Imperial Oil Limited

Hello, thank you for standing by, and welcome to Imperial Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Dave Hughes, Vice President, Investor Relations. Please go ahead.

Thank you very much. Good morning, everybody, and welcome to our fourth quarter earnings call. I'll start by introducing you to the management team we have in attendance. Brad Corson, Chairman, President, and CEO. Dan Lyons, Senior Vice President of Finance and Administration. Simon Younger, Senior Vice President of the Upstream. Sherry Evers, Vice President of Commercial and Corporate Development, and John Wetmore, Vice President of the Downstream. So I'll quickly go over the cautionary statement. Today's comments include reference to non-GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment 6 of our most recent press release and are available on our website with a link to this conference call. Today's comments may also contain forward-looking information, and any forward-looking information is not a guarantee of future performance and actual future performance. Financial performance and operating results can differ materially depending on a number of factors and assumptions. Forward-looking information and the risk factors and assumptions are described in further detail in our fourth quarter earnings press release that we issued this morning, as well as our most recent Form 10-K. And all of these documents are available on CDAR, EDGAR, and on our website. So I'd ask you to please refer to those. So just before I turn it over to Brad for his opening remarks, once he's done and he and Dan go over our financial and operating performance for the quarter, we will be moving to the Q&A session as usual. So with that, I'll turn it over to Brad.

Good morning, everybody, and welcome to our fourth quarter 2021 earnings call. I hope each of you are doing well and are in good health to start the new year. As we bring 2021 to a close, well, at least from a reporting point of view, I would like to repeat something I said on the third quarter call. Wow, what a difference a year makes. I'm very pleased to report that we finished the year strong with another quarter of solid operating performance and strong financial results. In 2020, we focused heavily on ensuring Imperial was well positioned to take advantage of the market recovery through ongoing focus on reducing our cost structure, improving our reliability, and progressing high-return brownfield projects. And you can now see the benefits of those efforts in our 2021 results as we continue to make the most of the improving and attractive business environment. This performance was reflected in all business lines, although we did see some pretty challenging weather to close out the year. And as it has all year, this performance allowed us to return a material amount of cash to shareholders in the quarter, and in fact, to accelerate the pace of these returns, resulting in around $3 billion for the full year, the highest level in the company's history. Throughout 2021, we continued to manage the ongoing challenges due to COVID-19. Our focus on maintaining the health and safety of our workforce was key, not only in minimizing disruptions to our operations, but also, and most importantly, in ensuring the well-being of our people. From a business perspective, we saw continued demand recovery throughout the year and significant improvement in commodity prices, both of which are reflected in our results. Over the next few minutes, Dan and I will detail the results of what was a very strong quarter. So now let's turn more specifically to the fourth quarter results. Earnings for the fourth quarter were $813 million, and our cash from operating activities was over $1.6 billion, both somewhat lower versus the third quarter. Earnings were negatively impacted by approximately $160 million in one-time non-cash events. and cash flow excluding working capital effects was up more than $100 million, reflecting our strong operating performance and the strong commodity fundamentals in the quarter. Crude prices continued to strengthen through the quarter while both downstream and chemical margins remained strong. Our upstream continued to perform very well, delivering its highest annual production in over 30 years. And our downstream performed well also. We saw utilization of 97% for the quarter and higher product sales as demand continued to recover. Our chemical business closed out the year with another strong quarter and delivered the highest full year earnings in over 30 years. As expected, polyethylene margins did soften somewhat in the quarter, but remained strong and supported the best-ever full-year earnings for this business. So, in total, our strong cash flow generation in a period of strong commodity prices was underpinned by continued strong operational performance. We were able to take advantage of attractive markets for crude, refined products, and chemicals. And all of this contributes to a very strong cash position, which continues to allow us to deliver on our priority of returning cash to shareholders. In the quarter, we returned $950 million to our shareholders in the form of dividends and accelerated share buybacks. For the year, we generated about $5.5 billion of cash from operating activities and around $4.5 billion of free cash flow. And we put this cash to good use. Early in the year, we announced the largest quarterly dividend in the company's history and reinstituted our share buyback program, which we suspended in 2020 due to the business environment brought on by the pandemic. And in the fourth quarter, we announced an acceleration of the renewed NCIB. All of this resulted in the return of nearly $3 billion of cash to our shareholders in the year. 2021 marks the 27th consecutive year of dividend increases. And you would have seen us continue this trend with the announcement this morning of another significant dividend increase of 7 cents per share, which is around 26%, our largest dividend increase in history. This equates to a 55% increase since the beginning of 2021, and represents an increase of almost 80 percent since the beginning of 2019. Going forward, following yesterday's completion of our accelerated NCIB and today's announcement of a sizable dividend increase, we remain committed to returning surplus cash to shareholders and are actively evaluating our next steps in this area, including a potential substantial issuer bid. We are unwavering in our commitment to a reliable and growing dividend and delivering further shareholder value and returns. I'll now turn it over to Dan to go through our financial performance for the quarter in more detail.