Imperial Oil (NYSEAMERICAN:IMO) reported what management described as “another strong quarter” on its fourth-quarter 2025 earnings call, highlighting cash generation, shareholder returns, and operational progress across its upstream and downstream businesses despite weather-related impacts at Kearl and maintenance in its eastern manufacturing hub.
Cash flow, capital spending, and shareholder returns
Chairman, President and CEO John Whelan said the company generated “just over” CAD 1.9 billion in cash flow from operations during the fourth quarter and CAD 6.7 billion for the full year. He added that Imperial ended 2025 with more than CAD 1.1 billion in cash on hand after funding its capital program and returning CAD 2.1 billion to shareholders in the quarter and CAD 4.6 billion over the year through dividends and share repurchases, including completion of its normal course issuer bid (NCIB).
SVP of Finance and Administration Dan Lyons said fourth-quarter capital expenditures totaled CAD 651 million, with full-year CapEx of CAD 2.0 billion in line with guidance. Upstream spending focused on sustaining capital at Kearl, Syncrude, and Cold Lake, while downstream spending was primarily sustaining capital across the refinery network.
Imperial declared a quarterly dividend of CAD 0.87 per share, payable April 1, 2026. Management said the CAD 0.15 per share increase is the largest nominal dividend increase in company history and represents “just over 20%.” Whelan noted the company has increased its quarterly dividend per share by 295% and repurchased 34% of its outstanding shares since 2020. Lyons said the company returned CAD 4.6 billion to shareholders in 2025, including CAD 1.4 billion in dividends and CAD 3.2 billion in repurchases.
On the Q&A, management said the dividend increase reflects long-term confidence rather than near-term commodity conditions, and that the company “doesn’t see the dividend and NCIB as competing.” Lyons added Imperial expects to renew the NCIB at the end of June and “commence on that,” with the ultimate level of buybacks dependent on commodity prices.
Identified items: Norman Wells and inventory optimization
Management highlighted two “identified items” that affected the quarter.
- Norman Wells: Imperial announced a decision to cease production at its Norman Wells asset in the Northwest Territories by the end of the third quarter of 2026. Whelan said this accelerated end-of-field-life timing resulted in a CAD 320 million after-tax one-time charge. Lyons said the charge includes a CAD 108 million impairment to reduce the asset’s net book value to zero and CAD 212 million for related contractual obligations, with about half expected to be paid later in 2026 and the remainder over a number of years.
- Inventory optimization: A companywide review of materials and supplies led to a CAD 156 million after-tax charge to reflect optimized inventory levels. Lyons said the charge did not affect operating cash flow but did affect simplified non-GAAP measures such as unit cash operating costs at Kearl and Cold Lake.
In response to analyst questions, management said the inventory review was informed by external benchmarking and best practices and covered utilization, movement, age, carrying costs, and technology solutions. The company said it plans to standardize inventory management processes across sites, improve visibility, reduce storage and warehouse requirements, and simplify the overall system while maintaining critical supplies.
Financial results by segment
Lyons said Imperial posted net income of $492 million in the fourth quarter. Excluding the two identified items, net income was $968 million, down from the prior year’s fourth quarter primarily due to lower upstream realizations. Sequentially, net income was down from the third quarter of 2025, and Lyons again cited lower upstream realizations as the main driver when excluding identified items.
By business line on a sequential basis:
- Upstream: Reported a small loss; excluding identified items, CAD 418 million of net income, down primarily on realizations.
- Downstream: Reported CAD 519 million of earnings; excluding identified items, CAD 564 million, up mainly on higher margins.
- Chemical: Reported CAD 9 million; excluding identified items, CAD 20 million, described as essentially flat amid “bottom-of-cycle” margin conditions.
Lyons said operating cash flow was $1.918 billion in the quarter. Excluding working capital, cash flow from operations was $1.260 billion, which included an unfavorable $325 million tied to the identified items. He said normalized cash flow from operations excluding working capital effects was about $1.585 billion.
Operational performance: Kearl, Cold Lake, Syncrude, downstream, and chemicals
Total upstream production averaged 444,000 oil-equivalent barrels per day for the quarter. Whelan said full-year upstream production averaged 438,000 oil-equivalent barrels per day, the highest annual level in more than 30 years, and said liquids production was the highest ever.
Kearl averaged 274,000 barrels per day gross in the quarter, down from a record third quarter. Whelan attributed the decline to “extremely wet conditions” in October that affected equipment mobility and delayed access to higher-quality ore. He said Kearl recovered as conditions improved, producing 298,000 barrels per day in December—its second-highest monthly production ever. During Q&A, management said there was “no carryover” from the October event and the company plans to evaluate road design and drainage to improve resilience during extreme conditions.
Kearl’s fourth-quarter unit cash cost was $23.84, including about $4.50 from the inventory optimization, according to Whelan. Full-year unit cash cost was $19.50, including about $1 from the inventory optimization. Management said costs excluding those impacts were well below $20 per barrel for the year and consistent with its path toward $18 per barrel. The company said it completed the K-2 turnaround in 2025 as part of a plan to extend turnaround intervals to four years, with comparable work planned on the other train (K-1) in 2026. Imperial reiterated annual guidance of 285,000 to 295,000 barrels per day at Kearl and said it remains confident in its “path” to 300,000 barrels per day, with management also pointing to potential upside beyond that level.
Cold Lake averaged 153,000 barrels per day in the quarter. Whelan said first production from the Leming SAGD project occurred in early November and that production was about 4,000 barrels per day at the time of the call, supporting confidence in the ramp to about 9,000 barrels per day over the year. Cold Lake unit cash costs were $16 in the quarter, including about $1 per barrel from inventory optimization; full-year unit cash cost was $14.67, including about $0.25 from the same item. Management reiterated a target of $13 per barrel in 2027 and said 2026 plans include infill drilling and early development of the Mahihkan SA-SAGD project, anticipated to start up in 2029 with peak production of 30,000 barrels per day.
Syncrude (Imperial’s share) averaged 87,000 barrels per day, with management attributing higher volumes to turnaround optimization and stronger mine performance. Whelan said an interconnect pipeline enabled Syncrude to produce about 7,000 additional barrels per day (Imperial’s share) of Syncrude Sweet Premium production in the quarter.
In the downstream, Imperial refined 408,000 barrels per day in the quarter, with utilization of 94%. Throughput was lower versus the third quarter due to additional maintenance in December in its eastern manufacturing hub; management said the maintenance was completed and will not affect 2026 throughput. Full-year throughput was 402,000 barrels per day at 93% utilization. Management also said the Sarnia turnaround was completed in the fourth quarter and that all downstream turnarounds in 2025 were completed ahead of schedule and below budget.
The company said it started the Strathcona Renewable Diesel facility mid-year and that it is running well, reducing reliance on high-cost imported products. Management said it is optimizing production based on hydrogen availability. During Q&A, VP of Downstream Scott Maloney said fourth-quarter refining margins were volatile but generally strong—especially in November—and that strong distillate margins led the company to adjust output to maximize distillate production.
In chemicals, management said results were pressured by the inventory optimization charge, while also noting challenging market conditions. Whelan said integration with the Sarnia refinery added resilience in low-price environments.
Restructuring and efficiency initiatives
Management said its restructuring plan announced in September is progressing “on plan.” Whelan said the company is reducing staff by about 20%, focused on “above field” roles, and expects to relocate the majority of remaining staff predominantly to Strathcona and Edmonton. He said the effort is expected to generate CAD 150 million per year in net annual savings starting in 2028, combining efficiency gains and outsourcing additional work to global capability centers.
Closing the call, Whelan said Imperial’s 2026 priorities are to profitably grow volumes, further lower unit cash costs, and increase cash flow generation, while maintaining a reliable and growing dividend and returning surplus cash in a timely manner.
About Imperial Oil (NYSEAMERICAN:IMO)
Imperial Oil (NYSEAMERICAN: IMO) is a Canadian integrated energy company involved in the exploration, production, refining and marketing of petroleum and petrochemical products. Headquartered in Calgary, Alberta, Imperial has operated in Canada for well over a century and is one of the country’s long-standing energy firms. The company is majority-owned by Exxon Mobil Corporation, which provides strategic and technical links to global upstream and downstream capabilities.
Imperial’s operations span upstream activities—exploration and production of crude oil, natural gas and oil-sands resources—and downstream operations including refining, manufacturing of fuels and lubricants, petrochemical products, and retail distribution.
