Imperial Oil Limited · TSX:IMO
Imperial Oil — Investor Day (November 2018)
83 slides from Imperial Oil's investor day presentation, Nov 7, 2018
Slide 1: Imperial Investor Day November 7, 2018
Imperial Investor Day November 7, 2018 Exhibit 99.1
Slide 2: Opening Remarks
Opening Remarks Rich Kruger Chairman, President and Chief Executive Officer
Slide 3: Q3 recap
Q3 recap Results consistent with expectations for strong second half performance 393,000 boepd Upstream production 388,000 bpd Refinery throughput 516,000 bpd Petroleum product sales $749 million Net income $1.2 billion Cash from operations $573 million Returned to shareholders
Slide 4: Global energy outlook
Global energy outlook Energy demand to increase 25% by 2040, oil and gas to remain key Energy is required to power economic growth and improve standards of living Demand increases driven by population growth and rising incomes Increased energy use expected in wide range of sectors World will need al
Slide 5: Global liquids outlook
Growth driven by transportation, chemicals Global resources sufficient to meet demand New supplies required from multiple regions Major ongoing investments required Must be globally competitive for capital Global liquids outlook Oil to remain the world's largest energy source well into the future Ne
Slide 6: Canada's opportunity
3rd largest liquid reserves globally Track record of innovation, responsible development Historically conducive investment climate Canada-specific challenges must be addressed New technologies key to competitiveness Canada’s opportunity Highest quality oil sands expected to be competitive on a globa
Slide 7: Imperial's operations
Imperial’s operations High quality, integrated, balanced, coast-to-coast asset portfolio Syncrude mining Kearl mining Cold Lake in situ Rail terminal F&L marketing Strathcona refinery Sarnia chemical Sarnia refinery Nanticoke refinery Research Distribution network
Slide 8: Business model
Business model Deliver superior, long-term shareholder value Long-life, competitively advantaged assets Disciplined investment and cost management Value chain integration and synergies High-impact technologies and innovation Operational excellence and responsible growth ExxonMobil relationship
Slide 9: Portfolio enhancement
Portfolio enhancement Focusing on highest value assets and competitive core competencies Startup of Cold Lake Nabiye expansion Rebranding Husky truck transport sites to Esso Commissioned Edmonton rail terminal Acquired interest in Celtic assets Startup of first phase at Kearl Startup of second phase
Slide 10: Upstream assets
Upstream assets Increasing concentration in long-life, high quality oil sands assets Gross production, IMO share Production Syncrude Cold Lake Kearl Total Kearl Mining - PFT 71% interest Cold Lake In situ – CSS/other 100% interest Syncrude Mining - upgrader 25% interest koebd
Slide 11: Downstream assets
Downstream assets Leveraging operational excellence, scale and integration to capture value Volumes Strathcona refinery 191 kbd capacity Sarnia refinery 119 kbd capacity Nanticoke refinery 113 kbd capacity Fuels marketing Coast-to-coast product sales Refinery throughput Petroleum product sales Inclu
Slide 12: Systematic approach in all areas / Risk management
Systematic approach in all areas Fundamental line management responsibility Robust internal/external compliance processes Integral to shareholder value Risk management Comprehensive management of full spectrum of enterprise risks Enterprise Risk Management Strategic Safety Health and Environment Com
Slide 13: Corporate responsibility
‘Taskforce on Climate-related Financial Disclosures’ guidelines Reducing GHG intensity of existing and future operations $2.4 billion spent with indigenous suppliers over last 10 years Strong commitment to local communities Diverse, independent Board of Directors Corporate responsibility Commitment
Slide 14: Safety and operational integrity
Safety and operational integrity Organization-wide priority to protect people, assets and the environment Upstream Downstream & other Total Recordable Incident Rate Incidents per 200,000 hours worked 5-yr average 2017 Upstream Downstream & other Average number of spills
Slide 15: Integration
Integration Delivering value, competitive advantage and resiliency across the business cycle Equity crude placed in highest netback markets Cost-advantaged feedstocks for refineries & chemical Highest value sales channels for petroleum products Multiple and optimized transportation networks Access t
Slide 16: Technology and innovation
Technology and innovation Unparalleled commitment and achievement throughout 138-year history Imperial has invested more than $2.1B over the past 20 years Access to $1 billion/yr in ExxonMobil R&D investments Canada’s first research department Cyclic steam stimulation patent First horizontal well in
Slide 17: Imperial's winning formula
Imperial’s winning formula Increase cash flow, deliver industry-leading returns throughout the cycle Deliver industry leading performance in reliability, safety and operations integrity Be the most valued partner with key stakeholders within our industry Leverage technology, integration and ExxonMob
Slide 18: Upstream Overview
Upstream Overview John Whelan Senior Vice President, Upstream
Slide 19: Upstream at a glance
Upstream at a glance Large, long-life predominantly oil sands portfolio Cold Lake in situ Kearl mining without upgrader Syncrude mining with upgrader Unconventional billion boe 2P reserves ~6.5 koebd Production ~400 Oil sands mining pioneer Norman Wells Next generation oil sands mining Industry lead
Slide 20: Upstream overview
Upstream overview 30+ year proved reserve life, nearly $17B cash generated over last 10 years Production Annual cash from operations koebd $B Proved reserve life based on 2017 production rates Gross production, IMO share $US/bbl WTI 95 48 67 WCS 74 35 45
Slide 21: Syncrude
Syncrude Oil sands mining pioneer 25% IMO owned Producing since 1978 Mining with upgrader bbls 2P reserves 0.7B kbd 2018 production outlook ~60 IMO share, before royalties High value synthetic crude oil Improve reliability by eliminating major events Capture regional integration opportunities Fully
Slide 22: Syncrude reliability
Production challenged Significant volume loss events Upgrader performance Reliability improvement essential Mechanical integrity Turnaround planning and execution Leadership and workforce Best practice and resource sharing Achieve 90% upgrader utilization Syncrude reliability High-potential asset wi
Slide 23: Owner company expertise
Owner company expertise Provision of business services Collaborative ‘production forums’ Regional logistics and infrastructure Commercial opportunities Syncrude collaboration Leverage owner strengths to accelerate performance improvement
Slide 24: Kearl
Mining without upgrader Kearl Next generation oil sands mining 3.3B ~200 bbls kbd 2P reserves 2018 production outlook Large, high quality resource Improving performance Near-term production growth 2P reserves IMO share, before royalties Gross production outlook, 100% interest 71% IMO owned Producing
Slide 25: Kearl performance
Leveraging full organizational capability Growing cash generation capacity Averaging $5/bbl CAD sustaining capex Targeting $20/bbl US cash opex ‘all-in’ Kearl performance Focused on improving reliability, cost structure and realizations Production and unit cost kbd $US/bbl Q3 2018 unit cost Gross pr
Slide 26: Kearl performance indicators
Kearl performance indicators Targeting best-in-class in all areas of operation Plant bitumen recovery, % Haul truck utilization, % Solvent loss, indexed Logistics cost/person, indexed Best-in-class
Slide 27: Improved ore preparation performance
Improved ore preparation performance Crusher and dump hoppers Ore conveyor drive chains Crusher teeth and bearings Enhanced piping durability Primary separation cells Hydro-transport lines Froth interface monitors Delivering on 200 kbd Actions previously completed to deliver on commitment of 200 kbd
Slide 28: Adding supplemental crushing capacity
Adding supplemental crushing capacity Offset equipment downtime Create surge bin conveyor redundancy Installing slurry piping interconnections Minimize maintenance impacts Optimize flow to facilities $550 million gross investment $14k per flowing barrel On schedule for 2020 start up Increasing to 24
Slide 29: Resource optimization
Resource optimization Primary separation cell upgrades Secondary bitumen recovery enhancements Froth treatment interconnects Diluent and solvent utilization Capital intensity similar to crusher project Opportunities for ~280 kbd Series of targeted debottlenecking and redundancy improvements
Slide 30: Productivity and digital initiatives
Asset improvement teams Bangalore Technology Centre Remote operating centre End-to-end recovery optimization Workforce visualization and deployment Value potential greater than $500M/year Productivity and digital initiatives Leveraging technology to drive improvements and enhance performance Machine
Slide 31: Autonomous haul trucks
Partnering with Caterpillar and Finning Fleet of seven trucks in productive service Testing for unique oil sands conditions Cost savings greater than $0.50/bbl Active workforce engagement Autonomous haul trucks Ongoing pilot to increase mine safety and productivity GPS Radar 3D sensing
Slide 32: Maximizing Kearl value
Currently delivering 200 kbd Supplemental crusher to deliver 240 kbd Opportunities for ~280 kbd Leveraging capabilities of entire organization Objective: maximize long-term cash generation Maximizing Kearl value Significantly improving financial and operating performance
Slide 33: Cold Lake
Cyclic steam stimulation Cold Lake Large scale in situ operation 1.5B ~150 bbls kbd 2P reserves 2018 production outlook Drilling program resumed in 2018 Continued application of new technology Use of solvent recovery techniques IMO share, before royalties 100% IMO owned Producing since 1985
Slide 34: Cold Lake performance
Continued strong operating performance Maximizing life-cycle return and recovery Optimizing steam distribution Fully utilizing existing wellbores Adding wells to sustain and grow production $12/bbl US cash opex, 1/3 energy Strong cash generation in all price environments Cold Lake performance Focus
Slide 35: Cold Lake performance indicators
Cold Lake performance indicators 40+ years of continuous improvement Fresh water use Bitumen recovery, % Power related volume loss 1970’s 1980’s 1990’s 2000’s 2010+ 3D seismic analysis Cyclic steam stimulation Steamflood Infill recovery processes Thermal pilots Drilling costs Indexed
Slide 36: Cold Lake recovery
Resource life supports technology testing Recovery technology evolving Driving digital solutions Economic and environmental benefits Cold Lake recovery Ongoing enhancement through technology and innovation Recovery method, % of production
Slide 37: Maximizing Cold Lake value
Annual base decline of approximately 5% Drilling and wellwork mitigate decline Technology enables growth Potential for 50 kbd expansion Regulatory approval in place Project timing to be determined Maximizing Cold Lake value Strengthening performance and offsetting natural decline Solvents kbd Produc
Slide 38: Norman Wells
Precautionary shutdown in late 2016 Replacement of 2 km pipeline section Restart of production in October 2018 Ramp back to 10 kbd in 2019 Optimize remaining productive life Norman Wells Operations restarted after two-year pipeline shutdown Source: Enbridge Pipelines (NW) Inc.
Slide 39: Unconventional optionality
Significant liquids rich acreage holdings Competitive with US unconventional Fully leveraging ExxonMobil/XTO expertise Initial Duvernay development underway Attractive rate of return Initial investment of $0.5B over 3 years Production outlook of 10 kbd & 70 mcfd by 2021 Montney resource assessment o
Slide 40: Pricing fundamentals
Pricing fundamentals Taking a closer look at bitumen realizations WTI North American light benchmark WCS Canadian heavy benchmark; ¼ diluent + ¾ bitumen Bitumen Non-upgraded oil sands production; not saleable, will not flow in pipeline Quality/differential between light and heavy crudes Transportati
Slide 41: Equity crude value
100 kbd via Contracted Pipe to GC USGC heavy adjusted for quality less pipeline tariff 100 kbd to IMO Refineries WCS Edmonton adjusted for quality offset by downstream gain Equity crude value Placing crude in markets that maximize general interest value 25 koebd 75 kbd 300 kbd Bitumen (400 kbd Dilbi
Slide 42: Market access
Two rail service providers Ramp-up agreements in place Unmatched access to railcar fleet Customer offloading facilities Optimizing cycle times Targeting further utilization Market access Edmonton rail terminal provides unique competitive advantage kbd Terminal Utilization Capacity
Slide 43: Near-term production outlook
Sustained production at Cold Lake Ramp-up of Norman Wells Improved reliability at Syncrude Supplemental crusher at Kearl Near-term production outlook Growth through capitally efficient projects and reliability improvements Gross production, IMO share Production koebd
Slide 44: Business Development
Business Development Theresa Redburn Senior Vice President, Commercial and Corporate Development
Slide 45: Research and development
138 years of unparalleled commitment Upstream & Downstream research centres Calgary - oil sands technologies, environmental Sarnia - products research, technical support Leverage ExxonMobil global research Refining, fuels, drilling, modelling Research for a lower carbon future Research and developme
Slide 46: Imperial research priorities
Lower costs Improve performance Reduce environmental impact Unlock resources Imperial Research priorities Focused on oil sands and product research Reliability and efficiency improvements Environmental solutions Advanced recovery technology Product technologies ~$150-200 million annually Enhanced re
Slide 47: In situ technologies
Asset characteristics drive technology Depth of resource Quality of resource Stage of development Improve economic performance Reduce environmental impact In situ technologies Developing full suite of technology applications to match resource base Pressure 100% Steam Steam and Solvent 90%+ Solvent C
Slide 48: Advanced in situ recovery
Advanced in situ recovery Technology drives economic and environmental performance improvement Reduction in capital intensity Lower GHG intensity Lower water use intensity Cyclic Technologies Continuous Technologies Liquid Addition to Steam to Enhance Recovery (LASER) Up to 10% solvent, 90% steam Mi
Slide 49: In situ growth portfolio
Accessible via variety of technologies Multiple phases, 50-75 kbd potential per phase ‘Design One, Build Many’ development approach Leveraging 40+ years of in situ experience In situ growth portfolio Large inventory of top tier development opportunities Kearl Aspen Corner CL Expansion Clyden Fort Mc
Slide 50: Resource inventory
Level of Definition Regulatory Status Commercial Project Name Resource Assessment Concept Select Development Plan Application Submission Scheme Approval Full Funding Aspen Phase 1 ü ü ü ü ü ü Aspen Phase 2 ü ü ü ü ü CL Expansion ü ü ü ü ü Corner ü ü ü ü Chard ü Clyden ü Resource inventory Progressin
Slide 51: Aspen phase 1
75 kbd bitumen production Project to develop 1.2 billion barrels $2.6B initial development Central processing facility with cogen Five initial well pads, 67 well pairs Synergies with Kearl Logistics and infrastructure Indigenous benefits agreements Targeted start-up 2022 Aspen phase 1 First commerci
Slide 52: Aspen technology
Aspen Technology key to delivering both economic and environmental benefits Pilot results, indexed Aspen LASER CSS SAGD Future Industry Imperial SAGD SA-SAGD In situ industry average Relative GHG intensity Boone et al 2012, internal estimates
Slide 53: Why Aspen, why now
SA-SAGD technology with economic and environmental benefits Lower carbon intensity vs. industry in situ assets Leverages 40+ years of Cold Lake in situ operating experience Counter-cyclical investment improves cost efficiency and execution Long term cash flow with significant price resilience Cataly
Slide 54: Growth opportunities
Growth opportunities Suite of attractive oil sands investment opportunities Near term projects Under evaluation Aspen Phase 1 Aspen Phase 2 Cold Lake Expansion Kearl Improvement Aspen Phase 1 Kearl Supplemental Crusher $K/bbl $K/bbl Production net to IMO
Slide 55: Downstream and Chemical Overview
Downstream and Chemical Overview Dan Lyons Senior Vice President, Finance and Administration
Slide 56: Downstream at a glance
Refining Downstream at a glance Well positioned, high performing and integrated Strategically positioned refineries Quality products Leading brands Strong logistics Refining capacity ~400 Product sales ~500 kbd kbd Logistics Marketing
Slide 57: Downstream overview
Annual cash from operations Refinery throughput and sales kbd $B Downstream overview Optimized throughput, growing sales, generated nearly $8 billion in cash since 2014 Throughput Sales
Slide 58: Refining performance
Increasing utilization Two thirds reduction in regretted losses Top-tier Solomon results in Canada Strathcona cogeneration project Increased energy efficiency Lower cash OPEX Refining performance Global best practices and targeted investment increase reliability and profitability Utilization, % Regr
Slide 59: Crude pricing
Product pricing largely Brent based Refineries benefit from discounted crude Substantial heavy crude discount Widening light crude discount Crude Pricing Industry product and feedstock pricing Widening differentials increase refining profitability Downstream & other Upstream Downstream & other Light
Slide 60: Refining feedstocks
Heavy crude differentials Increased crude slate flexibility Captured more than $200M pretax benefit Q3`18 YTD Light crude differentials Refining capacity exceeds upstream production Well positioned on an integrated basis $10 US/bbl increase in differential generates ~$250M CAD pretax ‘net’ benefit p
Slide 61: Sales and market position
2018 YTD Sales KBD Market Share Mogas 254 ~29% Diesel 126 ~22% Jet 41 ~27% Asphalt 23 ~29% Lubes/Other 59 N/A Total 503 N/A Unmatched scale Integrated across the value chain Sales support refining utilization Investing in logistics to sustain growth Sales and market position Market leader in product
Slide 62: Sales strategy
Build strategic relationships Grow ratable sales Capture brand value Optimize integrated profit Sales strategy Leverage scale, integration and brand to pursue profitable sales growth Spot Term Branded The brand advantage
Slide 63: Aviation
Increased sales into Canada’s major airports Over 50% of Ontario market Recently entered Vancouver market Attractive integrated earnings Aviation Market leader in growing segment kbd Jet sales
Slide 64: Asphalt
Growing North American demand Leveraging logistics to produce year round Utilizing advantaged Cold Lake blend Growth projects at Strathcona and Nanticoke Q3`18 YTD pretax benefit $185M Asphalt Leveraging integration to grow earnings 2014-17 Q3`18 YTD kbd Asphalt sales
Slide 65: Retail
Superior Products Synergy gasoline Synergy Diesel Efficient Convenience Nearly 2,200 locations Speedpass+ app Loyalty PC Optimum points Esso Extra Strategic partners Growth platforms Retail excellence Retail Captured # 1 position in Q3 2018 kbd Retail sales volumes Aubrey Can you Confirm the Imperia
Slide 66: Marine fuels
Heavy differentials to increase Diesel/jet prices to strengthen Shippers and refiners adapting Integration reduces impacts Marine fuels Well positioned for IMO 2020 sulphur specification change
Slide 67: Downstream summary
High performing refineries Advantaged feedstocks Scale, integration and logistics Growing high value sales Brand advantage Strong sustained cash flow Downstream summary Positioned for industry leading financial performance
Slide 68: Chemical at a glance
Chemical at a glance High value products, well positioned, integrated assets Integrated Sarnia Chemical Site kt Sales ~800 Billion Cash generated since 2014 $1.3 Advantaged location Integrated manufacturing High value products Polyethylene Specialty customer products
Slide 69: Chemical overview
Superior products and strong cash generation Annual cash from operations $M Chemical product sales kt Chemical overview Sales exclude carbon black and Dartmouth
Slide 70: Integrated petrochemical site
Fully integrated with Sarnia refinery Flexibility in feedstock optimization 90% of feedstocks are cost-advantaged Superior location to access customers Integrated petrochemical site Advantaged location and industry leading integration Feedstock, % Mid-west Ethane Mid-west Ethane Spot Marcellus Ethan
Slide 71: Specialty products
Key end uses Injection molding (pails, containers, crates) Rotational molding (storage tanks, toys) Superior customer experience Consistent resin quality, reliable supply Highly regarded technical service Specialty products Premium products Polyethylene for rotational and injection molding drives pr
Slide 72: Integration advantage
Leverage opportunities from crude to customer Financial resilience across commodity cycles Balance sheet strength and optionality Value chain Integrated across the value chain Integration advantage Aubrey Can you edit the graphic on this page so it is all consistent Optimization Manufacturing Crude
Slide 73: Delivering Value
Delivering Value Rich Kruger Chairman, President and Chief Executive Officer
Slide 74: Cash flow
Cash flow Delivering value and resiliency through integration, $33 billion from operations over last 10 years Cash from operating activities $US/bbl WTI 94 98 93 49 43 51 67 WCS 72 74 74 35 29 39 45 10-year average, % 5-year average, % Upstream Downstream & Chemical Upstream Downstream & Chemical $B
Slide 75: Financial strength
Maintain strong balance sheet Pay reliable and growing dividend Invest in high value projects Return surplus cash to shareholders Financial strength Strong balance sheet, optionality and access to financial markets June 30, 2018 debt to capital, % Ratings BBB+ BBB A- BBB+ AA+ Based on S&P Global deb
Slide 76: Dividends
100+ years of consecutive payment 24 years of consecutive growth 8.7% 5-yr compounded growth rate Increased to $0.19/sh payable in 3Q’18 Dividends Priority to pay a reliable and growing dividend Dividend per share Paid basis $
Slide 77: Share buybacks
Repurchased >50% of shares since 1995 Reinstated current program in 2017 Purchases of $2.2B since 2017 reinstatement Non-dilutive equity philosophy Priority on total shareholder value Share buybacks Proven history of returning surplus cash and preserving value 1995 Adjusted for three-for-one stock s
Slide 78: Shareholder distributions
Shareholder distributions Nearly $9 billion returned to shareholders over the last 10 years Source: company publications Average payout ratio 2008-2018 1H, % Total distributions 2008-2018 1H, $ billion Average payout ratio includes annual dividends and share repurchases as a percentage of annual cas
Slide 79: Capital expenditures
5-year capex average at $2.1-2.2 billion/year 80% upstream, 20% downstream/other Sustaining capital remains at $1.0-1.1 billion/year Roughly 70%, or $5/bbl, for upstream assets Growth capital to average $1.0-$1.1 billion/year Largely Aspen and Kearl Aspen at $2.6 billion, peaks in 2019-21 at ~$ 700
Slide 80: Financial strength and flexibility
Ability to meet highest priorities Significant cash flow leverage Flexibility for new opportunities Financial strength Resiliency and flexibility under a wide range of prices 2018 – 2022 annual average Growth Growth Surplus Cash Dividend Sustaining 60 40 Note: Dividend at current rates, nominal cash
Slide 81: Why Imperial
Why Imperial Distinct competitive advantages that deliver long-term shareholder value Growth opportunities Large inventory of opportunities to support future upstream growth Asset base High quality, long-life assets across the portfolio Operational excellence Technical, operational and financial ris
Slide 82: Cautionary statement
Cautionary statement Statements of future events or conditions in this presentation, including projections, targets, expectations, estimates, and business plans are forward-looking statements. Forward-looking statements can be identified by words such as "believe", "anticipate", "intend", “propose”,
Slide 83: For more information
For more information: Dave Hughes Manager, Investor Relations +1 587.476.4743 dave.a.hughes@exxonmobil.com imperialoil.ca twitter.com/ImperialOil linkedin.com/company/imperial-oil youtube.com/ImperialOil