Imperial provides corporate update, reduces spending by $1 billion

Imperial today provided an update on its operations and corporate guidance in response to the market conditions resulting from the COVID-19 pandemic and decreases in commodity prices.

“The current COVID-19 pandemic, as well as business and commodity price environment, poses many challenges for our industry,” said Brad Corson, chairman, president and chief executive officer of Imperial. “Imperial’s integrated business model, high quality asset portfolio, and strong balance sheet offer valuable stability during this period, and we are taking steps to exercise flexibility in our plans to respond to market conditions by reducing our capital investment and operating costs.”

The company’s priority remains the health and safety of its employees, contract partners, customers and the communities where we operate. In response to the risks posed by the COVID-19 pandemic, Imperial has activated existing pandemic monitoring and response plans. The company has emergency and safety protocols for mitigating risk in a variety of scenarios, including the challenges of COVID-19.

“As we continue to face these challenging conditions, I am extremely proud of the dedication and hard work by Imperial’s workforce across the country to maintain safe and reliable operations as they also look after the well-being of themselves and their coworkers, their families, communities and our customers,” said Corson.

Although Imperial is in a lower capital spending period in the cycle, the company has carefully assessed its 2020 plans and has identified opportunities to reduce spending in the near-term while maintaining focus on the lowest capital intensity, highest value-creating opportunities. Spending will focus on ensuring ongoing safe and reliable operation of Imperial’s assets, and paced investments to continue work on key growth-related projects at a level reflective of the current challenges presented by COVID-19 and the business environment. These deferrals have resulted in an updated capital outlook of $1.1 billion to $1.2 billion for 2020, a $500 million (30 percent) reduction compared to original guidance of $1.6 billion to $1.7 billion.

In addition to this reduction in capital spending, Imperial has identified opportunities to reduce operating expenses by $500 million compared to 2019 levels. As part of this exercise, the company has identified opportunities that drive efficiency, effectiveness and a degree of pacing due to COVID-19 impacts while ensuring ongoing safe and reliable operations.

As Imperial continues to assess the impact of COVID-19, scope reductions have been identified for the planned second-quarter turnaround at our Sarnia facility, and a planned coker turnaround at Syncrude has been deferred until the third quarter. The company continues to assess other turnaround activity across the business. More broadly, the impact of COVID-19 and the current business environment on demand is expected to result in negative impacts on Imperial’s Upstream production, and Downstream refinery utilization and product sales over the near term. While the magnitude of these impacts is uncertain, our scenario planning approach is ensuring we are prepared and positioned to respond to a broad range of potential outcomes.

Imperial has demonstrated a long-standing commitment to shareholder returns, underscored by over a century of consecutive dividend payments and 25 consecutive years of dividend growth. The measures Imperial is taking are designed to preserve the strength of the company’s strong balance sheet, while enabling the company to maintain its dividend to shareholders and deliver long-term value from its operations. Imperial currently has a normal course issuer bid in place with the Toronto Stock Exchange to repurchase outstanding common shares, which is set to expire on June 26, 2020. In light of the current industry environment, Imperial is suspending share repurchases under the program effective April 1, 2020.

Imperial continues to be well-positioned for the challenges presented in the current business environment, with a Canadian industry-leading debt-to-capital ratio and credit rating, over $1.7 billion of cash on hand at year-end 2019, low sustaining capital requirements and integration across its value chain.

“While the current combination of falling oil demand and increasing supply may be uniquely challenging, Imperial has a long history of weathering market volatility,” said Corson. “We have flexibility in our plans to respond to market conditions as they unfold and remain focused on maximizing long-term shareholder value in whatever business environment we operate.”