Imperial Oil (TSX:IMO) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.

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Summary

Imperial Oil reported a decrease in petroleum product sales to 441,000 barrels per day, down by 14,000 barrels compared to the previous year, mainly due to reduced opportunistic supply sales.

First quarter chemical earnings were $24 million, a decline of $7 million from the prior year, attributed to lower product pricing, partially offset by reduced feedstock costs.

The company emphasized its ongoing strategic investments in digital infrastructure and projects enhancing logistics and feedstock flexibility, aiming to maximize earnings and cash flow.

Imperial Oil's restructuring is advancing well, with a focus on safe and reliable operations, expecting improved efficiency and effectiveness.

The company plans to renew its normal course issuer bid in June, continuing its commitment to returning excess cash to shareholders.

Operational highlights include completing planned turnarounds at Strathcona and Curl to sustain reliability and performance.

Management reiterated commitment to profitably grow volumes, reduce unit cash costs, and increase cash flow generation despite a dynamic geopolitical environment.

Full Transcript

OPERATOR

Component that began in early April and is scheduled to be completed in just over a week's time. The work is focused on the crude unit which achieved the longest ever run length of 10 years before this planned turnaround. From a strategic perspective, we continue to invest in our structurally advantaged downstream business with a view to maximizing earnings and cash flow across the value chains. Investment in 2026 includes digital infrastructure enhancements and targeted projects to strengthen logistics and feedstock flexibility. Petroleum Product sales were 441,000 barrels per day, down 14,000 barrels per day compared to the first quarter of 2025 due primarily to a reduction in opportunistic supply sales, partially offset by increased retail sales. Overall, across our Canadian network we saw very similar demand for each of our primary petroleum products in the first quarter of 2026 relative to 2025. Turning now to chemicals, earnings in the first quarter were 24 million, down 7 million from the first quarter of 2025 due to lower product pricing partially offset by reduced feedstock cost. In closing, I would like to reiterate that despite the dynamic geopolitical environment, our priorities remain clear and consistent. We are focused on continuing to profitably grow volumes, further lowering unit cash costs and increasing cash flow generation. We remain committed to maximizing the value of our existing asset base, progressing our volume and cost targets, driving greater efficiency and effectiveness and delivering unmatched industry leading shareholder returns. Operationally, our focus remains on execution, excellence and being the most responsible operator. This includes safely and effectively completing the planned turnaround at Strathcona as well as the planned turnaround at Kearl in May. Both are important to sustaining reliability, capturing value from our assets and supporting long term performance. Looking ahead Our restructuring is firmly in the implementation phase and progressing well. We are taking a robust and disciplined approach with a focus on maintaining safe, reliable operations. This work is being advanced in an orderly manner with clear line of sight to the expected benefits over time including improved efficiency, improved effectiveness, competitiveness and long term value creation. Finally, our capital allocation priorities remain unchanged. We expect to continue generating cash beyond the needs of our capital plan and our dividend and our commitment remains to return that cash to shareholders in a timely manner. As noted in the press release this morning, we intend to renew our normal course issuer bid in late June. As always, I want to thank our employees for their commitment, professionalism and teamwork. Their dedication to safe operations, execution, excellence and customer and community service is what makes our achievements possible and I'd like to thank all of you once again for your continued interest and support. Now we'll Move to the Q and A session. I'll pass it back to Peter.

Peter

Thank you, John, as always, we'd appreciate it if you could limit yourself to one question plus a follow up so that we can get to as many questions as possible. So with that operator, could you please open up the lines for questions?

Dennis Fong (Equity Analyst)

Hi, good morning and thanks for taking my questions. The first one for me is just really around the upstream. Can you maybe discuss, we'll call it the progress around the pipeline of SAGD projects at Cold Lake. I know that there's kind of a long duration strategy around kind of growing or layering in projects between now and 2050 as the world kind of obviously evolves in terms of diversifying supply chains globally. Can you talk about opportunities to maybe accelerate some of that pipeline of projects as well as your appetite for that?

John (CEO)

Thanks Dennis. I can, I'll make a few comments on that. You know, I think maybe I'll step back first and talk about our capital plans in light, as you say, of the, you know, current current situation and commodity prices. You know, every year we review our corporate plan and we consider that over a range of inputs and a range of price scenarios and we pace our investment strategy to maximize value at the end of the day and you know, looking at that both in terms of our existing assets and progressing advantaged growth. So we are remain very focused on Kearl getting it to 300,000 coke, getting it 265,000 barrels per day and in the downstream, you know, flexibility and logistics projects. And of course we're advancing our EBIR pilot. So I think at the high level I wouldn't, you shouldn't expect or anticipate major changes. You know, we weren't waiting for a price signal to drive pace. We're looking at maximizing value for shareholders over a long term view and we believe we're progressing our growth opportunities at the appropriate pace to do just that. So that's kind of at the highest level if you think at Cold Lake. I mean we continue to work through this transformation of the asset. As I mentioned, Grand Rapids, SAGD is continuing to perform very well above 20,000 barrels a day. We're ramping up the Lemming SAGD, which is, you know, going back into the very. Where the original pilot was. That's ramping up towards 9,000 barrels per day. And then in the future plans, we have Mohi SAGD, which we've started to invest in, and that's still on track to bring on 30,000 barrels a day of advantaged, you know, technology volumes starting up in 2029. So we continue to progress those at a pace we think that makes sense. And, and, you know, stepping back from that at Cold Lake, if you think about the percentage this, we talk about this transforming the asset in 2020, you know, all of our production there was coming from CSS and Steam flood and not, not from what we're today characterizing as Advantage technology. In 2025, that was 20% was coming from Advantage Technology, largely the SAGD at Grand Rapids. You go ahead five more years, that's going to be up to 45%. Five years after that it's going to be 60%. And by the time you get to 2040, which is less than 15 years from now, about two thirds of our production will come from Advantage Technology at Cold Lake. So we continue to progress that at a pace we think that makes sense.

Dennis Fong (Equity Analyst)

Great. Really appreciate that color and context there. John. My second question shifts the focus back towards the downstream. And, and I was hoping you could provide us, or at least remind us about the flexibility in terms of your refining assets, as well as kind of revealing any opportunities to capitalize on dislocations of markets, whether it be locally or globally as well, and kind of maybe specifically focusing around distillate and jet fuel, just given how desirable those products happen to be.

John (CEO)

Yeah, I'll make a few comments. I'm going to ask Scott to chime in as well. You know, we feel really good about the, obviously our downstream business, the margin capture that we're able to get. Canada remains advantaged globally in terms of margin we get, and then Imperial Oil remains advantaged within Canada. So we really like our position. We do, you know, so we're really looking to maximize sales locally. However, given the current environment, we do look at, you know, the export market as well and, you know, and look to overall maximize the margin, our margin capture in that regard. So, you know, there are some constraints about what we can export when you look at logistics and so on, but we do continue to look across the whole portfolio and how to maximize overall capture. But we're really pleased with the advantage we have in Canada. And I think you saw us do that in the in the first quarter in terms of margin capture as we benefit from producing renewable diesel, the flexibility we've had to produce into the high the highest value products and into the highest value markets. So kind of high level, that's how I think about it. And I'll ask Scott to add some color to that. Sure. Thanks, John.

Scott

Appreciate the question, Dennis. First, on the gas to diesel and jet splits within our refineries, you know, we look at that from an optimization standpoint every single month. And so as we think about the feedstocks we're sending to our refineries, we're doing that based on the value we can achieve on the finished products that are manufactured. And so certainly in this time period we've been maximizing our production of diesel and jet molecules over gasoline. And that is a balance because a large portion of our production goes to supply customers within the Canadian marketplace and we can efficiently supply those customers within the Canadian marketplace with our coast to coast logistics network moving the barrels from our refineries in eastern and western Canada to those customers. And so that's where we see the highest uplift. And as John mentioned, we do do opportunistically look at exporting additional production on top of that. And certainly that is an opportunity in this sort of marketplace when you're seeing margins increase in other markets.

OPERATOR

Thank you very much for that caller. I'll turn it back and the next question will come from Greg Pardee with RBC Capital Markets.

Greg Pardee (Equity Analyst)

Yeah, thanks. Thanks. Good morning guys and as always, thanks for the detailed rundown. John, I wanted to come back to just the progress in terms of the restructuring that's going on, maybe to better understand perhaps at what stage you're at in terms of transferring workflows from IMO into some of the Exxon mobile excellence centers and so forth. And then also just in terms of the technology we're talking about in terms of those advanced and how that's being incorporated, maybe what stage are we at and what are the things that you're looking for in terms of, you know, key benchmarks of success?

John (CEO)

Thanks, Greg. Yeah, you know, as we step back in from this restructuring, it's all driven around as you as you pointed to, you know, leveraging rapidly advancing technology, environment and the growth of that we've seen in these global capability centers that ExxonMobil has and you know, that basis, that case for action remains really strong. And both of those things drove the decision and we feel very good about that. And it advances our long standing strategy about maximizing value and leaning into Technology and leaning into our relationship with ExxonMobil, I would say I feel very good about the progress we're making and we are advancing that transition on track today. If I think about that, if you look at it, we're basically, it's pretty ratable in terms of the we're doing two things. We're outsourcing work and we're capturing efficiencies. And as I've mentioned before, about 40% of the reduction in positions or the value is actually pure efficiency and about 60% is outsourcing work to these global capability centers where we already have work being done for us today. So we have very rigorous plans on the transfer of that work to those global capability centers and the positions where we will capture efficiencies. And each department and group within Imperial has detailed roadmaps on how they're progressing that it's going to be pretty ratable. We have had people leave the organization late last year. We've had people leave the organization in the first quarter of this year in the range of about 130 people in the first quarter of this year. And that's going to continue pretty ratably quarter by quarter and year by year, this year and next year. So that's progressing well and on track. And you'll see it kind of pretty ratably over that period. The technology, I think a couple things. Part of it is what we put in place that it's enabled us to move at this pace. And then the second part of it is as you move that into these global capability centers, we're going to be able to deploy technology more quickly at scale in the future. So a lot of it was putting, you know, the digital programs that we've spoken about in the past putting in place digital or data lakes, getting our data organized and in a structure that could be used in an efficient way, regardless where the work was being done, putting digital twins in place and then optim and then automating some of our work. So that enabled us to continue on this path. And then as we move these workflows into global capability centers, we see greater opportunity, AI machine learning and so on to further automate those workflows. And we're going to be able to do that more quickly and at scale when that work is being at a global capability center and being done in a broader sense across ExxonMobil's network.

Greg Pardee (Equity Analyst)

Okay. No, no, it does. I mean, I think it's usually these announcements they come out and then, you know, the focus is on cost out in the future, but obviously there's, you know, there's a transition to go through, so it's good to understand some of the context there. So let me, let me just pose maybe a related question then in terms from your perspective as a CEO, the capability of Imperial to go execute Aspen in the future and recognizing there's a pilot there and there's a bunch of work to do and so forth. It certainly sounds from where you're sitting that the only change in terms of where corporate strategy might be headed is not necessarily in terms of what you're going to deliver, but just where it's going to be delivered from and at what cost. Is that the right way to think about it?

John (CEO)

Absolutely. That's exactly the way to think about it. You know, nothing is changing in our company in terms of the governance of our, of our company. The, the skill sets we will have on the ground to support the assets we have today to support growth into the future. We will have, you know, we're still going to be an organization of 4,000 people after we go through this transition and, and our growth plans. You know, I really believe this sets us up to continue to deliver industry leading performance and actually builds the foundation for us to grow. And of course, if you think about an Aspen project, we're not sitting here today with the project team, you know, waiting for that project to come. Right. We build up capability when we see those projects coming in. Of course, a lot of it is done by contractors, but we will need additional capability. We're going to be in a better position to build up that capability because we're going to have support networks globally that are there that we can leverage and ramp up. So it doesn't change anything with our governance, doesn't change anything with our strategy. I'm as bullish or more bullish than I've ever been on our future in situ portfolio, the technology, and we have the ability to double our production with that, with that future in situ portfolio. And when the time is right, when the technology is ready and the investment environment is there, we have the capability to do that. All right, very good.

Greg Pardee (Equity Analyst)

Thanks, John.

OPERATOR

And moving on to Meno Hulshoff with TD Cowan.

Meno Hulshoff (Equity Analyst)

Thanks and good morning, everyone. I'll start with a question on curl. In your opening remarks, you touched on some of the initiatives you're pursuing to drive production above 300,000 barrels a day on a sustained basis. And you talked about turnaround optimization. But can you elaborate on where things stand on the key pieces within enhanced bitumen recovery and the overall performance of the equipment.

John (CEO)

Yeah, that's right, man. I mean, I'm going to ask Sheryl to chime in here, but we've got these three focus areas that we've had which around productivity and reliability improvement, the turnarounds, and then the one you mentioned around enhanced recovery. And we have specific projects focused on enhanced recovery. And so we're working all three of those components. Those are the things that will unlock and get us to 300,000 barrels a day, $18 a barrel. And I'm going to let Cheryl talk about a couple of the enhanced recovery projects that we have that we're progressing right now.

Cheryl

Sure. Thanks John and thank you for the question. Menno. You know, John references three items. I probably say there are more. This is a space where this is kind of our ultimate and equation. So when I think about Kearl and where we're headed with 300 kbd, I have very strong confidence in our future. And you've heard me say this before, which is we're anchored and we're building on a strong foundation. We're leveraging scale such that our incremental production really leverages this fixed high cost structure. We're doing recovery projects. We've got two in the hopper right now. One is called KFCC and that's going to come online at the end of the year and that captures additional bitumen from ore already processed. The second one is called CST or Pore Sands Tailings. That's in development. Think of this as where you get aeration in the system and it makes bubbles so the bitumen droplets you're able to recover more bitumen. The other, and in this space is the turnaround optimization that John mentioned and then technology solutions. This really hits on that productivity and reliability space you've heard me mention about. We're continuing to upsize our hydro transport lines. We're looking at mine automation where we're looking for more remote, semi and automated mining. This really takes the physical operations out. Continuing with our fleet optimizations on the autonomous side. And then the other thing I find is interesting with Kearl is just by design your haul distances get longer as mine develop. So there's cost headwinds. Our intent is to more than offset those via scale optimization and technology solutions. The final thing I'll leave you with, and this is one of the key milestones I'm very proud of, by late this summer, CRL is on target to hit our 1 billion barrels of production. So this is a significant milestone and very much looking forward to it.

Meno Hulshoff (Equity Analyst)

Yeah, thanks Cheryl. That is a Big number. Second question maybe on the recent increase to the SEO premium. What is your marketing team seeing day to day in terms of rising SEO demand to meet diesel and jet supply shortfalls? And how long do you think premium pricing could persist?

John (CEO)

I'm going to ask Scott to take that one.

Scott

Yeah. So you know, I mentioned before that certainly we're optimizing our refineries to manage additional diesel and jet production. You know, we feel like there's ample feedstocks in the marketplace to do that. And, you know, with the demand, you know, profile within Canada in particular, there's even some imported jet from other markets into portions of Western Canada. So we see some ongoing ability to continue pushing jet production and sales into the Canadian marketplace and believe we have

John (CEO)

enough feedstocks to do that. Yeah. And I would just add, obviously synthetics are trading higher because they're a good way to make diesel and jet. And that's probably we're not going to predict the future synthetic premium, but that may persist for a little bit as these margins stay quite high.

Meno Hulshoff (Equity Analyst)

Terrific. Thanks to you all. I'll turn it back

OPERATOR

and we'll take a question from Neil Maida with Goldman Sachs. Yeah, thank you. And this might be for you, Dan, just your perspective on return of capital, which has really been the hallmark of Imperial over the last couple of years. And as we've gotten into a firmer commodity environment, certainly the NCIB will get turned on. But how do you think about buying back stock here and the potential for an sib? And if there's any price sensitivity around shrinking the share account because stocks have done really well. So any perspective around that would be great.

Neil Maida (Equity Analyst)

Sure. Neil. Bottom line is no change in the way we look at this. Consistent with John's remarks earlier on, you know, we're committed obviously to the reliable and growing dividend. We, you know, paid our April 1st dividend at the higher rate of $0.87, which is a 20% increase from the prior. And as you noted, you know, when we said we're going to renew our ncib, you know, at the end of June when we can, and we'll certainly plan to proceed with that. And you know, and then the question is, okay, is there an SIB in there somewhere too? And the answer is it's just going to depend on where cash. I mean, right now at current prices, if those persist, you know, we'll have

Dan

a lot of cash. Right. So that would certainly be a possibility, but we'll just have to see what happens. So I'd say no change in our philosophy, we remain committed to returning cash to shareholders. And as we generate the cash, you know, based on, you know, commodity prices, we'll continue to return that, you know, really, as we have in the past. So no change to our philosophy. I would say we're not really setting our prices at a great run. And as I said in my opening remarks, it had this. The mark to market shit was so big, it showed up as a factor because of the rapid rise in the share price. But we believe that reflects value and we see the share buybacks as an efficient way to return cash. So we'll continue to return cash.

Neil Maida (Equity Analyst)

Yeah, thank you. Thanks, Dan. It's been a great run. So just the follow up on the questions about, you know, what you want to accomplish during the turnarounds that you referenced earlier for both Strathcone and Curl. Can you talk, can you give us, you know, pull back the onion a little bit and talk about specifically what are the two or three things you want to accomplish at both of those turnarounds and that we should be focused on?

John (CEO)

I mean, I'll make a few high level comments and then Cheryl and Scott can chime in. But being at Strathcona with the turnaround, the crude unit, again, it's had a 10 year run. So there are some, you know, we monitor obviously the integrity of the unit and there are some elements, components that need to be changed out at that point. They've come to the, you know, towards the end of their life. So part of that is just the maintenance that comes with it. So but 10 years is a long time to run a unit and we look to continue to optimize that. But at certain point you do need to go in and make some adjustments. Then at Curl, I mean, there is again the same thing we've been, you know, there are some elements that components and things that we do need to change out, they come to end of life. In general. We try to have redundancy when we do that, but you don't have that full redundancy to do it everywhere. But a big part is some of the upgrades that we're doing. Cheryl mentioned it already, I mentioned, but it's some of the upgrades we're doing to allow to get that turnaround to go from a two year interval to a four year interval. So that's metallurgy improvements, size of transport lines and things like that that will allow us to go longer. So that's at the high level, maybe. Scott, anything further on the Strathcona?

Scott

Yeah, maybe just one other comment. Yeah, just to confirm, it is an extended turnaround interval length. So that is something that we're pretty proud of, actually getting the units to run this long. But it is a normal turnaround from a work scope perspective. We don't plan to add any new equipment or things like that. The one other comment I'd share is that with our new renewable diesel unit located at our Strathcona refinery that continues to run during this turnaround and so we continue to manufacture renewable diesel and that's really been a bright spot for us in the first quarter. And so that has not been impacted by the turnaround activity in Streathcoan in the first quarter to date.

Cheryl

Sure. And I'll answer just a little bit of context for Kearl. So the K1 scope that we've got this year is essentially the same scope that we had for K2 last year. So the work we completed on K2 gives us confidence as we head into the turnaround in May. And a couple key items there. We have some modifications on the primary separation sale and then we got some hardening on our surge bin and those are really the key items to enable the four year turnaround. We do have a couple incremental items to work for K1 around the four, but in general I would say the majority of the scope is exactly what we did last year for K2.

Neil Maida (Equity Analyst)

Awesome. Thanks.

OPERATOR

And we'll take a question from Doug Leggett with Wolff Research.

Doug Leggett (Equity Analyst)

Thank you. Good morning everyone. I guess this might be for Dan. Dan. Royalties in Canada are, are typically priced off wti, which obviously has gone into overdrive here and WCS has blowed out quite a bit. I wonder if you could walk us through how we should think about that. You're getting obviously royalties priced on one number, but you're getting realizing prices a different number, particularly on, you know, the heavy oil and the wet. You know, obviously your production is more heavy than, than light. So can you walk us through that? And I guess if I could risk a follow up here, this is a really. I know it's a stupid question before I ask it, but I'm going to ask it anyway. And it's about technology, on things like SAGD. Where does it sit? Does it sit at ExxonMobil or does it sit at Imperial? And the stupid bit of my question is one can help feeling that we're coming into a very different era for oil prices. You know, with UAE pulling out of OPEC and maybe there was a restocking cycle and underinvestment, all the rest of It Imperial's never operated outside of the US Outside of Canada. My apologies. Is that ever a situation where the heavy oil opportunities in places like Venezuela might change that or does it all sit with ExxonMobil? Thanks.

Dan

Okay, so maybe I'll take the first one on royalties. You're right. I mean, it's pegged. The royalties are pegged. The royalty rates, I should say are pegged to wti. But the actual royalty payment is tied to your realizations on bitumen. So. And that's been the case for a long time. And I would say, on balance, you know, we feel the royalty regime in Canada is attractive. And in particular for Curl, which is pre payout, even at the very highest royalty rate, which is over 120Canadian WTI, we tap out at 9% gross, which so we have, you know, really great leverage to the upside on prices. So, yeah, we don't see it as a significant issue. I mean, the spread has widened out a bit. It's, you know, it's like maybe 15, I haven't looked today, but 15ish, which is, you know, historically, you know, not very wide. So it's the rates that are set on the wti, but the actual payments are based on your realizations of bitumen, you know, actual prices. So, so it's really to us overall, given the way the rates work, a good regime. And we don't see it as a headwind, we see it as more of a tailwind in a high price environment, especially for an asset like Curl.

Doug Leggett (Equity Analyst)

Thank you, Doug.

John (CEO)

And let me take the technology question, Doug. I think, here's how I think about it. We basically have access to all of ExxonMobil's technology and they have access to ours. So in terms of, you know, at the high level, is Imperial looking to expand its footprint beyond Canada? We're not, we're focused on Canada, but we basically have sharing agreements on the technology. And Imperial has largely the heavy oil related technologies. Sagd. Sagd. The technologies we use at Curl, the paraffinic froth treatment and so on, that has been developed by Imperial. So Imperial has kind of been the center of excellence around heavy oil technology. So if ExxonMobil were to decide to look at Venezuela or whatever, they could utilize some of our heavy oil technology involved in that. Right now we at Imperial are not looking to go outside of Canada. The flip side of that is we get to take advantage of ExxonMobil's technology. So we talked a lot about renewable diesel here. Today we're using a low temperature Proprietary technology that allows us to use that our renewable diesel can be used year round in cold weather environment. That's an ExxonMobil developed technology that we have full access to and we're able to use to give us a competitive advantage with our renewable diesel project. Much some of the metallurgy we use at CURL on our hydro transport lines has come from metallurgical technology advancements that ExxonMobil has developed. We just used the Exxon Mobil Proxima carbon fiber material in one of our bridges at Pearl so we have full access and we use much of their process optimization technology in our downstream and in our upstream as well. So we have full and free access to their technology. We use it in areas when it comes to heavy oil. That technology development has largely occurred through Imperial and will continue to occur. You know we just announced last year how we donated our technology center here to Southern Alberta Institute of Technology, which was a $37 million donation, the largest ever donation to it to an educational institution in Alberta. But we'll continue to have research at that research center going forward in specific to heavy oil, you know, optimization as well as tailings work and, and so on. So that's kind of how.

Doug Leggett (Equity Analyst)

Maybe not such dumb question. Maybe not such a dumb question. John, that's very informative. Thanks very much indeed.

OPERATOR

And that does conclude the question and answer session. I will now turn the conference back over to Peter Shaw, Vice President of Investor Relations for closing remarks.

Peter Shaw (Vice President of Investor Relations)

Thank you. So on behalf of the management team, I'd like to thank you, thank everyone for joining us this morning. If there are any other further questions, please don't hesitate to reach out to the investor relations team and we'll be happy to answer your questions with that. Thank you very much and have a great day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.