Imperial Oil announced its estimated first quarter financial and operating results. Bruce March, chairman, president and chief executive officer of Imperial Oil, commented, "Net income for the first quarter was $476 million, an increase of 65 percent from the first quarter of 2009. Upstream earnings increased with stronger crude oil commodity prices that were partially offset by higher royalty costs and the unfavorable foreign exchange effects of a stronger Canadian dollar. Downstream earnings were impacted by the ongoing challenges in North American economies that resulted in continued soft demands and lower margins.
Imperial Oil continued its long-term focus and disciplined approach to capital investment. In the first quarter of 2010, we continued to invest through this down cycle and add value for our shareholders. Capital and exploration expenditures increased to $900 million in the quarter and supported company growth projects like Kearl, continued exploration of promising shale gas acreage in Horn River and sustaining capital for Cold Lake and Syncrude production. For this quarter, Imperial's cash generation from operating activities was enough to fund the company growth and we ended with a cash balance higher than what we had coming into the year.
Our proven approach of focusing on operations excellence and the business elements within our control will continue to reward our shareholders in the future."
First quarter items of interest
First quarter 2010 vs. first quarter 2009
The company's net income for the first quarter of 2010 was $476 million or $0.56 a share on a diluted basis, compared with $289 million or $0.33 a share for the same period last year.
Earnings in the first quarter were higher than the same quarter in 2009, as higher Upstream earnings were partially offset by lower Downstream earnings. In the Upstream, earnings increased primarily due to the impact of higher crude oil commodity prices of about $550 million, partially offset by higher royalty costs due to higher commodity prices of about $180 million and the unfavorable foreign exchange effects of a higher Canadian dollar of about $100 million. Lower Downstream earnings were primarily due to lower margins of about $125 million.
Upstream net income in the first quarter was $444 million, $302 million higher than the same period of 2009. Higher crude oil commodity prices in the first quarter of 2010 increased revenues, contributing to higher earnings of about $550 million. This positive earnings factor was partially offset by higher royalties due to higher commodity prices of about $180 million and the unfavorable foreign exchange effects of a higher Canadian dollar of about $100 million.
The average price of Brent crude oil in U.S. dollars, a common benchmark for world oil markets, at $76.32 a barrel, in the first quarter, increased about 72 percent from the same quarter last year. The company's average realizations on sales of Canadian conventional crude oil also increased. Prices for Canadian heavier crude oil were also higher along with the lighter crude oil. The company's average bitumen realizations were favorably impacted by the lower spread between light and heavy crude oils in world markets, compared to the same quarter last year.
Gross production of Cold Lake bitumen returned to expected levels and averaged 148 thousand barrels a day during the first quarter, unchanged from the same quarter last year.
The company's share of Syncrude's gross production in the first quarter was 67 thousand barrels a day, slightly lower than 68 thousand barrels during the same period a year ago. Volumes in the first quarter of 2010 were impacted by the advancement of planned maintenance activities originally scheduled for later in the year. The maintenance activities were completed, and the impacted operating units returned to normal operations in the quarter.
In the first quarter, gross production of conventional crude oil averaged 24 thousand barrels a day, down from 26 thousand barrels in the same period last year, due to natural reservoir decline.
Gross production of natural gas during the first quarter of 2010 decreased to 273 million cubic feet a day from 307 million cubic feet in the same period last year. Lower production was primarily due to maintenance activities and natural reservoir decline.
Net income from Downstream was $39 million in the first quarter of 2010, compared with $202 million in the same period a year ago. Earnings were lower in the quarter mainly due to lower overall margins of about $125 million. Earnings were also negatively impacted by the unfavorable foreign exchange effects of a higher Canadian dollar of about $30 million and higher costs associated with planned maintenance activities in the first quarter of 2010.
Net income from Chemical was negative $1 million in the first quarter, compared with $3 million in the same quarter last year. Higher costs associated with planned maintenance activities on the Sarnia ethylene cracker in the first quarter of 2010 more than offset improvements in industry margins.
Net income effects from Corporate and other were negative $6 million in the first quarter, compared with negative $58 million in the same period of 2009. Favorable earnings effects were primarily due to lower share-based compensation charges.
In the first quarter of 2010, cash flow of $914 million was generated from operations, and $813 million was used to fund growth projects such as Kearl. The company's balance of cash was $534 million at March 31, 2010, compared with $513 million at the end of 2009.
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