Imperial Oil Limited

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 Cheryl Gomez-Smith, 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 a link to today's 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 and the risk factors and assumptions are described in further detail on our third 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 with some opening remarks and then hand it over to Dan, who's going to go 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 third quarter earnings call. I hope everyone's doing well. I'm really pleased to report another strong quarter for Imperial. We saw excellent operational performance across all of our assets, both upstream and downstream, which more than offset the impact of lower commodity prices on a sequential quarter-over-quarter basis. Despite the lower prices, net income was actually up nearly 10% versus the second quarter. I'm also happy to report that operational performance has remained strong as we've moved into the fourth quarter. Our upstream once again saw record production and continued reduction in unit costs, which more than offset the reduction in price realizations due to the softening of WTI prices. And with TMX in operation, we're seeing the value of additional egress in narrower and more stable differentials that provide a significant net benefit to Imperial. Our downstream business also performed well over the quarter and contributed solid earnings despite significant planned turnaround activity and softening of refinery crack spreads. All three of our manufacturing assets continue to realize the structural benefits of advantage feedstocks and import parity pricing in the Canadian market. So now let's review the third quarter results. Earnings for the quarter were $1,237,000,000 with cash from operating activities of $1,797,000,000 when excluding the impact of working capital. I'm very proud of the organization's ability to deliver on what is within their control, namely strong operational results and structural cost improvements, which positioned us to offset the moderation in crude prices and refining margins that I mentioned earlier. Earnings year to date are slightly higher than last year and up 10% on a per share basis. In the upstream, we achieved total production of 447,000 gross oil equivalent barrels per day in the third quarter. This marks the highest third quarter production over the past 30 years, even when including the historical volumes associated with the divested XTO assets. Our focus on structural cost reductions coupled with strategic volume growth have driven a unit cost savings of over $3 US a barrel when comparing to year-to-date 2023. Curl continued the year with yet another fantastic quarter and matched the assets record for highest third quarter production. And with record production now over the first nine months of the year and momentum carrying into the fourth quarter, we feel very confident in our ability to reach 280,000 barrels per day for the year on a gross basis. I'm also thrilled by the performance at Cold Lake. We had a very strong quarter that included the successful ramp-up of production from our Grand Rapids Phase I project, which is the industry's first solvent-assisted SAGD operation, which more than offset the impact of the planned turnaround activity. In the downstream, we continue to see strong operating performance as well, including the safe execution of turnarounds at both Nanticoke and Strathcona, which were below budget and ahead of schedule. Refinery throughput averaged 389,000 barrels per day, which equates to a refinery utilization in the quarter of 90% and a year-to-date utilization of 91%. With the last of our planned upstream and downstream turnaround activity completed in October, we are now well positioned for a strong finish to the year. Overall, we continue to deliver significant value to our shareholders through our reliable and growing dividend, which has now increased for the 30th consecutive year on a paid basis. We are also on track to complete the accelerated share repurchases under the normal course issuer bid by the end of this year, resulting in a 5% reduction in our share count and further returns to our shareholders. With that, I'll pass things over to Dan to discuss our financial results in more detail.

Thanks, Brad. Starting with financial results for the third quarter, we recorded net income of $1,237,000,000. This represents a decrease of $364 million from the third quarter of 2023, primarily as a result of lower margins in our downstream business. When comparing sequentially, third quarter net income is up $104 million from the second quarter of 2024, with strong operating performance on volumes and operating expenses, more than offsetting lower prices. Now, shifting our attention to East Business Line and looking sequentially, upstream earnings of $1,027,000,000 are up $228 million from second quarter, primarily due to higher volumes and lower OPEX, partially offset by lower realizations. Downstream earnings of $205 million are down $89 million from second quarter, mainly reflecting lower refining margins. Finally, our chemical business generated earnings of $28 million, down $37 million from the second quarter, primarily driven by a business segmentation shift of aromatics products from our chemical segment to our downstream segment. There is no impact on our consolidated financial results, but there is a one-time shift at the segment level in the third quarter of 2024 with nine months of after-tax earnings of $31 million and nine months of sales volumes of 120 KT moving from the chemical segment to the downstream segment. We made this shift because we now see aromatics as more closely aligned with our downstream finished products than with our chemical business. We will steward and report our business on this basis going forward. Moving on to cash flow. In the third quarter, we generated $1,487,000,000 in cash flows from operating activities, excluding unfavorable working capital effects of $310 million. Cash flows from operating activities for the third quarter were about $1.8 billion, up $289 million from the second quarter of this year, which brought our ending cash balance to about $1.5 billion. Shifting to CapEx, capital expenditures total $486 million in the third quarter, up $99 million from the third quarter of 2023. In the upstream, third quarter spending focused on sustaining and growing production at Curl, Syncrude, and Cold Lake. In the downstream, third quarter spending mainly included progressing our renewable diesel project at Strathcona. Year-to-date 2024 capital expenditures of $1,444,000,000 are $135 million higher than the comparable period in 2023. To support the momentum in our business, we've chosen to spend somewhat more than we initially anticipated. As such, we expect to finish this year modestly higher than the $1.7 billion guidance we provided in December of last year. Shifting to shareholder distributions, in the third quarter of 2024, we continue to demonstrate our longstanding commitment to return surplus cash to our shareholders. We paid $322 million of dividends and returned an additional $1.2 billion to accelerated share repurchases under our normal force issuer bid program. We remain on track to fully complete the program by year end. Finally, this morning, we announced a fourth quarter dividend of 60 cents per share, consistent with our third quarter dividend. Now, I'll turn it back to Brad to discuss our operational performance. Thanks, Dan.