Imperial Oil Ltd (IMO)

Imperial Oil Limited is one of Canada’s largest integrated oil companies, active in all phases of the petroleum industry in Canada, including the exploration for, and production and sale of, crude oil and natural gas. The company is a major producer of crude oil, the largest petroleum refiner, a leading marketer of petroleum products, and a major producer of petrochemicals. The company also pursues lower-emission business opportunities including carbon capture and storage, hydrogen, lower-emission fuels, and lithium. The Canadian energy and petrochemical industries are highly competitive, with competition existing in the search for and development of new sources of supply, the construction and operation of crude oil, natural gas and refined products pipelines and facilities, and the refining, distribution and marketing of petroleum products and chemicals. The energy and petrochemical industries also compete with other industries in supplying the energy, fuel and chemical needs of both industrial and individual consumers.

Exxon Mobil Corporation owns approximately 69.6 percent ¹ of the outstanding shares of the company. The company’s operations are conducted in three main segments: Upstream, Downstream and Chemical. The company’s integrated business model generally reduces the company’s risk from changes in commodity prices. The company’s financial strength represents a competitive advantage of strategic importance providing it the opportunity to readily access capital markets across a range of market conditions and enables the company to take on large, long-term capital commitments in the pursuit of maximizing shareholder value.

The company generates revenue through the exploration for, and production and sale of, crude oil and natural gas in the Upstream segment; the transportation and refining of crude oil, blending of refined products and the distribution and marketing of those products in the Downstream segment; and the manufacturing and marketing of various petrochemicals in the Chemical segment. The company supplements its own production of crude oil, condensate and petroleum products with substantial purchases from a number of other sources at negotiated market prices, in addition to undertaking trading activities. The company markets petroleum products throughout Canada under well-known brand names, most notably Esso and Mobil, to all types of customers, supplying petroleum products through Esso and Mobil-branded sites and independent marketers.

The Upstream segment includes the exploration for, and production of, crude oil, natural gas, synthetic crude oil and bitumen. The company’s Upstream assets include the Kearl joint venture, in which the company holds a 70.96 percent ² participating interest, the Cold Lake in-situ heavy oil bitumen operation, and the Syncrude joint venture, in which the company holds a 25 percent ³ participating interest. In 2025, the company’s share of Kearl’s net bitumen production was about 188,000 barrels per day ⁴ and gross production was about 199,000 barrels per day ⁵. At Cold Lake, net bitumen production was about 122,000 barrels per day ⁶ and gross production was about 151,000 barrels per day ⁷. The company’s share of Syncrude’s net production was about 68,000 barrels per day ⁸ and gross production was about 79,000 barrels per day ⁹. The company’s total average daily gross production on an oil-equivalent basis was 438,000 barrels per day ¹⁰ and net production was 387,000 barrels per day ¹¹.

The Downstream segment consists of the transportation and refining of crude oil, blending of refined products and the distribution and marketing of those products. The company owns and operates three refineries with aggregate distillation capacity of 434,000 barrels per day ¹². Total refinery throughput averaged 402,000 barrels per day ¹³ in 2025, with a utilization rate of 93 percent ¹⁴. The company supplies petroleum products through about 2,600 ¹⁵ sites operating under a branded wholesaler model. Net petroleum product sales averaged 470,000 barrels per day ¹⁶. The Chemical segment manufactures and markets aliphatic solvents, plasticizer intermediates, polyethylene resin, and markets refinery grade propylene. Total petrochemical sales volumes were 683,000 tonnes ¹⁷ in 2025.

In 2025, the company announced restructuring plans to improve its performance by centralizing additional corporate and technical activities in global business and technology centres, which includes a program of targeted workforce reductions involving involuntary employee separations expected to reduce employee roles by approximately 20% ¹⁸ and to be substantially completed by the end of 2027. The company accelerated share purchases under its normal course issuer bid program, which completed on December 17, 2025 as a result of the company purchasing the maximum allowable number of shares under the program, which enabled the company to purchase up to a maximum of 25,452,248 ¹⁹ common shares. The company also signed an agreement to sell the Calgary Imperial Campus, which resulted in a non-cash impairment charge of $306 million ²⁰ after-tax. The Strathcona renewable diesel project was completed and commissioned with first on-spec renewable diesel produced in July 2025.

Total revenues and other income for 2025 were $47,078 million ²¹, compared to $51,532 million ²² in 2024. Net income was $3,268 million ²³, or $6.48 ²⁴ per share on a diluted basis, compared to $4,790 million ²⁵, or $9.03 ²⁶ per share in 2024. Net income excluding identified items was $4,299 million ²⁷. Cash flows from operating activities were $6,708 million ²⁸ in 2025, compared to $5,981 million ²⁹ in 2024.

Total capital and exploration expenditures are expected to range between $2.0 billion to $2.2 billion ³⁰ in 2026. Expected capital and exploration expenditures for 2026 includes firm capital commitments of $585 million ³¹ for the construction and purchase of fixed assets and other permanent investments. An additional $89 million ³² of firm capital commitments have been made for years 2027 and beyond.

The company continues to evaluate opportunities to support long-term growth, including the pace of development for the Aspen project. The first phase of the Aspen project was approved by the company’s board and appropriated for $2.6 billion ³³, though major investment remains on hold due to continued market uncertainty. The Enhanced Bitumen Recovery Technology (EBRT) field pilot on the Aspen lease received funding approval in 2023, with development work underway for pilot start-up anticipated by 2027. The company also continues to evaluate other undeveloped, mineable oil sands acreage in the Athabasca region and other oil sands leases for potential future development. The company’s pursuit of lower-emission business opportunities including carbon capture and storage, hydrogen, lower-emission fuels, and lithium depends on the growth and development of markets for those products and services, including implementation of supportive and stable government policies and developments in technology.

The company’s environmental capital and operating expenditures totalled approximately $1.7 billion ³⁴ in 2025, spent primarily on activities to protect the land, air, and water including remediation projects. Environmental expenditures are expected to increase to approximately $2.0 billion ³⁵ in 2026, with capital expenditures expected to account for approximately 48 percent ³⁶ of the total. Costs for 2027 are anticipated to be approximately $1.7 billion ³⁷, with capital expenditures expected to account for approximately 41 percent ³⁸ of the total.

The company announced restructuring plans to improve its performance by centralizing additional corporate and technical activities in global business and technology centres. The restructuring plans include a program of targeted workforce reductions and involves involuntary employee separations. The program is expected to reduce employee roles by approximately 20% ³⁹ and to be substantially completed by the end of 2027. The number of regular employees was about 5,000 ⁴⁰ at the end of 2025, compared to 5,100 ⁴¹ at the end of 2024.

The company’s capital allocation priorities include investing for value and select volume growth, with focus on optimization within existing assets, cost reduction opportunities and productivity enhancements. The company will continue to evaluate the renewal of its normal course issuer bid share purchase program in June 2026 in the context of its overall capital activities. Dividends declared per common share were $2.88 ⁴² in 2025. The company contributed $148 million ⁴³ to the registered retirement plans in 2025. Future funding requirements are not expected to affect the company’s existing capital investment plans or its ability to pursue new investment opportunities.

The company faces headwinds from the potential impact of trade-related actions, including the imposition of tariffs on imports from Canada and other countries announced by the United States during 2025, and Canada’s retaliatory tariffs. The full impact and duration of such tariffs is uncertain, and there remains a possibility of further escalation in the trade dispute. Such actions could depress economic activity, reduce demand for the company’s products, limit or disrupt supply chains, increase costs, reduce market prices and export volumes of the company’s products. The company also faces constraints from greenhouse gas regulations and policies, including the Government of Canada’s target to achieve net-zero emissions by 2050, the federal carbon pricing under the Greenhouse Gas Pollution Pricing Act which increases to $170 per tonne ⁴⁴ in 2030, and Alberta’s Technology Innovation and Emissions Reduction Regulation (TIER) which applies to facilities with CO2 emissions in excess of 100,000 tonnes ⁴⁵ per year.

The company’s operations and earnings may be significantly affected by changes in oil, natural gas and petrochemical prices, and by changes in margins on refined products and petrochemicals. Commodity prices have been volatile, and the company expects that volatility to continue during the lifespan of its major assets. The company’s future results and ability to succeed through the energy transition while helping meet Canada’s emission-reduction goals will depend in part on the success of research and collaboration efforts and the company’s ability to adapt and apply the strengths of its current business model to providing the energy products of the future in a cost-competitive manner.

Management’s message emphasizes the company’s strong operational performance in 2025, with Upstream assets demonstrating strong operational performance and the company continuing to benefit from actions implemented in prior years to manage the cost structure and improve the reliability of its assets. The company’s current investment strategy is to invest for value and select volume growth, with focus on optimization within existing assets, cost reduction opportunities and productivity enhancements that aim to deliver robust returns at a wide range of prices. Management highlights the company’s financial strength, disciplined investment approach and technology portfolio as positioning the company well to participate in substantial investments to develop new Canadian energy supplies. Total capital and exploration expenditures are expected to range between $2.0 billion to $2.2 billion ⁴⁸ in 2026. The company will continue to evaluate the renewal of its normal course issuer bid share purchase program in June 2026 in the context of its overall capital activities.

Total revenues and other income for 2025 were $47,078 million ⁴⁹, compared to $51,532 million ⁵⁰ in 2024. Net income was $3,268 million ⁵¹ in 2025, compared to $4,790 million ⁵² in 2024. Diluted earnings per share were $6.48 ⁵³ in 2025, compared to $9.03 ⁵⁴ in 2024. Net income excluding identified items was $4,299 million ⁵⁵ in 2025. Cash flows from operating activities were $6,708 million ⁵⁶ in 2025, compared to $5,981 million ⁵⁷ in 2024. Total debt at year-end 2025 was $3,997 million ⁵⁸, compared to $4,011 million ⁵⁹ at year-end 2024. Shareholders’ equity at year-end 2025 was $22,254 million ⁶⁰, compared to $23,473 million ⁶¹ at year-end 2024. The debt-to-capital ratio was 15 percent ⁶² at year-end 2025. Current year results include identified items of a $320 million ⁶³ after-tax charge related to the Norman Wells end of field life acceleration, a $306 million ⁶⁴ after-tax non-cash impairment charge of the Calgary Imperial Campus, a $249 million ⁶⁵ after-tax restructuring charge, and a one-time $156 million ⁶⁶ after-tax charge associated with the optimization of materials and supplies inventory. Upstream net income was $2,121 million ⁶⁷ in 2025, compared to $3,262 million ⁶⁸ in 2024. Downstream net income was $1,869 million ⁶⁹ in 2025, compared to $1,486 million ⁷⁰ in 2024. Chemical net income was $82 million ⁷¹ in 2025, compared to $171 million ⁷² in 2024.

The company’s operations and earnings may be significantly affected by changes in oil, natural gas and petrochemical prices, and by changes in margins on refined products and petrochemicals, with commodity prices having been volatile and expected to continue to be volatile. The company faces risks from greenhouse gas regulations and policies, including the federal carbon price under the Greenhouse Gas Pollution Pricing Act which increases to $170 per tonne ⁴⁶ in 2030, and Alberta’s TIER regulation which applies to facilities with CO2 emissions in excess of 100,000 tonnes ⁴⁷ per year. The company’s future results and ability to succeed through the energy transition will depend on the success of research and collaboration efforts and the company’s ability to adapt its business model. The company is also exposed to risks from trade-related actions, including the imposition of tariffs on imports from Canada and other countries announced by the United States during 2025, and Canada’s retaliatory tariffs, which could depress economic activity, reduce demand for the company’s products, limit or disrupt supply chains, increase costs, reduce market prices and export volumes. The company’s results can be adversely impacted by political, legal or regulatory developments affecting operations and markets, including changes in environmental regulations, assessment processes or other laws.