Imperial Oil Limited · TSX:IMO
Imperial Oil — Investor Day (September 2015)
68 slides from Imperial Oil's investor day presentation, Sep 23, 2015
Slide 1: Imperial Investor Day September 23, 2015
Imperial Investor Day September 23, 2015
Slide 2: Cautionary statement
Cautionary statement Statements of future events or conditions in these materials, including projections, targets, expectations, estimates, and business plans, are forward-looking statements. Such statements are not guarantees of future performance and involve a number of risks and uncertainties. Ac
Slide 3: A worldwide view to 2040
A worldwide view to 2040 2 billion more people on the planet 140 percent larger global economy 35 percent greater demand for energy, despite efficiencies non-OECD countries lead the growth in demand 60 percent of demand to be supplied by oil and natural gas natural gas to surpass coal as the second-
Slide 4: Demand for all energy sources to increase
Demand for all energy sources to increase Global energy demand, quadrillion BTUs 250 2040 200 2010 150 100 50 0 Oil Gas Coal Nuclear Other Source: ExxonMobil 2015 Outlook for Energy; other includes biomass/waste, hydro and other renewables Imperial | 2015 | 4
Slide 5: Significant new liquids production required
Significant new liquids production required Global liquids, mbd 120 100 80 New production 60 40 Existing production 20 0 2015 2040 50+ million bpd of new production required by 2040 Source: International Energy Agency, World Energy Outlook 2014 Imperial | 2015 | 5
Slide 6: Responsible energy development
Responsible energy development Dual challenge to increase energy supplies… Safe Reliable Affordable Abundant …while addressing societal and environmental risks All energy sources required Technology & innovation key Investments must compete globally Imperial | 2015 | 6
Slide 7: Canadian business environment
Canadian business environment Large, accessible upstream resources Mature, competitive downstream markets Relative political stability, competitive fiscal regime Evolving regulatory, environmental framework Market access limitations, uncertainties Regional cost pressures, alleviating with downturn I
Slide 8: Imperial's business model
Imperial’s 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 relatio
Slide 9: Organizational priorities
Organizational priorities Focus on the things within our control Base business operating fundamentals Asset-specific improvement plans Achieving full value of recent investments Prudent scope and pace of new investments Organizational efficiency and productivity Imperial | 2015 | 9
Slide 10: Personnel safety
Personnel safety Committed to a workplace where “nobody gets hurt” Workforce safety, incidents per 200,000 hours worked1 1.0 0.8 0.6 0.4 0.2 0.0 Canadian industry Imperial 5-year rate 2014 1H 2015 1Equivalent to 100 workers for one year Imperial | 2015 | 10
Slide 11: Business scope
Business scope Industry leadership in all aspects of the value chain Syncrude mining Kearl mining Strathcona refinery Sarnia refinery Cold Lake in situ Edmonton rail terminal Nanticoke refinery Research Fuels & Lubes marketing Sarnia chemical 2015 | 11
Slide 12: Integration & synergies
Integration & synergies Delivering competitive advantage in all business lines Production Refining Chemical Crude oil & natural gas Petroleum products Commodities & specialties Imperial-ExxonMobil value-added capabilities Equity crude placed in highest netback markets Cost-advantaged feedstocks for
Slide 13: Financial performance
Financial performance Demonstrates the strength of our business model Net income, $/share 5 Downstream & Upstream Other 4 3 2 1 0 2010 2011 2012 2013 2014 5-year average, % Downstream & Other Upstream Imperial | 2015 | 13
Slide 14: Business segment profitability
Business segment profitability High performing upstream and downstream businesses Upstream, 3-year avg $/boe produced 20 15 10 5 0 IMO SU CVE HSE Downstream, 3-year avg $/bbl refined 15 10 5 0 SU IMO CVE HSE Source: Barclays Research Imperial | 2015 | 14
Slide 15: Industry-leading capital efficiency
Industry-leading capital efficiency Maximizing investment value and life-cycle performance Return on capital employed, % 20.0 10.0 0.0 IMO CNQ HSE SU CVE 5-year average 2014 Source: company publications Imperial | 2015 | 15
Slide 16: Unmatched shareholder distributions
Unmatched shareholder distributions Over $12 billion returned to shareholders in the last 10 years 2005-2014 distributions, $ billions 15 10 5 IMO SU HSE CNQ CVE Share reductions Dividends Imperial | 2015 | 16
Slide 17: Reliable and growing dividends
Reliable and growing dividends Committed to returning cash to shareholders Annual distributions, $ per share 0.60 0.30 0.00 05 06 07 08 09 10 11 12 13 14 100+ years of consecutive payment 20 years of consecutive growth Dividends shown on a paid basis. Imperial | 2015 | 17
Slide 18: Completing unprecedented period of growth
Completing unprecedented period of growth Investments funded largely with cash from operations Average annual capex, $ billions 6 4 2 0 2000-2009 2010-2014 2015-2020 2010-2014 total $ billions Cash from operations 20 Cash from asset sales 2 Investments 27 Dividends 2 Includes Upstream, Downstream, C
Slide 19: Production increasing significantly
Production increasing significantly 100+ kbd of additional liquids on stream in 2015 Liquids production outlook, kbd1 500 400 300 200 100 0 2010-2014 annual average 1H15 Post 2H15 ramp-up Kearl initial 2013 110 kbd2 Cold Lake Nabiye 1Q15 40 kbd Kearl expansion 2Q15 110 kbd2 1IMO share, before royalt
Slide 20: Cash flow capacity increasing with production
Cash flow capacity increasing with production Financial resilience under a wide range of prices Annual average, $ billions 6 4 $80 $60 2 $40 0 2016-2020 capex Cash flow from operations Ability to cover sustaining capital requirements Options to pursue selective growth investments Flexibility to resp
Slide 21: Rapid response to new price environment
Rapid response to new price environment Aggressively pursuing cost reductions and efficiencies Cash unit costs, $/boe1 40 Upstream Downstream 30 20 10 0 1H14 2H14 1H15 Spending thresholds reset Renegotiated 3rd party contracts Executed price amendments Enhancing workforce productivity Capturing inte
Slide 22: Clarify. Simplify. Focus.
Clarify. Simplify. Focus. Watch the video on Imperial’s YouTube channel Imperial | 2015 | 22 YouTube
Slide 23: Downstream & Chemical overview
Downstream & Chemical overview Operational excellence and integration drive performance Refining Strathcona | Sarnia | Nanticoke 421 kbd 94% refining capacity 2014 utilization Efficient, well-positioned assets Integrated, advantaged feedstocks Leveraging global best practices Chemical Sarnia 953 KT
Slide 24: Strong cash flow with selective investments
Strong cash flow with selective investments More than $7 billion of net cash generated over the past 5 years Downstream & Chemical net cash, $ billions Downstream & Chemical capex, % of depreciation 2 1 0 2010 2011 2012 2013 2014 150 100 Edmonton rail terminal 50 0 2005-2009 2010-2014 Imperial | 201
Slide 25: Maximizing refining value
Maximizing refining value Advantaged feeds and integrated product marketing Refinery operations, % Sales, kbd 2014 100 500 400 75 2010 300 50 200 25 100 0 0 Price-advantaged crude Capacity utilization Petroleum products Imperial | 2015 | 25
Slide 26: Solomon refining performance ranking
Solomon refining performance ranking Strong performance in North America, industry-leading in Canada 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile Non-energy Process unit Energy cash opex utilization efficiency Imperial refineries Canadian industry excluding Imperial Source: 2014 Solomon surve
Slide 27: Non-energy unit cash opex
Non-energy unit cash opex Rigorous cost control drives improvement versus competition Relative change (2014 vs. 2012) Canadian industry excluding Imperial 20% 10% +21% Imperial 0% -6% -10% Source: Solomon Imperial | 2015 | 27
Slide 28: Process unit utilization
Process unit utilization Improved utilization supported by integrated marketing strategy Relative change (2014 vs. 2012) 12% 6% +11% Canadian industry excluding Imperial 0% Imperial -5% -6% Source: Solomon Imperial | 2015 | 28
Slide 29: Fuels Marketing excellence
Fuels Marketing excellence Leading market share in all product segments Market Market share position Wholesale 28% #1 Retail1 18% #2 Aviation 35% #1 Marine 30% #1 Asphalt 33% #1 Lubricants 26% #1 1Source: Kent Market Share, The Kent Group Ltd. All others estimated based on Statistics Canada data and
Slide 30: Retail value proposition
Retail value proposition Industry-leading performance and customer experience Esso rank Retail measure vs. industry Overall site contribution #1 Non-fuel margin #1 Net site cash cost #1 Average site fuel volume* #1 Retail margin Non-fuel Fuel Esso On the Run ALWAYS Tim Hortons FRESH RBC® RBC Royal B
Slide 31: Retail business model
Retail business model Conducting assessment of remaining company-owned sites Company owned, agent operated ~500 stations Imperial Agent Supplies fuel & Operates brand standards retail site Owns real estate & facilities Considerations Market value Bidder operational performance & Financial capability
Slide 32: Downstream integration & operational excellence
Downstream integration & operational excellence Watch the video on Imperial’s YouTube channel Imperial | 2015 | 32 YouTube
Slide 33: Highly profitable chemical business
Highly profitable chemical business Top-tier polyethylene manufacturer Earnings, $ millions 250 record 200 150 record 100 50 0 2010 2011 2012 2013 2014 1H15 Imperial | 2015 | 33
Slide 34: Fully integrated with Sarnia refinery
Fully integrated with Sarnia refinery Diversified, low-cost feedstocks enhance profitability Feedstock, % 100 Spot Propane Marcellus ethane Mid-west Ethane Mid-west 50 Ethane Refinery Refinery off gas off gas 0 2009-2014 2015+ Indexed volume & unit margin, % 200 Unit margin Sales volume 150 100 50 0
Slide 35: Chemical gas cracker furnace project
Chemical gas cracker furnace project Improves energy efficiency, increases high value production Capital cost ~$80M - Replaces three existing furnaces Increases ethylene and polyethylene production - 7% additional capacity Reduces operating costs - Improved energy efficiency Start-up targeted by mid
Slide 36: Break
Break Imperial Imperial | 2015 | 36
Slide 37: Upstream overview
Upstream overview Large, long-life assets with growth potential Cold Lake Syncrude Kearl In situ portfolio Unconventional gas Oil sands research Imperial | 2015 | 37
Slide 38: Cold Lake: a world-class in situ operation
Cold Lake: a world-class in situ operation Best-in-class operational performance Cyclic steam stimulation | 100% Imperial owned | 1st production in 1985 1.8B bbls 170 kbd 2P reserves1 current production1 Large, high quality resource base Highly efficient operation Significant, long-term growth poten
Slide 39: Industry-leading reliability
Industry-leading reliability Achieved through a comprehensive, systematic approach 2014 reliability, % of capacity Cold Lake Imperial Peers 0 20 40 60 80 100 Design standardization Enhanced surveillance Preventive maintenance Wellwork productivity Workforce capabilities Source: Peters & Co. Limited
Slide 40: Competitive cost structure
Competitive cost structure Achieved through life-cycle cost discipline 2014 cash operating costs, C$/bbl Imperial Peers Cold Lake 0 5 10 15 20 25 Operations integrity Facility reliability Cogeneration capacity Technical innovations Workforce discipline Source: FirstEnergy Capital Corp. Imperial | 20
Slide 41: Nabiye expansion project
Nabiye expansion project “Design one, build multiple” strategy Funded in 2012 for $2 billion - 280 million bbls1, 40 kbd production capacity2 - 7 pads of 24 wells each - 140 kbd steam generation - 170 MW cogeneration2 First oil achieved in 1Q15 Bitumen production, kbd2 40 20 0 1Q15 2Q15 3Q15 to-date
Slide 42: Cold Lake future growth potential
Cold Lake future growth potential Midzaghe project summary submitted to AER in April 2015 Grand Rapids formation - 500-600 million bbls resource potential1 55 kbd production capacity, 25-30 year life - SA-SAGD technology, successful pilot Resource delineation, environmental assessment and consultati
Slide 43: Syncrude: a pioneer in oil sands mining
Syncrude: a pioneer in oil sands mining Strategic asset with improvement potential Mining with upgrader | 25% Imperial owned | 1st production in 1978 1.1B bbls 70 kbd 2P reserves1 5-year average production1 Synthetic crude production Competitive performance Intense improvement focus 1 IMO share, bef
Slide 44: Competitive performance
Competitive performance Targeted efforts to improve reliability and cost structure 5-year average capacity utilization, % 100 80 60 40 20 0 Shell Syncrude Suncor CNRL Capacity 255 kbd 350 kbd 350 kbd 135 kbd Source: FirstEnergy Capital Corp. Imperial | 2015 | 44
Slide 45: Syncrude focus areas
Syncrude focus areas Improving resilience in low price environment 2010-2014 production loss, % Other Upgrading Cash cost distribution, % Upgrading Mining Tailings Extraction Turnaround planning and execution - Mid-cycle de-coking EM/IOL best practice implementation Leadership development, workforce
Slide 46: Kearl: next generation oil sands mining
Kearl: next generation oil sands mining Establishing new performance standards Mining without upgrader | 71% Imperial owned | 1st production in 2013 3.2B bbls 220 kbd 2P reserves1 gross production Large, high-quality resource Proprietary froth treatment Environmental improvements Competitive cost st
Slide 47: Proprietary froth treatment
Proprietary froth treatment Producing pipeline-quality bitumen without an on-site upgrader Sediment and water Kearl Bitumen Dilbit “Paraffinic” Diluent froth treatment Refinery Asphaltenes Sedimentand water Other mines Bitumen Synthetic crude “Naphthenic” froth treatment Onsite Refinery upgrader Imp
Slide 48: Improved environmental performance
Improved environmental performance Wells-to-wheels GHGs similar to average crude refined in U.S. % 125 Production Refining Distribution Combustion 100 75 50 California Mining synthetic Venezuela Kearl Average barrel Mexico Heavy crude oil Boscan Dilbit refined in U.S. Maya Source: IHS CERA, “Compari
Slide 49: Operational update
Operational update Demonstrating ability to sustain 220 kbd targeted rate Kearl bitumen production, kbd1 220 165 110 55 0 2H13 2014 1Q15 2Q15 3Q15 to-date 1100%, before royalties, (71% IMO share) Initial development ramp-up issues largely resolved Lessons learned fully applied to expansion Expansion
Slide 50: Expansion project
Expansion project “Design one, build multiple” strategy delivered intended results KID KEP Safety - TRIR 0.51 0.17 Contractor work hours 34 million 24 million Construction months 36 months 28 months Each train at 50 kbd 6 months 12 days All three trains at 50 kbd 23 months 20 days Capital cost $12.9
Slide 51: Efficient cost structure
Efficient cost structure Sustain production at capacity, drive cost efficiencies Cash operating costs, % Cost above field Property taxes Logistics & infrastructure Energy Mine operations & maintenance Plant operations & maintenance Target: less than C$30/bbl Focused on: – Plant reliability – Mine eq
Slide 52: Near-term focus on asset performance
Near-term focus on asset performance 40+ year asset life, 345 kbd regulatory production limit Kearl, kbd1 400 300 200 100 0 - - - - Annual regulatory limit - - - - 150 110 150 110 Targeted annual production Stream-day design capacity Sustain 220 kbd targeted average production rate1 Pursue efficienc
Slide 53: Market access strategy
Market access strategy Ensure efficient take-away capacity for all equity crude Optimize use of existing systems to maximize value Participate in multiple new pipeline opportunities Use rail options to bridge timing and provide flexibility Mitigate any future surplus via portfolio optimizations Impe
Slide 54: Industry transportation costs
Industry transportation costs Significant value in minimizing overall portfolio costs Alberta to U.S. Gulf Coast, US$/bbl, Indicative 25 20 15 10 5 0 Committed pipeline Walk-up pipeline Efficient rail Inefficient rail Imperial | 2015 | 54
Slide 55: Pipeline transportation
Pipeline transportation Equity production and refining requirements largely covered Pipeline use, kbd 800 600 New pipelines 400 200 Existing pipelines 0 2015 2018+ Shipping 450 kbd from Alberta on existing lines Service improved through: Operational changes Facility optimizations New pipeline opport
Slide 56: Edmonton rail terminal
Edmonton rail terminal Provides significant flexibility and optimization value 210 kbd unit train capacity - Joint venture with Kinder Morgan Strategic value - Equity crude flow assurance - Mitigation of apportionment impact on refineries - Access to new Kearl markets Key milestones - Started-up in
Slide 57: Future opportunities
Future opportunities Imperial Imperial | 2015 | 57
Slide 58: Research priorities
Research priorities Deliver performance improvements and add long-term value Cyclic solvent process Extended reach wellbores and completions Tailings dewatering Next generation lubricants Non-aqueous extraction Polyethylene metallocene catalysts IMO $1 billion annually XOM Lower costs Improve perfor
Slide 59: Example: Cold Lake resource recovery
Example: Cold Lake resource recovery Achieved through technology, innovation and operational best practices Cold Lake demonstrated recovery, % 80 60 40 20 0 2010+ 2000’s 1990’s 1980’s 1970’s Thermal Pilots First horizontal well Commercialization of cyclic steam stimulation Megarow steaming 3D seismi
Slide 60: Large total resource base
Large total resource base 19 billion barrels of oil equivalent to support long-term growth YE 2014 resource base, billion boe1 20 15 10 5 0 Contingent Resource On Hold Development Pending Probable Proved Other Mining In situ Gas Liquids Growth opportunities Progressing Committed 1IMO share, after ro
Slide 61: In situ growth opportunities
In situ growth opportunities 300+ kbd production potential, development planning ongoing Aspen 100% IOL Fort McMurray Corner 63% IOL Clyden 27.5% IOL Grand Rapids (incl. Midzaghe) 100% IOL Edmonton Calgary Resource potential ~5 billion barrels1,2 Top-tier quality Enabling technology SAGD / SA-SAGD P
Slide 62: In situ development strategy
In situ development strategy Technical progression of multiple projects to provide optionality Subsurface Technical definition - Resource delineation program Enhancing drilling efficiency and reducing costs Technology enhancements - Solvent Assisted-SAGD Surface facilities Design standardization - “
Slide 63: Natural gas opportunities
Natural gas opportunities Large acreage position, development optionality Inuvik Mackenzie Norman Wells Whitehorse Yellowknife Horn River Montney Duvernay Edmonton Vancouver Calgary Resource potential Development options Plans 540,000 net acres ~14 TCF potential1,2 Liquids-rich Montney/Duvernay Larg
Slide 64: West Coast Canada LNG
West Coast Canada LNG Continuing to evaluate the competitiveness of an export project Celtic acquisition in February 2013 Resource Fiscal and Regulatory 30 MTA export license approved March 2014 Government engagement Pipeline Evaluating pipeline options Continuing to scope facility size & cost Lique
Slide 65: Factors impacting pace of future growth
Factors impacting pace of future growth Project Competitiveness Technology Advancements Market Conditions Regulatory Environment Financial Considerations Imperial | 2015 | 65
Slide 66: Executive summary
Executive summary Deliver superior, long-term shareholder value History of industry-leading financial and operating performance Significant value delivered through technology, integration and synergies Completion of growth projects greatly enhances cash flow capacity Business environment supports fo
Slide 67: For more information
For more information www.imperialoil.ca Twitter /ImperialOil YouTube /ImperialOil LinkedIn /Imperial-Oil For more detailed investor information, or to receive annual and interim reports, please contact: Meredith C. Milne Manager, Investor Relations Imperial Oil Limited 237 Fourth Avenue SW Calgary,
Slide 68: Imperial
Imperial