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Imperial takes Q3 in stride

Imperial Oil Ltd.’s recent Q3 report shows a tough quarter behind them as they move ahead with good performance on the upstream side in 2019.

Rich Kruger is retiring at the end of December.

Rich Kruger is retiring at the end of December.

Imperial achieved its highest third-quarter production in 30 years. This performance demonstrates the results of the companys focus on upstream reliability,says Rich Kruger, outgoing chairman and CEO. Overall, upstream gross oil-equivalent production averaged 407,000 barrels per day (BPD), up from 393,000 barrels per day in the third quarter of 2018.

Cash flow generated from operating activities was $1.376 billion in the third quarter, up from $1.207 billion in the corresponding period in 2018, primarily reflecting favourable working capital effects, partially offset by lower earnings.

 However, Imperial was not so fortunate with other aspects of the quarter. Crude-by-rail shipments were off by 8%, refinery through-put decreased 25,000BPD, product sales declined 28,000BPD and net income for the quarter was down more than $300 million compared to the same period last year. Even chemical income declined, with numbers revealing sales declines of about half compared to last year’s Q3 totals.

 The company reports that margin pressures and turnaround activities cost some $300 million in lost revenue in Q3. As a result, net income for downstream activity was written as $221 million in the third quarter, compared to $502 million in the third quarter of 2018.

 Big picture remains bright

 While some numbers in Q3 were less than optimum, 2019 looks like a good exit point for Kruger, who will retire this year and will be replaced by Brad Corson, who will take on the CEO mantle January 1, 2020. Corson was appointed president and director in September.

“Imperial’s people and assets provide a solid foundation for continued growth and leadership within the Canadian energy industry,” says Corson, adding he looks forward to building on Imperial’s strengths to deliver long-term shareholder value.

As Kruger hands over the reins, Imperial’s strengths look good moving forward despite challenges in the downstream side where income was $736 million for the first nine months of 2019, compared to $1.224 billion for the same period in 2018. Earnings were negatively impacted by lower margins of close to $430 million, reliability events of about $140 million, including the fractionation tower incident at Sarnia, and lower sales volumes of about $100 million.

 Challenges aside, Imperial’s management was able to increase net income in the first nine months of 2019. During this period income was $1.929 billion, or $2.51 per share on a diluted basis, up from net income of $1.461 billion or $1.79 per share in the first nine months of 2018. Behind this gain is a 4% decrease in Alberta’s corporate income tax rate.

Cash flow generated from operating activities is also up. The company reports earnings of $3,405 million in the first nine months of 2019, up from $3,051 million in the same period of 2018, primarily re


Rich Kruger is retiring at the end of December.

Imperial Oil CEO offers faint praise for Alberta curtailment cuts for rail plan

Alberta is going in the “right direction” with its plan to ease production curtailments for oil producers who add crude-by-rail capacity, the CEO of Imperial Oil Ltd. said, although he didn’t commit to transport more oil by rail.

Rich Kruger – one of the industry’s most outspoken critics of mandatory curtailments that began last January – said it’s necessary to review of the details of the province’s plan, which was announced Oct. 31.

“I would say, in the form of a compliment to the government, they’re trying to make the best of a bad situation. They’re playing the cards they were dealt,” he said on a webcast to discuss third-quarter results.

“The bad situation is that we’re in curtailment in the first place.”

Under the previous NDP government, Alberta put a cap on the amount of oil that the industry can produce as a way to narrow price discounts that grew as oil production exceeded the ability of pipelines to get the crude to market.

The measure was continued by the United Conservative government, when it was elected last spring, but the industry quota is rising to 3.81 million barrels per day in December, up 250,000 bpd from the original limit of 3.56 million bpd.

Imperial is more heavily invested in crude-by-rail than most producers because it co-owns a terminal in Edmonton with the capacity to load 210,000 bpd _ about one third of the province’s estimated rail capacity of 500,000 to 600,000 bpd.

However, Kruger said the economic case for shipping oil by rail steadily worsened over the summer because there’s not enough difference in price between Alberta and the U.S. Gulf Coast end market to support shipping by rail, which is more expensive than pipelines.

Rail shipments by Imperial in the third quarter fell from 76,000 bpd in July to 35,000 bpd in September, he said, adding the volumes would be headed even lower in the current quarter if not for the government announcement and the possible impact of an outage on the Keystone pipeline following a large oil spill in North Dakota earlier this week.

He said rail shipping volumes are “to be determined at this point,” adding Imperial uses Keystone but declining to give volumes.

Rival oilsands producer Cenovus Energy Inc. said it would quickly add as much as 20,000 bpd to oilsands output and proceed with bringing an oilsands expansion on stream, to add 50,000 bpd in the next six to 12 months following the Alberta decision on curtailments.

Suncor Energy Inc., meanwhile, said it would put up to 30,000 bpd on rail over the next month or so in view of the announcement.

Alberta’s lack of pipeline capacity has made oil-by-rail the next-best method of transport, but the switch comes with certain costs. In a 2016 study, researchers at the University of Alberta found that pipeline transportation of oil produced between 61 and 77% fewer greenhouse gas emissions than rail, and numerous studies have found that pipelines are the safer transport method.

Imperial reported Nov. 1 that net income fell 43%t to $424 million in the three months ended Sept. 30, compared with $749 million or 94 cents per share in the same period of 2018.

It said cash generated from operating activities added up to $1.38 billion in the quarter, up from $1.21 billion in the third quarter of 2018.

The biggest drag on earnings came from Imperial’s downstream operations, where net income slipped to $221 million from $502 million due to lower refinery profit margins and planned maintenance outages.

On the upstream side, Imperial reported slightly lower income due to higher operating expenses and royalties – it noted lower volumes at its Kearl oilsands mine and Cold Lake bitumen works but higher volumes from the Syncrude mining facility, in which it holds a 25 per cent stake.

Total production rose to 407,000 barrels of oil equivalent per day from 393,000 boe/d in the same period of 2018.

Kruger is retiring at the end of the year and his role is to be assumed by Brad Corson.


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Imperial Oil names new president, as Kruger announces retirement

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Corson is Imperial’s new president

The board of directors of Imperial Oil Limited is appointing B.W. (Brad) Corson as president.

Corson took on the role September 17, 2019. In turn, chairman and CEO R.M. (Rich) Kruger is retiring at the end of December 2019. Corson will assume the role of chairman, president and CEO of Imperial Oil Limited on January 1, 2020.

“On behalf of the Imperial board of directors, I would like to thank Rich Kruger for his outstanding leadership and dedication over the last almost seven years. During his tenure, Rich has led the organization through a period of record upstream growth, exceptional downstream financial and operational performance, and unprecedented returns to shareholders in the form of share repurchases and dividend growth,” Imperial Oil Limited board member Krystyna Hoeg said in a statement. “That said, perhaps Rich’s greatest legacy to the company and its employees is his work to successfully ignite and foster cultural change within Imperial to enhance competitiveness and position it well for the future.”

Rich Kruger is retiring at the end of December.

Rich Kruger is retiring at the end of December.

Kruger, born in Minneapolis, Minnesota, holds a mechanical engineering degree from the University of Minnesota and an MBA from the University of Houston. He began his career with Exxon in 1981 in Houston, Texas and held various technical and management positions throughout the United States. Kruger’s career then took an international turn and for the next 20 years, he led development and production activities in the former Soviet Union, Africa, Asia Pacific and the Middle East. In 2008, he was appointed president of ExxonMobil Production Company and a vice president of ExxonMobil Corporation. Then, in 2013, he began his tenure as chairman, president and CEO of Imperial Oil .

Corson, a native of Woodstock, Illinois, is a graduate of Auburn University’s chemical engineering program. He joined Exxon in 1983 in New Orleans, as a project engineer. During his 36 year career with the company, he held a variety of technical, operations, commercial and managerial assignments around the world. In addition to multiple assignments across the United States, he has also held key leadership positions in Hong Kong and London. In 2009, Corson was appointed vice president, ExxonMobil Production Company, with responsibilities for oil and gas production activities in Europe and the Caspian regions.

In 2015, Corson was appointed president, ExxonMobil Upstream Ventures and vice president of ExxonMobil Corporation where he was responsible for overseeing ExxonMobil’s global upstream acquisition and divestment programs. Under his leadership, ExxonMobil made key strategic acquisitions in the Permian Basin, Papua New Guinea, Mozambique and Brazil.