2009.
Downstream earnings were $442 million,
up from $278 million in 2009, due
largely to improved refinery operations
and strengthening of volumes in the
recovering economy.
Total refinery throughput of
444,000 barrels a day was up from
413,000 barrels a day in 2009, reflecting
a period of lower maintenance activity,
with average refinery utilization at
88 percent, up six percent. Favourable
market conditions and improved reliability
through the year helped to increase
volumes. Total net petroleum sales were
442,000 barrels a day, compared with
409,000 barrels a day in 2009.
Return on capital employed was
13.2 percent, and cash flow from
operating activities and asset sales
totalled $896 million.
Capital expenditures in Downstream
totalled $184 million in 2010 and
were focused on refinery projects to
improve reliability, feedstock flexibility,
energy efficiency, and environmental
performance as well as continuing
upgrades to the retail network. Capital
expenditures in 2011 will be about
$175 million and will focus on improving
refinery reliability to ensure sustainable
operation, reducing air emissions and
continuing upgrades to the retail network,
including new point-of-sale technology.
At a glance
2010
2009
2008
2007
2006
Net income (millions of dollars)
442
278
796
921
624
Cash flow from operating activities and
asset sales (millions of dollars)
Refinery throughput (thousands of barrels a day)
Refinery utilization (percent)
Net petroleum product sales (thousands of barrels a day)*
896
444
88
442
700
413
82
409
539
446
89
438
1 180
442
88
448
562
442
88
453
Average capital employed (millions of dollars)
3 361
3 598
3 460
3 257
3 161
Return on average capital employed (percent)
Capital and exploration expenditures (millions of dollars)
13.2
184
7.7
251
23.0
232
28.3
187
19.7
361
* Net petroleum product sales do not include sales under purchases/sales contracts with the same counterparty.
2010 Annual Report Imperial Oil Limited
17
Fuels marketing volumes up
The fuels marketing business in Canada
continues to be a significant contributor
to overall profitability. The retail segment
benefited from ongoing upgrades to
the network and improvements in its
marketing offers. During 2010, Imperial
relaunched both its station locator
application, using state-of-the-art
Internet mapping technology, and its
proprietary customer loyalty program,
Esso Extra. The business also achieved
Top Tier certification for all three grades
of gasoline. In addition, with a continued
focus on cost management, Imperial
maintained its best-in-class unit
cost position.
Imperial was well positioned to benefit
from growth in product demand,
achieving all-time records for sales
volumes in the retail and aviation fuel
segments. Fuels marketing sales
volumes were 317,000 barrels a day,
up almost 14,000 barrels a day from
the previous year. Sales of home heating
oil, diesel and jet fuels increased by about
seven percent due to strengthening
demand and competitive jet fuel
volume gains.
Imperial remains one of the largest
branded retail marketers in Canada,
with about 1,850 retail sites. At the
approximately 510 company-owned
or leased sites, average productivity
increased to 7.2 million litres, up four
percent from 2009.
Simplifying the industrial
and wholesale business
In 2010, Imperial embarked on a
program to improve its industrial and
wholesale segment, the portion of
the business involved in the sale of
bulk products through Esso-branded
agents and resellers across Canada. The
program involves moving to a branded
reseller method of business and is
expected to reduce complexity and risk
in the business. The initiative will be
implemented over a number of years.
Alliance with Tim Hortons renewed
In 2010, Imperial Oil and Tim Hortons
signed a 10-year renewal agreement.
The agreement includes a commitment
to add 175 Tim Hortons locations at
Esso sites across Canada through 2019.
Tim Hortons began opening kiosks inside
Esso gas stations in 1994, and since
then, the number of sites across Canada
has grown to more than 350 locations.
Mobil-branded product sales up
The lubricants and specialties business
continued to see sales growth in Mobil-
branded products. Imperial, the Canadian
distributor for Mobil lubricants, saw
branded car engine oil sales grow
31 percent from 2009 with the full
implementation of the Mobil Super
line of engine oils in Canada, which
complemented solid Mobil 1 growth.
Focus was also on increasing the brand
presence of Mobil Delvac, a heavy-duty
diesel engine oil for commercial vehicles
that was introduced in 2009. Sales of
branded heavy-duty engine oils were up
by six percent.
Through Imperial’s relationship with
ExxonMobil, the lubricants and
specialties business gained access to
industry-leading lubrication technology
development aimed at helping customers
improve their equipment life, reduce
energy consumption and extend oil
change intervals. This, coupled with
access to global supply chain capability
and the Sarnia global customer technical
service laboratory, continues to support
Imperial’s industry-leading position in the
Canadian lubricants business.
In 2010, the lubricant base stock
manufacturing facility in Sarnia was
idled after a strategic review determined
that profitability of key units in the
manufacturing plant could be improved
by producing low-sulphur diesel fuel
instead of lubricants. In addition, the
review determined that the lubes
manufacturing plant would come under
pressure due to international competition
from large plants and the facility’s
distance to global growth markets.
Through focused project management,
the shutdown of the facility was
completed flawlessly and well ahead
of schedule, allowing Imperial to begin
realizing the benefits sooner. Lubricant
products continue to be blended
at the Sarnia Lube Oil Blend Plant
using components brought in from
other sources.
Trademarks
- Mobil, Mobil Super, Mobil 1, Delvac and the Pegasus design are
trademarks of Exxon Mobil Corporation or one of its subsidiaries.
Imperial Oil licensee.
- On the Run is a registered trademark of Exxon Mobil Corporation
in Canada. Imperial Oil licensee.
- RBC and Royal Bank are registered trademarks of Royal Bank of Canada.
- Tim Hortons is a registered trademark of the TDL Marks Corporation.
- Aeroplan is a registered trademark of Aeroplan Limited Partnership.
ANNUAL THROUGHPUT –
COMPANY-OWNED OR LEASED
RETAIL SERVICE STATIONS
millions of litres per site
8
6
4
2
0
100
75
50
25
0
2006
2007
2008
2009
2010
Site productivity has increased
14 percent since 2006.
REFINERY UTILIZATION
percent
2006
2007
2008
2009
2010
Improved reliability contributed
to refinery utilization increasing
to 88 percent in 2010.
CHAIRMAN’S LETTER HIGHLIGHTS UPSTREAM DOWNSTREAM CHEMICAL FINANCIAL SUMMARY
18
2010 Annual Report Imperial Oil Limited
Strong year for Chemical earnings
CHEMICAL
Imperial is one of Canada’s
leading producers of chemical
products with the largest market
share in North America for
polyethylene used in rotational
molding and the second largest
market share in injection molding.
In a period of high turnaround activity,
the Chemical business delivered strong
safety and environmental performance
in 2010. Proven business controls
and stringent credit management
practices supported financial results
in a challenging but improving
economic environment.
The Chemical business operates in a
competitive global marketplace that is
highly cyclical. The recent growth of
global competitors’ polymers capacity
has placed additional pressure on the
North American chemical industry.
In response, Imperial has focused its
strategy of flawless execution on the
elements of the business within its
control. For example, the company’s
integration of its Chemical operations
with its refinery in Sarnia is key to
reducing cost and maximizing value for
both the refinery and the chemical plant.
Leveraging common site infrastructure,
sharing management and efficiently
optimizing energy needs across the site
contribute significantly to lower costs.
The company has also developed
a strategy to expand its feedstock
flexibility to lower costs and increase
yields. The ability to process feedstocks
from diverse sources enables the
business to quickly respond to changes
in feedstock quality, availability and cost.
This type of demonstrated leadership in
both cost and productivity is essential
to the Chemical businesses’ sustained
ability to reliably meet its customers’
needs in any economic environment.
Return on average capital employed
was 41.8 percent, and cash flow from
operating activities and asset sales
totalled $65 million.
Total sales of petrochemical products
were 989 thousand tonnes, compared
with 1,026 thousand tonnes in 2009.
Capital expenditures in 2010 were
$10 million, compared with $15 million
in 2009. Planned expenditures in 2011
are about $10 million and will include
investments in safety initiatives, water
management system enhancements,
and reliability improvements.
Earnings from Chemical operations
were $69 million in 2010, up from
$46 million in 2009. Higher margins
across all product lines were the main
driver of the stronger earnings, partly
offset by lower volumes and higher
costs, both due to planned maintenance
work at the Sarnia facility. This activity
was well executed and included an
expansion of Sarnia’s flexibility to crack
alternative feedstocks into ethylene.
Synergies with Imperial’s Downstream
business continue to deliver benefits
through the physical integration of
the Sarnia site, joint feedstock and
facilities planning, as well as shared
manufacturing excellence networks and
corporate services. As a result, Imperial
is able to upgrade Sarnia’s component
streams to their highest value.
At a glance
Net income (millions of dollars)
Cash flow from operating activities
and asset sales (millions of dollars)
Chemical sales volumes (thousands of tonnes)
Average capital employed (millions of dollars)
Return on average capital employed (percent)
Capital and exploration expenditures (millions of dollars)
2010
2009
2008
2007
2006
69
65
989
165
41.8
10
46
67
100
97
143
183
109
162
1 026
1 021
1 121
1 085
169
27.2
15
199
50.4
13
230
42.2
11
261
54.8
13
(cid:90) The company’s integration of its Chemical operations with its refinery
in Sarnia has been key to reducing cost and maximizing value.
2010 Annual Report Imperial Oil Limited
19
Celebrating Responsible Care® for 25 years
RESPONSIBLE CARE
Since its inception, Imperial
has supported Responsible Care,
an ethic that requires companies
to follow principles that govern
the safe and environmentally
responsible handling of
chemicals throughout their
life cycle.
Three decades ago, Canadian chemical
companies found themselves at a
crossroads. For years, the companies
had made products that improved quality
of life for Canadians. But as Canadians
became more concerned about the
potential for large-scale safety incidents
as well as the effects of chemicals on
health and environment, public trust in
the industry began to drop.
Recognizing this, industry responded
in 1985 with Responsible Care – a new
ethic challenging companies to pay
more attention to the public’s concerns
and assume greater stewardship for
their products and operations. Led by
the Canadian Chemical Producers’
Association (today’s Chemistry
Industry Association of Canada, CIAC),
Responsible Care required member
companies to follow new principles to
govern the safe and environmentally
responsible handling of chemicals
throughout their life cycle. The
association introduced six codes of
practice including requirements for
process safety, emergency response
and hazardous waste management. As
well, starting in the early 1990s, member
companies were required to be verified
every three years by external teams
made up of two industry experts and
two public stakeholders to determine
if they continued to meet Responsible
Care requirements. The goal of the ethic
was to “do the right thing and be seen to
do the right thing” and to “be open and
responsive to public concerns.”
(cid:90) As a member of the Chemistry Industry Association of Canada (CIAC), Imperial
Oil’s Chemical division not only supports Responsible Care, but has also played
an important role in championing the initiative over the last 25 years. Started in
Canada, Responsible Care has now been embraced by the chemical industry in
54 countries worldwide.
It was an important move forward for
the industry. And Imperial Oil’s Chemical
division played a leadership role from
the start.
“Over the years, Imperial Oil’s Chemical
division’s commitment to Responsible
Care has been outstanding,” says
Brian Wastle, CIAC’s vice-president of
Responsible Care. “They’ve been one
of the pioneers in helping to develop the
ethic. They’ve really embraced the idea
of driving this initiative forward.”
In the late 1980s and throughout
the following two decades, Imperial
executives have taken an active part
on the Canadian association’s board,
helping to shape the ethic and new codes
of practice. In 1993, the first business
to volunteer to undergo verification
was Imperial’s agricultural chemical
site at Redwater, Alberta. Later, in
1998, the company’s chemical plant
in Sarnia was verified. Over the years,
Responsible Care expectations became
closely integrated into the Chemical’s
business practices. In December
2010, a new external team started the
fourth verification of the company’s
commitment to Responsible Care. Their
work is planned to be done in the first
quarter of 2011.
Imperial has continued to take a strongly
supportive role, working with industry
peers over the last two years to update
the ethic and codes of practice to meet
changing expectations. Adopted in 2010
by CIAC, the revised ethic will require
that member companies dedicate
themselves, their technology and their
business practices to sustainability –
the ongoing betterment of society, the
environment and the economy. One
result is a set of new codes requiring
companies to assess the sustainability
of their products and processes, improve
resource conservation and energy
efficiency, and ensure the responsible use
of raw material through to end products.
In 2010, Imperial carried out a gap
analysis against the new codes. While
the analysis confirmed that the business
largely meets the new requirements,
there are some improvement
opportunities. The Sarnia plant will be
assessed against the revised ethic when
it undergoes reverification in 2013.
CHAIRMAN’S LETTER HIGHLIGHTS UPSTREAM DOWNSTREAM CHEMICAL FINANCIAL SUMMARY
20
2010 Annual Report Imperial Oil Limited
Global demand for
natural gas continues to grow
A fuel of the future: natural gas
As a company, our challenge
is to responsibly provide the
energy that Canada and the world
need. Meeting this challenge
requires integrated solutions that
can expand supplies, increase
efficiency and mitigate emissions.
Developing unconventional sources
of natural gas in Canada, such as
our promising shale gas play in
northeast British Columbia, is one of
our challenges. At Imperial, we are
committed to advancing solutions
through technological innovation and new
energy investments in order to continue
to provide fuel efficiently and responsibly.
At home and around the world, natural
gas is proving to be an ideal fuel to help
meet the public’s increasing demand
for energy that is clean, readily available
and abundant.
In the coming decades, natural gas is
expected to act as a transition fuel for
generating electricity as the world moves
away from its reliance on coal, a more
carbon-intensive fuel, to renewable
sources of energy.
TECHNOLOGY
increase efficiency
reduce emissions
expand supply
the history of gas
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Gas for lighting
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Gas for heating and cooking
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Gas for industry and power
2010 Annual Report Imperial Oil Limited
21
Natural gas began as a source
for lighting, cooking and heating.
Today, it is seen as the logical
choice to replace coal as the fuel
to generate electricity.
A logical
choice
100
80
60
40
20
0
NORTH AMERICAN
GAS DEMAND BY SECTOR
billions of cubic feet a day
GLOBAL ELECTRICITY
GENERATION BY
ENERGY SOURCE
Petawatt hours
30
20
10
0
1970
1985
2000
2015
2030
1970
1985
2000
2015
2030
Power generation
Industrial
Residential/commercial
Renewables
Nuclear
Coal
Gas
Liquids
(cid:90)
Increased use in electricity generation drives natural gas demand growth.
Demand for electricity on the rise
Projecting the future mix of fuels for
power generation is a complex task
with many variables. How these fuels
will compete economically will dictate
which fuel utilities and power generators
around the world will turn to for use at
existing plants and those to be built.
Global demand for natural gas
continues to grow
Through 2030, there will likely be a shift
away from coal toward natural gas, as
well as nuclear and renewable fuels. This
will be driven by environmental policies,
including ones that seek to reduce GHGs
by putting a cost on carbon emissions.
In North America, demand for natural
gas is expected to grow by about
1.2 percent a year over the next 20 years
because of its ample supply on the
continent, existing infrastructure and
low greenhouse gas emissions intensity.
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Gas to reduce emissions
22
2010 Annual Report Imperial Oil Limited
FINANCIAL SUMMARY
Independent auditors’ report
To the Shareholders of Imperial Oil
Limited:
We have audited, in accordance with
the standards of the Public Company
Accounting Oversight Board (United
States), the financial position of Imperial
Oil Limited and its subsidiaries as of
December 31, 2010, and 2009, and the
results of their operations and their cash
flows for each of the three years in the
period ended December 31, 2010, and in
our report dated February 25, 2011, we
expressed an unqualified opinion thereon.
The consolidated financial statements
referred to above (not presented herein)
appear in Appendix A to the Management
Proxy Circular for the 2011 annual
meeting of shareholders of the Company.
In our opinion, the information set
forth in the accompanying condensed
consolidated financial statements (pages
22 to 25) is fairly stated, in all material
respects, in relation to the consolidated
financial statements from which it has
been derived.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Calgary, Alberta, Canada
February 25, 2011
Summary of accounting policies and practices
The company’s accounting and financial reporting fairly reflect its straightforward
business model involving the extracting, refining and marketing of hydrocarbons and
hydrocarbon-based products. The summary financial statements have been prepared
in accordance with generally accepted accounting principles of the United States of
America (GAAP). The summary financial statements include certain estimates that
reflect management’s best judgment. All amounts are in Canadian dollars unless
otherwise indicated.
The summary financial statements include the accounts of Imperial Oil Limited and
its subsidiaries. Intercompany accounts and transactions are eliminated. Subsidiaries
include those companies in which Imperial has both an equity interest and the
continuing ability to unilaterally determine strategic, operating, investing and financing
policies. A significant portion of the company’s Upstream activities is conducted jointly
with other companies. The accounts reflect the company’s share of undivided interest
in such activities, including its 25 percent interest in the Syncrude joint venture and its
nine percent interest in the Sable offshore energy project as well as its 70.96 percent
interest in the Kearl project, which is currently under development.
Revenues associated with sales of crude oil, natural gas, petroleum and chemical
products are recognized when the products are delivered and title passes to
the customer.
Inventories of crude oil, products and merchandise are carried at the lower of current
market value or cost (generally determined under the last-in, first-out method – LIFO).
The company does not use financing structures for the purpose of altering
accounting outcomes or removing debt from the balance sheet. The company does
not use derivative instruments to speculate on the future direction of currency or
commodity prices.
The company’s exploration and production activities are accounted for under the
“successful efforts” method. Depreciation, depletion and amortization are primarily
determined under either the unit-of-production method or the straight-line method.
Unit-of-production rates are based on the amount of proved developed reserves of oil
and gas that are estimated to be recoverable from existing facilities. The straight-line
method is based on estimated asset service life.
The company incurs retirement obligations for certain assets at the time they are
installed. The fair values of these obligations are recorded as liabilities on a discounted
basis and are accreted over time for the change in their present value. The costs
associated with these liabilities are capitalized as part of the related assets and
depreciated. Liabilities for environmental costs are recorded when it is probable that
obligations have been incurred and the amounts can be reasonably estimated.
The company recognizes the underfunded or overfunded status of defined benefit
pension and other post-retirement plans as a liability or asset in the balance sheet with
the offset in shareholders’ equity, net of deferred taxes.
A variety of claims have been made against Imperial Oil and certain of its consolidated
subsidiaries in a number of pending lawsuits and tax disputes. For further information
on tax contingencies and litigation, see Notes 4 and 10 to the Consolidated Financial
Statements in Appendix A of Imperial Oil’s 2011 Management Proxy Circular.
The company awards share-based compensation to employees in the form of
restricted stock units. Compensation expense is measured each reporting period
based on the company’s current stock price and is recorded in the consolidated
statement of income over the requisite service period of each award.
Further information on the company’s accounting policies and practices can be found
in Appendix A of Imperial Oil’s 2011 Management Proxy Circular (Critical Accounting
Policies and Note 1 to the Consolidated Financial Statements).
2010 Annual Report Imperial Oil Limited
23
SUMMARY STATEMENT OF INCOME (U.S. GAAP)
millions of Canadian dollars
For the years ended December 31
Revenues and other income
Operating revenues (a) (b)
Investment and other income
Total revenues and other income
Expenses
Exploration
Purchases of crude oil and products (c)
Production and manufacturing (d)
Selling and general
Federal excise tax (a)
Depreciation and depletion
Financing costs
Total expenses
Income before income taxes
Income taxes
Net income
Per share information (Canadian dollars)
Net income per common share – basic
Net income per common share – diluted
Dividends
2010
2009
2008
24 946
146
25 092
191
14 811
3 996
1 070
1 316
747
7
21 292
106
21 398
153
11 934
3 951
1 106
1 268
781
5
31 240
339
31 579
132
18 865
4 228
1 038
1 312
728
–
22 138
19 198
26 303
2 954
2 200
5 276
744
621
1 398
2 210
1 579
3 878
2.61
2.59
0.43
1.86
1.84
0.40
4.39
4.36
0.38
(a) Operating revenues include federal excise tax of $1 316 million (2009 – $1 268 million, 2008 – $1 312 million).
(b) Operating revenues include amounts from related parties of $2 250 million (2009 – $1 699 million, 2008 – $2 150 million).
(c) Purchases of crude oil and products include amounts from related parties of $2 828 million (2009 – $3 111 million, 2008 – $4 729 million).
(d) Production and manufacturing expenses include amounts to related parties of $233 million (2009 – $217 million, 2008 – $169 million).
The information in the Summary Statement of Income (for 2008 to 2010), the Summary Balance Sheet (for 2009 and 2010), and the
Summary Statement of Cash Flows (for 2008 to 2010), shown on pages 23 through 25, corresponds to the information in the Consolidated
Statement of Income, the Consolidated Balance Sheet, and the Consolidated Statement of Cash Flows in the financial statements of
Imperial Oil’s 2011 Management Proxy Circular. For complete consolidated financial statements, including notes, please refer to Appendix A
of Imperial Oil’s 2011 Management Proxy Circular. See also Management’s Discussion and Analysis of Financial Condition and Results of
Operations and other information in Appendix A of the 2011 Management Proxy Circular.
CHAIRMAN’S LETTER HIGHLIGHTS UPSTREAM DOWNSTREAM CHEMICAL FINANCIAL SUMMARY
24
2010 Annual Report Imperial Oil Limited
SUMMARY BALANCE SHEET (U.S. GAAP)
millions of Canadian dollars
At December 31
Assets
Current Assets
Cash
Accounts receivable, less estimated doubtful amounts
Inventories of crude oil and products
Materials, supplies and prepaid expenses
Deferred income tax assets
Total current assets
Long-term receivables, investments and other long-term assets
Property, plant and equipment, less accumulated depreciation and depletion
Goodwill
Other intangible assets, net
Total assets
Liabilities
Current liabilities
Notes and loans payable
Accounts payable and accrued liabilities (a)
Income taxes payable
Total current liabilities
Long-term debt (b)
Other long-term obligations
Deferred income tax liabilities
Total liabilities
Commitments and contingent liabilities
Shareholders' equity
Common shares at stated value (c)
Earnings reinvested
Accumulated other comprehensive income
Total shareholders' equity
2010
2009
267
2 000
527
246
498
3 538
870
15 905
204
63
513
1 714
564
247
467
3 505
854
12 852
204
58
20 580
17 473
229
3 470
878
4 577
527
2 753
1 546
9 403
109
2 811
848
3 768
31
2 839
1 396
8 034
1 511
11 090
(1 424)
11 177
1 508
9 252
(1 321)
9 439
Total liabilities and shareholders' equity
20 580
17 473
(a) Accounts payable and accrued liabilities include amounts to related parties of $455 million (2009 – $59 million).
(b) Long-term debt includes amounts to related parties of $500 million (2009 – nil).
(c) Number of common shares outstanding was 848 million (2009 – 848 million).
The information in the Summary Statement of Income (for 2008 to 2010), the Summary Balance Sheet (for 2009 and 2010), and the
Summary Statement of Cash Flows (for 2008 to 2010), shown on pages 23 through 25, corresponds to the information in the Consolidated
Statement of Income, the Consolidated Balance Sheet, and the Consolidated Statement of Cash Flows in the financial statements of
Imperial Oil’s 2011 Management Proxy Circular. For complete consolidated financial statements, including notes, please refer to Appendix A
of Imperial Oil’s 2011 Management Proxy Circular. See also Management’s Discussion and Analysis of Financial Condition and Results of
Operations and other information in Appendix A of the 2011 Management Proxy Circular.
2010 Annual Report Imperial Oil Limited
25
SUMMARY STATEMENT OF CASH FLOWS (U.S. GAAP)
millions of Canadian dollars
Inflow/(outflow)
For the years ended December 31
Operating activities
Net income
Adjustments for non-cash items:
Depreciation and depletion
(Gain)/loss on asset sales
Deferred income taxes and other
Changes in operating assets and liabilities:
Accounts receivable
Inventories and prepaids
Income taxes payable
Accounts payable
All other items – net (a)
2010
2009
2008
2 210
1 579
3 878
747
(95)
152
(289)
38
30
651
(237)
781
(45)
(61)
(261)
42
(650)
271
(65)
728
(241)
387
679
(159)
–
(798)
(211)
Cash from (used in) operating activities
3 207
1 591
4 263
Investing activities
Additions to property, plant and equipment and intangibles
(3 856)
(2 285)
(1 231)
Proceeds from asset sales
Loans to equity company
Cash from (used in) investing activities
Financing activities
Short-term debt – net
Long-term debt issued
Reduction in capitalized lease obligations
Issuance of common shares under stock option plan
Common shares purchased
Dividends paid
Cash from (used in) financing activities
Increase (decrease) in cash
Cash at beginning of year
Cash at end of year (b)
144
3
67
2
(3 709)
(2 216)
120
500
(3)
3
(8)
(356)
256
(246)
513
267
–
–
(4)
1
(492)
(341)
(836)
(1 461)
1 974
513
272
(2)
(961)
–
–
(3)
7
(2 210)
(330)
(2 536)
766
1 208
1 974
(a) Includes contribution to registered pension plans of $421 million (2009 – $180 million, 2008 – $165 million).
(b) Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all highly liquid securities with maturity of three months or less when purchased.
The information in the Summary Statement of Income (for 2008 to 2010), the Summary Balance Sheet (for 2009 and 2010), and the
Summary Statement of Cash Flows (for 2008 to 2010), shown on pages 23 through 25, corresponds to the information in the Consolidated
Statement of Income, the Consolidated Balance Sheet, and the Consolidated Statement of Cash Flows in the financial statements of
Imperial Oil’s 2011 Management Proxy Circular. For complete consolidated financial statements, including notes, please refer to Appendix A
of Imperial Oil’s 2011 Management Proxy Circular. See also Management’s Discussion and Analysis of Financial Condition and Results of
Operations and other information in Appendix A of the 2011 Management Proxy Circular.
CHAIRMAN’S LETTER HIGHLIGHTS UPSTREAM DOWNSTREAM CHEMICAL FINANCIAL SUMMARY
26
2010 Annual Report Imperial Oil Limited
SHARE OWNERSHIP, TRADING AND PERFORMANCE
Share ownership
Average number outstanding, weighted monthly (thousands)
Number of shares outstanding at December 31 (thousands)
Shares held in Canada at December 31 (percent)
Number of registered shareholders at December 31 (a)
Number of shareholders registered in Canada
Shares traded (thousands)
Share prices (dollars) (b)
Toronto Stock Exchange
High
Low
Close at December 31
NYSE Amex (U.S. dollars)
High
Low
Close at December 31
Net income per share (dollars)
– basic
– diluted
Price ratios at December 31
Share price to net earnings (c)
Dividends declared (d)
Total (millions of dollars)
Per share (dollars)
2010
2009
2008
2007
2006
847 609
847 599
10.8
12 909
11 430
849 760
847 599
10.8
13 157
11 621
882 604
859 402
11.1
13 206
11 620
928 527
903 263
12.1
13 108
11 450
975 128
952 988
13.0
13 561
11 844
212 188
318 055
477 574
292 888
321 245
43.50
36.95
40.58
43.54
35.18
40.52
2.61
2.59
49.11
35.95
40.66
43.13
28.44
38.66
1.86
1.84
62.54
28.79
40.99
63.08
23.84
33.72
4.39
4.36
56.26
37.40
54.62
61.48
31.87
54.78
3.43
3.41
45.20
34.31
42.93
40.38
29.99
36.83
3.12
3.11
15.7
22.1
9.4
16.0
13.8
364
0.43
340
0.40
334
0.38
324
0.35
311
0.32
(a) Exxon Mobil Corporation owns 69.6 percent of Imperial’s shares.
(b) Imperial’s shares are listed on the Toronto Stock Exchange. The company’s shares also trade in the United States of America on the NYSE Amex LLC. Imperial has
unlisted privileges on the NYSE Amex LLC, a subsidiary of NYSE Euronext. The symbol on these exchanges for Imperial’s common shares is IMO. Share prices were
obtained from stock exchange records. U.S. dollar share price presented is based on consolidated U.S. market data.
(c) Closing share price at December 31 at the Toronto Stock Exchange, divided by net income per share – diluted.
(d) The fourth quarter dividend is paid on January 1 of the succeeding year.
Career employees
2010
4 969
2009
5 015
2008
4 843
2007
4 785
2006
4 869
2010 Annual Report Imperial Oil Limited
27
FREQUENTLY USED TERMS
Listed below are definitions of several of Imperial’s key business and financial performance measures. The definitions are provided to
facilitate understanding of the terms and how they are calculated.
Capital employed
Capital employed is a measure of net investment. When viewed from the perspective of how capital is used by the business, it includes the
company’s property, plant and equipment and other assets, less liabilities, excluding both short-term and long-term debt. When viewed
from the perspective of the sources of capital employed in total for the company, it includes total debt and equity. Both of these views
include the company’s share of amounts applicable to equity companies, which the company believes should be included to provide a more
comprehensive measurement of capital employed.
millions of dollars
2010
2009
2008
2007
2006
Business uses: asset and liability perspective
Total assets
Less: total current liabilities excluding notes and loans payable
total long-term liabilities excluding long-term debt
Imperial's share of equity company debt
Add:
Total capital employed
Total company sources: debt and equity perspective
Notes and loans payable
Long-term debt
Shareholders' equity
Add:
Imperial's share of equity company debt
Total capital employed
20 580
(4 348)
(4 299)
33
11 966
229
527
11 177
33
11 966
17 473
(3 659)
(4 235)
36
9 615
109
31
9 439
36
9 615
17 035
(4 084)
(3 743)
40
9 248
109
34
9 065
40
9 248
16 287
(4 833)
(3 385)
50
8 119
108
38
7 923
50
8 119
16 141
(4 270)
(3 028)
55
8 898
1 078
359
7 406
55
8 898
Return on average capital employed (ROCE)
ROCE is a financial performance ratio. From the perspective of the business segments, ROCE is annual business-segment net income divided
by average business-segment capital employed (an average of the beginning and end-of-year amounts). Segment net income includes
Imperial’s share of segment net income of equity companies, consistent with the definition used for capital employed, and excludes the cost
of financing. The company’s total ROCE is net income excluding the after-tax cost of financing divided by total average capital employed. The
company has consistently applied its ROCE definition for many years and views it as the best measure of historical capital productivity in a
capital-intensive, long-term industry to both evaluate management’s performance and demonstrate to shareholders that capital has been used
wisely over the long term. Additional measures, which are more cash flow based, are used to make investment decisions.
millions of dollars
Net income
Financing costs (after tax), including Imperial's share
of equity companies
Net income excluding financing costs
Average capital employed
Return on average capital employed (percent)
2010
2 210
2
2 212
10 791
20.5
2009
1 579
2
1 581
9 432
16.8
2008
3 878
2
3 880
8 684
44.7
2007
3 188
18
3 206
8 509
37.7
2006
3 044
10
3 054
8 515
35.9
Cash flow from operating activities and asset sales
Cash flow from operating activities and asset sales is the sum of the net cash provided by operating activities and proceeds from asset
sales reported in the consolidated statement of cash flows. This cash flow reflects the total sources of cash both from operating the
company’s assets and from the divesting of assets. The company employs a long-standing and regular disciplined review process to ensure
that all assets are contributing to the company’s strategic objectives. Assets are divested when they no longer meet these objectives or are
worth considerably more to others. Because of the regular nature of this activity, management believes it is useful for investors to consider
sales proceeds together with cash provided by operating activities when evaluating cash available for investment in the business and
financing activities, including shareholder distributions.
millions of dollars
Cash from operating activities
Proceeds from asset sales
Total cash flow from operating activities and asset sales
2010
3 207
144
3 351
2009
1 591
67
1 658
2008
4 263
272
4 535
2007
3 626
279
3 905
2006
3 587
212
3 799
CHAIRMAN’S LETTER HIGHLIGHTS UPSTREAM DOWNSTREAM CHEMICAL FINANCIAL SUMMARY
28
2010 Annual Report Imperial Oil Limited
Version française du rapport
Pour obtenir la version française du rapport
de la Compagnie Pétrolière Impériale Ltée,
veuillez écrire à la division des Relations
avec les investisseurs, Compagnie
Pétrolière Impériale Ltée, P.O. Box 2480,
Station ’M’, Calgary, Alberta, Canada
T2P 3M9.
Included in this Summary Annual Report
are financial and operating highlights and
summary financial statements. For
complete financial statements, including
notes, please refer to the Management
Proxy Circular for Imperial Oil’s 2011 annual
meeting. The Management Proxy Circular
also includes Management’s Discussion and
Analysis of Financial Condition and Results
of Operations. The Investors section of
Imperial Oil’s website (www.imperialoil.ca)
contains the Management Proxy Circular.
INFORMATION FOR INVESTORS
Head office
Imperial Oil Limited
P.O. Box 2480, Station ‘M’
Calgary, Alberta
Canada T2P 3M9
Telephone: 1-800-567-3776
Fax: 1-800-367-0585
Annual meeting
The annual meeting of shareholders will
be held on Thursday, April 28, 2011 at
9:30 a.m. local time at the Sheraton Suites
Calgary Eau Claire, Wildrose Ballroom,
255 Barclay Parade S.W.,
Calgary, Alberta, Canada.
Shareholder account matters
To change your address, transfer shares,
eliminate multiple mailings, elect to receive
dividends in U.S. funds, have dividends
deposited directly into accounts at financial
institutions in Canada that provide electronic
fund transfer services, enrol in the dividend
reinvestment and share purchase plan, or
enrol for electronic delivery of shareholder
reports, please contact Imperial’s transfer
agent, CIBC Mellon Trust Company.
CIBC Mellon Trust Company
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Ontario, Canada M5C 2W9
Telephone: 1-800-387-0825 (from
Canada or U.S.A.) or 416-643-5500
Fax: 416-643-5501
E-mail: inquiries@cibcmellon.com
Website: www.cibcmellon.com
United States resident shareholders may
transfer their shares through BNY Mellon
Shareowner Service.
BNY Mellon Shareowner Service
480 Washington Boulevard – 27th Floor
Jersey City, New Jersey
U.S.A. 07310-1900
Telephone: 1-800-589-9836
E-mail: shrrelations@bnymellon.com
Website: www.bnymellon.com
Dividend reinvestment and share
purchase plan
This plan provides shareholders with
two ways to add to their shareholdings
at a reduced cost. The plan enables
shareholders to reinvest their cash
dividends in additional shares at an average
market price. Shareholders can also invest
between $50 and $5,000 each calendar
quarter in additional shares at an average
market price.
Funds directed to the dividend reinvestment
and share purchase plan are used to buy
existing shares on a stock exchange rather
than newly issued shares.
Imperial online
Imperial publishes a wide range of
information on its website, including annual
and interim reports, SEC filings, proxy
circulars and forms, key dates for investors
and shareholders, as well as other
information that should be helpful to our
shareholders in the day-to-day management
of their shares. Should you not be able to
find the information you are looking for,
please contact customer service at
1-800-567-3776.
Website: www.imperialoil.ca
Investor information
Information is also available by writing to
the investor relations manager at Imperial’s
head office or by:
E-mail: investor.relations@esso.ca
Telephone: 403-237-4538
Fax: 403-237-2075
For all other shareholder services
related inquiries, please contact:
Brian W. Livingston
Vice-president, general counsel
and corporate secretary
Telephone: 403-237-2915
Fax: 403-237-2490
2010 Annual Report Imperial Oil Limited
29
DIRECTORS AND OFFICERS
Board of directors
Krystyna T. Hoeg
Corporate director
Toronto, Ontario
Bruce H. March
Chairman, president and
chief executive officer
Imperial Oil Limited
Calgary, Alberta
Jack M. Mintz
Palmer Chair in Public Policy
University of Calgary
Calgary, Alberta
Robert C. Olsen
Executive vice-president
ExxonMobil Production Company
Houston, Texas
David S. Sutherland
Corporate director
Waterloo, Ontario
Sheelagh D. Whittaker
Corporate director
London, England
Victor L. Young
Corporate director
St. John’s, Newfoundland and Labrador
Other officers
Paul J. Masschelin
Senior vice-president
finance and administration
and treasurer
T. Glenn Scott
Senior vice-president
resources division
Sean R. Carleton
Controller
Brian W. Livingston
Vice-president
general counsel
and corporate secretary
Audit committee
V.L. Young, chair
S.D. Whittaker, vice-chair
K.T. Hoeg
J.M. Mintz
D.S. Sutherland
Executive resources committee
K.T. Hoeg, chair
V.L. Young, vice-chair
J.M. Mintz
R.C. Olsen
D.S. Sutherland
S.D. Whittaker
Nominations and corporate
governance committee
S.D. Whittaker, chair
J.M. Mintz, vice-chair
K.T. Hoeg
R.C. Olsen
D.S. Sutherland
V.L. Young
Environment, health
and safety committee
J.M. Mintz, chair
D.S. Sutherland, vice-chair
K.T. Hoeg
R.C. Olsen
S.D. Whittaker
V.L. Young
Contributions committee
D.S. Sutherland, chair
K.T. Hoeg, vice-chair
B.H. March
J.M. Mintz
R.C. Olsen
S.D. Whittaker
V.L. Young
(cid:90) Imperial Oil Limited Board of Directors from left to right: David S. Sutherland,
Sheelagh D. Whittaker, Bruce H. March, Jack M. Mintz, Victor L. Young,
Krystyna T. Hoeg and Robert C. Olsen.
This report is printed on 30-percent
post-consumer waste fibre that is certified
by the Forest Stewardship Council.
Imperial Oil is one of Canada’s largest corporations and a leading member
of the country’s petroleum industry. The company is a major producer
of crude oil and natural gas, Canada’s largest petroleum refiner, a key
petrochemical producer and a leading marketer with a coast-to-coast
supply network that includes about 1,850 retail service stations.
Imperial Oil Limited
P.O. Box 2480, Station ‘M’
Calgary, Alberta T2P 3M9