IMPERIAL OIL LTD (Form: 10-Q, Received: 05/12/2003 15:27:59)

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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

ý Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2003

OR
o Transition Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to

Commission file number 0-12014

IMPERIAL OIL LIMITED
(Exact name of registrant as specified in its charter)

CANADA (State or other jurisdiction of incorporation or organization)		98-0017682 (I.R.S. Employer Identification No.)
111 St. Clair Avenue West,
Toronto, Ontario, Canada		M5W 1K3
(Address of principal executive offices)		(Postal Code)

Registrant's telephone number, including area code: 1-800-567-3776

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

The number of common shares outstanding, as of March 31, 2003, was 375,830,208.

IMPERIAL OIL LIMITED

INDEX

		PAGE
PART I
	Financial Information:
	Consolidated Statement of Earnings — Three months ended March 31, 2003 and 2002	3
	Consolidated Statement of Retained Earnings — Three months ended March 31, 2003 and 2002	3
	Consolidated Statement of Cash Flows — Three months ended March 31, 2003 and 2002	4
	Consolidated Balance Sheet — As at March 31, 2003 and December 31, 2002	5
	Notes to the Consolidated Financial Statements	6
	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
	Quantitative and Qualitative Disclosures about Market Risk	15
	Controls and Procedures	15
PART II
	Other Information	16
	Signatures	16

	In this report all dollar amounts are expressed in Canadian dollars. This report should be read in conjunction with the company's Annual Report on Form 10-K for the year ended December 31, 2002.
	Statements in this report regarding future events or conditions are forward-looking statements. Actual results could differ materially due to the impact of market conditions, changes in law or governmental policy, changes in operating conditions and costs, changes in project schedules, operating performance, demand for oil and gas, commercial negotiations or other technical and economic factors.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

IMPERIAL OIL LIMITED

CONSOLIDATED STATEMENT OF EARNINGS
(unaudited)

		Three months to March 31
millions of dollars		2003		2002

REVENUES
	Operating revenues	5,452		3,477
	Investment and other income	26		8

TOTAL REVENUES (2)		5,478		3,485

EXPENSES
	Exploration	7		9
	Purchases of crude oil and products	3,422		2,056
	Operating, selling and general	834		778
	Federal excise tax	302		290
	Depreciation and depletion	180		173
	Financing costs (5)	(57	)	10

TOTAL EXPENSES		4,688		3,316

EARNINGS BEFORE INCOME TAXES		790		169
INCOME TAXES		252		59

NET EARNINGS (2)		538		110

PER-SHARE INFORMATION — dollars
	Net earnings — basic (8)	1.42		0.29
	Net earnings — diluted (8)	1.42		0.29
	Dividends	0.210		0.210

CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(unaudited)

		Three months to March 31
millions of dollars		2003		2002

RETAINED EARNINGS AT BEGINNING OF PERIOD		3,277		2,382
	Net earnings for the period	538		110
	Share purchases (8)	(126	)	(11	)
	Dividends	(79	)	(80	)

RETAINED EARNINGS AT END OF PERIOD		3,610		2,401

The notes to the financial statements are part of these financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
inflow/(outflow)

		Three months to March 31
millions of dollars		2003		2002

OPERATING ACTIVITIES
	Net earnings	538		110
	Depreciation and depletion	180		173
	Future income taxes and other	(158	)	(86	)

	Cash flow from earnings	560		197
	Accounts receivable	(274	)	(184	)
	Inventories and prepaids	(115	)	(147	)
	Income taxes payable	143		(409	)
	Accounts payable and other	386		414

	Change in operating assets and liabilities	140		(326	)

CASH FROM OPERATING ACTIVITIES		700		(129	)

INVESTING ACTIVITIES
	Additions to property, plant and equipment	(345	)	(250	)
	Proceeds from asset sales (4)	5		12

CASH FROM(USED IN) INVESTING ACTIVITIES		(340	)	(238	)

CASH FLOW BEFORE FINANCING ACTIVITIES		360		(367	)
FINANCING ACTIVITIES
	Common shares purchased (8)	(141	)	(13	)
	Dividends paid	(79	)	(80	)

CASH FROM(USED IN) FINANCING ACTIVITIES		(220	)	(93	)

INCREASE(DECREASE) IN CASH		140		(460	)
CASH AT BEGINNING OF PERIOD		766		872

CASH AT END OF PERIOD		906		412

The notes to the financial statements are part of these financial statements.

CONSOLIDATED BALANCE SHEET
(unaudited)

millions of dollars		As at Mar. 31 2003		As at Dec. 31 2002

ASSETS
Current assets
	Cash	906		766
	Accounts receivable	1,622		1,348
	Inventories of crude oil and products	496		433
	Materials, supplies and prepaid expenses	162		110
	Future income tax assets	382		323

Total current assets		3,568		2,980
Investments and other long-term assets		115		134
Property, plant and equipment at cost		18,402		18,105
	less accumulated depreciation and depletion	(9,684	)	(9,553	)

Property, plant and equipment (net)		8,718		8,552
Goodwill		204		204
Other intangible assets		23		24

TOTAL ASSETS		12,628		11,894

LIABILITIES
Current liabilities
	Short-term debt	72		72
	Accounts payable and accrued liabilities	2,432		2,114
	Income taxes payable	701		557

Total current liabilities		3,205		2,743
Long-term debt		1,404		1,466
Other long-term obligations (7)		1,255		1,207
Future income tax liabilities		1,230		1,262

TOTAL LIABILITIES		7,094		6,678
SHAREHOLDERS' EQUITY
Common shares (8)		1,924		1,939
Earnings retained and used in the business		3,610		3,277

TOTAL SHAREHOLDERS' EQUITY		5,534		5,216

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		12,628		11,894

The notes to the financial statements are part of these financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

In the opinion of the management, the accompanying unaudited consolidated financial statements reflect all known accruals and adjustments necessary for a fair presentation of the financial position of the company as at March 31, 2003, and December 31, 2002, and the results of operations and changes in cash flows for the three months ending March 31, 2003, and 2002. All such adjustments are of a normal recurring nature.

The results for the three months ending March 31, 2003, are not necessarily indicative of the operations to be expected for the full year.

All figures are in millions of Canadian dollars unless otherwise stated.

1. Adjustments under United States GAAP

The financial statements of the company have been prepared in accordance with generally accepted accounting principles (GAAP) in Canada. These principles conform in all material respects to those in the United States except for the following:

		Three months to March 31
millions of dollars		2003	2002

Net earnings as shown in financial statements (2)(a)		538	110
Impact of U.S. accounting principles (b)
	Capitalized interest	2	(1	)
	Restatement to reflect accounting change (c)	—	(4	)

Net earnings under U.S. GAAP before cumulative effect of accounting change (a)		540	105
Cumulative effect of accounting change (a)(c)		4	—

Net earnings under U.S. GAAP (a)		544	105
Other comprehensive income, net of tax (b):
	Minimum pension liability adjustment	—	—

Comprehensive income under U.S. GAAP		544	105

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued.....)
(unaudited)

The adjustments, on the previous page, under United States GAAP result in changes to the Consolidated Balance Sheet of the company as follows:

		As at March 31, 2003				As at December 31, 2002
		As Reported		U.S. GAAP		As Reported		U.S. GAAP
millions of dollars		As Reported		U.S. GAAP		As Reported		U.S. GAAP

Current assets		3,186		3,186		2,657		2,657
Future income tax assets		382		588		323		530
Investments and other long-term assets		115		115		134		134
Property, plant and equipment — cost		18,402		18,518		18,105		18,157
Property, plant and equipment
	— accumulated depreciation and depletion	(9,684	)	(9,777	)	(9,553	)	(9,610	)
Goodwill		204		204		204		204
Other intangible assets		23		138		24		138

TOTAL ASSETS		12,628		12,972		11,894		12,210

Current liabilities		3,205		3,205		2,743		2,743
Long-term debt		1,404		1,404		1,466		1,466
Other long-term obligations		1,255		1,890		1,207		1,823
Future income tax liabilities		1,230		1,238		1,262		1,267
Shareholders' equity		5,534		5,235		5,216		4,911

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		12,628		12,972		11,894		12,210

Shareholders' Equity:
Common shares at stated value
	At beginning	1,939		1,939		1,941		1,941
	Share purchases at stated value	(15	)	(15	)	(2	)	(2	)

	At end	1,924		1,924		1,939		1,939

Retained earnings
	At beginning	3,277		3,287		2,396		2,402
	Net earnings for the period	538		544		1,210		1,214
	Share purchases in excess of stated value	(126	)	(126	)	(11	)	(11	)
	Dividends	(79	)	(79	)	(318	)	(318	)

	At end	3,610		3,626		3,277		3,287

Accumulated other comprehensive income
	At beginning	—		(315	)	—		(77	)
	Other comprehensive income for the period	—		—		—		(238	)

	At end	—		(315	)	—		(315	)

Total shareholders' equity		5,534		5,235		5,216		4,911

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued.....)
(unaudited)

(a): Earnings per share — basic and diluted (dollars) (9)

		Three months to March 31
		2003	2002

Under accounting principles of
Canada		1.42	0.29
United States
	Earnings before cumulative effect of accounting change	1.43	0.28
	Cumulative effect of accounting change	0.01	—

	Net earnings	1.44	0.28

(b) Impact of accounting principles
An explanation of these items is found on pages 17 to 20 of the company's annual report on Form 10-K for the year ended December 31, 2002.

(c) Accounting change
As of January 1, 2003, the company adopted Financial Accounting Standards Board (FASB) Statements of Financial Accounting Standards No. 143 (SFAS No. 143), "Accounting for Asset Retirement Obligations". The Canadian Institute of Chartered Accountants (CICA) adopted a similar standard that harmonizes Canadian GAAP with U.S. GAAP. Disclosures required by the new U.S. and Canadian accounting standards are described in note 3.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation — Transition and Disclosure — an amendment of FASB Statement No. 123". The standard provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based employee compensation. It also requires more prominent disclosures in the financial statements about the method of accounting for stock based employee compensation and the effect of the method used in reported results. Effective January 1, 2003, the company adopted for all stock based compensation granted after that date the fair value based recognition provisions as prescribed by SFAS No. 123 "Accounting for Stock Based Compensation" and complied with the disclosure requirements under SFAS No. 148. The company has not issued any new stock based employee compensation to its employees in the first quarter of 2003.

(d) The company makes limited use of derivatives. There were no significant derivatives outstanding at January 1 or March 31, 2003, nor were any significant derivatives undertaken during the first three months of 2003.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued.....)
(unaudited)

2. Business segments


Three months to March 31		Resources			Products			Chemicals
millions of dollars		2003	2002		2003	2002		2003	2002

REVENUES
	Operating revenues (a)	1,004	510		4,168	2,741		280	226
	Intersegment sales (b)	635	456		378	201		65	45
	Investment and other income	12	(1	)	8	5		—	—

TOTAL REVENUES		1,651	965		4,554	2,947		345	271

EXPENSES
	Exploration (c)	7	9		—	—		—	—
	Purchases (b)	733	372		3,500	2,193		267	192
	Operating, selling & general (b)	281	249		491	468		62	59
	Federal excise tax	—	—		302	290		—	—
	Depreciation and depletion	119	112		54	55		7	6
	Financing costs	1	—		—	—		—	—

TOTAL EXPENSES		1,141	742		4,347	3,006		336	257

EARNINGS BEFORE INCOME TAXES		510	223		207	(59	)	9	14
INCOME TAXES		171	79		68	(22	)	3	5

NET EARNINGS		339	144		139	(37	)	6	9

EXPORT SALES TO THE UNITED STATES		352	140		248	180		148	124
CASH FLOW FROM EARNINGS		425	218		133	(28	)	4	13
CAPEX (c)		227	186		120	71		8	2
TOTAL ASSETS AS AT March 31 (b)		6,120	5,507		5,510	4,723		439	377
CAPITAL EMPLOYED AS AT March 31		3,366	3,031		2,511	2,159		187	181


Three months to March 31			Corporate				Consolidated
millions of dollars			2003		2002		2003		2002

REVENUES
	Operating revenues (a)		—		—		5,452		3,477
	Intersegment sales (b)		—		—		—		—
	Investment and other income		6		4		26		8

TOTAL REVENUES			6		4		5,478		3,485

EXPENSES
	Exploration (c)		—		—		7		9
	Purchases (b)		—		—		3,422		2,056
	Operating, selling & general (b)		—		3		834		778
	Federal excise tax		—		—		302		290
	Depreciation and depletion		—		—		180		173
	Financing costs		(58	)	10		(57	)	10

TOTAL EXPENSES			(58	)	13		4,688		3,316

EARNINGS BEFORE INCOME TAXES			64		(9	)	790		169
INCOME TAXES			10		(3	)	252		59

NET EARNINGS			54		(6	)	538		110

EXPORT SALES TO THE UNITED STATES			—		—		748		444
CASH FLOW FROM EARNINGS			(2	)	(6	)	560		197
CAPEX (c)			—		—		355		259
TOTAL ASSETS AS AT March 31 (b)			906		413		12,628		10,752
CAPITAL EMPLOYED AS AT March 31			946		459		7,010		5,830
(a) Includes crude sales made by Products in order to optimize refining operations.
(b) Consolidated amounts exclude intersegment transactions, as follows:

							2003		2002

		Purchases					1,078		701
		Operating expenses					—		1

		Total intersegment sales					1,078		702

		Intersegment receivables and payables					347		268

(c) Capital and exploration expenditures (CAPEX) include exploration expenses, additions to property, plant and equipment and additions to capital leases.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued.....)
(unaudited)

3. Reporting change

The new CICA standard dealing with accounting for asset retirement obligations changes the method of accruing for certain site-restoration costs. Under the new standard, the fair values of asset retirement obligations are recorded as liabilities on a discounted basis when they are incurred, which is typically at the time the related assets are installed. Amounts recorded for the related assets are increased by the amount of these obligations. Over time the liabilities will be accreted for the change in their present value and the initial capitalized costs will be depreciated over the useful lives of the related assets. There are no asset retirement liabilities set up for those assets which have an indeterminate useful life.

Estimated cash flows have been discounted at six percent. Implementation of the new standard has increased site-restoration liabilities by $8 million to $517 million as of March 31, 2003. The total undiscounted amount of the estimated cash flows required to settle the obligations is $895 million. Payments to settle the obligations occur on an ongoing basis and will continue over the lives of the operating assets, which can exceed more than 25 years. This change in accounting standard has no impact on the cash flow profile of the company. The new standard has been applied retroactively, and the financial statements of prior periods have been restated.

The impact of adopting the new accounting for asset retirement obligations standard on the consolidated balance sheet and statement of earnings is:

Change in consolidated balance sheet

	As at Mar.31
millions of dollars — increase/(decrease)	2003	2002

Property, plant and equipment	26	20

Total assets	26	20

Other long-term obligations	8	29
Future income tax liabilities	6	(3	)
Retained earnings	12	(6	)

Total liabilities and shareholders' equity	26	20

Change in consolidated statement of earnings

	Three months to March 31
millions of dollars — increase/(decrease)	2003		2002

Operating, selling and general expense	(12	)	(6	)
Income taxes	4		2

Net earnings	8		4

Earnings per share — basic (dollars)	0.02		0.01
Earnings per share — diluted (dollars)	0.02		0.01

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued.....)
(unaudited)

4. Divestments

Investment and other income includes gains and losses on asset sales as follows:

	Three months to March 31
millions of dollars	2003	2002

Proceeds from asset sales	5	12
Assets and liabilities disposed of (a)	5	12

Gain/(loss) on asset sales, before tax	—	—

Gain/(loss) on asset sales, after tax	—	—

(a): Assets sold did not include cash.

5. Financing costs

	Three months to March 31
millions of dollars	2003		2002

Debt related interest	8		8
Other interest	1		1

Total interest expense	9		9
Foreign exchange expense (gain) on long-term debt	(66	)	1

Total financing costs	(57	)	10

6. Incentive compensation programs

The company accounts for its incentive compensation programs, except for the incentive stock option plan, by using the fair-value-based method. Under this method, compensation expense related to the units of these programs is recorded in the consolidated statement of earnings over the vesting period. The company accounts for incentive stock options issued prior to January 1, 2003, using the intrinsic-value-based method and did not recognize compensation expense on the issuance of those stock options because the exercise price was equal to the market value at the date of grant. If the fair-value-based method of accounting had been adopted to account for the incentive stock option plan, the impact on net earnings and earnings per share would have been negligible.

The company expects to purchase shares on the market to fully offset the dilutive effects from the exercise of incentive stock options. The company does not plan to issue stock options in the future.

7. Other long-term obligations

millions of dollars	As at Mar. 31 2003	As at Dec. 31 2002

Employee retirement benefits	712	671
Site restoration	467	454
Other obligations	76	82

Total other long-term obligations	1,255	1,207

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued.....)
(unaudited)

8. Common shares

thousands of shares	As at Mar. 31 2003	As at Dec. 31 2002

Authorized	450,000	450,000
Common shares outstanding	375,830	378,863

In 1995 through 2001, the company purchased shares under seven 12-month normal course share purchase programs, as well as an auction tender. On June 21, 2002, another 12-month normal course program was implemented with an allowable purchase of 18.9 million shares (five percent of the total on June 19, 2002), less any shares purchased by the employee savings plan and company pension fund. The results of these activities are as shown below:

		millions of
Year		Shares	Dollars

1995 - 2001		202.4	5,156
2002 — First quarter		0.3	13
	Full year	0.3	13
2003 — First quarter		3.0	141
Cumulative purchases to date		205.7	5,310

Exxon Mobil Corporation's participation in the above maintained its ownership interest in Imperial at 69.6 percent.

The excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of retained earnings.

There is no significant dilutive effect on basic net earnings per share from the outstanding incentive stock options described in note 6.

IMPERIAL OIL LIMITED

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

OPERATING RESULTS

The company's net earnings for the first quarter of 2003 were $538 million or $1.42 a share, the highest quarterly earnings on record, compared with $110 million or $0.29 a share for the same period last year. Earnings increased mainly because of higher prices for crude oil and natural gas and higher industry margins for petroleum products. Favourable foreign exchange effects on the company's U.S.-dollar denominated debt also contributed to the increase in the first quarter's earnings.

Total revenues were $5,478 million in the first quarter versus $3,485 million in the corresponding period last year.

Natural resources

During the first quarter of 2003, net earnings from natural resources were $339 million compared with $144 million in the same period last year. Earnings increased due to higher prices for crude oil and natural gas and higher Cold Lake bitumen volumes from the recently completed phases 11 to 13, partly offset by lower production volumes from the company's interest in Syncrude and lower natural gas volumes.

Prices for natural gas averaged $8.12 a thousand cubic feet in the first quarter of 2003, compared with $3.26 a thousand cubic feet during the same period last year. Prices for conventional crude oil averaged $47.86 a barrel in the first quarter, compared with $30.44 a barrel in the same period last year. Average prices for Cold Lake bitumen in the first quarter of 2003 were about 50 percent higher than the prior year's prices.

Gross production of natural gas during the first quarter of 2003 was 487 million cubic feet a day, compared with 557 million cubic feet a day during the same period in 2002. The decrease was mainly due to reservoir decline and production timing.

Total production of crude oil and natural gas liquids (NGLs) increased to 240 thousand barrels a day in the first quarter from 238 thousand barrels a day in the same period last year.

During the first three months this year, gross production of conventional crude oil averaged 47 thousand barrels a day versus 52 thousand barrels a day during the same period last year. Production of NGLs available for sale was 27 thousand barrels a day during the first quarter, compared with 29 thousand barrels a day in the first three months of 2002. Natural reservoir decline in the Western Canadian Basin was the main reason for the reduced production.

The company's share of Syncrude's gross production was 47 thousand barrels a day in the first quarter of 2003, compared with 57 thousand barrels a day during the same period last year. Lower volume was attributable to an increase in scheduled and unscheduled maintenance activity at the upgrader and Aurora mine site.

Gross production of Cold Lake bitumen was 119 thousand barrels a day during the first quarter of 2003, compared with 100 thousand barrels a day in the same period a year ago. Higher production was a result of the start-up of the new Mahkeses project (phases 11 to 13) in December 2002 and the timing of steaming cycles on existing pads.

IMPERIAL OIL LIMITED

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued.....)

In March this year, geotechnical work programs began in the Inuvialuit Settlement Region and Gwich'in Settlement Area near Inuvik to advance the proposed Mackenzie Gas Project. The work programs consist mainly of soil analysis and geotechnical surveys that will help to determine the optimal location of the Mackenzie Valley pipeline and associated facilities. The programs will also provide engineering data to support development of regulatory applications for the proposed project. Contracts to carry out the work programs have been awarded to local contractors for services including geotechnical consulting, geotechnical drilling and land surveying.

Petroleum products

The net earnings from petroleum products were $139 million in the first quarter of 2003, compared with a net loss of $37 million during the same period a year ago. Earnings improved as a result of the strengthening of industry margins and higher sales of petroleum products. The increased petroleum product volumes were principally due to higher demand for heating oil, diesel and gasolines.

In the first quarter of this year, the company commissioned the new 62-kilometer extension to the products pipeline connecting its Sarnia and Nanticoke refineries. It provides a critical link in the production of low-sulphur gasoline and allows further manufacturing integration of the two refineries.

Chemicals

Net earnings in the first quarter of 2003 from chemical operations were $6 million, compared with $9 million during the same period last year. Reduced margin as a result of higher feedstock costs was the main factor for the decrease in earnings.

Corporate and other

Net earnings from corporate and other operations were $54 million in the first quarter this year, compared with negative $6 million in the same period last year. Favourable foreign exchange effects on the company's U.S.-dollar denominated debt contributed to the improvement.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operating activities was $700 million during the first quarter of 2003, compared with negative $129 million in the same period last year. The increase in cash inflow was mainly due to higher earnings and timing of scheduled income tax payments.

During the first quarter of 2003, total investing activities used $340 million of cash, compared with $238 million used in the same quarter last year.

Capital and exploration expenditures were $355 million in the first quarter, compared with $259 million during the corresponding period in 2002. For the resources segment, the additional capital and exploration expenditures were used mainly at Syncrude to maintain and expand production capacity. Petroleum products increased its capital expenditures mainly in projects to reduce the sulphur content of gasoline and to improve operating efficiency.

During the first quarter, the company resumed share repurchases and bought 3 million shares for $141 million under a normal course issuer bid that began on June 21, 2002, which has an allowable maximum purchase of 18.9 million shares. In the first quarter of last year, the company purchased 296 thousand shares for $13 million under the previous program which expired on June 20, 2002.

IMPERIAL OIL LIMITED

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued.....)

Total cash dividends of $79 million were paid in the first quarter in 2003, compared with $80 million paid in the same period last year. Resumption of share repurchase activities reduced the number of shares outstanding and dividend payments. Dividends per share remained unchanged at $0.21 a share.

The above factors led to an increase in the company's balance of cash and marketable securities to $906 million at March 31, 2003, from $766 million at the end of 2002.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Information about market risks for the three months ended March 31, 2003 does not differ materially from that discussed in Item 7A on page 25 in the company's annual report on Form 10-K for the year ended December 31, 2002.

Item 4. Controls and Procedures

(a) Evaluation of disclosure control and procedures
As indicated in the certifications on pages 17 and 18 of this report, the company's principal executive officer and principal financial officer have evaluated the company's disclosure controls and procedures as of a date within 90 days prior to the filing of this report. Based on that evaluation, these officers have concluded that the company's disclosure controls and procedures are effective for the purpose of ensuring that material information relating to the company, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this quarterly report is being prepared.

(b) Changes in internal controls
There have not been significant changes in the company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation.

IMPERIAL OIL LIMITED

PART II — OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

At the annual meeting of shareholders on April 22, 2003, all of the management's nominee directors were re-elected to hold office until the close of the next annual meeting. The votes for the directors were: P. Des Marais II 316,818,015 shares for and 239,099 shares withheld, B.J. Fischer 316,853,575 shares for and 203,539 shares withheld, T.J. Hearn 316,820,607 shares for and 236,507 shares withheld, R. Phillips 316,852,265 shares for and 204,849 shares withheld, J.F. Shepard 316,845,929 shares for and 211,185 shares withheld, P.A. Smith 316,828,991 shares for and 228,123 shares withheld, S.D. Whittaker 316,828,512 shares for and 228,602 shares withheld, K.C. Williams 316,843,016 shares for and 214,098 shares withheld, and V.L. Young 316,846,184 shares for and 210,930 shares withheld.

At the same annual meeting of shareholders, PricewaterhouseCoopers LLP were reappointed as the auditors by a vote of 316,640,028 shares for and 355,983 shares were withheld from the reappointment of the auditors. By-Law No.1 was approved by a vote of 312,784,654 shares for and 921,763 shares were voted against the approval of By-Law No.1. A shareholders' proposal that the company prepare a report to shareholders on its greenhouse gas emissions was defeated by a vote of 298,966,997 shares against and 14,588,074 shares for.

Item 6. Exhibits and Reports on Form 8-K

(a) By-Law No.1 is Exhibit (3)(ii) to this report.

(b) Reports on Form 8-K.
Except for a report on Form 8-K dated March 26, 2003, no other reports on Form 8-K have been filed during the quarter for which this report is filed. By the report on Form 8-K dated March 26, 2003, the company submitted to the Securities and Exchange Commission written certifications by each of the chief executive officer and the chief financial officer of the company for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the company's annual report on Form 10-K for the year ended December 31, 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		IMPERIAL OIL LIMITED (Registrant)
Date: May 12, 2003		/s/ Paul A. Smith (Signature) Paul A. Smith Controller and senior vice-president, finance and administration (Principal Accounting Officer)
Date: May 12, 2003		/s/ John Zych (Signature) John Zych Corporate Secretary

IMPERIAL OIL LIMITED

CERTIFICATIONS

I, Timothy J. Hearn, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Imperial Oil Limited;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003

/s/ T.J. Hearn

(Signature)
Timothy J. Hearn
Chairman of the board,
president and chief executive officer
(Principal Executive Officer)

IMPERIAL OIL LIMITED

CERTIFICATIONS

I, Paul A. Smith, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Imperial Oil Limited;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

Date: May 12, 2003

/s/ Paul A. Smith

(Signature)
Paul A. Smith
Controller and senior vice-president,
finance and administration
(Principal Financial Officer)

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IMPERIAL OIL LIMITED
PART II — OTHER INFORMATION
SIGNATURES
CERTIFICATIONS
CERTIFICATIONS

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IMPERIAL OIL LIMITED

INDEX TO EXHIBITS

Exhibit No.		Description
(3)(ii)		By-Law No.1 of the company

Exhibit (3)(ii)

BY-LAW NO. 1

SEAL
	1.	The corporation may but need not have one or more corporate seals, in such form as the board of directors may determine from time to time. The impression or reproduction of a facsimile of either seal on any document shall be deemed to be the affixing of the corporate seal of the corporation to such documents.
FINANCIAL YEAR
	2.	The financial year of the corporation shall terminate on such date in each year as the board of directors may from time to time determine.
MEETINGS OF SHAREHOLDERS
	3.	Meeting by Telephonic, Electronic or Other Communications Facility. Any person entitled to attend a meeting of shareholders may participate in the meeting by means of a telephonic, electronic or other communications facility made available by the corporation that permits all participants to communicate adequately with each other during the meeting. The persons participating in a meeting by such means shall be deemed to be present at that meeting. If the board of directors or the shareholders call a meeting of shareholders, the board of directors or shareholders, as the case may be, may determine that the meeting shall be held entirely by means of a telephonic, electronic or other communications facility, if the corporation makes available such a communications facility.
	4.	Chair, Secretary and Scrutineers. The chair of any meeting of shareholders shall be the first mentioned of such of the following officers as have been appointed and who is present at the meeting: chairman of the board, chief executive officer, president, or a vice-president who is a director of the corporation. If no such officer is present within 15 minutes from the time fixed for holding the meeting, the shareholders present in person or by proxy shall choose one of the shareholders present in person to be chair of the meeting. If the secretary of the corporation is absent, the chair of the meeting shall appoint some person, who need not be a shareholder, to act as secretary of the meeting. The chair of the meeting, or the shareholders by resolution, may appoint one or more scrutineers, who need not be shareholders, to count proxies, conduct polls, distribute and count ballots and prepare certificates as to the result of any vote. No candidate for the office of director shall be appointed a scrutineer at any meeting at which directors are being elected.

MEETINGS OF SHAREHOLDERS (cont'd)
	5.	Persons Entitled to be Present. The only persons entitled to attend a meeting of shareholders of the corporation shall be those entitled to vote thereat, the directors, auditors of the corporation and others who, although not entitled to vote, are entitled by law to be present at the meeting. Any other person may be admitted by permission of the chair of the meeting.
	6.	Quorum. A quorum for the transaction of business at any duly constituted meeting of shareholders shall be five persons present and entitled to vote at such meeting.
	7.	Voting. At any meeting of shareholders, every question shall, unless otherwise required by law, be determined by the majority of the votes cast on the matter. Voting at any meeting of shareholders may be by a show of hands except where, either before or after any vote by show of hands, a ballot is required by the chair of the meeting or is demanded by a shareholder or proxyholder entitled to vote at the meeting. Upon a show of hands, each person present and entitled to vote at the meeting shall have one vote. Unless a ballot is required or demanded, a declaration by the chair of the meeting that the vote upon the matter has been carried, carried by a particular majority or carried unanimously or not carried shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such matter.
	8.	Ballots. If a ballot is required by the chair of the meeting or demanded by a shareholder or proxyholder entitled to vote at the meeting, a ballot so required or demanded shall be taken in such manner as the chair of the meeting shall direct and the result of the ballot shall be the decision of the shareholders upon the matter in question. A requirement or demand for a ballot may be withdrawn at any time prior to the taking of the ballot. The requirement of or demand for a ballot shall not prevent the continuation of the meeting for the transaction of any business other than that on which the ballot has been required or demanded.
	9.	Adjournment. The chair of the meeting may adjourn the meeting from time to time and from place to place. Any business may be brought before or dealt with at the adjourned meeting that might have been brought before or dealt with at the original meeting in accordance with the notice calling the same.

DIRECTORS
	10.	Calling and Notice of Meetings. Meetings of the board of directors or of a committee of the board of directors shall be held from time to time and at such place as any director or the secretary of the board of directors or, in the case of a committee of the board, any committee member or the secretary of the committee may determine. Notice of every meeting so called shall be given to each director not less than 48 hours before the time when the meeting is to be held; provided that, meetings of the board of directors or of a committee of the board may be held without formal notice if all the directors are present and do not object to formal notice not having been given or those absent waive notice, in any manner, before or after the meeting. In addition, the board of directors may by resolution appoint a day or days in any month or months for regular meetings of the board of directors at a place and hour to be named. A copy of any resolution of the board of directors fixing the place and time of regular meetings of the board of directors shall be sent to each director forthwith after being passed.
	11.	Meeting by Telephonic, Electronic or Other Communications Facility. If all the directors consent, a director may participate in a meeting of the board of directors or a committee of the board of directors by means of a telephonic, electronic or other communications facility that permits all participants in the meeting to communicate with each other during the meeting, and a person participating in such a meeting by such means is deemed to be present at the meeting. Any such consent shall be effective whether given before or after the meeting to which it relates and may be given with respect to all meetings of the board of directors and of committees of the board of directors held while a director holds office.
	12.	First Meeting of New Board of Directors. Provided a quorum of directors is present, each newly elected board of directors may without notice hold its first meeting immediately following the meeting of shareholders at which such board of directors is elected.
	13.	Chair of Meetings of the Board of Directors. The chair of any meeting of the board of directors shall be the first mentioned of such of the following officers as has been appointed and who is a director and is present at the meeting: chairman of the board, chief executive officer, president, executive vice-president, senior vice-president, or a vice-president and, if there are present at the meeting two or more vice-presidents who hold the same designation of office (no other director of a more senior designation of office being present) then the one with the greater cumulative term or terms of office as a director shall be chair. If no such officer is present, the directors present shall choose one of their number to be chair.

DIRECTORS (cont'd)
	14.	Number of Directors. The board of directors shall consist of such number of directors within the range set out in the articles of incorporation, including any amendments thereto, as the board of directors may determine from time to time by resolution.
	15.	Quorum and Voting. At meetings of the board of directors, five of the directors shall form a quorum for the transaction of business; provided that the quorum of any committee of directors shall be such as the board of directors may determine by resolution. Every question shall be decided by a majority of the votes cast on the question and in the case of an equality of votes, the chair of the meeting shall be entitled to a second or casting vote.
SHARES
	16.	Share Certificates. Share certificates and acknowledgments of a shareholder's right to a share certificate, respectively, shall be in such form as the board of directors shall from time to time approve. Any share certificate and acknowledgment of a shareholder's right to a share certificate, respectively, shall be signed in the manner determined by the board of directors from time to time and need not be under corporate seal.
	17.	Replacement of Share Certificates. The board of directors or any officer or agent designated by the board of directors may, in its or his or her discretion, direct the issue of a new share certificate in lieu of and upon cancellation of a share certificate that has been mutilated or in substitution for a share certificate that has been lost, stolen or destroyed on payment of such fee, if any, and on such terms as to indemnity and as to evidence of loss, theft, destruction and of title as the board of directors may from time to time prescribe, whether generally or in any particular case.
	18.	Transfer of Share Certificate. Subject to the provisions of the Canada Business Corporations Act or any successor statute, shares shall be transferable only on the securities register or branch securities registers maintained by or for the corporation upon surrender of the certificate representing such shares with a properly executed transfer and in such manner as the board of directors may from time to time prescribe.
	19.	Joint Shareholders. If two or more persons are registered as joint holders of any share of the corporation, any one of such persons may give an effective receipt for the certificate issued in respect thereof or for any dividend, return of capital or other money payable or warrant issuable in respect of such share.

SHARES (cont'd)
	20.	Bearer Share Warrants.
		(a) If the bearer of a share warrant requests to be registered on the security registers of the corporation as a shareholder in respect of the shares specified in the said warrant, the bearer shall surrender the said warrant for cancellation and shall deliver to the registered office of the corporation a declaration in writing signed by the bearer requesting registration as a shareholder. The declaration shall be in such form as the board of directors may from time to time determine and shall without limiting the generality of the foregoing state the bearer's name, address and occupation.
		(b) The bearer of a share warrant surrendered for cancellation in accordance with the foregoing may state in the declaration the name, address and occupation of another person whom the bearer wishes to be registered as a shareholder in respect of the shares specified in the said share warrant.
		(c) The corporation shall be entitled to recognize the bearer or holder for the time being of any share warrant as the absolute owner thereof.
		(d) If any share warrant be lost or destroyed the board of directors may, upon the loss or destruction of the share warrant being established to their satisfaction and upon such indemnity being given to the corporation as the board of directors think adequate and upon such other conditions as the board of directors may think fit, permit the person claiming to be entitled thereto or his or her nominee to be registered as the shareholder in respect of the shares specified in the said share warrant as if the same had been surrendered in accordance with the provisions of subclause (a) of this clause.
		(e) No person as holder or bearer of a share warrant or coupon shall be entitled to receive any dividends unless and until he or she shall surrender such warrant or the warrant to which the coupon belonged, as the case may be, and be registered as a shareholder under the provisions of subclause (a) of this clause. Within 30 days of registration as a shareholder of the shares specified in the said share warrant, the shareholder shall be entitled to all dividends declared but unpaid on such shares.
		(f) No person as a holder or bearer of a share warrant shall be entitled in respect thereto to receive notice of or attend or vote or exercise any of the rights of a shareholder at any meeting of the shareholders of the corporation or participate in the requisitioning of any meeting of shareholders.

DIVIDENDS
	21.	A dividend payable in cash shall be paid by cheque to the order of each registered holder of shares of the class in respect of which the dividend has been declared and mailed by prepaid post to such registered holder at his or her address as recorded on the securities registers of the corporation, unless such shareholder otherwise in writing directs. In the case of joint shareholders the cheque shall, unless such joint shareholders in writing otherwise direct, be made payable to the order of all such joint shareholders and if more than one address is recorded on the securities registers of the corporation in respect of such joint holding, the cheque shall be mailed to the first address so recorded. The mailing of such cheques as aforesaid shall satisfy and discharge all liability for the dividends to the extent of the sum represented thereby, plus the amount of any tax required by law to be deducted therefrom, unless such cheque be not paid on due presentation. In the event of non-receipt of any dividend cheque by the person to whom it is so sent as aforesaid, the corporation may issue to such person a replacement cheque for a like amount upon such terms as to indemnity and evidence of non-receipt as the board of directors may from time to time prescribe, whether generally or in any particular case.
AGENTS, ATTORNEYS AND EXECUTION OF DOCUMENTS
	22.	Agents and Attorneys. The board of directors may from time to time determine the directors, officers or other persons who in writing may appoint, or the board of directors may by resolution appoint, any person as the attorney or agent of the corporation for such purposes and with such powers and authorities and for such periods and subject to such conditions as may be prescribed in the written appointment.
	23.	Execution of Documents. The board of directors may from time to time determine the directors, officers or other persons by whom any particular document or instrument or class of documents or instruments of the corporation may be signed on behalf of the corporation and the manner of signing thereof, including the use of facsimile reproductions of any or all signatures and the use of the corporate seal or a facsimile reproduction thereof.
NOTICES
	24.	Method of Giving Notice by the Corporation. Any notice, communication or document required to be given by the corporation to a shareholder, director or other person entitled to receive such notice, communication or document, shall be sufficiently given if delivered personally to the person to whom it is to be given or if delivered to the

NOTICES (cont'd)
		person's address as recorded in the records of the corporation or if mailed by prepaid ordinary or air mail addressed to the person at the person's address as recorded in the records of the corporation or if sent to the person at such address by any other means of prepaid transmitted, written or recorded communication, including by facsimile or by way of an electronic document. In addition to the foregoing, any notice, communication or document required to be given by the corporation may be given to a director or an officer of the corporation by delivering the same to his or her place of business. The secretary of the corporation may change the address in the records of the corporation of any director, officer, shareholder or other person entitled to receive a notice, communication or document required to be given by the corporation, in accordance with any information believed by him or her to be reliable. A notice, communication or document so delivered shall be deemed to have been given when delivered personally or to the address as set out in the records of the corporation or if to a director or officer when delivered to his or her place of business; a notice, communication or document mailed as aforesaid shall be deemed to have been given when deposited in a post office or a public letter box in Canada; and a notice, communication or document sent as aforesaid by any other means of prepaid transmitted written or recorded communication shall be deemed to have been given when dispatched or delivered to the appropriate communication company or agency or its representative for dispatch. In the event that it is impossible or impracticable for any reason whatsoever to give notice as aforesaid, notice may be given by advertisement published once in a newspaper in such cities or places as the board of directors may from time to time determine.
	25.	Signature to Notice. The signature to any notice to be given by the Corporation may be printed or otherwise mechanically reproduced thereon.
	26.	Notice to Joint Shareholders. All notices, communications or documents with respect to any share registered in more than one name may, if more than one address is recorded in the records of the corporation in respect of such joint holding, be given to such joint shareholders at the first address so recorded and notice so given shall be sufficient notice to all the joint holders of any such shares.
	27.	Omission and Errors. The accidental omission to give any notice to any shareholder, director or other person entitled to receive notice from the corporation or the non-receipt of any notice by such person or any error in any notice not affecting the substance thereof shall not invalidate any action taken pursuant to such notice or otherwise founded thereon.

NOTICES (cont'd)
	28.	Persons Entitled by Death or Operation of Law. Every person who, by operation of law, transfer, death or by any other means whatsoever, shall become entitled to any share of the corporation, shall be bound by every notice in respect of such share which shall have been duly given to the person from whom he or she derives the title to such share, prior to his or her name and address being entered on the securities registers of the corporation, whether such notice was given before or after the happening of the event upon which he or she became so entitled.
INTERPRETATION
	29.	In this by-law, unless the context otherwise requires, words importing the singular number only shall include the plural, the masculine gender shall include the feminine and neuter genders and vice versa; words importing persons shall include an individual, partnership, association, body corporate, trustee, executor, administrator, legal representative, and any number or aggregate of persons.
EFFECTIVE DATE AND REPEAL
	30.	Effective Date. This by-law shall come into force on the date that it is confirmed by the shareholders.
	31.	Repeal. All previous by-laws of the corporation are repealed as of the coming into force of this by-law, provided that such repeal shall not affect the previous operation of any by-law so repealed or affect the validity of any act done or right, privilege, obligation or liability acquired or incurred under or the validity of any contract or agreement made pursuant to any such by-law prior to its repeal. All officers and persons acting under any by-law so repealed shall continue to act as if appointed under the provisions of this by-law and all resolutions of the shareholders or board of directors with continuing effect passed under any repealed by-law shall continue good and valid except to the extent inconsistent with this by-law and until amended or repealed.

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INDEX TO EXHIBITS