Imperial Oil's Q3 Net Income Plummets 56% Amid Soaring Expenses

TL;DR

**IMO's Q3 earnings are a disaster, with net income cut in half – time to re-evaluate your position.**

AI Summary

IMPERIAL OIL LTD reported a significant decline in net income for both the third quarter and the nine months ended September 30, 2025. Third-quarter net income decreased by 56.4% to $539 million from $1,237 million in Q3 2024, while nine-month net income fell by 22.2% to $2,776 million from $3,565 million in the prior year. Total revenues and other income also decreased, dropping 9.1% to $12,049 million in Q3 2025 from $13,259 million in Q3 2024, and 8.0% to $35,798 million for the nine months from $38,925 million. This decline was primarily driven by a substantial increase in depreciation and depletion, which rose 79.3% to $911 million in Q3 2025 from $508 million in Q3 2024, and 32.0% to $1,920 million for the nine months from $1,454 million. Selling and general expenses also saw a sharp increase of 179.0% to $622 million in Q3 2025 from $223 million in Q3 2024. Cash flows from operating activities, however, increased by 20.9% to $1,798 million in Q3 2025 from $1,487 million in Q3 2024, and by 14.3% to $4,790 million for the nine months from $4,192 million. The company also reported a gain on asset sales of $22 million in Q3 2025, compared to a loss of $2 million in Q3 2024.

Why It Matters

Imperial Oil's significant drop in net income and revenues signals potential headwinds for investors, suggesting lower profitability and possibly impacting future dividend growth. The substantial increase in depreciation and depletion, alongside higher selling and general expenses, indicates rising operational costs or asset write-downs that could erode shareholder value. For employees, this could imply a more cautious approach to hiring or compensation. In a competitive energy market, these financial results could weaken Imperial Oil's position against rivals like Suncor Energy or Canadian Natural Resources, who might be demonstrating better cost control or revenue generation. Customers might not see direct immediate impacts, but sustained financial pressure could eventually affect investment in new projects or service quality.

Risk Assessment

Risk Level: medium — The company experienced a 56.4% decrease in net income for Q3 2025, falling to $539 million from $1,237 million in Q3 2024, and a 22.2% decrease for the nine months ended September 30, 2025, to $2,776 million from $3,565 million. This significant decline in profitability, coupled with a 79.3% increase in depreciation and depletion expenses to $911 million in Q3 2025, indicates potential operational challenges and asset value concerns.

Analyst Insight

Investors should scrutinize the drivers behind the sharp increase in depreciation and depletion, and selling and general expenses, as these significantly impacted profitability. Consider if these are one-off events or indicative of a sustained trend. Await further clarification from management on cost control strategies and future revenue generation plans before making significant investment decisions.

Financial Highlights

debt To Equity

N/A

revenue

$12,049 million

operating Margin

N/A

total Assets

$77,049 million

total Debt

N/A

net Income

$539 million

eps

$1.07

gross Margin

N/A

cash Position

$1,861 million

revenue Growth

-9.1%

Revenue Breakdown

Key Numbers

• $539 million — Net income for Q3 2025 (down 56.4% from $1,237 million in Q3 2024)
• $2,776 million — Net income for nine months 2025 (down 22.2% from $3,565 million in nine months 2024)
• $12,049 million — Total revenues and other income for Q3 2025 (down 9.1% from $13,259 million in Q3 2024)
• $35,798 million — Total revenues and other income for nine months 2025 (down 8.0% from $38,925 million in nine months 2024)
• $911 million — Depreciation and depletion for Q3 2025 (up 79.3% from $508 million in Q3 2024)
• $1,920 million — Depreciation and depletion for nine months 2025 (up 32.0% from $1,454 million in nine months 2024)
• $622 million — Selling and general expenses for Q3 2025 (up 179.0% from $223 million in Q3 2024)
• $1,798 million — Cash flows from operating activities for Q3 2025 (up 20.9% from $1,487 million in Q3 2024)
• 496,861,027 — Common shares outstanding as of September 30, 2025 (total shares outstanding)
• $466 million — Calgary Imperial campus asset transfer (transferred from Upstream to Corporate and other segment)

Key Players & Entities

• IMPERIAL OIL LTD (company) — registrant
• Bloomberg (company) — publisher
• SEC (regulator) — filing authority
• Suncor Energy (company) — competitor
• Canadian Natural Resources (company) — competitor
• United States (person) — export destination
• Canada (person) — country of incorporation
• Calgary (person) — headquarters location

FAQ

Risk Factors

• Commodity Price Volatility [high — market]: The company's financial performance is highly sensitive to fluctuations in the prices of crude oil and natural gas. For instance, the significant increase in depreciation and depletion expenses (79.3% in Q3 2025) and the decrease in total revenues (9.1% in Q3 2025) suggest potential impacts from market price movements or production costs.
• Production and Manufacturing Costs [medium — operational]: Increases in production and manufacturing expenses, as well as selling and general expenses (up 179.0% in Q3 2025), can significantly impact profitability. These rising costs, coupled with lower revenues, put pressure on margins.
• Environmental Regulations [medium — regulatory]: The oil and gas industry is subject to stringent environmental regulations. Changes in these regulations, or the cost of compliance, could materially affect the company's operations and financial results.
• Depreciation and Depletion Increases [high — financial]: A substantial rise in depreciation and depletion expenses (79.3% in Q3 2025 to $911 million) significantly reduced net income. This could be due to new capital expenditures, asset impairments, or changes in accounting estimates.
• Asset Management and Transfers [low — operational]: The transfer of the Calgary Imperial campus asset ($466 million) from Upstream to Corporate and other segment indicates strategic asset reallocation, which could have implications for segment profitability and operational focus.

Industry Context

Imperial Oil operates within the integrated oil and gas industry, facing global competition and commodity price volatility. The industry is characterized by significant capital intensity, long investment cycles, and increasing pressure to address environmental concerns and transition to lower-carbon energy sources. Recent trends include a focus on operational efficiency and strategic asset management to navigate market uncertainties.

Regulatory Implications

The company operates under a complex web of environmental, health, and safety regulations at federal, provincial, and municipal levels. Compliance with these regulations, particularly those related to emissions, water usage, and land reclamation, requires ongoing investment and can lead to significant liabilities if not managed effectively. Changes in climate policy or carbon pricing mechanisms could also impact operational costs and competitiveness.

What Investors Should Do

1. Monitor trends in depreciation and depletion expenses.
2. Analyze the drivers of increased selling and general expenses.
3. Evaluate the sustainability of operating cash flow growth.
4. Assess the impact of segment revenue shifts.

Glossary

Depreciation and depletion

The systematic allocation of the cost of tangible assets (depreciation) and natural resources (depletion) over their useful lives. For oil and gas companies, depletion specifically relates to the extraction of natural resources. (A significant increase in these expenses (79.3% in Q3 2025) directly reduced net income, highlighting a key driver of the earnings decline.)

Selling and general expenses

Costs incurred in marketing, selling, and distributing products, as well as general administrative expenses not directly tied to production. (A sharp increase (179.0% in Q3 2025) in these expenses contributed to the lower net income, indicating rising operational overhead.)

Cash flows from operating activities

The cash generated or used by a company's normal business operations, excluding financing and investing activities. (Despite lower net income, operating cash flows increased (20.9% in Q3 2025), suggesting strong underlying cash generation from core operations.)

Intersegment sales

Sales transactions that occur between different business segments within the same company. (Changes in intersegment sales significantly impacted the reported revenues of the Upstream and Downstream segments.)

Year-Over-Year Comparison

Compared to the prior year, Imperial Oil experienced a significant downturn in profitability, with net income for Q3 2025 falling by 56.4% to $539 million and for the nine months by 22.2% to $2,776 million. This was accompanied by a revenue decrease of 9.1% in Q3. Key factors contributing to this performance include a substantial 79.3% surge in depreciation and depletion expenses and a dramatic 179.0% increase in selling and general expenses, which overshadowed the positive growth in operating cash flows.

Filing Documents

• imo-20250930.htm (10-Q) — 1112KB
• imoex31110-q2025q3.htm (EX-31.1) — 10KB
• imoex31210-q2025q3.htm (EX-31.2) — 11KB
• imoex32110-q2025q3.htm (EX-32.1) — 6KB
• imoex32210-q2025q3.htm (EX-32.2) — 6KB
• imo-20250930_g1.jpg (GRAPHIC) — 28KB
• imo-20250930_g2.jpg (GRAPHIC) — 24KB
• imo-20250930_g3.jpg (GRAPHIC) — 26KB
• imo-20250930_g4.jpg (GRAPHIC) — 35KB
• imo-20250930_g5.jpg (GRAPHIC) — 24KB
• imo-20250930_g6.jpg (GRAPHIC) — 24KB
• 0000049938-25-000070.txt ( ) — 6649KB
• imo-20250930.xsd (EX-101.SCH) — 37KB
• imo-20250930_cal.xml (EX-101.CAL) — 58KB
• imo-20250930_def.xml (EX-101.DEF) — 117KB
• imo-20250930_lab.xml (EX-101.LAB) — 432KB
• imo-20250930_pre.xml (EX-101.PRE) — 307KB
• imo-20250930_htm.xml (XML) — 1223KB

FINANCIAL INFORMATION 3

PART I. FINANCIAL INFORMATION 3

Financial statements 3

Item 1. Financial statements 3 Consolidated statement of income 3 Consolidated statement of comprehensive income 4 Consolidated balance sheet 5 Consolidated statement of shareholders' equity 6 Consolidated statement of cash flows 7

Notes to consolidated financial statements 8

Notes to consolidated financial statements 8

Management's discussion and analysis of financial condition and results of operations 20

Item 2. Management's discussion and analysis of financial condition and results of operations 20

Quantitative and qualitative disclosures about market risk 28

Item 3. Quantitative and qualitative disclosures about market risk 28

Controls and procedures 28

Item 4. Controls and procedures 28

OTHER INFORMATION 29

PART II. OTHER INFORMATION 29

Legal proceedings 29

Item 1. Legal proceedings 29

Unregistered sales of equity securities and use of proceeds 29

Item 2. Unregistered sales of equity securities and use of proceeds 29

Other information 29

Item 5. Other information 29

Exhibits 30

Item 6. Exhibits 30 SIGNATURES 31 In this report, all dollar amounts are expressed in Canadian dollars unless otherwise stated. This report should be read in conjunction with the company's annual report on Form 10-K for the year ended December 31, 2024. Note that numbers may not add due to rounding. The term "project" as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports. In this report, unless the context otherwise indicates, reference to "the company" or "Imperial" includes Imperial Oil Limited and its subsidiaries. 2 IMPERIAL OIL LIMITED

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial statements

Item 1. Financial statements Consolidated statement of income (U.S. GAAP, unaudited) Third Quarter Nine Months to September 30 millions of Canadian dollars 2025 2024 2025 2024 Revenues and other income Revenues (a) 11,994 13,215 35,668 38,812 Investment and other income (note 3) 55 44 130 113 Total revenues and other income 12,049 13,259 35,798 38,925 Expenses Exploration 1 1 3 3 Purchases of crude oil and products (b) 7,776 8,734 22,747 25,296 Production and manufacturing (c) 1,625 1,517 4,975 4,870 Selling and general (c) (note 11) 622 223 1,132 690 Federal excise tax and fuel charge 380 661 1,344 1,908 Depreciation and depletion (includes impairments) (note 11) 911 508 1,920 1,454 Non-service pension and postretirement benefit 25 1 36 3 Financing (d) (note 5) 8 11 8 37 Total expenses 11,348 11,656 32,165 34,261 Income (loss) before income taxes 701 1,603 3,633 4,664 Income taxes 162 366 857 1,099 Net income (loss) 539 1,237 2,776 3,565 Per share information (Canadian dollars) Net income (loss) per common share - basic (note 9) 1.07 2.33 5.47 6.67 Net income (loss) per common share - diluted (note 9) 1.07 2.33 5.46 6.66 (a) Amounts from related parties included in revenues (note 1) 3,345 3,755 10,340 10,829 (b) Amounts to related parties included in purchases of crude oil and products (note 1) 1,619 1,955 4,188 5,177 (c) Amounts to related parties included in production and manufacturing, and selling and general expenses. 88 121 382 406 (d) Amounts to related parties included in financing. 30 40 79 127 The information in the notes to consolidated financial statements is an integral part of these statements. 3 IMPERIAL OIL LIMITED Consolidated statement of comprehensive income (U.S. GAAP, unaudited) Third Quarter Nine Months to September 30 millions of Canadian dollars 2025 2024 2025 2024 Net income (loss) 539 1,237 2,776 3,565 Other comprehensive income (loss), net of income taxes Postretirement

Notes to consolidated financial statements (unaudited)

Notes to consolidated financial statements (unaudited) Note 1. Basis of financial statement preparation These unaudited consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) and follow the same accounting policies and methods of computation as, and should be read in conjunction with, the most recent annual consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC) in the company's 2024 annual report on Form 10-K. In the opinion of the company, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature. The company's exploration and production activities are accounted for under the "successful efforts" method. Amounts for related party revenues and purchases for the three months ended September 30, 2024 have been revised from $ 2,999 million to $ 3,755 million and from $ 1,199 million to $ 1,955 million, respectively. Amounts for related party revenues and purchases for the nine months ended September 30, 2024 have been revised from $ 8,674 million to $ 10,829 million and from $ 3,022 million to $ 5,177 million, respectively. Impacts of the revision offset to zero. The results for the nine months ended September 30, 2025, are not necessarily indicative of the operations to be expected for the full year. All amounts are in Canadian dollars unless otherwise indicated. 8 IMPERIAL OIL LIMITED Note 2. Business segments Third Quarter Upstream Downstream Chemical millions of Canadian dollars 2025 2024 2025 2024 2025 2024 Revenues and other income Revenues (a) (b) 72 24 11,675 12,997 247 194 Intersegment sales 4,034 4,583 1,517 1,562 96 60 Investment and other income (note 3) 3 2 31 11 — 1 Total revenues and other income 4,109 4,609 13,223 14,570 343 255 Expenses Exploration 1 1 — —

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