2020 annual financial statements and management discussion and analysis Cover photo: Strathcona refinery’s cogeneration unit, completed in 2020. Producing 41 megawatts of power, about 80% of the refinery’s electricity. Reducing greenhouse gas emissions by approximately 112,000 tonnes per year, equivalent to taking nearly 24,000 vehicles off the road annually. Highlighting Imperial’s commitment to investing in sustainability and reducing emissions. Annual financial statements and management's discussion and analysis of financial condition and operating results For the year ended December 31, 2020 The following annual financial statements and management’s discussion and analysis should be read in conjunction with the company’s annual report on Form 10-K for the year ended December 31, 2020. Reference to Item 1A. “Risk factors” and specific page numbers in this document indicate the section and page numbers found in the company’s annual report on Form 10-K. The company’s annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to these reports are available online at www.sedar.com, www.sec.gov and the company’s website www.imperialoil.ca. Unless the context otherwise indicates, reference to the “company” or “Imperial” includes Imperial Oil Limited and its subsidiaries, and reference to ExxonMobil includes Exxon Mobil Corporation and its affiliates, as appropriate. All dollar amounts set forth in this report are in Canadian dollars, except where otherwise indicated. Note that numbers may not add due to rounding. Forward-looking statements Statements of future events or conditions in this report, including projections, targets, expectations, estimates, and business plans are forward-looking statements. Forward-looking statements can be identified by words such as believe, anticipate, intend, propose, plan, goal, seek, project, predict, target, estimate, expect, strategy, outlook, schedule, future, continue, likely, may, should, will and similar references to future periods. Forward-looking statements in this report include, but are not limited to, references to being well positioned to participate in future investments and reduce commodity price risk; the company’s long-term business outlook including demand, supply and energy mix and pathways to recovery from the impacts of COVID-19; segment growth, competitive strategies and benefits from an integrated business model; continued monitoring of curtailment regulations including with respect to rail shipments and pace of the Aspen project; the company’s focus on key oil sands assets and the most attractive portions of its unconventional portfolio; Kearl 2021 production outlook and growth initiatives; Cold Lake 2021 production outlook and focus on base performance in the near-term; potential impacts from environmental risks, carbon policy and climate related regulations; the impact of Downstream strategies and competitive position; the benefits to the Chemical business from integration with the Sarnia refinery and relationship with ExxonMobil; market uncertainty and the extent of ongoing effects of the COVID-19 pandemic on economic activity and supply and demand; expected full year capital expenditures of about $1.2 billion for 2021; the intention to continue applying for the Canada Emergency Wage Subsidy; the impact of measures implemented by the company in response to COVID-19; capital structure and financial strength as a competitive advantage, for risk mitigation and meeting funding requirements; earnings sensitivities; risks associated with use of derivative instruments; the impact of any pending litigation, accounting standards and unrecognized tax benefits; and standardized measures of discounted future cash flows. Forward-looking statements are based on the company's current expectations, estimates, projections and assumptions at the time the statements are made. Actual future financial and operating results, including expectations and assumptions concerning demand growth and energy source, supply and mix; commodity prices, foreign exchange rates and general market conditions; production rates, growth and mix; project plans, timing, costs, technical evaluations and capacities, and the company’s ability to effectively execute on these plans and operate its assets; production life, resource recoveries and reservoir performance; the performance of third-party service providers; applicable laws and government policies, including taxation, climate change, production curtailment and restrictions in response to COVID-19; evolution of COVID-19 and its impacts on Imperial’s ability to operate its assets, including the possible shutdown of facilities due to COVID-19 outbreaks; the company’s ability to effectively execute on its business continuity plans and pandemic response activities; cost savings; the adoption and impact of new facilities or technologies, including on capital efficiency, production and reductions to greenhouse gas emissions intensity; refinery utilization and product sales; financing sources and capital structure; and capital and environmental expenditures could differ materially depending on a number of factors. These factors include global, regional or local changes in supply and demand for oil, natural gas, and petroleum and petrochemical products and resulting price, differential and margin impacts; transportation for accessing markets; political or regulatory events, including changes in law or government policy, applicable royalty rates, tax laws, production curtailment and actions in response to COVID-19; the receipt, in a timely manner, of regulatory and third-party approvals; third-party opposition to operations, projects and infrastructure; environmental risks inherent in oil and gas exploration and production activities; environmental regulation, including climate change and greenhouse gas regulation and changes to such regulation; currency exchange rates; availability and allocation of capital; availability and performance of third-party service providers, including in light of restrictions related to COVID-19; unanticipated technical or operational difficulties; management effectiveness and disaster response preparedness, including business continuity plans in response to COVID-19; commercial negotiations; project management and schedules and timely completion of projects; reservoir analysis and performance; unexpected technological developments; the results of research programs and new technologies, and ability to bring new technologies to commercial scale on a cost-competitive basis; operational hazards and risks; cybersecurity incidents; general economic conditions, including the occurrence and duration of economic recessions; the ability to develop or acquire additional reserves; and other factors discussed in Item 1A risk factors and Item 7 management’s discussion and analysis of financial condition and results of operations of this annual report on Form 10-K. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to Imperial Oil Limited. Imperial Oil Limited’s actual results may differ materially from those expressed or implied by its forward-looking statements and readers are cautioned not to place undue reliance on them. Imperial Oil Limited undertakes no obligation to update any forward-looking statements contained herein, except as required by applicable law. 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. Financial section Table of contents Page Financial information (U.S. GAAP) ....................................................................................................................................... 2 Frequently used terms .......................................................................................................................................................... 3 Management’s discussion and analysis of financial condition and results of operations ...................................................... 5 Overview .................................................................................................................................................................... 5 Business environment and risk assessment .............................................................................................................. 6 Results of operations ............................................................................................................................................... 11 Liquidity and capital resources ................................................................................................................................. 17 Capital and exploration expenditures ....................................................................................................................... 20 Market risks and other uncertainties ........................................................................................................................ 21 Critical accounting estimates ................................................................................................................................... 23 Management’s report on internal control over financial reporting ....................................................................................... 29 Report