Tim Hearn Imperial Oil Overview
Tim Hearn Imperial Oil Overview
Tim Hearn Imperial Oil Overview
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<strong>Imperial</strong> <strong>Oil</strong> <strong>Overview</strong><br />
<strong>Tim</strong> <strong>Hearn</strong><br />
Chairman,<br />
president and<br />
chief executive officer
Agenda<br />
T.J. (<strong>Tim</strong>) <strong>Hearn</strong><br />
P.A. (Paul) Smith<br />
B.J. (Brian) Fischer<br />
Break<br />
J.M. (Michael) Yeager<br />
T.J. (<strong>Tim</strong>) <strong>Hearn</strong><br />
<strong>Imperial</strong> <strong>Oil</strong> <strong>Overview</strong><br />
Finance and Administration<br />
Products and Chemicals<br />
15 minutes<br />
Resources<br />
Summary and Questions
<strong>Imperial</strong> is executing a strategy that:<br />
• Continually improves base operations<br />
• Invests in future opportunities<br />
• Increases shareholder value
2004 Year-to-Date Results<br />
$M<br />
1600<br />
1400<br />
1200<br />
1000<br />
800<br />
600<br />
400<br />
200<br />
0<br />
1410<br />
Earnings After Tax<br />
1255<br />
1224<br />
1682<br />
1502<br />
2000 2001 2002 2003 2004<br />
9 mo<br />
• Best-ever safety<br />
performance<br />
• Excellent reliability<br />
• Record third-quarter and<br />
nine-month earnings<br />
• 2000-2004 YTD:<br />
-$6G in capex<br />
-$5G in dividends and<br />
share repurchases<br />
-19% annual<br />
shareholder return
Strong Business Fundamentals<br />
• Petroleum essential to economy and society<br />
• Rising demand<br />
• New supplies required<br />
• Canada uniquely positioned<br />
• <strong>Imperial</strong> <strong>Oil</strong> – assets and resources for<br />
long-term earnings growth
Population Grows 27% by 2030<br />
Russia/<br />
Caspian<br />
North America<br />
Europe<br />
Middle East<br />
China<br />
Japan<br />
Latin America<br />
2003 Population<br />
Level<br />
Africa<br />
India<br />
2003 World Population<br />
6.3 Billion<br />
Other Asia Pacific
Population Grows 27% by 2030<br />
Russia/<br />
Caspian<br />
Middle East<br />
North America<br />
Europe<br />
China<br />
Japan<br />
Latin America<br />
2003 Population Level<br />
2030 Increased Population Africa<br />
India<br />
2030 Decreased Population<br />
Other Asia Pacific<br />
2030 World Population – 8.0 Billion
World GDP Grows by 2.8% Annually<br />
Russia/Caspian<br />
$0.6T<br />
North America<br />
$11.9 T<br />
Europe<br />
$12.2T<br />
Middle East<br />
$0.7T<br />
China<br />
$1.4T<br />
Japan<br />
$4.3T<br />
2003 US$ GDP<br />
Latin<br />
America<br />
$1.8T<br />
Africa<br />
$0.7T<br />
India<br />
$0.6T<br />
Other Asia Pacific<br />
$2.5T<br />
2003 World GDP – US$36.3 Trillion
World GDP Grows by 2.8% Annually<br />
$23.9 T<br />
$20.6T<br />
$1.6T<br />
Russia/Caspian<br />
$7.4T<br />
North America<br />
$4.3T<br />
Europe<br />
Middle East<br />
$1.5T<br />
China<br />
$2.2T<br />
Japan<br />
$5.8T<br />
$6.4T<br />
2003$ GDP Level<br />
Latin<br />
America<br />
2030 Increase in GDP<br />
Africa<br />
$1.6T<br />
India<br />
Other AP<br />
2030 World GDP – US$76.5 Trillion
World Energy Demand By Fuel Grows 1.7%/year<br />
Moeb/d<br />
350<br />
300<br />
250<br />
Solar/Wind<br />
Biomass<br />
Hydro<br />
Nuclear<br />
200<br />
150<br />
Coal<br />
100<br />
Gas<br />
50<br />
<strong>Oil</strong><br />
0<br />
1980 1990 2000 2010 2020 2030
New <strong>Oil</strong> and Gas Supply Required<br />
Moeb/d<br />
180<br />
150<br />
120<br />
90<br />
60<br />
30<br />
0<br />
<strong>Oil</strong> and Gas Supply<br />
Annual<br />
Growth Rate<br />
~2 %<br />
Industry Field<br />
Decline ~ 4 - 6%<br />
Existing Production<br />
Required<br />
New<br />
Production<br />
1985 1995 2005 2015<br />
• Half of supply<br />
required in 2015 is<br />
not yet on stream<br />
• Significant industry<br />
investment required<br />
• Technology and<br />
access critical to<br />
supply growth
Canada’s Distinct and Advantaged Role<br />
<strong>Oil</strong><br />
• Only G-7 country with<br />
hydrocarbon growth potential<br />
• Sound fiscal regime<br />
Gas<br />
• Extensive pipeline<br />
infrastructure<br />
• Secure source of future supply
U.S. <strong>Oil</strong> and Gas Imports - 2003<br />
Moeb/d<br />
4<br />
3<br />
2<br />
1<br />
0<br />
Canada<br />
Saudi Arabia<br />
Mexico<br />
Venezuela<br />
Nigeria<br />
Iraq<br />
UK<br />
Algeria<br />
Angola<br />
Norway<br />
Russia
Large <strong>Oil</strong> Resources Exist<br />
8<br />
<strong>Oil</strong> in Place<br />
Locations of Major Deposits<br />
6<br />
Trillions of Barrels<br />
4<br />
2<br />
0<br />
Produced<br />
Conventional<br />
<strong>Oil</strong><br />
Heavy <strong>Oil</strong>/<br />
<strong>Oil</strong> Sands<br />
<strong>Oil</strong> Shale<br />
• Canada’s <strong>Oil</strong> Sands –<br />
A Major Resource
Current <strong>Oil</strong> Prices<br />
...Reality and Perception<br />
• World not short of hydrocarbons<br />
• Strong world demand for crude oil driven<br />
by economic growth<br />
• Business cycles not eliminated<br />
• Non-OPEC production growing<br />
• Stability of supply – an element of market perception<br />
• Markets adjust
<strong>Imperial</strong> <strong>Oil</strong> Limited<br />
• Largest integrated in Canada<br />
• Market cap: C$25G<br />
• Net proved reserves: 1.84 Goeb<br />
• Upstream production: 340 koeb/d<br />
• Major oil sands producer: 180 kbd<br />
• Leading refiner and marketer<br />
• Chemical sales: > 1.2 MT/year
The <strong>Imperial</strong> <strong>Oil</strong> Advantage<br />
• Consistent management approach<br />
• Continually improving base operations<br />
• Financial strength – ‘AAA’<br />
• Disciplined investment strategy<br />
• Significant proved reserves/resource base<br />
• Technology leader – commitment to research<br />
• ExxonMobil relationship<br />
• Tradition of sound governance
Consistent Management Approach<br />
Disciplined<br />
Investment<br />
• Flawless execution<br />
Superior<br />
Cash Flow<br />
Growth in<br />
Shareholder<br />
Value<br />
Operational<br />
Excellence<br />
• Grow profitable sales<br />
volumes<br />
• Best-in-class cost<br />
structures<br />
Industry<br />
Leading<br />
Returns<br />
• Improve quality of<br />
asset mix
Improving the Base<br />
Proven Management Systems to Improve Base Business<br />
Disciplined<br />
Investment<br />
In-Place Management Systems<br />
Superior<br />
Cash Flow<br />
Growth in<br />
Shareholder<br />
Value<br />
Operational<br />
Excellence<br />
Safety and environment<br />
Production costs<br />
Operations Integrity (OIMS)<br />
Production Operations<br />
Industry<br />
Leading<br />
Returns<br />
Best Practices (POBP)<br />
Maintenance and utilization<br />
Reliability and Maintenance<br />
Energy efficiency<br />
Global Energy Management (GEMS)<br />
Project management<br />
Capital Project Management<br />
Product quality<br />
Product Quality Management<br />
Business controls<br />
Controls Integrity (CIMS)
Safety Leadership – Nobody Gets Hurt<br />
2.5<br />
Employee Total Recordable Injury Rate<br />
2.0<br />
1.5<br />
1.0<br />
Competitors’<br />
Average<br />
0.5<br />
0.0<br />
1983 1993 2003
Improving the Base – Operations<br />
$G<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
Normalized Opex<br />
(constant energy)<br />
Opex @ CPI<br />
Index<br />
• Offset $750M inflation<br />
impact 1995-2003<br />
• Upstream mix more<br />
weighted to higher cost<br />
oil sands production<br />
1.0<br />
0.0<br />
1995 2003
Disciplined Investment<br />
Superior Shareholder Distributions<br />
$2.8<br />
Billion<br />
$1.6<br />
Billion<br />
$0.3<br />
Billion<br />
Use of Cash (1999-2003)<br />
Investments<br />
Dividends<br />
Share Repurchases<br />
Debt Repayment<br />
$5.3<br />
Billion<br />
• Funding all quality<br />
opportunities<br />
• Surplus cash directed<br />
to shareholder<br />
distributions<br />
• Dividends increased<br />
10 years in a row
Resource Base an Enabler for Growth<br />
Goeb - 2003<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
2004 Increase<br />
Production<br />
Proved<br />
Reserves<br />
Non-<br />
Proved<br />
Resource<br />
• Largest proved reserves<br />
base in Canada<br />
• Long life reserves<br />
RLI > 16 years<br />
• Non-proved resource<br />
~ 9 billion oil-equivalent<br />
barrels<br />
• 2004 net increase –<br />
oil sands
Technology Leader<br />
%<br />
30<br />
25<br />
20<br />
15<br />
10<br />
Cold Lake -<br />
Demonstrated Recovery<br />
13<br />
17<br />
19<br />
20<br />
25<br />
• Commitment to<br />
proprietary research<br />
• Leading edge oil sands<br />
technology<br />
• Access to ExxonMobil<br />
research and technology<br />
• <strong>Imperial</strong> <strong>Oil</strong> Centre for <strong>Oil</strong><br />
Sands Innovation at<br />
University of Alberta<br />
5<br />
0<br />
1977 1987 1989 1993 1999
Leveraging the ExxonMobil Relationship<br />
Scale/Size Technology Procurement Human Resources<br />
Global centres<br />
of excellence<br />
Proprietary<br />
research -<br />
$1 billion<br />
per year<br />
World-bundled<br />
pricing<br />
Development<br />
and training<br />
• Management systems honed worldwide<br />
• Shared perspectives – best practices transfer
Sustained Increase in Shareholder Value<br />
Ten-Year Cumulative Total Returns<br />
600<br />
500<br />
400<br />
300<br />
S&P/TSX ENERGY<br />
200<br />
S&P/TSX COMPOSITE<br />
100<br />
Source: Bloomberg<br />
0<br />
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003<br />
Value of $100 Invested on December 31, 1993
Sustained Competitive Advantage<br />
Leading Return on Capital Employed<br />
25%<br />
20%<br />
15%<br />
10%<br />
5%<br />
0%<br />
Source: Bloomberg<br />
1999 2000 2001 2002 2003 2004<br />
Five-Year Rolling Average Return on Capital
Agenda<br />
T.J. (<strong>Tim</strong>) <strong>Hearn</strong><br />
P.A. (Paul) Smith<br />
B.J. (Brian) Fischer<br />
Break<br />
J.M. (Michael) Yeager<br />
T.J. (<strong>Tim</strong>) <strong>Hearn</strong><br />
<strong>Imperial</strong> <strong>Oil</strong> <strong>Overview</strong><br />
Finance and Administration<br />
Products and Chemicals<br />
15 minutes<br />
Resources<br />
Summary and Questions