IMPERIAL OIL LTD (IMO)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 EPS beat while revenue missed consensus: EPS was US$1.75 vs consensus US$1.50 (+17%), revenue US$8.67B vs consensus US$11.93B (-27%). Management cited strong Downstream margin capture and narrower heavy oil differentials; note estimates are S&P Global data.* *
• Net income rose to C$1,288MM (+7% y/y; +5% q/q); diluted EPS C$2.52; free cash flow C$1,150MM; cash from ops excluding working capital C$1,760MM.
• Upstream production averaged 418 mboe/d; Kearl gross 256 mb/d (impacted by extreme cold and unplanned downtime), Cold Lake gross 154 mb/d (Grand Rapids SA‑SAGD exceeded expectations at 23 mb/d); refinery utilization 91%.
• Capital returns: declared Q2 dividend C$0.72 and intend to renew NCIB in June; ending cash C$1,764MM; no Q1 buybacks. CEO transition to John Whelan on May 8 is a narrative catalyst.

What Went Well and What Went Wrong

What Went Well

• Downstream margin capture: “Our Downstream profitability continued to reflect the structural advantages of the Canadian market” and “placing barrels in the highest uplift opportunities” drove strong results.
• Cold Lake transformation: Grand Rapids SA‑SAGD averaged 23 mb/d and reduced unit cash cost; management reiterated the journey toward US$13/bbl cash costs.
• Free cash flow and liquidity: FCF C$1,150MM; cash C$1,764MM; support for reliable and growing dividend and NCIB renewal.

What Went Wrong

• Kearl volumes: Gross production 256 mb/d vs 277 mb/d y/y, due to extreme cold and March unplanned downtime; April recovered strongly.
• Lower refinery throughput: 397 mb/d and 91% utilization vs 407 mb/d and 94% y/y, primarily additional maintenance in the eastern hub.
• Chemicals down y/y: Chemical net income C$31MM vs C$57MM in Q1 2024 on lower margins and aromatics shift.

Financial Results

Headline P&L, Cash Flow, EPS (CAD)

Segment Net Income (CAD)

Operating KPIs

Unit Cash Operating Costs (Upstream, CAD $/oeb)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Imperial delivered strong financial results in the first quarter, highlighting the resilience of our integrated business model… Upstream benefitted from improved egress and narrower heavy oil differentials, while our Downstream profitability continued to reflect the structural advantages of the Canadian market.” — Brad Corson
• “We intend to renew our normal course issuer bid later this quarter… we remain fully committed to returning surplus cash to shareholders.” — Brad Corson
• “Grand Rapids solvent‑assisted SAGD production continued to exceed expectations… improving unit cash cost.” — Brad Corson
• “Following this year's [Kearl] turnaround, we are targeting to run the K2 train for 4 years….” — Brad Corson; elaboration by Cheryl Gomez‑Smith on data/analytics and global learnings enabling extension
• “Imperial’s strategy to win will remain very consistent… increasing cash flow and delivering unmatched industry‑leading shareholder returns.” — John Whelan

Q&A Highlights

• Downstream margin capture: management emphasized structural advantages and opportunistic barrel placement across regions to maximize uplift, aided by seasonal maintenance in the market.
• Capital returns cadence: strong cash position supports timely return of surplus cash; past acceleration of NCIB provides flexibility for potential SIBs.
• Cold Lake cost trajectory: continued SA‑SAGD rollout (Grand Rapids, Leming) targeting US$13/bbl cash costs; Q1 showed >US$3/bbl improvement y/y.
• Kearl turnaround strategy: plan to extend intervals to 4 years through technology, analytics, and clearer turnaround scope; expected ~9 kb/d full‑year volume impact in 2025.
• Demand/resilience: no material degradation in refined product demand; inventories near lower end of 5‑year band supportive of pricing.
• EBRT pilot at Aspen: focus on validating production uplift, overall recovery, and solvent recovery; staged approach with startup planned in early 2027.

Estimates Context

• Q1 2025 EPS: Actual US$1.75 vs consensus US$1.50 — beat.*
• Q1 2025 Revenue: Actual US$8.67B vs consensus US$11.93B — miss.*
• EPS estimates based on 8 analysts; revenue based on 1 estimate.*
  Values retrieved from S&P Global.*

Key Takeaways for Investors

• Mixed print: EPS beat driven by Downstream capture (structural advantages) and narrower heavy oil differentials, but revenue missed S&P consensus; consider market reaction focused on quality of earnings vs topline.* *
• Upstream resilience with Cold Lake SA‑SAGD exceeding expectations and lowering unit cash cost; Kearl managed extreme cold better than 2022 and is shifting to longer turnaround intervals.
• Strong cash generation (CFO excl. WC C$1.76B; FCF C$1.15B) supports continued dividend (C$0.72) and upcoming NCIB renewal in June.
• Near-term operational cadence: Q2 turnarounds (Kearl K2, Strathcona, Nanticoke) imply transient volume/throughput impacts (~9 kb/d Kearl; ~3 kb/d Cold Lake full‑year).
• Mid‑2025 catalyst: Strathcona renewable diesel startup; late‑2025 Leming startup (peak ~9 kb/d). Monitor execution and feedstock/regulatory backdrop.
• Governance continuity: CEO transition to John Whelan with a consistent strategy (cash flow, returns, structural cost improvements) reduces strategic uncertainty.
• Macro watch: tariff volatility and broader trade environment flagged; demand resilience cited; inventories at low end support margins.