Imperial Oil Limited · TSX:IMO
Imperial Oil — Investor Day (September 2016)
77 slides from Imperial Oil's investor day presentation, Sep 21, 2016
Slide 1: Form 8-K Current Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 21, 2016 IMPERIAL OIL LIMITED (Exact name of registrant as specified in i
Slide 2: Item 7.01 Regulation FD Disclosure
Item 7.01 Regulation FD Disclosure On September 21, 2016, the Company hosted an investor meeting in Toronto, Ontario at which senior management gave a presentation (the “Presentation”) that provided an update on the Company’s current operations and major projects. The Presentation included informati
Slide 3: Investor Day
Exhibit 99.1 September 21 Investor Day
Slide 4: Cautionary statement
Cautionary statement Statements of future events or conditions in these materials, including projections, targets, expectations, estimates, and bu siness plans, are forward-looking statements. Such statements are not guarantees of future performance and involve a number of risks and uncertainties. A
Slide 5: Why Imperial?
Why Imperial? Distinct competitive advantages that deliver long-term value Asset base Growth opportunities High quality, high performing assets A large inventory of attractive opportunities across the portfolio to support future upstream growth Operational excellence Technology leadership Effective
Slide 6: Energy fundamentals
Energy fundamentals Global megatrends will drive the world’s demand for energy Increasing populations Growing economies Improved living standards Advances in energy efficiency Imperial │ 2016 │ 4
Slide 7: Energy demand
Energy demand Global demand to increase 25% by 2040, oil & gas remain key Energy demand, quadrillion BTUs 750 + 25% Gas demand driven by power generation 500 Renewables1 + Fastest growing major energy source Coal Oil remains largest energy source + Meets 90+% of all transportation needs 250 Gas Outl
Slide 8: Responsible development
Responsible development Dual challenge to meet demand, reduce environmental impact All energy sources required Climate policies to affect energy mix Investments must compete globally Technology and innovation key Imperial │ 2016 │ 6
Slide 9: Liquids challenge
Liquids challenge Significant new production required to offset natural decline Global liquids production, mbd 120 Global decline of 4-5% per year 90 New 50 + New supplies needed from all regions 60 mbd Existing Major ongoing investment required 30 Technology key to competitiveness 0 2016 2040 Sourc
Slide 10: Canada's opportunity
Canada’s opportunity Oil sands represent large, accessible liquids resource base Access to world’s oil reserves World class resources Relative political stability Other Open to Restricted Canada private Balanced regulatory environment (97% oil sands) sector Competitive fiscal terms Leader in respons
Slide 11: Global competitiveness
Global competitiveness Highest quality oil sands competitive on a global basis Breakeven Brent price, US$ 125 100 mining mining 75 in situ in 50 25 0 Brazil North Sea GOM West Africa Canada North America oil sands tight oil Source: IHS, Assumes a 10% internal rate of return Imperial │ 2016 │ 9
Slide 12: Oil sands
Oil sands Unique technical and operational requirements Production, mbd 3 Production split between in situ & mining 2 History of technology and innovation In situ Economies of scale fundamental 1 Specialized expertise Mining 0 2005 2010 2015 Source: CAPP Imperial │ 2016 │ 10
Slide 13: Business environment
Business environment Several challenges, time of uncertainty and opportunity Current period of low oil prices Environmental, regulatory reviews Global competitiveness pressures Pipeline, market access uncertainties Imperial │ 2016 │ 11
Slide 14: Scope of operations
Scope of operations Nationwide leadership across the full value chain Kearl mining Research Syncrude mining Sarnia refinery Rail terminal Cold Lake in situ Sarnia chemical Strathcona refinery Nanticoke refinery Fuels marketing Imperial │ 2016 │ 12
Slide 15: 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 Imper
Slide 16: Company priorities
Company priorities Disciplined focus on performance, execution and creating value Base business fundamentals + Maximizing asset performance + Capturing cost and organizational efficiencies Progressing growth opportunities + Developing enabling technologies + Creating optionality on scope and pace Pr
Slide 17: Safety performance
Safety performance Committed to a workplace where “Nobody gets hurt” Total incidents per 200,000 hours worked1 1.0 0.8 0.6 5-yr 0.4 average 2015 0.2 YTD 0.0 Canadian industry Imperial 1Equivalent to 100 workers for one year Imperial │ 2016 │ 15
Slide 18: Organizational effectiveness
Organizational effectiveness Definitive steps to enhance efficiency, increase effectiveness Above-field personnel1, indexed % 100 Contractors - 22% “Clarify. Simplify. Focus.” mindset 75 Realigning capacity with business need 50 Employees Retaining institutional knowledge 25 $200M reduction in “abov
Slide 19: Integration & synergies
Integration & synergies Delivering competitive advantage in all business lines Equity crude placed in Upstream highest netback markets Oil & natural gas production Cost-advantaged feedstocks for refineries & chemical IMO / XOM Highest value sales channels Downstream value-added for petroleum product
Slide 20: Technology leadership
Technology leadership Unparalleled commitment, history of research and innovation Canada’s first Cyclic steam Steam-assisted Solvent assisted research stimulation gravity drainage technology patent department patent pilots IMO $1 billion annual R&D spend XOM Lower costs Improve performance Reduce en
Slide 21: Upstream
Upstream
Slide 22: Upstream portfolio
Upstream portfolio Completing period of unprecedented liquids growth In situ Production, kbd Cold Lake 500 Highest liquids production since 1989 Growth portfolio Highest total production since 1995 400 Mining Kearl Syncrude 300 Gas Natural gas 200 Unconventional growth portfolio 100 Liquids Research
Slide 23: Core asset growth
Core asset growth Large, long-life oil sands portfolio Production, kbd Kearl Mining - PFT 400 71% interest 300 Syncrude Mining - upgrader 200 25% interest 100 Cold Lake In situ – CSS 0 100% interest 1985 1990 1995 2000 2005 2010 2015 Imperial │ 2016 │ 21
Slide 24: Cold Lake: world-class in situ operation
Cold Lake: world-class in situ operation Best-in-class operational performance Cyclic steam 100% IMO Producing stimulation owned since 1985 1.7B 165 bbls kbd 2P reserves1 average production1 Large, high quality bitumen resource Highly efficient operation Significant, long-term growth potential 1IMO
Slide 25: Continuously improving resource recovery
Continuously improving resource recovery Achieved through technology, innovation and best practices Cold Lake demonstrated recovery, % 80 2010+ 60 2000’s 40 1990’s 1980’s 20 1970’s 0 Thermal Pilots Commercialization of Megarow steaming Limited entry Liquid addition cyclic steam perforations to steam
Slide 26: Maximizing steam utilization
Maximizing steam utilization Achieving enhanced economic, environmental performance 2008 vs. 2015, indexed % 100 75 Recycling more than 95% of water 50 Reducing energy intensity Increasing production 25 0 Fresh water to Total fresh bitumen ratio water use Imperial │ 2016 │ 24
Slide 27: Industry-leading reliability
Industry-leading reliability Achieved through continuous improvement 2012-15 average gas turbine1 reliability, % 100 99 +7 days annual Leader in equipment reliability 98 uptime Effective maintenance strategies 97 Optimizing turnaround intervals 96 95 Global fleet Cold Lake 1OEM fleet data Imperial │
Slide 28: Achieving lower cost per barrel
Achieving lower cost per barrel Mature, lean asset continuing to see improvements Unit cash opex, US$ Production, kbd 2015 industry unit cash opex, C$ indexed % 100 180 75 120 Cold Lake 50 60 25 0 0 0 5 10 15 20 2014 2015 1H16 Source: FirstEnergy Capital Corp. Imperial │ 2016 │ 26
Slide 29: Kearl: next generation oil sands mining
Kearl: next generation oil sands mining Driving operational performance and synergies Mining without 71% IMO Producing upgrader owned since 2013 3.2B 220 bbls kbd 2P reserves1 targeted production2 Large, high-quality bitumen resource Capturing economies of scale Environmental leadership 1IMO share,
Slide 30: Proprietary froth treatment
Proprietary froth treatment Producing pipeline-quality bitumen without an on-site upgrader + Diluent Kearl Bitumen Dilbit “Paraffinic” froth treatment Sediment & water Refinery Asphaltenes Other mines Bitumen Synthetic crude “Naphthenic” froth treatment Sediment & On-site Refinery water upgrader Imp
Slide 31: Achieving lower cost per barrel
Achieving lower cost per barrel Cost discipline, economies of scale fundamental to success Unit cash opex, US$ Production, kbd indexed % 100 150 75 More than 50% reduction in unit opex 100 50 Expansion benefiting cost profile 50 Continuing improvement efforts 25 0 0 2014 2015 1H16 Imperial │ 2016 │
Slide 32: Mine performance improvement
Mine performance improvement Optimization ongoing, integrating with plant performance 2014 vs. 20151, % Best-in-class 100 75 Best-in-class availability 50 Utilization improving with plant uptime 25 Enhancing ore processing 0 Truck Shovel Truck Shovel Availability Effective utilization 1SMART industr
Slide 33: Plant performance improvements
Plant performance improvements Doing more with less, extracting value from plant operations Solvent additions, indexed % 2014 2015 - 60% Systematic, integrated team approach 0 25 50 75 100 Sustainable value capture Bitumen recovery rate1, % Exceeding performance expectations 2014 + 11% 2015 0 25 50
Slide 34: Enhancement opportunities
Enhancement opportunities Activities focused on efficient capacity creep Existing scope Implementation of operational learnings to enhance capacity Incremental scope and optimize asset Equipment upgrades and utilities integration to enhance volumes and efficiencies Major scope Major additions to the
Slide 35: Syncrude: pioneer of oil sands mining
Syncrude: pioneer of oil sands mining Improvement underway to capture full potential Mining with 25% IMO Producing upgrader owned since 1978 1.1Bbbls 76kbd 2P reserves1 average production1 High value, synthetic crude production Competitive mining performance Intense improvement focus 1IMO share, bef
Slide 36: Reliability improvement
Reliability improvement Value is driven by producing the incremental barrel Production1, kbd 80 Impact of fire & turnarounds 60 Reliability risk management 40 Planning and execution excellence Focus on upgrader performance 20 0 2014 2015 1Q16 2Q16 1IMO share, before royalties Imperial │ 2016 │ 34
Slide 37: Syncrude focus areas
Syncrude focus areas Improving resilience in a low price environment 2015 cash conservation, % Market US$10 per barrel opex reduction capture Enhanced execution of key programs Scope and timing Work selection and fit-for-purpose scope Efficiencies Workforce productivity Imperial │ 2016 │ 35
Slide 38: Enhancement opportunities
Enhancement opportunities Leveraging existing and owner-driven oil sands expertise Reliability Utilization of expertise, competency and equipment Synergy strategies to enhance performance Identify further opportunities to leverage owner-provided services with joint venture Integration capability Imp
Slide 39: Sustainable, structural savings
Sustainable, structural savings Driving upstream costs down with continuous improvement Continued market capture Scope, structure and technology Ongoing rate, term negotiation Innovative, efficient new work approaches Expanded scope of reverse auctions Optimizing workflow, organizational synergies P
Slide 40: Upstream costs per barrel
Upstream costs per barrel Asset portfolio remains competitive at full cost Unit cash opex1, US$ 30 - 35% Realizing economies of scale 20 Implementing scope optimization 10 Sustainable efficiency gains 0 2014 2015 1H16 1Data as reported in company 10-K, 8-K filings Imperial │ 2016 │ 38
Slide 41: Leader in technological advancement
Leader in technological advancement Objective to improve economics, reduce environmental impact Well-to-wheels GHG emissions intensity, indexed % 125 Production Imperial breakthrough technologies Refining 100 Distribution 75 CSS Mining SAGD SA-SAGD Kearl Avg barrel Other solvent Combustion dilbit sy
Slide 42: Watch the video on Imperial's YouTube channel
Watch the video on Imperial’s YouTube channel Imperial │ 2016 │ 40
Slide 43: Upstream resources
Upstream resources Large, high quality resource base with significant potential In situ Year-end 2015 resource base, billion boe1 Aspen Cold Lake Exp. 25 Growth portfolio 20 Other Mining Non-aqueous Contingent Resource extraction 15 Mining On Hold Natural gas 10 Unconventional Development Pending gr
Slide 44: In situ growth portfolio
In situ growth portfolio Multiple opportunities, development planning ongoing Resource potential ~5 billion barrels bitumen1,2 Top-tier quality Enabling technology SA-SAGD / other solvent technologies Potential scope Multiple phases, 55-75 kbd per phase Estimated cost Average ~$2B per phase Regulato
Slide 45: In situ technology advancements
In situ technology advancements SA-SAGD provides step-change improvement opportunity Pilot results, indexed % 100 SAGD Industry 75 Economic, environmental gains SA- SAGD IMO Ability to scale efficiently 50 Technology ready to apply 25 0 Cumulative steam oil Initial capital per ratio flowing barrel I
Slide 46: Aspen
Aspen First potential commercial SA-SAGD project In situ with 100% IMO 1st production solvents owned 2020+ 1.2B 75K barrels bbl/d resource gross production potential1 per phase1 Environmental, economic technology advantages Two phase project, ~$2 billion per phase Progressing technical, regulatory f
Slide 47: Cold Lake Expansion
Cold Lake Expansion Development of Grand Rapids formation with SA-SAGD In situ with 100% IMO 1st production solvents owned 2020+ 550M 55K barrels bbl/d resource gross potential1 production1 Environmental assessment, consultation One phase project, ~$2 billion initial capex Regulatory application sub
Slide 48: Upstream summary
Upstream summary Distinct competitive advantages deliver long-term value Asset Operational Growth Technology base excellence opportunities leadership + High quality + Industry leading + Large inventory + Innovation + Long-life + Integrity & reliability + In situ focus + Asset improvement + Oil sands
Slide 49: Downstream & Chemical
Downstream & Chemical
Slide 50: Downstream & Chemical portfolio
Downstream & Chemical portfolio Operational excellence and integration drive performance Refining Operations, % Volumes, kbd Nanticoke Sarnia 100 500 Strathcona 2015 10-year Marketing 75 avg Esso Mobil 1 50 250 Chemical Sarnia 25 Research 0 0 Sarnia Refinery Advantaged Petroleum product utilization
Slide 51: Strong cash flow, selective investments
Strong cash flow, selective investments More than $8 billion net cash generated over the past 5 years Net cash, C$ billion 2 Strong cash generating capabilities 1 Continued structural advantages Low sustaining capital required 0 2010-14 2015 1H16 average Imperial │ 2016 │ 49
Slide 52: Refining: efficient, value-driven business
Refining: efficient, value-driven business Integration elevates advantage in mature industry Nanticoke, Sarnia, Strathcona, Ontario Ontario Alberta 421 kbd 92 percent refining capacity 2015 utilization Well-positioned, competitive assets Integrated, 100% advantaged feeds Leveraging global best pract
Slide 53: Refining ranking
Refining ranking Strong performance in North America, top-tier in Canada 1st Quartile 2nd Quartile IMO refineries Canadian industry 3rd Quartile excluding IMO 4th Quartile Non-energy Process unit Energy cash opex utilization efficiency Source: 2014 Solomon survey, includes 96 refineries in North Ame
Slide 54: Continuous improvement
Continuous improvement Global leadership, ongoing competitive focus 2015 refinery utilization, % 100 90 » Improvement vs. 2010 80 70 IMO Canada* North America Global Source: BP Statistical Review of World Energy 2016, company data Imperial │ 2016 │ 52 * Excludes IMO
Slide 55: Downstream enhancements
Downstream enhancements Evaluating further value creation Cogeneration Strathcona │Earliest FID 2017 Capture gas-power spread More efficient steam Leverage carbon tax credits Diluent Recovery Unit Strathcona │Timing to be determined Recycle local diluent pool Reduce supply costs Leverage rail termin
Slide 56: Optimizing value
Optimizing value Competitive advantage through scale, skill and integration Currently shipping 400 kbd by pipeline Crude sold to 35+ refineries worldwide Real-time midstream optimization Imperial │ 2016 │ 54
Slide 57: Rail terminal
Rail terminal Strategic asset provides options to reach high value markets Edmonton, Location Start-up April Alberta advantage 2015 Joint 210K venture bbl/d with Kinder gross Morgan capacity Equity crude flow assurance Mitigation of apportionment impact Ability to reach new, less accessible markets
Slide 58: Fuels & Lubes: marketing excellence
Fuels & Lubes: marketing excellence Delivering valued products to customers nationwide Wholesale Commercial Industrial 1,700 + 478 BW kbd retail sites1 2015 sales Focused on premium markets High capability distributor network Leading market share in all segments 1Full conversion to branded wholesale
Slide 59: Retail conversion
Retail conversion Sale of remaining 497 company-owned sites Company-owned, Branded wholesaler agent-operated owned and operated Pre-sale: ~30% of sites Pre-sale: ~70% of sites Post-sale: 0% of sites Post-sale: 100% of sites Imperial Agent Proceeds: $2.8B Imperial 3rd party Proven operators Supplies
Slide 60: Continuous development
Continuous development Committed to enhance retail offering and grow value Existing, successful Fuel technology partnerships development Long-term supply Customer experience agreements enhancements Commitment to grow Standardized the Esso brand loyalty programs Imperial │ 2016 │ 58
Slide 61: Chemical: unique, commodity business
Chemical: unique, commodity business One of Canada’s leading producers of chemical products Sarnia, Refinery Location Ontario integration advantage 945 $287 kt million 2015 sales 2015 record earnings Top-tier asset, specialty customers Integrated manufacturing facility Leveraging proprietary technol
Slide 62: Leadership in polyethylene
Leadership in polyethylene Innovation in injection and rotational molding since 1983 Outstanding resin quality Expert technical knowledge Solutions for complex designs Imperial │ 2016 │ 60
Slide 63: Fully integrated with Sarnia refinery
Fully integrated with Sarnia refinery Diversified, low-cost feedstocks enhance profitability Feedstock mix, % Indexed % 100 250 Spot Propane Unit margin Cost 200 Sales volume Midwest advantaged ethane ethane 150 50 100 Refinery Refinery off gas off gas 50 0 0 2009-2014 2015+ 2010 2011 2012 2013 2014
Slide 64: Gas cracker furnace project
Gas cracker furnace project Improves energy efficiency, increases high value production Cutting-edge Capacity Feed-in technology creep July 2016 7% $5M capacity annual cost increase savings Improved energy efficiency Reduced maintenance costs Increased polyethylene sales Imperial │ 2016 │ 62
Slide 65: Downstream and Chemical summary
Downstream and Chemical summary Distinct competitive advantages deliver long-term value Asset Operational Value chain Technology base excellence integration leadership + Location advantage + History & expertise + Customer focus + Product development + Operational scale + Global best practices + Logi
Slide 66: Corporate
Corporate Imperial │ 2016 │ 64
Slide 67: Financial performance
Financial performance Demonstrating value of integration through the business cycle Cash flow from operating activities, C$ billion Five-year average, % 5 4 3 Upstream Downstream & other 2 1 0 2011 2012 2013 2014 2015 Imperial │ 2016 │ 65
Slide 68: Capital efficiency
Capital efficiency Maximizing investment value and life cycle performance Return on capital employed, % 25 10-year average 3-year average 15 5 IMO HSE SU CNQ CVE -5 Source: company publications Imperial │ 2016 │ 66
Slide 69: Financial strength
Financial strength Strong balance sheet, priority access to financial markets 2Q16 debt to capital, % 40 30 Leverage XOM relationship 20 Borrow on most attractive terms 10 Optimize use of floating rate debt 0 Maintain capital structure flexibility CNQ HSE SU IMO CVE BBB+ BBB+ A- AA+ BBB Ratings1 1Ba
Slide 70: Shareholder distributions
Shareholder distributions Over $10 billion returned to shareholders in the last 10 years 2006-15 average payout ratio1, % 2006-15 total distributions, C$ billion IMO SU HSE IMO CVE HSE SU CNQ CNQ CVE 0 5 10 15 20 25 30 35 0 3 6 9 12 Source: company publications, Yahoo Finance 1Operating cash flow pa
Slide 71: Share buybacks
Share buybacks Proven history of returning cash and preserving value Million1 2,000 1995 1,500 Repurchased 50% of shares 1,000 Non-dilutive equity strategy 2015 Priority on shareholder interests 500 0 Shares outstanding 1Adjusted for three-for-one stock splits (May 15, 1998 and May 23, 2006) Imperia
Slide 72: Dividends
Dividends Priority to pay a reliable and growing dividend Dividend per share1, C$ 0.60 100+ years of consecutive payment 0.40 21 years of consecutive growth 5.5% 10-yr compounded growth rate 0.20 Increase to $0.15/sh payable 2Q16 0.00 2005 2010 2015 1Adjusted for three-for-one stock split (May 23, 2
Slide 73: Capital expenditures
Capital expenditures Recently completed growth, evaluating future opportunities Annual average, C$ billion 6 5 Kearl, Nabiye projects complete + Added nearly 200 kbd capacity 4 3 Sustaining capex under C$1B annually + Down 30+% from earlier estimates 2 1 Next tranche of growth likely in situ + Scope
Slide 74: Financial resilience
Financial resilience Strength provides flexibility under a range of oil prices 2016-20 annual average, C$ billion 4 $55 3 Ability to meet highest priorities 2 $45 Significant cash flow leverage Growth Options to pursue growth 1 Sustaining $35 Dividend1 Flexibility for new opportunities 0 Dividend Ca
Slide 75: Why Imperial?
Why Imperial? Distinct competitive advantages that deliver long-term value Asset base Growth opportunities High quality, high performing assets A large inventory of attractive opportunities across the portfolio to support future upstream growth Operational excellence Technology leadership Effective
Slide 76: For more information
For more information: imperialoil.ca | Twitter | YouTube | LinkedIn For more detailed investor information, or to receive annual and interim reports, please contact: Meredith C. Milne Manager, Investor Relations T: +1 (587) 476-4743 E: [email protected] Imperial Oil 505 Quarry Park Blvd SE Ca
Slide 77: Investor Day
September 21 Investor Day