Strong business performance and resilience
deliver industry-leading shareholder value
2014
Letter to
Shareholders
2014
Letter to
Shareholders
Imperial’s strong
financial and operating
performance in 2014
can be attributed to our
competitively advantaged
assets, integrated business
model and focus on the
fundamentals.
Most notable among our achievements
last year was continued strong performance
at our flagship Cold Lake in situ operation,
ramp-up at our Kearl oil sands mine, record
refinery capacity utilization and significant
growth in petroleum product sales.
Net income in 2014 was $3.8 billion,
the second highest in company history,
up 34 percent from 2013. Return on
average capital employed was an industry-
leading 13.7 percent and cash flow from
operating activities and asset sales was
$5.3 billion, up $1.8 billion. Capital and
exploration expenditures totaled $5.7
billion, driven primarily by Upstream growth
projects at Kearl and Nabiye.
Imperial’s performance in 2014 resulted in
an annual shareholder return of 7.5 percent,
out-performing both the S&P TSX integrated
Oil and Gas Index (-6.1 percent) and our
peer group (-7.4 percent). Our strong cash
flow, combined with long-life, high-quality
assets and industry leadership across all
business lines, provides Imperial a significant
competitive advantage.
Commitment to safety, environmental
responsibility and operational excellence
The safety of our workforce, developing
our resources responsibly and ensuring
operational excellence are company-
wide priorities.
Our 2014 workforce safety performance
matched our best-ever, while working
more than 52 million hours, our highest
total on record. We continue to prioritize
safety performance and our commitment
to achieving a workplace where Nobody
Gets Hurt is unwavering. The successful
completion of maintenance turnarounds
at Kearl, Cold Lake and at the Sarnia and
Nanticoke refineries during the year without
any lost-time safety incidents underscores
our commitment to safety.
In addition, we continue to look for ways
to minimize our environmental footprint and
take into consideration the economic and
social needs within the communities where
we operate.
Long-life, high-quality Upstream assets
deliver robust results and growth
Overall Upstream net income was
$2.1 billion, $347 million higher than
2013. Total gross oil-equivalent production*
averaged 310,000 barrels per day, up
five percent from 295,000 in 2013.
Excluding the impact of conventional
Upstream asset divestments in 2014,
production was up 12 percent.
Gross production from Cold Lake averaged
146,000 barrels per day, down from
153,000 barrels in 2013. Lower volumes
were primarily due to the cyclical nature of
steaming and the impact of unplanned
third-party power outages.
Cold Lake’s Nabiye project start-up occurred
throughout December with bitumen
production expected in the first quarter of
2015. At its peak, Nabiye will add about
40,000 barrels per day before royalties.
With a 25 percent ownership, Imperial’s
share of Syncrude’s production averaged
64,000 barrels per day, down slightly from
67,000 barrels in 2013. Priorities at Syncrude
include improving reliability and reducing
unit operating costs.
Imperial’s share of gross production from
the Kearl initial development was 51,000
barrels per day versus 16,000 in 2013.
Since start-up, improvements to equipment
reliability and operating procedures have
been made. At year end, the construction
phase of the Kearl expansion project was
essentially complete. The project is ahead of
schedule and start-up is slated for the third
quarter 2015. At capacity, the expansion
ultimately adds another 110,000 barrels per
day (78,000 Imperial’s share). Our “design
one, build multiple” approach to project
execution, as applied to Kearl expansion, is
cost-effective and captures synergies and
lessons learned.
Imperial has a long-standing practice of
reviewing all assets for their contribution in
an effort to maximize value. Consistent with
this practice, in 2014 we completed the sale
of conventional assets located at Boundary
Lake, Cynthia/West Pembina and Rocky
Mountain House for $855 million.
Record refinery utilization and higher
sales volumes drive Downstream
performance
Imperial’s Downstream businesses delivered
net income of $1.6 billion, up $542 million
versus 2013. Earnings benefitted from
improved refinery reliability, further access
to advantaged feedstocks, as well as a
weaker Canadian dollar and increased sales
volumes. Refinery throughput increased
five percent in 2014 (excluding Dartmouth)
averaging 394,000 barrels per day, with
annual capacity utilization reaching a
record high of 94 percent. Net petroleum
product sales increased seven percent to
485,000 barrels per day, consistent with our
strategy to grow sales in profitable Canadian
markets. Currently, about 1,200 of our
1,700 Esso-branded sites across Canada
operate under a branded wholesaler
model where Imperial supplies fuel to
independent parties who own and operate
retail stations. In early 2015 we announced
plans to evaluate the potential transition of
the remaining approximately 500 company-
owned Esso retail sites to our branded
wholesaler operating model.
Anchored by a world-scale polyethylene
plant, Imperial’s Chemical business achieved
record net income of $229 million in 2014,
up $67 million from 2013. This result was
achieved with strong margins across all
major product lines and processing of
cost-advantaged ethane feedstock from the
Marcellus. Total sales volumes of 953,000
tonnes were up 13,000 tonnes from 2013.
Addressing market access challenges
Upstream production growth, coupled with
delays in new pipeline projects, continued
to challenge the Canadian oil and gas
industry in 2014. To support the company’s
Upstream growth strategy, and to mitigate
uncertainties associated with pending
pipeline projects, Imperial is developing a rail
terminal near our Strathcona refinery. The
terminal, scheduled to start up in 2015, will
provide incremental transportation capacity
of up to 210,000 barrels per day, ensuring
access to the highest-value markets for
equity crude production.
Technology unlocks growth
opportunities
In 2014, Imperial invested $175 million
in research and technology to enhance
environmental performance, improve
efficiency and augment bitumen recovery.
Priorities included advancing optimization
of the extraction and paraffinic froth
treatment processes at Kearl and the
Cyclic Solvent Process (CSP), a promising
technology to enhance in situ bitumen
recovery, while reducing water use and
greenhouse gas emissions. A pilot to further
test CSP began in June 2014 at Cold Lake.
Our Solvent-Assisted Steam-Assisted
Gravity Drainage (SA-SAGD) technology,
jointly developed with ExxonMobil,
enhances bitumen recovery by adding
solvents. This technology is currently being
evaluated for commercial application.
Technology and innovation are fundamental
to unlocking the potential of future
company growth opportunities, particularly
for in situ projects, including Aspen, Corner,
Clyden and Cold Lake Midzaghe (formerly
Grand Rapids).
Resiliency to market conditions
The business environment of the past
several months, with the dramatic decline
in global crude prices, illustrates the cyclical
nature of the oil and gas business. Imperial
plans and operates its businesses with
a long-term perspective that results in
resiliency across a wide range of market
conditions. Our resiliency is achieved in
large part due to our long-life, high-quality
assets, integrated business model and
ongoing focus on business fundamentals.
Consequently, our near-term investment
plans remain largely unchanged. However,
we will continue to closely monitor and
respond to market conditions, rigorously
examining operating costs and capital
investments to maximize value in whatever
business environment we operate in.
Our workforce is a competitive
advantage
Imperial’s success is the result of hard work,
dedication and commitment to excellence
by our workforce. Collectively, we strive
to deliver industry-leading performance
in safety, operational integrity, reliability
and profitability. On behalf of the Board
of Directors and Imperial’s workforce, I
would like to thank you, our shareholders,
for your trust and confidence in our ability
to continue to deliver superior, long-term
shareholder value.
Rich Kruger
Chairman, President and CEO
*Gross production is the company’s share of production
(excluding purchases) before deduction of the mineral owner’s
or governments’ share or both.
2014 highlights
Imperial’s Business Model
- Long-life, competitively advantaged assets
- Disciplined investment, cost management
- Value chain integration and synergies
- High-impact technologies and innovation
- Operational excellence, responsible growth
Cold Lake
Gross production averaged
146,000 barrels per day [1]
Imperial’s Cold Lake operations, one
of the largest thermal in situ heavy
oil operations in the world, extracts
bitumen located 400 metres below
the surface by injecting steam into the
ground. Production at Cold Lake’s Nabiye
expansion is expected in the first quarter
2015, ultimately adding about 40,000
barrels per day of production.
[1] 100 percent Imperial-owned
[2] Imperial’s share. Jointly owned by Imperial (71 percent) and ExxonMobil Canada (29 percent)
[3] Imperial’s share. 25 percent owned by Imperial
Kearl
Gross production averaged
51,000 barrels per day [2]
Kearl, an oil sands mining operation,
has one of Canada’s highest-quality oil
sands deposits. By using our proprietary
paraffinic froth treatment technology,
we are the only oil sands operation that
produces pipeline-quality bitumen
without the need of an onsite upgrader.
With an estimated total of 4.6 billion
barrels of recoverable bitumen resource,
Kearl expansion, scheduled to start up in
the third quarter 2015, will ultimately add
about 110,000 barrels per day of capacity.
Syncrude
Gross production averaged 64,000
barrels per day [3]
Syncrude, a mining and upgrading
operation, has been operating for more
than 35 years. Improved reliability and
profitability is the focus for future growth
opportunities.
2014
Letter to
Shareholders
Chemicals
Record earnings of $229 million
Imperial is one of Canada’s leading
producers of chemical products.
By focusing on integration synergies,
operational excellence and with a
disciplined approach to investing,
Imperial’s chemical business delivered
best-ever results in 2014.
Research and growth
opportunities
Committed to innovation
Our continued investment in research
and technology helps unlock potential
new resource opportunities and allows
us to explore for, produce, refine and
market products with the highest level
of operational efficiency.
Refining
Record capacity utilization of 94%
Imperial is the largest petroleum refiner
in Canada with a significant share in all
major petroleum product market sectors.
Our competitive advantage is achieved
through record utilization and price-
advantaged feedstocks.
Fuels and lubricants
Product sales of 485,000
barrels per day
The fuels and lubricants business is a
major contributor to Imperial’s overall
downstream profitability. Imperial remains
one of the largest branded retail marketers
in Canada, providing high-quality fuel and
lubricant products across the country.
Market access
Providing incremental capacity
The new Edmonton rail facility will provide
incremental transportation capacity of
up to 210,000 barrels per day ensuring
access to the highest-value markets
throughout North America for equity
crude production.
WCC LNG
Environmental assessment
initiated
Imperial filed a project description,
required to initiate an environmental
assessment, for the west coast British
Columbia LNG project (WCC), a project
jointly owned with ExxonMobil Canada.
A final investment decision, not anticipated
in the near term, will ultimately be
based on a number of factors, including
satisfactory government and regulatory
approvals, economic competitiveness,
future market conditions and LNG sales
agreements.
Note: Gross production is the company ’s share of production (excluding purchases) before deduction of the mineral owner’s or
governments’ share or both.
2014 financial and
operating highlights
2014 Share Price Performance
Annual Return %
+10
Imperial
+7.5
0
-10
S&P TSX
Integrated
Oil & Gas
-6.1
Peer group
average
-7.4
Board of Directors
Cash flow from
operating activities
and asset sales
increased 52% to
$5.3 billion
Net earnings
increased 34% to
$3.8 billion, or
$4.45 per share
Return on average
capital employed
increased to
13.7%
Dividends increased
for the 20thconsecutive
year paying $0.52
per share
Richard M. Kruger
Krystyna T. Hoeg
Jack M. Mintz
David S. Sutherland
D. G. (Jerry) Wascom
Chairman, president and
chief executive officer
Imperial Oil Limited
Calgary, Alberta
Corporate director
Toronto, Ontario
Chair – Executive resources
committee
Vice-chair – Contributions
committee
Palmer Chair in Public
Policy University of Calgary
Calgary, Alberta
Chair – Environment, health
and safety committee
Vice-chair – Nominations
and corporate governance
committee
Corporate director
Waterloo, Ontario
Chair – Contributions
committee
Vice-chair – Environment,
health and safety
committee
Vice-president of Exxon
Mobil Corporation and
president of ExxonMobil
Refining & Supply
Company
Fairfax, Virginia
Total production
increased 5% to
310,000 gross
oil-equivalent
barrels per day
Refinery throughput
increased 5%
averaging 394,000
barrels per day
Petroleum product
sales of 485,000
barrels per day, up 7%
Capital and exploration
expenditures of
$5.7 billion focused
on major upstream
growth projects
Financial highlights (millions of Canadian dollars)
2014
2013
2012
2011
2010
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 (a)
36 231
32 722
31 053
30 474
24 946
3 785
5 256
215
2 828
3 452
272
3 766
3 371
2 210
4 906
4 803
3 351
482
1 202
6 891
6 287
1 647
1 207
27 637
21 941
16 302
13 261
10 791
267
756
Capital and exploration expenditures
5 654
8 020
5 683
4 066
4 045
Key financial ratios
Net income per share – diluted (dollars)
Return on average capital employed (percent) (a)
Return on average shareholders’ equity (percent)
Annual shareholders’ return (percent) (b)
Debt to capital (percent) (c)
Dividends declared per share (dollars)
2014
2013
2012
2011
2010
4.45
13.7
18.0
7.5
23
0.52
3.32
12.9
15.8
11.3
24
0.49
4.42
23.1
25.4
(4.8)
9
3.95
25.4
27.5
12.9
9
2.59
20.5
21.4
0.9
7
0.48
0.44
0.43
Operating highlights
2014
2013
2012
2011
2010
Gross crude oil and NGL production (thousands of barrels per day)
Gross natural gas production (millions of cubic feet per day)
Gross total production (thousands of oil-equivalent barrels per day)
282
168
310
261
201
295
250
192
282
255
254
297
247
280
294
Net proved reserves (millions of oil-equivalent barrels)
3 959
3 622
3 574
3 191
2 549
Refinery throughput (thousands of barrels per day) (d)
Petroleum product sales (thousands of barrels per day)
Chemical sales volumes (thousands of tonnes)
394
485
953
426
454
940
435
445
430
447
1 044
1 016
444
442
989
(a) Definitions can be found under “frequently used terms” of the Financial section of the Management Proxy Circular.
(b) Includes share appreciation and dividends.
(c) Definition can be found under Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Management Proxy Circular.
(d) Refinery operations at the Dartmouth refinery were discontinued on September 16, 2013.
Other Officers
B. P. (Bart) Cahir
Senior vice-president, upstream division
David G. Bailey
Treasurer
Paul J. Masschelin
Senior vice-president, finance
and administration, and controller
W. J. (Bill) Hartnett, Q.C.
Vice-president and general counsel
Bradley G. Merkel
Vice-president, fuels, lubricants
and specialties marketing
John W. Blowers
Refining manufacturing manager
Marvin E. Lamb
Director, corporate tax
Lara H. Pella
Assistant general counsel
and corporate secretary
Sheelagh D. Whittaker
Victor L. Young
Corporate director
London, England
Chair – Nominations and
corporate governance
committee
Vice-chair – Audit
committee
Corporate director
St. John’s, Newfoundland
and Labrador
Chair – Audit committee
Vice-chair – Executive
resources committee
Head office
Imperial Oil Limited
P.O. Box 2480, Station ‘M’
Calgary, Alberta T2P 3M9
Investor information
Online: imperialoil.ca
Email: investor.relations@esso.ca
Telephone: 587-476-4743
Forward-looking statements
Statements of future events or conditions in this report, including projections, targets, expectations, estimates, and business plans are forward-looking statements. Actual future results, including demand
growth and energy source mix; production growth and mix; project plans, dates, costs and capacities; production rates and resource recoveries; cost savings; product sales; financing sources; and capital and
environmental expenditures could differ materially depending on a number of factors, such as changes in the price, supply of and demand for crude oil, natural gas, and petroleum and petrochemical products;
political or regulatory events; project schedules; commercial negotiations; the receipt, in a timely manner, of regulatory and third-party approvals; unanticipated operational disruptions; unexpected technological
developments; and other factors discussed in this report and Item 1A of Imperial’s most recent Form 10-K. Forward-looking statements are not guarantees of future performance and involve a number of risks
and uncertainties, some that are similar to other oil and gas companies and some that are unique to Imperial. Imperial’s actual results may differ materially from those expressed or implied by its forward-looking
statements and readers are cautioned not to place undue reliance on them.
The term “project” as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.
Reserves and contingent resource information presented in this report are an estimate of the company’s net interest after royalties at year-end 2014, as determined by Imperial’s internal qualified reserves
evaluator. Contingent resources are those quantities of petroleum 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. Contingencies on resources may include, but are not limited to, factors such as economic, legal, environmental,
political and regulatory matters or a lack of markets. There is no certainty that it will be economically viable or technically feasible to produce any portion of the resource.
Imperial online
Visit our website at imperialoil.ca to learn more information about Imperial’s operations, including videos about our projects and a report on our corporate citizenship efforts.
For complete consolidated financial statements, including notes, please refer to the Management Proxy Circular for Imperial’s 2015 annual meeting of shareholders. The Management Proxy Circular also
includes Management’s Discussion and Analysis of Financial Condition and Results of Operations. The circular is located on the investors section of our website.
@ImperialOil /ImperialOil Imperial-Oil
Front cover image Kearl Expansion Project courtesy of Phil Fetterman, Kearl Construction Advisor