Imperial Oil Limited

Good morning, everybody. Welcome to our first quarter earnings conference call. I'm joined this morning by Imperial's senior management team, including Brad Corson, Chairman, President, and CEO, Dan Lyons, Senior Vice President, Finance and Administration, Sherry Evers, Senior Vice President of Sustainability, Commercial Development, and Product Solutions, and Simon Younger, Senior Vice President of the Upstream. Today's comments include reference to non-GAAP financial measures. The definitions and reconciliations of these measures can be found in attachment six of our most recent press release and are available on our website with the link to this conference call. Today's comments may also contain forward-looking information. Any forward-looking information is not a guarantee of future performance and actual future performance, and operating results can vary materially depending on a number of factors and assumptions. Forward-looking information on the risk factors and assumptions are described in further detail on our first quarter earnings release that we issued this morning, as well as our most recent Form 10-K. All these documents are available on CDAR+, EDGAR, and our website, so I'd ask you to refer to those. Brad is going to start this morning with some opening remarks and then hand it over to Dan, who is going to provide a financial update, and then Brad will provide an operations update once that is done. We will follow with the Q&A session. So with that, I will turn it over to Brad for his opening remarks.

Thank you, Peter. Good morning, everybody, and welcome to our first quarter earnings call. I hope everyone is doing well and the year is off to a good start for you. Today, I'm very pleased to report that we sustained the strong operating momentum from the past several quarters, and the organization has delivered another very strong quarter to start 2024. Curl had a fantastic quarter and delivered more records with the highest first quarter production in the assets history. And Cold Lake is getting very close to first production from Grand Rapids phase one, which, as you may recall, is the first deployment of solvent-assisted SAGD technology in the industry. And we're very excited about that. Our downstream and chemicals businesses also ran well over the quarter and contributed very solid earnings. Overall, We feel really good about the strong start to the year. We are well positioned to meet our guidance for the year and continue delivering significant value to our shareholders by returning surplus cash through our reliable and growing dividend and industry-leading share repurchase programs. Over the next few minutes, Dan and I will detail the results of this very strong quarter. Earnings for the quarter. were $1,195,000,000 with cash from operating activities of $1,521,000,000 when excluding the impact of working capital. From an earnings perspective, this represents the second best first quarter in company history. Throughout the quarter, the commodity price environment remained strong and our financial results continue to reflect exceptional operating performance. which included a number of records across both our upstream and downstream business lines. In the upstream, we achieved total production of 421,000 gross oil equivalent barrels per day in the first quarter, underpinned by record performance at Curl, which delivered 277,000 total gross barrels per day of production, which, as I mentioned, was the highest first quarter production in the asset's history. I'll talk about each asset in more detail in a few minutes. In the downstream, we continue to see strong operating performance as well. Refining throughput averaged 407,000 barrels per day, which equates to a refinery utilization in the quarter of 94%, and included record first quarter throughput at our Nanocoque refinery. Crack spread strengthened over the quarter with improving gasoline fundamentals, and we continue to capture additional margin from advantaged Canadian crudes. With that, I'll pass things over to Dan.

Thanks, Brad. Starting with financial results for the first quarter, we recorded net income of $1,195 million, a decrease of $53 million from the first quarter of 2023, primarily reflecting lower margins in the downstream, partly offset by higher realizations in the upstream. Looking sequentially, our first quarter net income is down $170 million from the fourth quarter of 2023. reflecting an expected seasonal decrease in upstream production volumes. Now looking at each business line, upstream earnings of $558 million are down, sorry, $212 million from fourth quarter earnings of $770 million, driven primarily by lower production volumes. Downstream earnings of $631 million are up $36 million from fourth quarter earnings of $595 million, mainly reflecting higher refining margins, partly offset by lower product sales volumes. Finally, our chemicals business generated earnings of $57 million, up $40 million from the fourth quarter, reflecting the absence of the Sarnia gas cracker turnaround that was completed in the fourth quarter. Moving on to cash flow, we ended the quarter with about $1.2 billion of cash on hand. In the first quarter, we generated about $1.1 billion in cash flows from operating activities. Excluding working capital effects of about $450 million, cash flows from operating activities in the quarter were about $1.5 billion, down about $30 million from the first quarter of 2023. Cash flows from operating activities were also impacted by unfavorable LIFO-WAC deferred tax impacts driven by higher commodity prices in the first quarter of 2024 as compared to the fourth quarter of 2023. As a U.S. GAAP LIFO reporter, we tend to see negative inventory-driven deferred tax impacts when prices rise and positive impacts when prices fall. Now we'll discuss CapEx. Capital expenditures total $496 million in the first quarter, up $67 million from the first quarter of 2023, and remain in line with our plans and full year guidance of $1.7 billion. In the upstream, first quarter spending focused on smaller projects to sustain and grow production at Curl, Syncrude, and Cold Lake, as well as progressing the In-Pit Tailings Project at Curl and the SASAG-D Grand Rapids Project at Cold Lake. In the downstream, first quarter spending mainly included progressing our renewable diesel projects at Strathcona. Shifting to shareholder distributions, in the first quarter of 2024, we paid $278 million of dividends. A reliable and growing dividend is the cornerstone of our cash distribution strategy, and this morning we declared a second quarter dividend of 60 cents per share, payable in July, consistent with our first quarter dividend. We continue to demonstrate our longstanding commitment to delivering industry-leading returns to our shareholders, and we are positioned to deliver 30 consecutive years of dividend growth this year. Additionally, in line with our long-standing philosophy of returning surplus cash to shareholders, we intend to file for renewal of our normal course issuer bid in late June 2024, consistent with prior years. Under the terms of the NCIB, Imperial Oil would be permitted to repurchase up to 5% of its outstanding common shares during the ensuing 12 months. Now I'll turn it back to Brad to discuss our operational performance.