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| IMO > SEC Filings for IMO > Form 10-Q on 1-May-2009 | All Recent SEC Filings |
1-May-2009
Quarterly Report
OPERATING RESULTS
The company's net income for the first quarter of 2009 was $289 million or $0.33 a share on a diluted basis, compared with $681 million or $0.75 a share for the same period last year.
Earnings in the first quarter were lower than the same quarter in 2008, as lower Upstream and Chemical earnings were partially offset by higher Downstream earnings. In the Upstream, earnings decreased primarily due to lower crude oil and natural gas commodity prices of about $940 million, partially offset by lower royalty costs due to lower commodity prices of about $270 million and the impact of a lower Canadian dollar of about $250 million. Higher Downstream earnings were primarily due to stronger margins of about $90 million and increased refinery throughput and utilization of about $60 million. Chemical earnings were negatively impacted by the slow economy in the first quarter with lower overall margins and lower sales volumes. Higher share-based compensation costs also contributed to lower earnings.
Upstream
Net income in the first quarter was $142 million versus $650 million in the same period of 2008. Earnings decreased primarily due to lower crude oil and natural gas commodity prices of about $940 million. Earnings were also negatively impacted by higher production costs, Syncrude maintenance costs and exploration expenses totaling about $70 million. These factors were partially offset by lower royalty costs due to lower commodity prices of about $270 million and the impact of a lower Canadian dollar of about $250 million.
The average price of Brent crude oil, a common benchmark for world oil markets, was $44.44 a barrel, in U.S. dollars, in the first quarter, down about 54 percent from the same quarter last year. The company's realizations on sales of Canadian conventional crude oil mirrored the same trend as world prices, decreasing about 50 percent in the first quarter compared to the same period last year.
Prices for Canadian heavy oil, including the company's heavy oil from Cold Lake, moved generally in line with that of the lighter crude oil. The price of Bow River, a benchmark Canadian heavy oil, fell by about 44 percent in the first quarter compared to the same quarter last year.
Gross production of Cold Lake heavy oil averaged 148 thousand barrels a day during the first quarter, versus 154 thousand barrels in the same quarter last year. Lower production volumes in the first quarter were due to the cyclic nature of production at Cold Lake and increased maintenance activities.
The company's share of Syncrude's gross production in the first quarter was 68 thousand barrels a day compared with 67 thousand barrels during the same period a year ago. Volumes in the first quarter were slightly higher than the same period in 2008, as lower maintenance activities were largely offset by bitumen production constraints and acceleration of planned maintenance activities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued ....)
In the first quarter, gross production of conventional crude oil averaged 26 thousand barrels a day, down from 27 thousand barrels a day in the same period last year, due to natural reservoir decline.
Gross production of natural gas during the first quarter of 2009 decreased to 307 million cubic feet a day from 325 million cubic feet in the same period last year as a result of natural reservoir decline.
Downstream
Net income was $202 million in the first quarter of 2009, compared with $30 million in the same period a year ago. Earnings were higher in the quarter mainly due to stronger downstream margins of about $90 million, increased refinery throughput and utilization of about $60 million and the impact of a lower Canadian dollar of about $45 million. Partially offsetting these factors were lower industry sales volumes due to the slowdown in the economy of about $25 million.
Chemical
Net income was $3 million in the first quarter, compared with $24 million in the same quarter last year. Chemical earnings were negatively impacted by the slow economy in the first quarter with lower margins for polyethylene and aromatic products and lower sales volumes for polyethylene and intermediate products.
Corporate and other
Net income effects were negative $58 million in the first quarter, compared with negative $23 million in the same period of 2008. Unfavourable earnings effects were primarily due to higher share-based compensation charges.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow used in operating activities was $296 million during the first quarter of 2009, compared with cash flow generated from operating activities of $289 million in the same period last year. Lower cash flow was primarily driven by lower earnings and timing of scheduled income tax payments. These factors were partially offset by lower seasonal inventory builds. The net effects of lower commodity prices on receivable and payable balances did not have a material impact on cash flow. Funding contributions of $161 million to the company's registered pension plan in the first quarter were at a slightly higher level than the same period last year.
Investing activities used net cash of $407 million in the first quarter, an increase of $169 million from the corresponding period in 2008. Additions to property, plant and equipment were $411 million in the first quarter, compared with $251 million during the same quarter 2008. For the Upstream segment, expenditures during the quarter were primarily for advancing the Kearl oil sands project and development drilling at Cold Lake. Other investments included facilities improvements at Syncrude, exploration drilling at Horn River and development drilling at conventional fields in Western Canada. The Downstream segment's capital expenditures were focused mainly on refinery projects to increase sulphur recovery to further reduce sulphur dioxide emissions, upgrade water management systems as well as enhance feedstock flexibility and energy efficiency.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued ....)
During the first quarter of 2009, the company repurchased about 10.5 million shares for $429 million. Under the current share repurchase program, which began on June 25, 2008, the company has purchased about 34 million shares, including shares purchased from ExxonMobil.
Cash dividends of $86 million were paid in the first quarter of 2009 compared with dividends of $82 million in the first quarter of 2008. Per-share dividends declared in the first quarter were $0.10, up from $0.09 in 2008.
The above factors led to a decrease in the company's balance of cash to $755 million at March 31, 2009, from $1,974 million at the end of 2008.
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