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
Imperial Investor Day November 7, 2018 Imperial │ 2018 │ 1
Slide 2: Opening Remarks
Opening Remarks Rich Kruger Chairman, President and Chief Executive Officer Imperial │ 2018 │ 2
Slide 3: Q3 recap
Q3 recap Results consistent with expectations for strong second half performance 393,000 boepd $749 million Upstream production Net income 388,000 bpd $1.2 billion Refinery throughput Cash from operations 516,000 bpd $573 million Petroleum product sales Returned to shareholders Imperial │ 2018 │ 3
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
Slide 5: Global liquids outlook
Global liquids outlook Oil to remain the world's largest energy source well into the future Demand mbd 120 Growth driven by transportation, chemicals 100 New Global resources sufficient to meet demand Production 80 Required New supplies required from multiple regions 60 40 Major ongoing inve
Slide 6: Canada's opportunity
Canada’s opportunity Highest quality oil sands expected to be competitive on a global basis Breakeven Brent price $US/bbl 125 3rd largest liquid reserves globally 100 mining Track record of innovation, responsible development 75 in situ Historically conducive investment climate 50 Canada-spe
Slide 7: Imperial's operations
Imperial’s operations High quality, integrated, balanced, coast-to-coast asset portfolio Kearl mining F&L marketing Distribution network Syncrude mining Strathcona refinery Sarnia refinery Cold Lake in situ Sarnia chemical Rail terminal Nanticoke refinery Research Imperial │ 2018 │ 7
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 Imper
Slide 9: Portfolio enhancement
Portfolio enhancement Focusing on highest value assets and competitive core competencies Acquired Startup of Startup of Cold Commissioned Startup of Rebranding Husky Rebranding 200+ Installing interest in first phase Lake Nabiye Edmonton rail second phase truck transport retail sites under supplemen
Slide 10: Upstream assets
Upstream assets Increasing concentration in long-life, high quality oil sands assets Production Kearl koebd Mining - PFT 71% interest 400 Total 300 Syncrude Kearl Mining - upgrader 25% interest 200 Syncrude 100 Cold Lake In situ – CSS/other Cold Lake 100% interest 0 1998 2008 2018 Gross production,
Slide 11: Downstream assets
Downstream assets Leveraging operational excellence, scale and integration to capture value Volumes kbd Strathcona refinery 191 kbd capacity 500 Petroleum product sales 400 Sarnia refinery 119 kbd capacity 300 200 Refinery throughput Nanticoke refinery 113 kbd capacity 100 0 2008 2013 2018 Fuels mar
Slide 12: Risk management
Risk management Comprehensive management of full spectrum of enterprise risks Strategic Reputational Safety Systematic approach in all areas Fundamental line management responsibility Enterprise Financial and Health and Economic Risk Environment Management Robust internal/external compliance p
Slide 13: Corporate responsibility
Corporate responsibility Commitment to strong environmental, social and governance principles ‘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 commit
Slide 14: Safety and operational integrity
Safety and operational integrity Organization-wide priority to protect people, assets and the environment Total Recordable Incident Rate Average number of spills 0.5 25 0.4 20 5-yr average 0.3 2017 15 Upstream Downstream & other 0.2 10 0.1 5 0.0 0 Canadian peers Imperial 2008-12 2013-17 Q3'18 YTD In
Slide 15: Integration
Integration Delivering value, competitive advantage and resiliency across the business cycle Equity crude placed in Upstream highest netback markets Oil & natural gas production Cost-advantaged feedstocks for refineries & chemical Downstream Highest value sales channels for petroleum products Refini
Slide 16: Technology and innovation
Technology and innovation Unparalleled commitment and achievement throughout 138-year history Canada’s first Cyclic steam Steam-assisted gravity Solvent-assisted research department stimulation patent drainage patent technology pilots Imperial has invested more than $2.1B over the past 20 years Firs
Slide 17: Imperial's winning formula
Imperial’s winning formula Increase cash flow, deliver industry-leading returns throughout the cycle Deliver industry Leverage technology, Continue to achieve Be the most Aggressively capture leading performance integration and improvements in valued partner new opportunities in reliability, safety
Slide 18: Upstream Overview
Upstream Overview John Whelan Senior Vice President, Upstream Imperial │ 2018 │ 18
Slide 19: Upstream at a glance
Upstream at a glance Large, long-life predominantly oil sands portfolio ~6.5 Norman Wells Syncrude mining with upgrader Kearl mining without upgrader billion boe Cold Lake in situ 2P reserves ~400 Unconventional koebd Production Industry leading Next generation Oil sands Remaining in situ oil sands
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 3 400 300 2 200 1 100 0 0 2011-14 2015-17 2018e 2011-14 2015-17 Q3`18 YTD $US/bbl WTI 95 48 67 Liquids Gas WCS 74 35 45 Proved reserve life based on 2017 prod
Slide 21: Syncrude
Syncrude Oil sands mining pioneer Mining with 25% IMO Producing upgrader owned since 1978 0.7B bbls ~60 kbd 2P reserves 2018 production outlook High value synthetic crude oil Improve reliability by eliminating major events Capture regional integration opportunities Fully leverage owner compa
Slide 22: Syncrude reliability
Syncrude reliability High-potential asset with priority on eliminating one-time events Production kbd Production challenged 90 Significant volume loss events Target production Upgrader performance 60 Reliability improvement essential Mechanical integrity Turnaround planning and execution
Slide 23: Syncrude collaboration
Syncrude collaboration Leverage owner strengths to accelerate performance improvement Owner company expertise Provision of business services Collaborative ‘production forums’ Regional logistics and infrastructure Commercial opportunities Imperial │ 2018 │ 23
Slide 24: Kearl
Kearl Next generation oil sands mining Mining without 71% IMO Producing upgrader owned since 2013 3.3B bbls ~200 kbd 2P reserves 2018 production outlook Large, high quality resource Improving performance Near-term production growth 2P reserves IMO share, before royalties Gross production outlo
Slide 25: Kearl performance
Kearl performance Focused on improving reliability, cost structure and realizations Production and unit cost kbd $US/bbl 300 40 Leveraging full organizational capability 200 Growing cash generation capacity 20 Averaging $5/bbl CAD sustaining capex 100 Targeting $20/bbl US cash opex ‘all-in’
Slide 26: Kearl performance indicators
Kearl performance indicators Targeting best-in-class in all areas of operation Haul truck utilization, % Solvent loss, indexed 100 100 50 50 0 0 2013-14 2015-16 2017-18 2013 2018 Plant bitumen recovery, % Logistics cost/person, indexed 100 100 50 50 0 0 2013-14 2015-16 2017-18 2013 2018 Best-in-clas
Slide 27: Delivering on 200 kbd
Delivering on 200 kbd Actions previously completed to deliver on commitment of 200 kbd annual average Improved ore preparation performance Crusher and dump hoppers Ore conveyor drive chains Crusher teeth and bearings Mine equipment Enhanced piping durability Primary separation cells Hy
Slide 28: Increasing to 240 kbd
Increasing to 240 kbd Investing to increase production from 200 to 240 kbd in 2020 Adding supplemental crushing capacity Offset equipment downtime Create surge bin conveyor redundancy Installing slurry piping interconnections Minimize maintenance impacts Optimize flow to facilities $55
Slide 29: Opportunities for ~280 kbd
Opportunities for ~280 kbd Series of targeted debottlenecking and redundancy improvements Resource optimization Primary separation cell upgrades Secondary bitumen recovery enhancements Froth treatment interconnects Diluent and solvent utilization Capital intensity similar to crusher proj
Slide 30: Productivity and digital initiatives
Productivity and digital initiatives Leveraging technology to drive improvements and enhance performance Asset improvement teams Bangalore Technology Centre Digital foundation Drones for mine connecting equipment, planning and equipment Remote operating centre assets and people inspection En
Slide 31: Autonomous haul trucks
Autonomous haul trucks Ongoing pilot to increase mine safety and productivity GPS Partnering with Caterpillar and Finning Fleet of seven trucks in productive service Testing for unique oil sands conditions 3D sensing Cost savings greater than $0.50/bbl Active workforce engagement Radar Imp
Slide 32: Maximizing Kearl value
Maximizing Kearl value Significantly improving financial and operating performance 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 Imperial │ 2018 │
Slide 33: Cold Lake
Cold Lake Large scale in situ operation Cyclic steam 100% IMO Producing stimulation owned since 1985 1.5B bbls ~150 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 Im
Slide 34: Cold Lake performance
Cold Lake performance Focus on life-cycle optimization and cash generation Production kbd 200 Continued strong operating performance 150 Maximizing life-cycle return and recovery Optimizing steam distribution 100 Fully utilizing existing wellbores Adding wells to sustain and grow productio
Slide 35: Cold Lake performance indicators
Cold Lake performance indicators 40+ years of continuous improvement Drilling costs Fresh water use Power related volume loss 100 100 100 Indexed 50 50 50 0 0 0 2015 2018 2008 2017 2014 2017 Bitumen recovery, % 80 2010+ 60 2000’s 40 1990’s 1970’s 1980’s 20 0 Thermal pilots Cyclic steam stimulation 3
Slide 36: Cold Lake recovery
Cold Lake recovery Ongoing enhancement through technology and innovation Recovery method, % of production 100 Resource life supports technology testing Recovery technology evolving 50 Driving digital solutions Economic and environmental benefits 0 2000 2010 Current 2030 CSS Steamflood Solven
Slide 37: Maximizing Cold Lake value
Maximizing Cold Lake value Strengthening performance and offsetting natural decline Production kbd Annual base decline of approximately 5% Solvents Drilling and wellwork mitigate decline Technology enables growth Potential for 50 kbd expansion Regulatory approval in place Project timing
Slide 38: Norman Wells
Norman Wells Operations restarted after two-year pipeline shutdown 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 Source: Enbridge Pipelines (NW) Inc. Imperial │ 2
Slide 39: Unconventional optionality
Unconventional optionality Liquids rich opportunity, paced development approach 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.
Slide 40: Pricing fundamentals
Pricing fundamentals Taking a closer look at bitumen realizations 2017 2018 YTD $US/bbl $US/bbl WTI North American light benchmark $51/bbl $67/bbl Quality/differential between light and heavy crudes Transportation from production to USGC ($12/bbl) ($22/bbl) WCS Canadian heavy benchmark; $39/bbl $45/
Slide 41: Equity crude value
Equity crude value Placing crude in markets that maximize general interest value 400 koebd Total Production 25 koebd 75 kbd 300 kbd Bitumen (400 kbd Dilbit) Natural Gas Syncrude synthetic and assorted liquids (Strathcona Refinery) 100 kbd to IMO 100 kbd via Contracted 100 kbd via Rail to GC 100 kbd
Slide 42: Market access
Market access Edmonton rail terminal provides unique competitive advantage Terminal Utilization kbd Two rail service providers 240 Ramp-up agreements in place 200 Capacity 160 Unmatched access to railcar fleet 120 Customer offloading facilities 80 Optimizing cycle times 40 Targeting furt
Slide 43: Near-term production outlook
Near-term production outlook Growth through capitally efficient projects and reliability improvements Production koebd Sustained production at Cold Lake Ramp-up of Norman Wells Improved reliability at Syncrude Supplemental crusher at Kearl Gross production, IMO share Imperial │ 2018 │ 43
Slide 44: Business Development
Business Development Theresa Redburn Senior Vice President, Commercial and Corporate Development Imperial │ 2018 │ 44
Slide 45: Research and development
Research and development Continuous long-term investment in technology and innovation 138 years of unparalleled commitment IMO Upstream & Downstream research centres $1 billion Calgary - oil sands technologies, environmental annual R&D Sarnia - products research, technical support spend Le
Slide 46: Imperial Research priorities
Imperial Research priorities Focused on oil sands and product research Advanced recovery technology Enhanced recovery technology development Lower costs Improve performance Reliability and ~$150-200 Environmental million Reliability and Environmental efficiency efficiency improvements solutions
Slide 47: In situ technologies
In situ technologies Developing full suite of technology applications to match resource base Pressure Higher CSS CSP Asset characteristics drive technology LASER Depth of resource Quality of resource SA- Stage of development SAGD SAGD Lower EBRT Improve economic performance Continuous Cycl
Slide 48: Advanced in situ recovery
Advanced in situ recovery Technology drives economic and environmental performance improvement Cyclic Technologies Cyclic Solvent Liquid Addition to Steam to Enhance Recovery Process (LASER) (CSP) Up to 10% solvent, 90% steam 100% solvent Mid-life technology Enhanced resource recovery Solven
Slide 49: In situ growth portfolio
In situ growth portfolio Large inventory of top tier development opportunities Kearl Accessible via variety of technologies Aspen Syncrude Fort McMurray Δ Multiple phases, 50-75 kbd potential per phase Corner Chard ‘Design One, Build Many’ development approach Clyden CL Expansion Cold Lake L
Slide 50: Resource inventory
Resource inventory Progressing multiple development opportunities Level of Definition Regulatory Status Commercial Project Name Resource Concept Development Application Scheme Full Assessment Select Plan Submission Approval Funding Aspen Phase 1 Aspen Phase 2 CL Expansion
Slide 51: Aspen phase 1
Aspen phase 1 First commercial SA-SAGD development 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 bene
Slide 52: Aspen
Aspen Technology key to delivering both economic and environmental benefits Pilot results, indexed Relative GHG intensity 100 In situ industry average Industry 50 Imperial SA- SAGD SAGD 0 Capital intensity Cumulative SOR CSS LASER SAGD Aspen Future Boone et al 2012, internal estimates Imperial │ 201
Slide 53: Why Aspen, why now
Why Aspen, why now Large, long-life high quality investment opportunity Annual free cash flow 1st 10-year Average SA-SAGD technology with economic and environmental benefits $billion Brent, $/bbl 1.0 100 Lower carbon intensity vs. industry in situ assets 80 Leverages 40+ years of Cold Lake in
Slide 54: Growth opportunities
Growth opportunities Suite of attractive oil sands investment opportunities Near term projects Under evaluation $K/bbl $K/bbl 40 40 Capital intensity 30 30 Aspen Phase 1 20 Aspen 20 Aspen Cold Lake Phase 1 Expansion Phase 2 10 Kearl 10 Kearl Supplemental Improvement Crusher 0 0 0 50 100 150 0 50 100
Slide 55: Downstream and Chemical Overview
Downstream and Chemical Overview Dan Lyons Senior Vice President, Finance and Administration Imperial │ 2018 │ 55
Slide 56: Downstream at a glance
Downstream at a glance Well positioned, high performing and integrated ~400 kbd Refining capacity Marketing Logistics Refining ~500 kbd Product sales Strategically Strong Quality products positioned refineries logistics Leading brands Imperial │ 2018 │ 56
Slide 57: Downstream overview
Downstream overview Optimized throughput, growing sales, generated nearly $8 billion in cash since 2014 Refinery throughput and sales Annual cash from operations kbd $B 600 2.0 500 1.5 400 300 1.0 200 0.5 100 0 0.0 2009-13 2014-17 Q3`18 YTD 2009-13 2014-17 Q3`18 YTD Throughput Sales Imperial │ 2018
Slide 58: Refining performance
Refining performance Global best practices and targeted investment increase reliability and profitability Utilization, % Regretted loss, % 100 Increasing utilization 90 Two thirds reduction in regretted losses Top-tier Solomon results in Canada 80 Strathcona cogeneration project Increased
Slide 59: Industry product and feedstock pricing
Industry product and feedstock pricing Widening differentials increase refining profitability Crude Pricing $US/bbl 90 80 Brent 70 Product pricing largely Brent based 60 50 Refineries benefit from discounted crude 40 MSW 30 Substantial heavy crude discount 20 WCS 10 Widening light crude disc
Slide 60: Refining feedstocks
Refining feedstocks Well positioned to capture differentials Heavy crude refined kbd 100 Heavy crude differentials Increased crude slate flexibility 50 Captured more than $200M pretax benefit Q3`18 YTD 0 2014-17 Q3`18 YTD Light crude differentials Light crude produced/refined kbd Refining
Slide 61: Sales and market position
Sales and market position Market leader in product sales actively capturing new business 2018 YTD Sales KBD Market Share Mogas 254 ~29% Unmatched scale Diesel 126 ~22% Integrated across the value chain Jet 41 ~27% Asphalt 23 ~29% Sales support refining utilization Lubes/Other 59 N/A Investin
Slide 62: Sales strategy
Sales strategy Leverage scale, integration and brand to pursue profitable sales growth The brand advantage Build strategic relationships Grow ratable sales Capture brand value Optimize integrated profit Spot Term Branded Imperial │ 2018 │ 62
Slide 63: Aviation
Aviation Market leader in growing segment Jet sales kbd 50 Increased sales into Canada’s major airports 40 Over 50% of Ontario market 30 Recently entered Vancouver market 20 Attractive integrated earnings 10 0 2014-17 Q3`18 YTD Imperial │ 2018 │ 63
Slide 64: Asphalt
Asphalt Leveraging integration to grow earnings Asphalt sales kbd 25 Growing North American demand 20 Leveraging logistics to produce year round 15 Utilizing advantaged Cold Lake blend 10 Growth projects at Strathcona and Nanticoke Q3`18 YTD pretax benefit $185M 5 0 2014-17 Q3`18 YTD Imper
Slide 65: Retail
Retail Captured # 1 position in Q3 2018 Retail sales volumes Superior Products kbd Synergy gasoline 180 Synergy Diesel Efficient 160 140 Convenience 120 Nearly 2,200 locations 100 Speedpass+ app 80 Loyalty 60 PC Optimum points 40 Esso Extra 20 0 Strategic partners 2014 2015 2016
Slide 66: Marine fuels
Marine fuels Well positioned for IMO 2020 sulphur specification change Heavy differentials to increase Diesel/jet prices to strengthen Shippers and refiners adapting Integration reduces impacts Imperial │ 2018 │ 66
Slide 67: Downstream summary
Downstream summary Positioned for industry leading financial performance High performing refineries Advantaged feedstocks Scale, integration and logistics Growing high value sales Brand advantage Strong sustained cash flow Imperial │ 2018 │ 67
Slide 68: Chemical at a glance
Chemical at a glance High value products, well positioned, integrated assets ~800 Integrated Sarnia Chemical Site Specialty customer products kt Sales Polyethylene $1.3 Billion Cash generated since 2014 Advantaged Integrated High value location manufacturing products Imperial │ 2018 │ 68
Slide 69: Chemical overview
Chemical overview Superior products and strong cash generation Chemical product sales Annual cash from operations kt $M 1,000 300 250 750 200 500 150 100 250 50 0 0 2009-13 2014-17 2018e 2009-13 2014-17 Q3`18 YTD Sales exclude carbon black and Dartmouth Imperial │ 2018 │ 69
Slide 70: Integrated petrochemical site
Integrated petrochemical site Advantaged location and industry leading integration Feedstock, % 100 Spot Propane Fully integrated with Sarnia refinery Marcellus Ethane Mid-west Flexibility in feedstock optimization Ethane Mid-west Ethane 50 90% of feedstocks are cost-advantaged Refinery Refine
Slide 71: Premium products
Premium products Polyethylene for rotational and injection molding drives profitability Key end uses Injection molding (pails, containers, crates) Rotational molding (storage tanks, toys) Superior customer experience Consistent resin quality, reliable supply Highly regarded technical ser
Slide 72: Value chain
Value chain Integrated across the value chain Integration advantage Crude Optimization Manufacturing Logistics Commercial B2B Chemical Branded Retail Leverage opportunities from crude to customer Financial resilience across commodity cycles Balance sheet strength and optionality Imperial │ 201
Slide 73: Delivering Value
Delivering Value Rich Kruger Chairman, President and Chief Executive Officer Imperial │ 2018 │ 73
Slide 74: Cash flow
Cash flow Delivering value and resiliency through integration, $33 billion from operations over last 10 years Cash from operating activities 5-year average, % $B 5 4 Upstream Downstream & Chemical 3 10-year average, % 2 1 Downstream & Chemical Upstream 0 2012 2013 2014 2015 2016 2017 Q3'18 $US/bbl Y
Slide 75: Financial strength
Financial strength Strong balance sheet, optionality and access to financial markets June 30, 2018 debt to capital, % 50 Maintain strong balance sheet 25 Pay reliable and growing dividend Invest in high value projects Return surplus cash to shareholders 0 CNQ CVE SU HSE IMO BBB+ BBB A- BBB+
Slide 76: Dividends
Dividends Priority to pay a reliable and growing dividend $ Dividend per share 0.80 100+ years of consecutive payment 0.60 24 years of consecutive growth 0.40 8.7% 5-yr compounded growth rate 0.20 Increased to $0.19/sh payable in 3Q’18 0.00 2008 2013 2018 Paid basis Imperial │ 2018 │ 76
Slide 77: Share buybacks
Share buybacks Proven history of returning surplus cash and preserving value Shares outstanding, million 2,000 Repurchased >50% of shares since 1995 1995 1,500 Reinstated current program in 2017 1,000 Purchases of $2.2B since 2017 reinstatement 500 Non-dilutive equity philosophy 0 1995 2018
Slide 78: Shareholder distributions
Shareholder distributions Nearly $9 billion returned to shareholders over the last 10 years Total distributions 2008-2018 1H, $ billion Average payout ratio 2008-2018 1H, % SU IMO IMO SU HSE HSE CNQ CVE CVE CNQ 0 5 10 15 20 0 10 20 30 Average payout ratio includes annual dividends and share repurcha
Slide 79: Capital expenditures
Capital expenditures Five-year capital expenditure plan consistent with previous communications Capital expenditures $B 3 5-year capex average at $2.1-2.2 billion/year 80% upstream, 20% downstream/other 2 Sustaining capital remains at $1.0-1.1 billion/year G Roughly 70%, or $5/bbl, for upstr
Slide 80: Financial strength
Financial strength Resiliency and flexibility under a wide range of prices 2018 – 2022 annual average $B WTI, $/bbl 8 Ability to meet highest priorities 6 80 GrowSurplus th Significant cash flow leverage 4 Cash 60 2 Growth 40 Flexibility for new opportunities Sustaining Dividend 0 Dividend Cas
Slide 81: Why Imperial
Why Imperial Distinct competitive advantages that deliver long-term shareholder value Asset base Growth opportunities High quality, long-life assets Large inventory of opportunities across the portfolio to support future upstream growth Operational excellence Technology leadership Technical, operati
Slide 82: Cautionary statement
Cautionary statement Statements of future events or conditions in this presentation, including projections, targets, expectations, estimates, and thousand cubic feet (Mcf) to one barrel (bbl). BOE may be misleading, particularly if used in isolation. A BOE conversion business plans are forward-looki
Slide 83: imperialoil.ca
For more information: Dave Hughes Manager, Investor Relations +1 587.476.4743 [email protected] imperialoil.ca twitter.com/ImperialOil linkedin.com/company/imperial-oil youtube.com/ImperialOil Imperial │ 2018 │ 83