1. Canadian Oil and Gas Industry
Fundamental Analysis and
Recommendations:
Suncor, Imperial Oil, Talisman

2. Presenters Karen Ford– Industry Overview Aaron Cawker– Suncor
Stephanie Cornell– Talisman
Rahim Dhanji– Imperial Oil

3. Industry Overview Largest industry in the world
Oil & gas trade surplus accounts 57% of Canada’s merchandise trade balance in 2003
3.5 per cent share of the world market, since 1998
Employment near 500,000 in Canada
Invest close to $24 billion

4. Overview…continued
Payments to governments have averaged close to $8.5 billion per year over the last 10 years
In 2003, the oil and gas industry contributed an estimated $16 billion to government revenues in the form of royalty payments, bonus payments and income taxes. 
We produce more than 20% of North America’s crude oil and natural gas but account for only 10% of its consumption
Capital Spending 2003: Conventional $23.8 billion 
Oil Sands $5.0 billion 
Total $28.8 billion

5. Origins and History
Most crude oil and natural gas originate from plant and animal life millions of years ago: swamps and oceans.
Heat and pressure transformed the soft parts of the plants and animals into solid, liquid or gaseous hydrocarbons known as fossil fuels - coal, crude oil or natural gas
Located in sand oils and oil fields
Found by drilling and creating wells

7. Sectors of the Industry
Petroleum Exploration and Production
Upstream
Refining
Midstream
Distribution and Retail Sales
Downstream

8. Types and Uses Crude Oil and Natural Gas Uses:
Mobility, heat and cool our homes and provide electricity
Products:
plastics, life-saving medications, clothing, cosmetics, and many other items you may use daily
Barrel – a unit of measure for oil and petroleum products that is equivalent to 42 U.S. gallons

9. Canadian Economy Canada's GDP 2003 grew 1.7%., 2002 it grew 2.2%
Slowdown of Canada’s economy:
weak U.S. economic growth for most of the year;
a strong appreciation of the Canadian dollar;
the SARS outbreak in Toronto;
restrictions on exports of softwood lumber and beef (due to mad cow disease).
Recovery of the U.S. economy, high oil and natural gas prices, and continued spending from the Canadian government are expected to boost Canada’s economy in 2004.
The Canadian economy is forecast to grow 3.6% in 2004

10. Situational Analysis Demand is increasing
Oil and Natural Gas together provide the largest source of energy (64%) in Canada
Natural gas 39% and Oil 25%
Hydro 20%
Coal 11%
Nuclear 5%
Prices have become volatile on the market
Energy shares make up 17 percent of the value of the S&P/TSX, the second-largest group in the index

11. Crude Oil in Canada Highlights
Ninth-largest producer of crude oil in the world
Prior to 2002, Canada did not even rank in the top 20 of countries with the most proven crude oil reserves. Alberta's oil sands, which stood at billion barrels as of January 2004
Saudi Arabia holds most crude oil reserves in the world
      

12. Crude Oil…continued Reserves: 178.9 billion barrels (2nd)
World Reserves

13. Crude Oil…continued
Production:
3.1 million barrels per day (bbl/d) for 2003, an increase of 7% over 2002
Oil sands production is expected to increase significantly and to offset the decline in conventional crude oil production, becoming Canada's major source of oil supply
Western Canada Sedimentary Basin (WCSB), underlying most Alberta and parts of British Columbia, Saskatchewan, Manitoba and the Northwest Territories main source of oil

15. Crude Oil Continued… Wells Drilled: 4,845 Exports
US: 1.4 million barrels per day
3rd largest exporter of crude oil to
the US
Canada makes up 15% of total US oil imports
Canada supplies 9% of US oil consumption
Imports
912,000 barrels per day

16. Crude Oil Prospects

17. Crude Oil Forecast
Significant potential for new crude oil production planned to come on stream over the next ten years
Canada’s crude oil production growth is driven by the development of oil sands in Alberta and to a lesser degree by offshore projects in eastern Canada

18. Crude Oil Prospects Maturing basin being extended by technology
Horizontal drilling
3D Seismic
New drilling/recovery technology
Emerging basins
Oil Sands
Northern Canada
Offshore East Coast
Technology is key
Total Canadian production is projected to increase from the current 2.6 million barrels per day to reach 3.6 million barrels per day (b/d) by 2015.

19. Crude Oil Resources (Billions of Barrels)

20. Crude Oil Supply Forecast

21. Natural Gas Highlights
Canada is the third-largest producer of natural gas
Production:
16.9 billion cubic feet per day
Reserves:
59.1 Tcf (Jan. 2004)
Wells Drilled in 2003: 12,951
Exports:
2nd largest exporter in world
to US: 3.8 trillion cubic feet per year
Largest exporter of natural gas to the US
Canada makes up 94% of total US gas imports
Canada supplies 17% of US gas consumption
No imports listed

22. Natural Gas Production and Consumption

23. Natural Gas Outlook
Short-term outlook, natural gas production is expected to decline 3%, from 16.3 Bcf/d at the end of 2002, to 15.8 Bcf/d in 2005
new fields coming onstream are small and quickly depleted
If prices stay high, incentive to exploit the many small natural gas pools in the WCSB, as well as coalbead methane, of which the region holds considerable reserves

24. Natural Gas Outlook: Productive Capacity

25. Prospects of Natural Gas
Natural gas demand keeps growing
– Supply running hard to catch growing demand
– New sources of supply coming on
Gas from tight sands is promising resource
Arctic gas from the Mackenzie Delta to be piped to Canadian and U.S. network of pipes
As demand for gas grows, Canada’s resources will combine with Liquid Natural Gas (LNG) imports as important sources of this cleaner-burning fuel of choice in an increasingly environmentally conscious North America

26. Natural Gas Prospects…
Significant untapped potential remaining
Sufficient pipeline capacity New supplies:
Northern gas
East Coast offshore
Coal-bed methane

27. Potential of Natural Gas (TCF)

28. North America Natural Gas Demand

29. Strengths Size and number oil sands in Alberta
Potential of Eastern and Northern Canada
high-tech exploration
cold-climate and offshore operations
construction and operations of pipelines
specialized controls and computer applications
environmental protection technology and safety training
innovative products and services that meet customer needs
refining processes that produce quality petroleum-based products while minimizing the impact on the environment.

30. Weaknesses Limited natural gas reserves
Capacity for natural gas is forecasted to decrease
Canada is one of the high-cost places in the world to find and produce oil and gas
Deep gas, natural gas from coal and developments offshore, in the oil sands and the North are large, complex and expensive and have long lead times before they turn a profit
Challenges in meeting North America’s energy needs

31. Opportunities Exporting to the US Oils Sands
Exploration of Northern and Eastern Canada
World population is currently around 6 billion people, but is expected to grow to approximately 7.6 billion by a huge increase in the demand for transportation fuels, electricity, and many other consumer products made from oil and natural gas.

32. Threats
Canada/US Foreign Exchange Rate

33. Threats Price volatility High Development costs Environmental Issue
Especially Marine Life
Substitutes
Alternatives to oil and gas
Solar Power, Coal, Wind, Hydro, and Nuclear Power

34. Competitive Rivalry
Top Companies in Oil and Gas Producers (Selected by Assets)
EnCana Corp.
Canadian Natural Resources
Nexen
Penn West Petroleum
Western Oil Sands Inc
Paramount Resources
Compton Petroleum
Bonavista Energy Trust
PetroKazakhstan Inc.

35. Price History –Crude Oil 1 Year

36. Crude Oil Prices since 1920

37. Crude Oil Price Forecast

38. Natural Gas Prices- 1 year

39. Natural Gas Prices-Since 1930

40. Natural Gas Price Forecast

42. Current Events
Despite high oil and gas prices, anticipated market volatility is preventing energy companies from increasing their rate of investment
Nov. 8 (Bloomberg)
Canadian Stocks Fall as Oil Prices Slip; Suncor, Talisman Drop
-- Canadian stocks fell, led by oil and gas producers such as Suncor Energy Inc., after crude oil prices declined. A rise in the Canadian dollar to 84 U.S. cents for the first time in more than 12 years weighed on the benchmark index.
``Oil and gas stocks in Canada are very sensitive to falling oil prices because of how high'' crude prices are
Tuesday, November 09, 2004
Crude oil futures tumbled below $48 (U.S.) a barrel Tuesday, closing at their lowest level in seven weeks, on rising expectations that the U.S. supply of transport and home-heating fuels will be adequate this winter.

44. Company Overview
Suncor Energy Inc. is an integrated energy company strategically focused on developing one of the world’s largest petroleum resource basins – Canada’s Athabasca oil sands.
Strong focus on technology
37 years of oil sands experience

45. Company Overview Became a publicly traded company in 1992
Total returns to shareholders have averaged more than 25% per year.

46. Corporate Committee Richard George – President & CEO since 1991
Kenneth Alley – Senior VP & CFO since 2003, with Suncor since 1984
Mike Ashar – Executive VP, Refining and Marketing since 2003, with Suncore since 1987
David Byler – Executive VP, Natural Gas & Renewable Energy since 2000, with Suncore since 1979
Terrence Hopwood – Senior VP & General Council since 2002, with Suncore since 1988
Sue Lee – Senior VP, HR & Communications since 1996
Kevin Nabholz – Senior VP, Major projects since 2002, with Suncore since 1986
Thomas Ryley – Executive VP, Energy Marketing & Refining, with Suncore since 1983
Steven Williams – Executive VP Oil Sands since 2003, with Suncore since years of energy industry experience.

47. Pipeline network

48. Businesses Oil Sands Natural Gas and Renewable Energy
Located near Fort McMurray, Alberta
The foundation of Suncor’s assets and is the center of their growth strategy.
Natural Gas and Renewable Energy
Based in Calgary, Alberta
Produce natural gas in Western Canada
Provides a price hedge against internal consumption at oil sands and refining operations.

49. Businesses Refining, Marketing and Retail Canada
Refinery feedstock and natural gas production are marketed to commercial and industrial consumers.
Products from the Sarnia refinery are sold to customers in Ontario, Quebec, and the Northeastern US, and to retail customers through approximately 500 Suncor-owned(Sunoco) and joint venture service stations in Ontario.

50. Businesses United States
In August 2003, acquired a Denver, Colorado refinery along with 43 Phillips 66 retail stations.
Expansion into the rocky Mountain States allows easier movement of crude oil products to US markets.

51. Business Strategy - growth
Develop multiple sources of supply from the oil sands resource base
Upgrade technology to increase production
Use increase production to feed growing North American energy market
How to improve current model: make it bigger.

53. Short term Goals
Increase crude oil production to more than barrels per day by from current level of bpd.
Reduce costs of production
Provide superior shareholder returns while providing social and economic benefits to stakeholders.
Reduce environmental impact of operations

54. Crude Oil Production
Planned expansion is designed to leverage economies of scale to keep costs per barrel among the lowest in the industry.

56. Natural gas

57. Main Resource – Oil Sands

58. Oil Sands Suncor’s future is built on Canada’s oil sands
An estimated 175 billion barrels of crude oil reserves
First company to develop oil sands
Leases contain an estimated 12 billion barrels of bitumen reserves (heavy oil)

59. Oil Sands
With known resource base, Suncor doesn’t have risk and cost associated with conventional exploration.
12000 million barrels = (12000/0.5)1/365 = 65+ years of resources.
In the process of acquiring further leases

60. Supply of Bitumen
Mining – Surface mines supply majority of current production, plans to extend current mines with new operations planned to begin in 2010
In-situ – Firebag development uses steam assisted gravity drainage (SAGD) to heat the underground reservoir, allowing the bitumen to be pumped to the surface. Expected to be at full production in 2005.
Third Party Agreements – plan on providing a fee-for-service agreement to process barrels per day of 3rd party butimen (2008).

61. Production of Crude Oil vs. Revenue

62. Markets
Refining and marketing strategy builds on connections between the Oil sands production base and North American refiners and consumers.
This is the largest crude oil and refined product market in the world.

63. Markets - continued
Don’t just supply the market, also participate in it through short and long-term marketing contracts as well as through retail distribution (Sunoco).

64. Markets - continued Retail
operates nearly 300 Sunoco-branded retail stations in Ontario and supplies to over 200 other stations through joint venture operations.
In 2003, purchased 43 Phillips 66 retail stations in Colorado and long-term supply contracts with nearly 150 more retailers.

65. Breakdown of Businesses

66. Investments
Currently producing hydrocarbon fuels to meet today’s needs
Investing to supply new markets with renewable energy.
In 2003, they began the wind power project in southern Alberta, with partner EHN Wind Power Canada, Inc.

67. Stock Info. Price as of Nov. 10, 2004: $40.46 52 week low: $27.00
52 week high: $44.49
Average Daily Volume  1,500,000
Number of Shares Outstanding: 453,421,000

68. 1 Year weekly chart
1 Year weekly chart

69. 1 Year weekly chart vs. S&P Energy

70. 5 Year Weekly Chart

71. 5 Year weekly chart vs. S&P 500

72. Company Analysis (Excel file)
2004
(9 months)
2003
2002
2001
2000
Share Price (End of period):
40.69
32.5
24.7
26.2
19.15
Revenue($millions):
6311
6306
5032
4294
3484
Net Earnings($millions):
767
1,084
761
388
377
EBIT ($millions)
1186
1,804
1277
531
628
Total Assets($millions)
11362
10427
8683
8094
6833
Total Liabilities($millions):
6774
6002
5225
5317
4361
Total Debt($millions):
2347
2479
2686
3144
2256
Interest Expense($millions): 50 83
133 18 8
Equity($millions):
4588
4,588
3458
2777
2472
Shares Outstanding(EOP):
453,000,000
450,505,000
448,839,000
445,820,000
443,546,000
Beta:
0.16
Operating Cash Flow($millions):
1562
2,081
1440
831
958
Capital Expenditures:
1174
1,316
877
1678
1998
Dividends:
0.17
0.1925

73. Analysis of Earnings

74. Performance Measures Measures 2004 (9 months) 2003 2002 2001 2000 1999
Price to Book:
4.02
3.19
3.21
4.21
3.44
3.17
EPS
1.69
2.41
1.70
0.87
0.85
0.42
P/E
24.03
13.51
14.57
30.10
22.53
35.89
NAV
10.13
9.82
7.70
6.23
5.57
4.77
Free Cash Flow($millions)
388
765
563
-847
-1,040
-512
ROA
10.4%
17.3%
14.7%
6.6%
9.2%
6.5%
ROE
16.7%
23.6%
22.0%
14.0%
15.3%
8.8%
Interest Coverage
23.7
21.7
9.6
29.5
78.5
13.0
Debt to Equity
0.51
0.54
0.78
1.13
0.91
0.66
Dividend Yield
0.42%
0.59%
0.69%
0.65%
0.89%
1.13%
Market Cap.($millions)
18432
14641
11086
11680
8493
6674

76. Recent News
Oct 18:
Suncor CEO Richard George told the downtown Toronto business audience:
American consumption of oil and gas is expected to increase almost 50 per cent by 2025,
Domestic production is projected to remain flat.
The United States is looking north to close the gap, and this represents a big opportunity for Canada's energy industry.
"The bottom line for Canada is that energy is not an obstacle to economic growth. It's a key driver of economic growth," said George.
"This is not just an opportunity for Western Canada. Our energy industry is about Canada's opportunity, Canada's prosperity, and our role globally."

77. More news Suncor profit climbs, but oil hedges limit gain
Suncor, known for its huge oil sands mining and synthetic crude operations, would have earned 25 percent more if over a third of its output not been sold forward at $22.50 a barrel. Oil averaged nearly $44 a barrel in the quarter.

78. What the Brokers say
Strong Buy 5
Buy 8
Hold 6
Sell 2
Strong Sell

79. Value Drivers Production of crude oil
Since they are essentially price takers, the more they produce, the more revenues increase
The price of oil
This is the price of their product, and if price increases, earnings increase.
To a lesser extent the success of downstream operations

80. Recommendation BUY Pros: Cons: Sound business plan
Product is in constant demand
Near unlimited resources, just a matter of extracting them
Continuous growth in revenue and earnings
Cons:
Stock price has surged over last year, and stock is expensive compared to 1 year ago

82. Talisman’s Background
Large independent oil and gas producer with global operations
focused mainly on exploration and development 
Created in 1992 – Formally British Petroleum Canada
Started out with operations solely in Canada
Market Capitalization approximately $500million
Produced 51,00 boe/d

83. Talisman’s Background
Through corporate and asset acquisitions , operations were quickly established in the North Sea, North Africa, and Southeast Asia
Today – 11 billion dollar company with global operations
2003 – production was 437,000 boe/d
60% of reserves are natural gas, 40% crude oil and natural gas liquids

84. Mission Statement
“To create value for its shareholders in the upstream oil and gas business”

85. Goal
Committed to continuing production per share growth of at least 5-10% per annum for the next three years (2004, 2005, 2006)
Most transparent measure of value creation
Continue to grow its large North American natural gas reserves while pursuing world scale international opportunities

86. Management Team James W. Buckee, President & CEO
British Petroleum Canada, 1991 appointed Chief operating officer of Talisman, 1993 became CEO of Talisman
Ron J. Eckhardt, Executive Vice President, North America
1986 – Joined Talisman (then British Petroleum Canada)
T.N.D. Hares, Executive Vice-President, Frontier & International Op.
– Worked for British Petroleum, 1994 joined Talisman
Joseph Horler, Executive VP, Marketing
1987 – Joined Talisman (BP Canada)
Michael D. McDonald, E.V.P. Finance and CFO
1982 – Joined BP Canada
Robert M. Redgate, E.V.P., Corporate Services
1978 – Joined Talisman (BP Canada)
Jacqueline Sheppard, E.V.P., Corporate and Legal
1993 – Joined Talisman, prior to this she was a partner in a law firm
John ‘t Hart, E.V.P., Exploration

87. Competitors EnCana Penn West Petroleum Compton Petroleum
Canadian Natural Resources
Western Oil Sands Inc
Bonavista Energy Trust
Nexen
Paramount Resources
PetroKazakhstan Inc 

88. Areas of Operation North America – 50% of company’s production (2003)
International – 50% of company’s production (2003)

89. North America (Canada and US)
Mainly Natural Gas, but also oil and liquids
Focuses mainly on natural gas in Rocky mountain foothills in Alberta
New core gas area in upstate New York

90. North Sea (United Kingdom and Norway)
Represented 2/3 of international production in 2003
Mainly oil and liquids
In UK central North Sea - Established a number of commercial hubs
Norwegian sector of North Sea– building a new core area
Large drilling program underway designed to increase liquid and oil production by 5-10% in 2005

91. Malaysia/Vietnam (Malaysia, Vietnam, Indonesia)
Talisman completed a $1billion oil and gas development project on time and on budget

92. Southeast Asia Large gas reserves in Indonesia
Negotiating new gas sales and transportation agreements

93. Caribbean and Latin America (Columbia, Trinidad and Tobago)
Working in a number of high exploration areas.
Trinidad – development of the Greater Angostura oil and gas project is underway
Columbia and Trinidad – exploration drilling programs

94. Africa and Middle East (Algeria, and Qatar)
March 2003 – completed sale of its indirectly held interest in the Greater Nile Oil project in Sudan
$1.1 billion, gain of $296 million
Production and development interests in Algeria and exploration acreage in Qatar

95. Stock Information Share Price – $30.85 CAD (November 8, 2004)
Listed – Toronto and New York Stock exchanges
Ticker Symbol – TLM
Shares Outstanding – 384,105,983 (November 8, 2004)
Market Capitalization – $11,849,669, (384,105,983* $30.85) 
52 Week low and High – $ $  
Dividends - June 30, $.15 and Dec 31, $.15

96. Talisman - 1 Year Prices

97. Talisman - 5 Year Prices

98.   Talisman vs. S&P 500 – 1 Year

99. Talisman vs. Energy – 1 year

100. Performance Measures

101. Performance Measures

102. Production

103. Prices

104. 2004 - YTD Sept. 30/04 – Production up 11% over last year Net Income
Sept 30, $542m ($1.39/share)
Sept 30, $904m ($2.29/share)
Income down this year because of the sale of the Sudan in 2003
Talisman lost $103 million due to hedges to sell at below below market prices

105. Breaking News – Nov. 9/04
Supply cushion – only about 1% of the 82.4 million barrels consumed daily
Two key exporters might be vulnerable to disruptions in the near future
Iraq – US military have vowed to disrupt the country’s oil exports, and a northern pipeline has been knocked out by saboteurs lowering supply
Nigeria – Oil workers are planning a general strike aimed at halting the country’s exports –
Nigeria is America’s fifth largest source of crude oil

106. Value Drivers
Production
Oil and Gas Prices

107. Recommendations Sound business plan Product is always in demand
Price of stock is down right now and is likely to increase
Company has increased production by 11% year to date
BUY!

109. Corporate Profile
Imperial Oil Limited has been a leading member of the Canadian energy industry for more than 120 years
One of the largest producers of crude oil and natural gas liquids in Canada and a major producer of natural gas
Canada’s largest refiner and marketer of petroleum products – sold primarily under the Esso brand name
Major producer of petrochemicals

110. Management Team
Imperial's 2003 Board of Directors (left to right) P. Des Marais II, B.J. Fischer, T.J. Hearn, R. Phillips, J.F. Shepard, P.A. Smith, S.D. Whittaker, K.C. Williams, V.L. Young
Majority of management team are from within Imperial Oil or Exxon/Mobil
(Exxon has a 69.59% interest in Imperial)

111. Management Team
T.J. (Tim) Hearn has been a director of Imperial Oil since January 1, 2002.
With the company since 1967
He is currently Imperial's chairman, president and CEO
P.A. (Paul) Smith Mr. Smith has been a director of Imperial Oil since February 1, 2002.
He is currently controller and senior vice-president, finance and administration.
Joined Imperial Oil in 1980

112. Management cont…
B.J. (Brian) Fischer Mr. Fischer has been a director of Imperial since Sept. 1, 1992.
He is currently senior vice-president of Imperial's products and chemicals division
Joined Imperial Oil in 1968
J. M. (Mike) Yeager Mr. Yeager has been a director of Imperial Oil since August 1, 2004.
He is currently senior vice-president, resources division, and president and chief executive officer of Imperial Oil Resources
He joined the company from Mobil

113. Business Segments
Natural Resources
Petroleum Products
Chemicals

114. Natural Resources Segment
CRUDE OIL
Wholly owned Cold Lake operation in Northern Alberta
25 percent ownership position in Syncrude.
NATURAL GAS
Wizard Lake
Sable Offshore Energy Project
Gwillim Field

115. Crude Oil – Cold Lake This is a long-life asset
Net proved reserves were 760 MB at year-end 2003
Additional untapped resource

116. - Received regulatory approval for further development in March 2004

117. Crude Oil - Syncrude World's largest mineable oil sands operation.
Syncrude is the single largest crude oil producer in Canada with net reserves of about 3 billion barrels and production of over 200 kbd in 2003.
Imperial was a founding member of Syncrude and has a 25 percent interest

118. Crude Oil – Syncrude (cont…)
Syncrude is currently progressing a major expansion for the operation -- one that will increase production by 50 percent and improve the quality and the sales price of the entire sales stream.
Total expected cost of $7.8 billion
Disappointing cost and schedule performance to date

119. Natural Gas
Full production from the natural gas cap at Imperial’s Wizard Lake oil field in Alberta began in July 2003.
Production rates of about 180 million cubic feet a day will be achieved in 2004 once gas plant capacity is available and are expected to continue through 2006.
In November, the first natural gas was produced from the Gwillim field in northeastern BC. Additional development of this field is planned.
Natural gas production from 9% interest in the Sable offshore energy project averaged 40 million cubic feet a day before royalties.
production began from a fourth Sable field, Alma, and construction was started on facilities for a fifth field, South Venture.
Funding was also approved for a natural gas compression facility that will service production from all Sable fields by late 2006.

120. Natural Resources - Potential
Kearl Oil Sands (200k barrels/day)
Mackenzie Gas Project
regulatory review process to take about 2 years
design and construction should take 3-4 years
potential for Mackenzie gas production by the end of the decade
Cree exploration well abandoned in the third quarter
Acquired 25% interest in Orphan Basin (Natural Gas)

121. Production

124. Petroleum Products Segment
787 company-owned sites
Average productivity per site for 2003 was 5.2 million litres a year, up six percent from 2002.
650 Esso convenience stores across Canada, including On the Run and Tiger Express, was the second largest in Canada.
Convenience-store sales rose by about nine percent in 2003, well above the industry average.
400 sites with car-wash facilities is the largest in the industry.
Esso retail sites providing Tim Hortons food and refreshments had increased to more than 300 from 270 in 2002

125. Petroleum Products cont…
Points-Exchange alliances
Market leader in finished lubricants
Exclusive Canadian marketer of Mobil products
Quadrupled average productivity per site

126. Petroleum Products cont…
Focus on reducing working capital
Decreased days inventory by 4% vs. 2002
Freed up more than $35 million in cash
Over the last 10 years, this has been reduced by about 25 percent.

127. Petroleum Products cont…
Capital Expenditures of $478 million in 2003
Allowed them to meet specifications of 2004 model-year automobile technology
Refineries have improved energy efficiency by more than 40 percent over last 30 years

128. Chemicals Segment Earnings of $37 million
Cash flow from earnings of $66 million
Sales of petrochemical products were 3,300 tonnes a day, down slightly from 2002.
N.A. demand was low in 2003, with high feedstock costs and soft sales volumes.

129. Chemicals cont… One of Canada’s leading producers of chemical products
Largest market share in North America for polyethylene
Largest share of the Canadian market for solvents
Annual capacity of 450,000 tonnes

130. Chemicals cont…
$41 million in Capital Expenditures aimed at reducing net costs of ethylene production by 10 percent.

131. Financial Summary of Segments

132. Net Earnings by Segment

133. Valuation Ratios Measures Industry 2003 2002 2001 2000 1999 P/E 21.9
12.73
13.92
13.88
11.69
21.30
Price to Book:
3.70
3.71
3.27
4.03
3.92
3.09
Price to Sales
0.9
1.11
1.00
1.01
0.91
1.04
Price to CF
11.3
9.76
13.01
11.29
11.50
16.89
EPS
$4.3
$4.52
$3.23
$3.19
$3.38
$1.46
Dividend Yield
1.90%
1.51%
1.87%
1.98%
2.42%

134. Ratios cont… Financial Strength Company Industry Quick Ratio 0.775
0.87
Debt to Equity
0.24
0.86
Interest Coverage
57.2
7.39
Profitability
Gross Margin
60.28
56.90
Net Profit Margin
8.76
14.94
Management
ROA
19.4
6.47
ROE
29.1
16.51
Inventory Turnover
28.45
18.43
*Due to repayment of LT Debt

135. Growth Measures Revenue growth of 49.44% from 1999
S/H Equity growth of 33.53% from 1999:
Increased due to increasing net earnings
Partly offset by Share Repurchase Program

136. Statement of Cash Flows

137. Cash Flows cont…
2003
2002
2001
2000
1999
Operating Cash Flow($millions):
2194
1676
2004
2089
1470
Capital Expenditures ($millions):
1393
1491
1024
312
566
Free Cash Flow($millions):
801
185
980
1777
904

138. Use of Cash Flow

139. Value Drivers and Earnings Sensitivities

140. Stock Information Ticker Symbols: Market Capitalization (IMO-T) on TSX
(IMO-A) on Amex
Market Capitalization
(IMO-T) Billion
(IMO-A) Billion

141. Stock Information 2003 2002 2001 2000 1999 Dividend 0.87 0.84 0.83
As of 10/11/04
Ticker
Close
Open
Change
Volume
52-Week High
52-Week Low
IMO-T
$70.15
$68.90
$1.25
340,600
$73.17
$51.12
IMO-A
$58.56*
$57.40
$1.10
35,000
$59.75
$38.84
* Prices in U.S. Dollars
2003
2002
2001
2000
1999
Dividend
0.87
0.84
0.83
0.78
0.75

142. IMO vs Oil & Gas Index (1 year)

143. IMO vs. Oil & Gas Index (5 year)

144. Wall St. Recommendations

145. Recommendation: BUY Strong sales and EPS growth
High profitability compared to industry and S&P 500
High return ratios (ROE, ROA, ROI)
Steady return potential for capital investments
Strong dividend record and repurchase record
BUY