FORM 10-K IMPERIAL OIL LIMITED

Sales volumes
2004 2003 2002 2001 2000
(thousands of tonnes a day (a))
Polymers & basic chemicals................................. 2.7 2.4 2.5 2.4 2.2
Intermediates and other....................................... 0.6 0.9 1.0 0.9 0.9
Total chemicals.................................................. 3.3 3.3 3.5 3.3 3.1
(a)
Volumes a day are calculated by dividing total volumes for the year by the number of days in the year.
Total revenues from chemical operations were $1,509 million, compared with $1,232 million in 2003
(2002 – $1,164 million). Higher prices for polyethylene, intermediate chemicals and aromatics were the
contributing factors.
The average industry price of polyethylene was $1,584 a tonne in 2004, up 12 percent from $1,415
a tonne in 2003 (2002 – $1,229). Margins were higher as demand for polyethylene products grew.
Sales of chemicals were 3,300 tonnes a day, unchanged from 2003 (2002 – 3,500 tonnes), while
polyethylene and benzene sales were up three percent and 32 percent respectively over 2003.
Operating costs in the chemicals segment for 2004 were about the same as 2003. Higher energy
costs were offset by lower depreciation expense. A significant portion of the property, plant and equipment
currently used in production and manufacturing, has been fully depreciated.
Corporate and other
Net income from corporate and other accounts was negative $35 million in 2004, compared with positive
$118 million in 2003 (2002 – negative $7 million). Lower net income in 2004 was mainly due to the absence
of the favourable foreign exchange effects on the Company’s U.S. dollar denominated debt, which was replaced
with Canadian dollar denominated debt in June and July of 2003. Net income for 2004 also included
a non-recurring after-tax write-down of $42 million on a north Toronto property, which was acquired in 1991
to be the Company’s future Toronto headquarters site. The remeasurement at fair value of this property
reflected a change in its intended use and management’s commitment to sell following the announcement
of the relocation of the Company’s headquarters to Calgary.
Liquidity and capital resources
Sources and uses of cash
20
2004 2003
Cash provided by/(used in) (millions of dollars)
Operating activities............................................................... 3,312 2,227
Investing activities................................................................ (1,306) (1,426)
Financing activities............................................................... (1,175) (1,119)
Increase/(decrease) in cash and cash equivalents..................... 831 (318)
Cash and cash equivalents at end of year................................ 1,279 448
Although the Company issues long term debt from time to time, internally generated funds cover the
majority of its financial requirements. The management of cash that may be temporarily available as surplus
to the Company’s immediate needs is carefully controlled, both to ensure that it is secure and readily
available to meet the Company’s cash requirements as they arise and to optimize returns on cash balances.
Cash flows from operating activities are highly dependent on crude oil and natural gas prices and
product margins. In addition, the Company will need to continually find and develop new resources, and
continue to develop and apply new technologies and recovery processes to existing fields, in order to
maintain or increase production and resulting cash flows in future periods. Projects are in place, or
underway, to increase production capacity. However, these volume increases are subject to a variety of
risks including project execution, operational outages, reservoir performance and regulatory changes.
The Company’s financial strength enables it to make large, long term capital expenditures. The
Company’s large and diverse portfolio of development opportunities and the complementary nature of its
business segments help mitigate the overall risks of the Company and associated cash flow. Further, due
to its financial strength, debt capacity and diverse portfolio of opportunities, the risk associated with failure
or delay of any single project would not have a significant impact on the Company’s liquidity or ability to
generate sufficient cash flows for operations and its fixed commitments.
Cash flow from operating activities
Cash provided by operating activities was $3,312 million, up from $2,227 million in 2003 (2002 –
$1,688 million). The increased cash inflow was mainly due to higher net income, timing of scheduled
income tax payments and the additional funding contributions to the employee pension plan in 2003.