##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
    
    Commission file number: 0-12014
 IMPERIAL OIL LIMITED
  CANADA
    
    98-0017682(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)237 FOURTH AVENUE S.W., CALGARY, AB, CANADA
(Address of principal executive offices)
    
    T2P 3M9
(Postal Code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class 
None
    
    Name of each exchange on
which registered
None
 Securities registered pursuant to Section 12(g) of the Act:
Common Shares (without par value)
 (Title of Class)
  þ o
  o þ
  þ o
  þ o
  þ o o
  o þ




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##### 



PagePART IItem 1.
    
    BusinessFinancial Information by Operating Segments
    
    
    3Natural Resources
    
    
    4Petroleum and Natural Gas Production
    
    
    4Land Holdings
    
    
    10Exploration and Development
    
    
    10Petroleum Products
    
    
    12Supply
    
    
    12Refining
    
    
    12Distribution
    
    
    13Marketing
    
    
    13Chemicals
    
    
    14Research
    
    
    14Environmental Protection
    
    
    15Human Resources
    
    
    15Competition
    
    
    15Government Regulation
    
    
    15The Company Online
    
    
    16Item 1A.
    
    Risk Factors
    
    
    16Item 2.
    
    Properties
    
    
    18Item 3.
    
    Legal Proceedings
    
    
    18Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    18PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    19Item 6.
    
    Selected Financial Data
    
    
    20Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    20Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 8.
    
    Financial Statements and Supplementary Data
    
    
    31Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    36Item 9A.
    
    Controls and Procedures
    
    
    36PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    37Item 11.
    
    Executive Compensation
    
    
    39Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    48Item 13.
    
    Certain Relationships and Related Transactions
    
    
    49Item 14.
    
    Principal Accountant Fees and Services
    
    
    50PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    51Index to Financial Statements
    
    
    F-1Managements Report on Internal Control over Financial Reporting
    
    
    F-2Report of Independent Registered Public Accounting Firm
    
    
    F-2
  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.
  2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(dollars)Rate at end of period
    
    
    0.8582
    
    
    
    0.8579
    
    
    
    0.8310
    
    
    
    0.7738
    
    
    
    0.6329Average rate during period
    
    
    0.8844
    
    
    
    0.8276
    
    
    
    0.7702
    
    
    
    0.7186
    
    
    
    0.6368High
    
    
    0.9100
    
    
    
    0.8690
    
    
    
    0.8493
    
    
    
    0.7738
    
    
    
    0.6619Low
    
    
    0.8528
    
    
    
    0.7872
    
    
    
    0.7158
    
    
    
    0.6349
    
    
    
    0.6200
  2




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This report contains forward looking information on future production, project start ups and
future capital spending. Actual results could differ materially as a result of market conditions
or changes in law, government policy, operating conditions, costs, project schedules, operating
performance, demand for oil and natural gas, commercial negotiations or other technical and
economic factors.
 
 PART I
 
 Item 1. Business.
   
 Financial Information by Operating Segments (under U.S. GAAP)
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions of dollars)External sales (1) :Natural resources
    
    $
    4,619
    
    
    $
    4,702
    
    
    $
    3,689
    
    
    $
    3,390
    
    
    $
    2,573Petroleum products
    
    
    18,527
    
    
    
    21,793
    
    
    
    17,503
    
    
    
    14,710
    
    
    
    13,362Chemicals
    
    
    1,359
    
    
    
    1,302
    
    
    
    1,216
    
    
    
    994
    
    
    
    955Corporate and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    24,505
    
    
    $
    27,797
    
    
    $
    22,408
    
    
    $
    19,094
    
    
    $
    16,890Intersegment sales:Natural resources
    
    $
    3,837
    
    
    $
    3,487
    
    
    $
    2,891
    
    
    $
    2,224
    
    
    $
    2,217Petroleum products
    
    
    2,256
    
    
    
    2,224
    
    
    
    1,666
    
    
    
    1,294
    
    
    
    1,038Chemicals
    
    
    345
    
    
    
    363
    
    
    
    293
    
    
    
    238
    
    
    
    209Net income (2) :Natural resources
    
    $
    2,376
    
    
    $
    2,008
    
    
    $
    1,517
    
    
    $
    1,174
    
    
    $
    1,052Petroleum products
    
    
    624
    
    
    
    694
    
    
    
    556
    
    
    
    462
    
    
    
    147Chemicals
    
    
    143
    
    
    
    121
    
    
    
    109
    
    
    
    44
    
    
    
    54Corporate and other (3) /eliminations
    
    
    (99
    )
    
    
    (223
    )
    
    
    (130
    )
    
    
    25
    
    
    
    (39
    )$
    3,044
    
    
    $
    2,600
    
    
    $
    2,052
    
    
    $
    1,705
    
    
    $
    1,214Identifiable assets at December 31 (4) :Natural resources
    
    $
    7,513
    
    
    $
    7,289
    
    
    $
    6,822
    
    
    $
    6,397
    
    
    $
    5,982Petroleum products
    
    
    6,450
    
    
    
    6,257
    
    
    
    5,509
    
    
    
    5,225
    
    
    
    5,034Chemicals
    
    
    504
    
    
    
    500
    
    
    
    490
    
    
    
    433
    
    
    
    417Corporate and other/eliminations
    
    
    1,674
    
    
    
    1,536
    
    
    
    1,206
    
    
    
    282
    
    
    
    570$
    16,141
    
    
    $
    15,582
    
    
    $
    14,027
    
    
    $
    12,337
    
    
    $
    12,003Capital and exploration expenditures:Natural resources
    
    $
    787
    
    
    $
    937
    
    
    $
    1,113
    
    
    $
    1,007
    
    
    $
    986Petroleum products
    
    
    361
    
    
    
    478
    
    
    
    283
    
    
    
    478
    
    
    
    589Chemicals
    
    
    13
    
    
    
    19
    
    
    
    15
    
    
    
    41
    
    
    
    25Corporate and other
    
    
    48
    
    
    
    41
    
    
    
    34
    
    
    
    33
    
    
    
    12$
    1,209
    
    
    $
    1,475
    
    
    $
    1,445
    
    
    $
    1,559
    
    
    $
    1,612
 
 (1)
    
    Export sales are reported in note 3 to the consolidated financial statements on page
F-9. Total external sales include $4,894 million for 2005, $3,584 million for 2004, $2,851
million for 2003 and $2,431 million for 2002 for purchases/sales contracts with the same
counterparty. Associated costs were included in purchases of crude oil and products.
Effective January 1, 2006, these purchases/sales were recorded on a net basis. See note 1,
Summary of significant Accounting Policies.(2)
    
    These amounts are presented as if each segment were a separate business entity and,
accordingly, include the financial effect of transactions between the segments.
Intersegment sales are made essentially at prevailing market prices.(3)
    
    Includes primarily interest charges on the debt obligations of the company, interest
income on investments, incentive compensation expenses, and intersegment consolidating
adjustments.(4)
    
    The identifiable assets in each operating segment represent the net book value of the
tangible and intangible assets attributed to such segment. Net intangible assets
representing unrecognized prior service costs associated with the recognition of the
additional minimum pension liability in 2005 and prior years have been reclassified from
the operating segments to the corporate and other segment. Amounts reclassified into the
corporate and other segment were $92 million for 2005, $97 million in 2004, $89
million for 2003 and $114 million in 2002. This change has no impact on total identifiable
assets at December 31 of 2005 and prior years. 3




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Natural Resources
 
 Petroleum and Natural Gas Production
  2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(thousands a day)Conventional (including natural gas liquids):Cubic metres
     Gross (1)
    
    
    8.7
    
    
    
    11.0
    
    
    
    12.1
    
    
    
    11.8
    
    
    
    12.4 Net (2)
    
    
    6.7
    
    
    
    8.6
    
    
    
    9.4
    
    
    
    9.1
    
    
    
    9.5Barrels
     Gross (1)
    
    
    55
    
    
    
    69
    
    
    
    76
    
    
    
    74
    
    
    
    78 Net (2)
    
    
    42
    
    
    
    54
    
    
    
    59
    
    
    
    57
    
    
    
    60Heavy Oil (3):Cubic metres
     Gross (1)
    
    
    24.1
    
    
    
    22.1
    
    
    
    20.0
    
    
    
    20.5
    
    
    
    17.8 Net (2)
    
    
    20.1
    
    
    
    19.7
    
    
    
    17.7
    
    
    
    18.4
    
    
    
    16.9Barrels
     Gross (1)
    
    
    152
    
    
    
    139
    
    
    
    126
    
    
    
    129
    
    
    
    112 Net (2)
    
    
    127
    
    
    
    124
    
    
    
    112
    
    
    
    116
    
    
    
    106Oil Sands (4):Cubic metres
     Gross (1)
    
    
    10.3
    
    
    
    8.4
    
    
    
    9.5
    
    
    
    8.4
    
    
    
    9.1 Net (2)
    
    
    9.3
    
    
    
    8.4
    
    
    
    9.4
    
    
    
    8.3
    
    
    
    9.1Barrels
     Gross (1)
    
    
    65
    
    
    
    53
    
    
    
    60
    
    
    
    53
    
    
    
    57 Net (2)
    
    
    58
    
    
    
    53
    
    
    
    59
    
    
    
    52
    
    
    
    57Total:Cubic metres
     Gross (1)
    
    
    43.1
    
    
    
    41.5
    
    
    
    41.6
    
    
    
    40.7
    
    
    
    39.3 Net (2)
    
    
    36.1
    
    
    
    36.7
    
    
    
    36.5
    
    
    
    35.8
    
    
    
    35.5Barrels
     Gross (1)
    
    
    272
    
    
    
    261
    
    
    
    262
    
    
    
    256
    
    
    
    247 Net (2)
    
    
    227
    
    
    
    231
    
    
    
    230
    
    
    
    225
    
    
    
    223
 
 (1)
    
    Gross production of crude oil is the companys share of production from conventional
wells, Syncrude oil sands and Cold Lake heavy oil, and gross production of natural gas
liquids is the amount derived from processing the companys share of production of natural
gas (excluding purchased gas), in each case before deduction of the mineral owners or
governments share or both.(2)
    
    Net production is gross production less the mineral owners or governments share or
both.(3)
    
    Heavy oil typically is represented by crude oils with a viscosity of greater than
10,000 cP and recovered through enhanced thermal operations. The companys heavy oil
production volumes are from the Cold Lake production operations.(4)
    
    Oil sands are a semi-solid material composed of bitumen, sand, water and clays which
are recovered through surface mining methods. Imperials oil sands production volumes are
the companys share of production volumes in the Syncrude joint venture.  4




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2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions a day)Sales (1) :Cubic metres
    
    
    14.5
    
    
    
    15.2
    
    
    
    14.7
    
    
    
    13.0
    
    
    
    14.1Cubic feet
    
    
    513
    
    
    
    536
    
    
    
    520
    
    
    
    460
    
    
    
    499Gross Production (2):Cubic metres
    
    
    15.8
    
    
    
    16.4
    
    
    
    16.1
    
    
    
    14.5
    
    
    
    15.0Cubic feet
    
    
    556
    
    
    
    580
    
    
    
    569
    
    
    
    513
    
    
    
    530Net Production (2):Cubic metres
    
    
    14.1
    
    
    
    14.6
    
    
    
    14.7
    
    
    
    12.9
    
    
    
    13.1Cubic feet
    
    
    496
    
    
    
    514
    
    
    
    518
    
    
    
    457
    
    
    
    463
 
 (1)
    
    Sales are sales of the companys share of production (before deduction of the
mineral owners and/or governments share) and sales of gas purchased, processed and/or
resold.(2)
    
    Gross production of natural gas is the companys share of production (excluding
purchases) before deducting the shares of mineral owners or governments or both. Net
production excludes those shares. Production data include amounts used for internal
consumption with the exception of amounts reinjected.    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Average Sales Price:Crude oil and natural gas liquids:Per cubic metre
    
    $
    283.84
    
    
    $
    234.04
    
    
    $
    207.26
    
    
    $
    181.92
    
    
    $
    174.72Per barrel
    
    
    45.13
    
    
    
    37.21
    
    
    
    32.95
    
    
    
    28.92
    
    
    
    27.78Natural gas:Per thousand cubic metres
    
    $
    255.58
    
    
    $
    317.71
    
    
    $
    239.34
    
    
    $
    232.99
    
    
    $
    141.91Per thousand cubic feet
    
    
    7.24
    
    
    
    9.00
    
    
    
    6.78
    
    
    
    6.60
    
    
    
    4.02Average Production Costs Per
Unit of Net Production (1),(2):Per cubic metre
    
    $
    69.69
    
    
    $
    67.82
    
    
    $
    58.16
    
    
    $
    60.78
    
    
    $
    53.09Per barrel
    
    
    11.08
    
    
    
    10.78
    
    
    
    9.25
    
    
    
    9.66
    
    
    
    8.44
 
 (1)
    
    Average production costs per unit of production do not include depreciation and
depletion of capitalized acquisition, exploration and development costs. Administrative
expenses are included. Average production (lifting) costs per unit of net production were
computed after converting gas production into equivalent units of oil on the basis of
relative energy content.(2)
    
    Unit production costs are sometimes referred to as lifting costs.      5




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Crude Oil
    
    
    Natural Gas
    
    
    TotalGross (1)
    
    
    Net (2)
    
    
    Gross (1)
    
    
    Net (2)
    
    
    Gross (1)
    
    
    Net (2)Conventional
wells
    
    
    1,241
    
    
    
    794
    
    
    
    4,791
    
    
    
    2,612
    
    
    
    6,032
    
    
    
    3,406Heavy Oil wells
    
    
    3,983
    
    
    
    3,983
    
    
    
    
    
    
    
    
    
    
    
    3,983
    
    
    
    3,983
 
 (1)
    
    Gross wells are wells in which the company owns a working interest.(2)
    
    Net wells are the sum of the fractional working interests owned by the company in gross
wells, rounded to the nearest whole number. Conventional Oil and Gas
    Cold Lake
      6




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Other Heavy Oil Activity
   Syncrude Mining Operations
  
  7




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8




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2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Total mined overburden (1)millions of cubic metres
    
    
    98.0
    
    
    
    74.2
    
    
    
    76.6
    
    
    
    83.5
    
    
    
    77.9millions of cubic yards
    
    
    128.2
    
    
    
    97.1
    
    
    
    100.3
    
    
    
    109.2
    
    
    
    102.0Mined overburden to oil sands ratio (1)
    
    
    1.18
    
    
    
    1.02
    
    
    
    0.94
    
    
    
    1.15
    
    
    
    1.05Oil sands minedmillions of tonnes
    
    
    175.0
    
    
    
    152.7
    
    
    
    170.9
    
    
    
    152.4
    
    
    
    156.5millions of tons
    
    
    195.5
    
    
    
    168.0
    
    
    
    188.0
    
    
    
    168.0
    
    
    
    172.1Average bitumen grade (weight percent)
    
    
    11.4
    
    
    
    11.1
    
    
    
    11.1
    
    
    
    11.0
    
    
    
    11.2Crude bitumen in mined oil sandsmillions of tonnes
    
    
    19.9
    
    
    
    16.9
    
    
    
    19.0
    
    
    
    16.8
    
    
    
    17.5millions of tons
    
    
    22.2
    
    
    
    18.6
    
    
    
    20.9
    
    
    
    18.5
    
    
    
    19.2Average extraction recovery (percent)
    
    
    90.3
    
    
    
    89.1
    
    
    
    87.3
    
    
    
    88.6
    
    
    
    89.9Crude bitumen production (2)millions of cubic metres
    
    
    17.7
    
    
    
    15.1
    
    
    
    16.4
    
    
    
    14.7
    
    
    
    15.5millions of barrels
    
    
    111.6
    
    
    
    94.2
    
    
    
    103.3
    
    
    
    92.3
    
    
    
    97.8Average upgrading yield (percent)
    
    
    84.9
    
    
    
    85.3
    
    
    
    85.5
    
    
    
    86.0
    
    
    
    86.3Gross synthetic crude oil producedmillions of cubic metres
    
    
    15.2
    
    
    
    12.6
    
    
    
    14.1
    
    
    
    12.5
    
    
    
    13.5millions of barrels
    
    
    95.5
    
    
    
    79.3
    
    
    
    88.4
    
    
    
    78.4
    
    
    
    84.8Companys net share (3)millions of cubic metres
    
    
    3.4
    
    
    
    3.1
    
    
    
    3.4
    
    
    
    3.0
    
    
    
    3.3millions of barrels
    
    
    21.3
    
    
    
    19.3
    
    
    
    21.6
    
    
    
    19.1
    
    
    
    20.7
 
 (1)
    
    Includes pre-stripping of mine areas and reclamation volumes.(2)
    
    Crude bitumen production is equal to crude bitumen in mined oil sands multiplied by the
average extraction recovery and the appropriate conversion factor.(3)
    
    Reflects the companys 25 percent interest in production, less applicable royalties
payable to the Province of Alberta. Other Oil Sands Activity
   9




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Land Holdings
  Hectares
    
    
    AcresDeveloped
    
    
    Undeveloped
    
    
    Total
    
    
    Developed
    
    
    Undeveloped
    
    
    Total2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005(thousands)Western ProvincesConventional Gross (1)
    
    
    1,032
    
    
    
    1,055
    
    
    
    154
    
    
    
    181
    
    
    
    1,186
    
    
    
    1,236
    
    
    
    2,550
    
    
    
    2,607
    
    
    
    381
    
    
    
    447
    
    
    
    2,931
    
    
    
    3,054Net (2)
    
    
    407
    
    
    
    430
    
    
    
    95
    
    
    
    109
    
    
    
    502
    
    
    
    539
    
    
    
    1,006
    
    
    
    1,063
    
    
    
    235
    
    
    
    269
    
    
    
    1,241
    
    
    
    1,332Heavy Oil Gross (1)
    
    
    41
    
    
    
    41
    
    
    
    174
    
    
    
    193
    
    
    
    215
    
    
    
    234
    
    
    
    101
    
    
    
    101
    
    
    
    430
    
    
    
    477
    
    
    
    531
    
    
    
    578Net (2)
    
    
    41
    
    
    
    41
    
    
    
    105
    
    
    
    105
    
    
    
    146
    
    
    
    146
    
    
    
    101
    
    
    
    101
    
    
    
    260
    
    
    
    260
    
    
    
    361
    
    
    
    361Oil Sands Gross (1)
    
    
    47
    
    
    
    47
    
    
    
    119
    
    
    
    72
    
    
    
    166
    
    
    
    119
    
    
    
    116
    
    
    
    116
    
    
    
    294
    
    
    
    178
    
    
    
    410
    
    
    
    294Net (2)
    
    
    12
    
    
    
    11
    
    
    
    54
    
    
    
    31
    
    
    
    66
    
    
    
    42
    
    
    
    30
    
    
    
    27
    
    
    
    133
    
    
    
    77
    
    
    
    163
    
    
    
    104Canada Lands (3):Conventional Gross (1)
    
    
    31
    
    
    
    31
    
    
    
    322
    
    
    
    322
    
    
    
    353
    
    
    
    353
    
    
    
    77
    
    
    
    77
    
    
    
    795
    
    
    
    795
    
    
    
    872
    
    
    
    872Net (2)
    
    
    3
    
    
    
    3
    
    
    
    98
    
    
    
    98
    
    
    
    101
    
    
    
    101
    
    
    
    7
    
    
    
    7
    
    
    
    242
    
    
    
    242
    
    
    
    249
    
    
    
    249Atlantic OffshoreConventional Gross (1)
    
    
    17
    
    
    
    17
    
    
    
    2,600
    
    
    
    2,600
    
    
    
    2,617
    
    
    
    2,617
    
    
    
    42
    
    
    
    42
    
    
    
    6,425
    
    
    
    6,425
    
    
    
    6,467
    
    
    
    6,467Net (2)
    
    
    2
    
    
    
    2
    
    
    
    616
    
    
    
    616
    
    
    
    618
    
    
    
    618
    
    
    
    5
    
    
    
    5
    
    
    
    1,522
    
    
    
    1,522
    
    
    
    1,527
    
    
    
    1,527Total (4) :Gross (1)
    
    
    1,168
    
    
    
    1,191
    
    
    
    3,369
    
    
    
    3,368
    
    
    
    4,537
    
    
    
    4,559
    
    
    
    2,886
    
    
    
    2,943
    
    
    
    8,325
    
    
    
    8,322
    
    
    
    11,211
    
    
    
    11,265Net (2)
    
    
    465
    
    
    
    487
    
    
    
    968
    
    
    
    959
    
    
    
    1,433
    
    
    
    1,446
    
    
    
    1,149
    
    
    
    1,203
    
    
    
    2,392
    
    
    
    2,370
    
    
    
    3,541
    
    
    
    3,573
 
 (1)
    
    Gross hectares or acres include the interests of others.(2)
    
    Net hectares or acres exclude the interests of others.(3)
    
    Canada Lands include the Arctic Islands, Beaufort Sea/Mackenzie Delta, and Other
Northwest Territories, Nunavut and the Yukon.(4)
    
    Certain land holdings are subject to modification under agreements whereby others may
earn interests in the companys holdings by performing certain exploratory work (farm-out)
and whereby the company may earn interests in others holdings by performing certain
exploratory work (farm-in). 
 Exploration and Development
   10




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##### Table of Contents



2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Western and Atlantic Provinces:ConventionalExploratory Oil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gas
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    1Dry Holes
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    2Development Oil
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    4
    
    
    
    1Gas
    
    
    192
    
    
    
    155
    
    
    
    207
    
    
    
    89
    
    
    
    42Dry Holes
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    3
    
    
    
    3Heavy Oil (Cold Lake and other)Development Oil
    
    
    174
    
    
    
    87
    
    
    
    218
    
    
    
    118
    
    
    
    332Total
    
    
    368
    
    
    
    245
    
    
    
    432
    
    
    
    218
    
    
    
    381
   Western Provinces
  Beaufort Sea/Mackenzie Delta
     11




---



##### Table of Contents



Arctic Islands
  Atlantic Offshore
  ,
    
 Petroleum Products
 
 Supply
    
 Refining
   12




---



##### Table of Contents



Average Daily Volumes of
    
    
    Daily RatedRefinery Throughput (1)
    
    
    Capacities atYear Ended December 31

    
    December 31 (2)2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002

    
    2006
    
    
    2001(thousands of cubic metres)Strathcona, Alberta
    
    
    25.5
    
    
    
    27.6
    
    
    
    27.1
    
    
    
    27.6
    
    
    
    26.0
    
    
    
    29.8
    
    
    
    29.0Sarnia, Ontario
    
    
    17.6
    
    
    
    16.9
    
    
    
    17.2
    
    
    
    14.7
    
    
    
    16.5
    
    
    
    19.2
    
    
    
    19.2Dartmouth, Nova Scotia
    
    
    12.3
    
    
    
    12.5
    
    
    
    12.7
    
    
    
    13.0
    
    
    
    12.5
    
    
    
    13.1
    
    
    
    13.1Nanticoke, Ontario
    
    
    14.9
    
    
    
    17.2
    
    
    
    17.3
    
    
    
    16.3
    
    
    
    16.2
    
    
    
    17.8
    
    
    
    17.8Total
    
    
    70.3
    
    
    
    74.1
    
    
    
    74.3
    
    
    
    71.6
    
    
    
    71.2
    
    
    
    79.9
    
    
    
    79.1
 Average Daily Volumes of
    
    
    Daily RatedRefinery Throughput (1)
    
    
    Capacities atYear Ended December 31
    

    
    December 31 (2)2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002

    
    2006



    2001(thousands of barrels)Strathcona, Alberta
    
    
    160
    
    
    
    174
    
    
    
    170
    
    
    
    174
    
    
    
    163
    
    
    
    187
    
    
    
    182Sarnia, Ontario
    
    
    111
    
    
    
    106
    
    
    
    108
    
    
    
    92
    
    
    
    104
    
    
    
    121
    
    
    
    121Dartmouth, Nova Scotia
    
    
    77
    
    
    
    79
    
    
    
    80
    
    
    
    82
    
    
    
    78
    
    
    
    82
    
    
    
    82Nanticoke, Ontario
    
    
    94
    
    
    
    108
    
    
    
    109
    
    
    
    102
    
    
    
    102
    
    
    
    112
    
    
    
    112Total
    
    
    442
    
    
    
    466
    
    
    
    467
    
    
    
    450
    
    
    
    447
    
    
    
    502
    
    
    
    497
 
 (1)
    
    Refinery throughput is the volume of crude oil and feedstocks that is processed in
the refinery atmospheric distillation units.(2)
    
    Rated capacities are based on definite specifications as to types of crude oil and
feedstocks that are processed in the refinery atmospheric distillation units, the products
to be obtained and the refinery process, adjusted to include an estimated allowance for
normal maintenance shutdowns. Accordingly, actual capacities may be higher or lower than
rated capacities due to changes in refinery operation and the type of crude oil available
for processing.  
 Distribution
   
 Marketing
    13




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##### Table of Contents



2006



    2005


    2004


    2003


    2002(thousands a day)Gasolines:Cubic metres
    
    
    32.7
    
    
    
    33.4
    
    
    
    33.2
    
    
    
    33.0
    
    
    
    32.9Barrels
    
    
    206
    
    
    
    210
    
    
    
    209
    
    
    
    208
    
    
    
    207Heating, Diesel and Jet Fuels:Cubic metres
    
    
    26.4
    
    
    
    26.9
    
    
    
    27.3
    
    
    
    26.2
    
    
    
    25.0Barrels
    
    
    166
    
    
    
    169
    
    
    
    172
    
    
    
    165
    
    
    
    157Heavy Fuel Oils:Cubic metres
    
    
    5.1
    
    
    
    6.0
    
    
    
    5.9
    
    
    
    5.4
    
    
    
    4.9Barrels
    
    
    32
    
    
    
    38
    
    
    
    37
    
    
    
    34
    
    
    
    31Lube Oils and Other ProductsCubic metres
    
    
    7.7
    
    
    
    7.6
    
    
    
    7.0
    
    
    
    5.8
    
    
    
    6.4Barrels
    
    
    49
    
    
    
    48
    
    
    
    44
    
    
    
    36
    
    
    
    41Net petroleum product sales:Cubic metres
    
    
    71.9
    
    
    
    73.9
    
    
    
    73.4
    
    
    
    70.4
    
    
    
    69.2Barrels
    
    
    453
    
    
    
    465
    
    
    
    462
    
    
    
    443
    
    
    
    436
  2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    200296.1
    %
    
    
    95.3
    %
    
    
    93.0
    %
    
    
    93.3
    %
    
    
    91.5
    %
  
 Chemicals
   2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(thousands a day)Petrochemicals:Tonnes
    
    
    3.0
    
    
    
    3.0
    
    
    
    3.3
    
    
    
    3.3
    
    
    
    3.5Tons
    
    
    3.3
    
    
    
    3.3
    
    
    
    3.6
    
    
    
    3.6
    
    
    
    3.9
 
 Research
     14




---



##### Table of Contents



Environmental Protection
   
 Human Resources
  
 Competition
  
 Government Regulation
 Petroleum and Natural Gas Rights
  Crude Oil
 Production
  Exports
  Natural Gas
 Production
  15




---



##### Table of Contents



Exports
   Royalties
   Investment Canada Act
   
 The Company Online
  
 Item 1A. Risk Factors.
 Volatility of Oil and Natural Gas Prices
    Competitive Factors
  16




---



##### Table of Contents



Environmental Risks
   Climate Change
 Climate Change and Emissions Management Act
 Other Regulatory Risk
  Need to Replace Reserves
  Other Business Risks
  17




---



##### Table of Contents



Uncertainty of Reserve Estimates
   Project Factors
  Market Risk Factors
  
 Item 2. Properties.
  
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  18




---



##### Table of Contents



PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 Information for Security Holders Outside Canada
     Quarterly Financial and Stock Trading Data
 2006
    
    
    2005three months ended
    
    
    three months endedMar. 31
    
    

    June 30
    
    
    Sept. 30
    
    
    Dec. 31
    
    
    Mar. 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 31(millions of dollars)
    
    
    (millions of dollars)Financial dataTotal revenues and other income (a)
    
    
    5,818
    
    
    
    6,688
    
    
    
    6,651
    
    
    
    5,631
    
    
    
    5,958
    
    
    
    6,802
    
    
    
    7,711
    
    
    
    7,743Total expenses (a)
    
    
    4,928
    
    
    
    5,604
    
    
    
    5,421
    
    
    
    4,735
    
    
    
    5,370
    
    
    
    5,989
    
    
    
    6,753
    
    
    
    6,184Income before income taxes
    
    
    890
    
    
    
    1,084
    
    
    
    1,230
    
    
    
    896
    
    
    
    588
    
    
    
    813
    
    
    
    958
    
    
    
    1,559Income taxes
    
    
    (299
    )
    
    
    (247
    )
    
    
    (408
    )
    
    
    (102
    )
    
    
    (195
    )
    
    
    (274
    )
    
    
    (306
    )
    
    
    (543
    )Net income
    
    
    591
    
    
    
    837
    
    
    
    822
    
    
    
    794
    
    
    
    393
    
    
    
    539
    
    
    
    652
    
    
    
    1,016Per-share information(b)
    
    (dollars)
    
    (dollars)Net earnings  basic
    
    
    0.60
    
    
    
    0.85
    
    
    
    0.84
    
    
    
    0.83
    
    
    
    0.38
    
    
    
    0.52
    
    
    
    0.64
    
    
    
    1.00Net earnings  diluted
    
    
    0.59
    
    
    
    0.85
    
    
    
    0.84
    
    
    
    0.83
    
    
    
    0.37
    
    
    
    0.52
    
    
    
    0.64
    
    
    
    1.00Dividends (declared quarterly)
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.07
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08Share prices(b)
    
    (dollars)
    
    (dollars)Toronto Stock ExchangeHigh
    
    
    42.28
    
    
    
    43.33
    
    
    
    45.20
    
    
    
    44.80
    
    
    
    31.44
    
    
    
    34.99
    
    
    
    45.79
    
    
    
    45.39Low
    
    
    35.36
    
    
    
    36.18
    
    
    
    35.33
    
    
    
    34.31
    
    
    
    22.50
    
    
    
    27.37
    
    
    
    33.33
    
    
    
    32.28Close
    
    
    41.91
    
    
    
    40.78
    
    
    
    37.47
    
    
    
    42.93
    
    
    
    30.67
    
    
    
    34.01
    
    
    
    44.67
    
    
    
    38.47American Stock Exchange
    
    ($U.S.)
    
    ($U.S.)High
    
    
    36.67
    
    
    
    39.64
    
    
    
    40.38
    
    
    
    38.93
    
    
    
    25.73
    
    
    
    28.38
    
    
    
    39.14
    
    
    
    38.93Low
    
    
    30.54
    
    
    
    32.50
    
    
    
    31.64
    
    
    
    29.99
    
    
    
    18.27
    
    
    
    21.57
    
    
    
    27.46
    
    
    
    27.47Close
    
    
    35.85
    
    
    
    36.50
    
    
    
    33.55
    
    
    
    36.83
    
    
    
    25.38
    
    
    
    27.75
    
    
    
    38.35
    
    
    
    33.20
 
 (a)
    
    Amounts for purchases/sales with same counterparty are included in both total
revenues and other income and total expenses in 2005 quarterly data. Effective January 1,
2006, these purchases/sales were recorded on a net basis. See note 1 (page F-7), Summary
of Significant Accounting Policies.(b)
    
    Adjusted to reflect the May 2006 three-for-one share split.    19




---



##### Table of Contents



Issuer purchases of equity securities (1)
 (c) Total number of shares
    
    (d) Maximum number(a) Total number
    
    
    
    
    
    purchased as part
    
    (or approximate dollar value)of shares
    
    (b) Average price
    
    of publicly
    
    of shares that may yet be(or units)
    
    paid per share
    
    announced plans
    
    purchased under the plans orPeriod
    
    purchased
    
    (or unit)
    
    or programs
    
    programsOctober 2006
(October 1 - October 31)
    
    
    1,315,785
    
    
    $
    36.14
    
    
    
    1,315,785
    
    
    
    34,336,470November 2006
(November 1 - November 30)
    
    
    5,554,679
    
    
    $
    41.65
    
    
    
    5,554,679
    
    
    
    28,721,476December 2006
(December 1 - December 31)
    
    
    3,031,537
    
    
    $
    43.99
    
    
    
    3,031,537
    
    
    
    25,632,528
 
 (1)
    
    The purchases were pursuant to a 12 month normal course share purchase program that
was renewed on June 23, 2006 under which the company may purchase up to 48,772,466 of its
outstanding common shares less any shares purchased by the employee savings plan and the
company pension fund. If not previously terminated, the program will terminate on June 22,
2007. 
 Item 6. Selected Financial Data.
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions of dollars)Total operating revenues (a)
    
    $
    24,505
    
    
    $
    27,797
    
    
    $
    22,408
    
    
    $
    19,094
    
    
    $
    16,890Net income
    
    
    3,044
    
    
    
    2,600
    
    
    
    2,052
    
    
    
    1,705
    
    
    
    1,214Total assets
    
    
    16,141
    
    
    
    15,582
    
    
    
    14,027
    
    
    
    12,337
    
    
    
    12,003Long term debt
    
    
    359
    
    
    
    863
    
    
    
    367
    
    
    
    859
    
    
    
    1,466Other long term obligations
    
    
    1,683
    
    
    
    1,728
    
    
    
    1,525
    
    
    
    1,314
    
    
    
    1,822(dollars)Net
income/share  basic (b)
    
    
    3.12
    
    
    
    2.54
    
    
    
    1.92
    
    
    
    1.53
    
    
    
    1.07Net
income/share  diluted (b)
    
    
    3.11
    
    
    
    2.53
    
    
    
    1.91
    
    
    
    1.53
    
    
    
    1.07Cash dividends/share (b)
    
    
    0.32
    
    
    
    0.31
    
    
    
    0.29
    
    
    
    0.29
    
    
    
    0.28
 
 (a)
    
    Total operating revenues include $4,894 million for 2005, $3,584 million for 2004,
$2,851 million for 2003 and $2,431 million for 2002 for purchases/sales contracts with
the same counterparty. Associated costs were included in purchases of crude oil and
products. Effective January 1, 2006, these purchases/sales were recorded on a net basis.
See note 1 (page F-7), Summary of significant Accounting Policies.(b)
    
    Adjusted to reflect the three-for-one share split.  
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
    20




---



##### Table of Contents



Business environment and outlook
 Natural resources
        Petroleum products
    Chemicals
  21




---



##### Table of Contents



Results of operations
  Natural resources
  Financial statistics
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions of dollars)Net income
    
    $
    2,376
    
    
    $
    2,008
    
    
    $
    1,517
    
    
    $
    1,174
    
    
    $
    1,052Operating revenues
    
    
    8,456
    
    
    
    8,189
    
    
    
    6,580
    
    
    
    5,584
    
    
    
    4,790
    Average realizations and prices
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Canadian dollars)Conventional crude oil realizations (a
barrel)
    
    $
    68.58
    
    
    $
    64.48
    
    
    $
    48.96
    
    
    $
    40.10
    
    
    $
    36.81Natural gas liquids realizations (a barrel)
    
    
    40.75
    
    
    
    40.00
    
    
    
    33.78
    
    
    
    32.09
    
    
    
    23.38Natural gas realizations (a thousand cubic feet)
    
    
    7.24
    
    
    
    9.00
    
    
    
    6.78
    
    
    
    6.60
    
    
    
    4.02Par crude oil price at Edmonton (a barrel)
    
    
    73.75
    
    
    
    69.86
    
    
    
    53.26
    
    
    
    43.93
    
    
    
    40.44Heavy oil price at Hardisty (Bow River, a barrel)
    
    
    51.90
    
    
    
    45.62
    
    
    
    37.98
    
    
    
    33.00
    
    
    
    31.85
    22




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##### Table of Contents



Crude oil and NGLs  production and sales
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002gross
    
    
    net
    
    
    gross
    
    
    net
    
    
    gross
    
    
    net
    
    
    gross
    
    
    net
    
    
    gross
    
    
    net(thousands of barrels a day)Cold Lake
    
    
    152
    
    
    
    127
    
    
    
    139
    
    
    
    124
    
    
    
    126
    
    
    
    112
    
    
    
    129
    
    
    
    116
    
    
    
    112
    
    
    
    106Syncrude
    
    
    65
    
    
    
    58
    
    
    
    53
    
    
    
    53
    
    
    
    60
    
    
    
    59
    
    
    
    53
    
    
    
    52
    
    
    
    57
    
    
    
    57Conventional crude oil
    
    
    31
    
    
    
    23
    
    
    
    38
    
    
    
    29
    
    
    
    43
    
    
    
    33
    
    
    
    46
    
    
    
    35
    
    
    
    51
    
    
    
    39Total crude oil production
    
    
    248
    
    
    
    208
    
    
    
    230
    
    
    
    206
    
    
    
    229
    
    
    
    204
    
    
    
    228
    
    
    
    203
    
    
    
    220
    
    
    
    202NGLs available for sale
    
    
    24
    
    
    
    19
    
    
    
    31
    
    
    
    25
    
    
    
    33
    
    
    
    26
    
    
    
    28
    
    
    
    22
    
    
    
    27
    
    
    
    21Total crude oil and NGL production
    
    
    272
    
    
    
    227
    
    
    
    261
    
    
    
    231
    
    
    
    262
    
    
    
    230
    
    
    
    256
    
    
    
    225
    
    
    
    247
    
    
    
    223Cold Lake sales, including diluent (b)
    
    
    198
    
    
    
    
    
    
    
    183
    
    
    
    
    
    
    
    167
    
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    145NGL sales
    
    
    29
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    40
 Natural gas  production and sales
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002gross
    
    
    net
    
    
    gross
    
    
    net
    
    
    gross
    
    
    net
    
    
    gross
    
    
    net
    
    
    gross
    
    
    net(millions of cubic feet a day)Production (c)
    
    
    556
    
    
    
    496
    
    
    
    580
    
    
    
    514
    
    
    
    569
    
    
    
    518
    
    
    
    513
    
    
    
    457
    
    
    
    530
    
    
    
    463Sales
    
    
    513
    
    
    
    
    
    
    
    536
    
    
    
    
    
    
    
    520
    
    
    
    
    
    
    
    460
    
    
    
    
    
    
    
    499
 
 (a)
    
    Daily volumes are calculated by dividing total volumes for the year by the number of
days in the year. Gross production is the companys share of production (excluding
purchases) before deducting the share of mineral owners or governments or both. Net
production excludes those shares.(b)
    
    Diluent is natural gas condensate or other light hydrocarbons added to the Cold Lake
heavy oil to facilitate transportation to market by pipeline.(c)
    
    Production of natural gas includes amounts used for internal consumption with the
exception of the amounts reinjected.   Petroleum products
  23




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##### Table of Contents



Financial statistics
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions of dollars)Net income
    
    $
    624
    
    
    $
    694
    
    
    $
    556
    
    
    $
    462
    
    
    $
    147Operating revenues (a)
    
    
    20,783
    
    
    
    24,017
    
    
    
    19,169
    
    
    
    16,004
    
    
    
    14,400
 Sales of petroleum products
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions of litres a day (b))Gasolines
    
    
    32.7
    
    
    
    33.4
    
    
    
    33.2
    
    
    
    33.0
    
    
    
    32.9Heating, diesel and jet fuels
    
    
    26.4
    
    
    
    26.9
    
    
    
    27.3
    
    
    
    26.2
    
    
    
    25.0Heavy fuel oils
    
    
    5.1
    
    
    
    6.0
    
    
    
    5.9
    
    
    
    5.4
    
    
    
    4.9Lube oils and other products
    
    
    7.7
    
    
    
    7.6
    
    
    
    7.0
    
    
    
    5.8
    
    
    
    6.4Net petroleum product sales
    
    
    71.9
    
    
    
    73.9
    
    
    
    73.4
    
    
    
    70.4
    
    
    
    69.2Total domestic sales of petroleum products (percent)
    
    
    96.1
    
    
    
    95.3
    
    
    
    93.0
    
    
    
    93.3
    
    
    
    91.5
 Refinery utilization
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(thousands of barrels a day (b))Total refinery throughput (c)
    
    
    442
    
    
    
    466
    
    
    
    467
    
    
    
    450
    
    
    
    447Refinery capacity at December 31
    
    
    502
    
    
    
    502
    
    
    
    502
    
    
    
    502
    
    
    
    499Utilization of total refinery capacity (percent)
    
    
    88
    
    
    
    93
    
    
    
    93
    
    
    
    90
    
    
    
    90
 
 (a)
    
    Operating revenues in 2005 and prior years included amounts for purchases/sales with
the same counterparty. Associated costs were included in purchases of crude oil and
products. Effective January 1, 2006, these purchases/sales were recorded on a net basis.
See note 1, summary of significant Accounting Policies, on page F-9.(b)
    
    Volumes a day are calculated by dividing total volumes for the year by the number of
days in the year.(c)
    
    Crude oil and feedstocks sent directly to atmospheric distillation units.      Chemicals
  Financial statistics
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions of dollars)Net income
    
    $
    143
    
    
    $
    121
    
    
    $
    109
    
    
    $
    44
    
    
    
    54Operating revenues
    
    
    1,704
    
    
    
    1,665
    
    
    
    1,509
    
    
    
    1,232
    
    
    
    1,164
 Sales
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(thousands of tonnes a day (a))Polymers and basic chemicals
    
    
    2.2
    
    
    
    2.1
    
    
    
    2.4
    
    
    
    2.4
    
    
    
    2.5Intermediate and others
    
    
    0.8
    
    
    
    0.9
    
    
    
    0.9
    
    
    
    0.9
    
    
    
    1.0Total chemicals
    
    
    3.0
    
    
    
    3.0
    
    
    
    3.3
    
    
    
    3.3
    
    
    
    3.5
 
 (a)
    
    Calculated by dividing total volumes for the year by the number of days in the year.   24




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##### Table of Contents



Corporate and other
  Liquidity and capital resources
 Sources and uses of cash
 2006
    
    
    2005(millions of dollars)Cash provided by/(used in)Operating activities
    
    $
    3,587
    
    
    $
    3,451Investing activities
    
    
    (965
    )
    
    
    (992
    )Financing activities
    
    
    (2,125
    )
    
    
    (2,077
    )Increase/(decrease) in cash and cash equivalents
    
    
    497
    
    
    
    382Cash and cash equivalents at end of year
    
    $
    2,158
    
    
    $
    1,661
    Cash flow from operating activities
  Capital and exploration expenditures
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions of dollars)Exploration
    
    $
    32
    
    
    $
    43
    
    
    $
    60
    
    
    $
    57
    
    
    $
    39Production
    
    
    237
    
    
    
    232
    
    
    
    234
    
    
    
    181
    
    
    
    143Heavy oil and oil sands
    
    
    518
    
    
    
    662
    
    
    
    819
    
    
    
    769
    
    
    
    804Total capital and exploration expenditures
    
    $
    787
    
    
    $
    937
    
    
    $
    1,113
    
    
    $
    1,007
    
    
    $
    986
  25




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##### Table of Contents



2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions of dollars)Marketing
    
    $
    97
    
    
    $
    91
    
    
    $
    85
    
    
    $
    91
    
    
    $
    133Refining and supply
    
    
    248
    
    
    
    368
    
    
    
    178
    
    
    
    369
    
    
    
    399Other (a)
    
    
    16
    
    
    
    19
    
    
    
    20
    
    
    
    18
    
    
    
    57Total capital expenditures
    
    $
    361
    
    
    $
    478
    
    
    $
    283
    
    
    $
    478
    
    
    $
    589
 
 (a)
    
    Consists primarily of real estate purchases.    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions of dollars)Capital expenditures
    
    $
    13
    
    
    $
    19
    
    
    $
    15
    
    
    $
    41
    
    
    $
    25
    Cash flow from financing activities
  26




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##### Table of Contents



Financial percentages and ratios
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Total debt as a percentage of capital (a)
    
    
    17
    
    
    
    18
    
    
    
    19
    
    
    
    21
    
    
    
    24Interest coverage ratiosEarnings basis (b)
    
    
    66
    
    
    
    88
    
    
    
    83
    
    
    
    64
    
    
    
    46Cash-flow basis (c)
    
    
    77
    
    
    
    101
    
    
    
    108
    
    
    
    80
    
    
    
    63
 
 (a)
    
    Current and long-term portions of debt (page F-5), divided by debt and shareholders
equity (page F-5).(b)
    
    Net income (page F-3), debt-related interest before capitalization (page F-19, note 14)
and income taxes (page F-3) divided by debt-related interest before capitalization.(c)
    
    Cash flow from net income adjusted for other non-cash items (page F-4), current income
tax expense (page F-11, note 5) and debt-related interest before capitalization (page F-19,
note 14) divided by debt-related interest before capitalization.   Contractual obligations
  Financial
    
    
    
    
    
    
    Payment due by periodStatementNote Reference2008 to
    
    
    2012 and
    
    
    Total2007
    
    

2011
    
    
    beyond
    
    
    Amount(millions of dollars)Long-term debt and capital leases(a)
    
    Note 4
    
    $
    907
    
    
    $
    332
    
    
    $
    27
    
    
    $
    1,266Operating leases(b)
    
    Note 11
    
    
    53
    
    
    
    172
    
    
    
    48
    
    
    
    273Unconditional purchase obligations(c)
    
    Note 11
    
    
    58
    
    
    
    167
    
    
    
    40
    
    
    
    265Firm capital commitments(d)
    
    Note 11
    
    
    149
    
    
    
    29
    
    
    
    
    
    
    
    178Pension and other post-retirement obligations(e)
    
    Note 6
    
    
    226
    
    
    
    173
    
    
    
    669
    
    
    
    1,068Asset retirement obligations(f)
    
    Note 7
    
    
    52
    
    
    
    282
    
    
    
    88
    
    
    
    422Other long-term agreements(g)
    
    Note 11
    
    
    271
    
    
    
    677
    
    
    
    240
    
    
    
    1,188
 
 (a)
    
    Includes capitalized lease obligations. Long-term debt amounts exclude the companys
share of equity company debt.(b)
    
    Minimum commitments for operating leases, shown on an undiscounted basis, primarily
cover office buildings, rail cars and service stations.(c)
    
    Unconditional purchase obligations mainly pertain to pipeline throughput agreements.(d)
    
    Firm capital commitments related to capital projects, shown on an undiscounted basis.
The largest commitment outstanding at year-end 2006 was $41 million associated with the
companys share of capital projects at Syncrude.(e)
    
    The amount by which the projected benefit obligations exceeded the fair value of fund
assets for pension and other post-retirement plans at year-end. The payments by period
include expected contributions to funded pension plans in 2007 and estimated benefit
payments for unfunded plans in all years.(f)
    
    Asset retirement obligations represent the discounted present value of legal
obligations associated with site restoration on the retirement of assets with determinable
useful lives.(g)
    
    Other long-term agreements include primarily raw material supply and transportation
services agreements. 27




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Recently issued Statement of Financial Accounting Standards
 Accounting for uncertainty in income taxes
  .
 Critical accounting policies
  Hydrocarbon reserves
     28




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##### Table of Contents



Impact of reserves on depreciation
  Impact of reserves and prices on testing for impairment
      Pension benefits
  29




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##### Table of Contents



Asset retirement obligations and other environmental liabilities
    
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
     30




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Earnings sensitivities
 millions of dollars after taxSix dollars (U.S.) a barrel change in crude oil prices
    
    
    +(-
    )
    
    $
    270Ninety cents a thousand cubic feet change in natural gas prices
    
    
    +(-
    )
    
    
    27One cent (U.S) a litre change in sales margins for total petroleum products
    
    
    +(-
    )
    
    
    175One cent (U.S.) a pound change in sales margins for polyethylene
    
    
    +(-
    )
    
    
    7One-quarter percent decrease (increase) in short-term interest rates
    
    
    +(-
    )
    
    
    2Nine cents decrease (increase) in the value of the Canadian dollar versus the U.S. dollar
    
    
    +(-
    )
    
    
    400
 
 (a)
    
    The amount quoted to illustrate the impact of each sensitivity represents a change
of about 10 percent in the value of the commodity or rate in question at the end of 2006.
Each sensitivity calculation shows the impact on net income that results from a change in
one factor, after tax and royalties and holding all other factors constant. While these
sensitivities are applicable under current conditions, they may not apply proportionately
to larger fluctuations.
   
 Item 8. Financial Statements and Supplementary Data.
  Syncrude Mining Operations
   Synthetic Crude OilBase mine and
    
    
    Aurora mine
    
    
    TotalNorth mine(millions of cubic metres)Beginning of year 2004
    
    
    53
    
    
    
    71
    
    
    
    124Revision of previous estimate
    
    
    (16
    )
    
    
    16
    
    
    
    Production
    
    
    (2
    )
    
    
    (2
    )
    
    
    (4
    )End of year 2004
    
    
    35
    
    
    
    85
    
    
    
    120Revision of previous estimate
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (1
    )
    
    
    (2
    )
    
    
    (3
    )End of year 2005
    
    
    34
    
    
    
    83
    
    
    
    117Revision of previous estimate
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (2
    )
    
    
    (1
    )
    
    
    (3
    )End of year 2006
    
    
    32
    
    
    
    82
    
    
    
    114
 31




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##### Table of Contents



Synthetic Crude OilBase mine and
    
    
    Aurora mine
    
    
    TotalNorth mine(millions of barrels)Beginning of year 2004
    
    
    331
    
    
    
    450
    
    
    
    781Revision of previous estimate
    
    
    (103
    )
    
    
    100
    
    
    
    (3
    )Production
    
    
    (11
    )
    
    
    (10
    )
    
    
    (21
    )End of year 2004
    
    
    217
    
    
    
    540
    
    
    
    757Revision of previous estimate
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (9
    )
    
    
    (10
    )
    
    
    (19
    )End of year 2005
    
    
    208
    
    
    
    530
    
    
    
    738Revision of previous estimate
    
    
    
    
    
    
    1
    
    
    
    1Production
    
    
    (9
    )
    
    
    (12
    )
    
    
    (21
    )End of year 2006
    
    
    199
    
    
    
    519
    
    
    
    718
 Oil and Gas Producing Activities
  Results of operations
 2006
    
    
    2005
    
    
    2004(millions of dollars)Sales to customers (1)
    
    $
    2,601
    
    
    $
    2,739
    
    
    $
    2,160Intersegment sales(1) (2)
    
    
    1,251
    
    
    
    1,013
    
    
    
    976$
    3,852
    
    
    $
    3,752
    
    
    $
    3,136Production expenses
    
    
    1,016
    
    
    
    1,035
    
    
    
    870Exploration expenses
    
    
    32
    
    
    
    31
    
    
    
    44Depreciation and depletion
    
    
    467
    
    
    
    583
    
    
    
    565Income taxes
    
    
    564
    
    
    
    716
    
    
    
    547Results of operations
    
    $
    1,773
    
    
    $
    1,387
    
    
    $
    1,110
 Capital and exploration expenditures
 2006
    
    
    2005
    
    
    2004(millions of dollars)Property costs(3)Proved
    
    $
    
    
    
    $
    
    
    
    $
    Unproved
    
    
    
    
    
    
    7
    
    
    
    1Exploration costs
    
    
    32
    
    
    
    37
    
    
    
    43Development costs
    
    
    496
    
    
    
    330
    
    
    
    408Total capital and exploration expenditures
    
    $
    528
    
    
    $
    374
    
    
    $
    452
 Property, plant and equipment
 2006
    
    
    2005(millions of dollars)Property costs(3)Proved
    
    $
    3,226
    
    
    $
    3,231Unproved
    
    
    139
    
    
    
    162Producing assets
    
    
    6,392
    
    
    
    6,111Support facilities
    
    
    184
    
    
    
    174Incomplete construction
    
    
    595
    
    
    
    432Total cost
    
    $
    10,536
    
    
    $
    10,110Accumulated depreciation and depletion
    
    
    7,326
    
    
    
    6,934Net property, plant and equipment
    
    $
    3,210
    
    
    $
    3,176
 
 (1)
    
    Sales to customers or intersegment sales do not include the sale of natural gas and
natural gas liquids purchased for resale, as well as royalty payments. These items are
reported gross in note 3 (page F-10) in external sales, intersegment sales and in
purchases of crude oil and products.(2)
    
    Sales of crude oil to consolidated affiliates are at market value, using posted field
prices. Sales of natural gas liquids to consolidated affiliates are at prices estimated to
be obtainable in a competitive, arms-length transaction.(3)
    
    Property costs are payments for rights to explore for petroleum and natural gas and
for purchased reserves (acquired tangible and intangible assets such as gas plants,
production facilities and producing-well costs are included under producing assets).
Proved represents areas where successful drilling has delineated a field capable of
production. Unproved represents all other areas.
 32




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##### Table of Contents



Oil and Gas Reserves
 Crude oil and natural gas liquids
    
    
    Natural GasConventional
    
    
    Heavy Oil(2)
    
    
    Total
    
    
    Total(millions of cubic metres)
    
    
    (billions of cubicmetres)Proved developed and undeveloped reserves(1)Beginning of year 2004
    
    
    20
    
    
    
    121
    
    
    
    141
    
    
    
    29Revisions and improved recovery
    
    
    1
    
    
    
    (78
    )
    
    
    (77
    )
    
    
    (2
    )(Sale)/purchase of reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Discoveries and extensions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (3
    )
    
    
    (6
    )
    
    
    (9
    )
    
    
    (5
    )End of year 2004
    
    
    18
    
    
    
    37
    
    
    
    55
    
    
    
    22Revisions and improved recovery
    
    
    
    
    
    
    56
    
    
    
    56
    
    
    
    4(Sale)/purchase of reserves in place
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )
    
    
    Discoveries and extensions
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    Production
    
    
    (3
    )
    
    
    (7
    )
    
    
    (10
    )
    
    
    (5
    )End of year 2005
    
    
    13
    
    
    
    88
    
    
    
    101
    
    
    
    21Revisions and improved recovery
    
    
    
    
    
    
    37
    
    
    
    37
    
    
    
    4(Sale)/purchase of reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Discoveries and extensions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (2
    )
    
    
    (7
    )
    
    
    (9
    )
    
    
    (5
    )End of year 2006
    
    
    11
    
    
    
    118
    
    
    
    129
    
    
    
    20
 
 (1)
    
    Proved developed and undeveloped reserves reported on this table represent net
reserves. Net reserves are the companys share of reserves after deducting the shares of
mineral owners or governments or both. All reported reserves are located in Canada.
Reserves of natural gas are calculated at a pressure of 101.325 kilopascals absolute at 15
degrees Celsius.(2)
    
    Heavy oil reserves typically are represented by crude oils with a viscosity of greater
than 10,000 cP and recovered through enhanced thermal operations. Currently, the companys
heavy oil reserves are from the Cold Lake production operations.
 Crude oil and natural gas liquids
    
    
    Natural GasConventional
    
    
    Heavy Oil(2)
    
    
    Total
    
    
    Total(millions of barrels)
    
    
    (billions ofcubic feet)Beginning of year 2004
    
    
    126
    
    
    
    763
    
    
    
    889
    
    
    
    1,023Revisions and improved recovery
    
    
    11
    
    
    
    (490
    )
    
    
    (479
    )
    
    
    (32
    )(Sale)/purchase of reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )Discoveries and extensions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Production
    
    
    (22
    )
    
    
    (41
    )
    
    
    (63
    )
    
    
    (190
    )End of year 2004
    
    
    115
    
    
    
    232
    
    
    
    347
    
    
    
    791Revisions and improved recovery
    
    
    
    
    
    
    350
    
    
    
    350
    
    
    
    137(Sale)/purchase of reserves in place
    
    
    (12
    )
    
    
    
    
    
    
    (12
    )
    
    
    (6
    )Discoveries and extensions
    
    
    
    
    
    
    14
    
    
    
    14
    
    
    
    13Production
    
    
    (20
    )
    
    
    (45
    )
    
    
    (65
    )
    
    
    (188
    )End of year 2005
    
    
    83
    
    
    
    551
    
    
    
    634
    
    
    
    747Revisions and improved recovery
    
    
    4
    
    
    
    236
    
    
    
    240
    
    
    
    140(Sale)/purchase of reserves in place
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    (6
    )Discoveries and extensions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Production
    
    
    (15
    )
    
    
    (46
    )
    
    
    (61
    )
    
    
    (181
    )End of year 2006
    
    
    71
    
    
    
    741
    
    
    
    812
    
    
    
    710
 
 (1)
    
    Proved developed and undeveloped reserves reported on this table represent net
reserves. Net reserves are the companys share of reserves after deducting the shares of
mineral owners or governments or both. All reported reserves are located in Canada.
Reserves of natural gas are calculated at a pressure of 14.73 pounds per square inch at
60°F.(2)
    
    Heavy oil reserves typically are represented by crude oils with a viscosity of greater
than 10,000 cP and recovered through enhanced thermal operations. Currently, the companys
heavy oil reserves are from the Cold Lake production operations.
 33




---



##### Table of Contents



Net proved developed and undeveloped reserves of crude oil and natural gas as of December 31
(1)
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions)Crude Oil:ConventionalCubic metres
    
    
    11
    
    
    
    13
    
    
    
    18
    
    
    
    20
    
    
    
    23Barrels
    
    
    71
    
    
    
    83
    
    
    
    115
    
    
    
    126
    
    
    
    146Heavy OilCubic metres
    
    
    118
    
    
    
    88
    
    
    
    37
    
    
    
    121
    
    
    
    127Barrels
    
    
    741
    
    
    
    551
    
    
    
    232
    
    
    
    763
    
    
    
    801TotalCubic metres
    
    
    129
    
    
    
    101
    
    
    
    55
    
    
    
    141
    
    
    
    150Barrels
    
    
    812
    
    
    
    634
    
    
    
    347
    
    
    
    889
    
    
    
    947Natural Gas
    
    
    
    
    
    
    
    (billions)Cubic metres
    
    
    20
    
    
    
    21
    
    
    
    22
    
    
    
    29
    
    
    
    35Cubic feet
    
    
    710
    
    
    
    747
    
    
    
    791
    
    
    
    1,023
    
    
    
    1,224
 
 (1)
    
    Net reserves are the companys share of reserves after deducting the shares of
mineral owners or governments or both.
 34




---



##### Table of Contents



Net proved developed reserves of crude oil and natural gas as of December 31(1
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(millions)Crude Oil:ConventionalCubic metres
    
    
    11
    
    
    
    13
    
    
    
    18
    
    
    
    19
    
    
    
    22Barrels
    
    
    71
    
    
    
    81
    
    
    
    111
    
    
    
    121
    
    
    
    139Heavy OilCubic metres
    
    
    80
    
    
    
    58
    
    
    
    37
    
    
    
    63
    
    
    
    49Barrels
    
    
    501
    
    
    
    368
    
    
    
    232
    
    
    
    398
    
    
    
    308TotalCubic metres
    
    
    91
    
    
    
    71
    
    
    
    55
    
    
    
    82
    
    
    
    71Barrels
    
    
    572
    
    
    
    449
    
    
    
    343
    
    
    
    519
    
    
    
    447Natural Gas
    
    
    
    
    
    
    
    
    
    (billions)Cubic metres
    
    
    17
    
    
    
    18
    
    
    
    20
    
    
    
    24
    
    
    
    27Cubic feet
    
    
    608
    
    
    
    643
    
    
    
    704
    
    
    
    859
    
    
    
    959
 
 (1)
    
    Net reserves are the companys share of reserves after deducting the shares of
mineral owners or governments or both.
 Standardized measure of discounted future net cash flows related to proved oil and gas
reserves
  2006
    
    
    2005
    
    
    2004(millions of dollars)Future cash flows
    
    $
    36,751
    
    
    $
    21,911
    
    
    $
    11,625Future production costs
    
    
    (16,290
    )
    
    
    (11,376
    )
    
    
    (3,123
    )Future development costs
    
    
    (2,633
    )
    
    
    (2,039
    )
    
    
    (1,492
    )Future income taxes
    
    
    (5,039
    )
    
    
    (2,777
    )
    
    
    (2,260
    )Future net cash flows
    
    
    12,789
    
    
    
    5,719
    
    
    
    4,750Annual discount of 10 percent for estimated timing of cash flows
    
    
    (6,374
    )
    
    
    (1,405
    )
    
    
    (1,433
    )Discounted future net cash flows
    
    $
    6,415
    
    
    $
    4,314
    
    
    $
    3,317
 Changes in standardized measure of discounted future net cash flows related to proved oil and gas reserves
 2006
    
    
    2005
    
    
    2004(millions of dollars)Balance at beginning of year
    
    $
    4,314
    
    
    $
    3,317
    
    
    $
    4,738Changes resulting from:Sales and transfers of oil and gas produced, net of production costs
    
    
    (2,839
    )
    
    
    (2,650
    )
    
    
    (2,240
    )Net changes in prices, development costs and production costs
    
    
    4,221
    
    
    
    3,343
    
    
    
    (3,692
    )Extensions, discoveries, additions and improved recovery, less related costs
    
    
    (4
    )
    
    
    (513
    )
    
    
    (43
    )Development costs incurred during the year
    
    
    411
    
    
    
    272
    
    
    
    345Revisions of previous quantity estimates
    
    
    87
    
    
    
    660
    
    
    
    1,838Accretion of discount
    
    
    568
    
    
    
    417
    
    
    
    663Net change in income taxes
    
    
    (343
    )
    
    
    (532
    )
    
    
    1,708Net change
    
    
    2,101
    
    
    
    997
    
    
    
    (1,421
    )Balance at end of year
    
    $
    6,415
    
    
    $
    4,314
    
    
    $
    3,317
  35




---



##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
     36




---



##### Table of Contents



PART III
 
 Item 10. Directors and Executive Officers of the Registrant.
    Last majorposition or office with theName and current principal
    
    company or Exxon Mobiloccupation or employment
    
    Corporation
    
    Director since
    
    Holdings (3)(4)(5)R.L. (Randy) Broiles
    
    Global planning manager,
    
    July 21, 2005
    
    Common shares ofSenior vice-president,
    
    ExxonMobil Production
    
    
    
    Imperial Oil Limited
    
    
    5,000resources division,
    
    Company
    
    
    
    Deferred share units ofImperial Oil Limited
    
    
    
    
    
    Imperial Oil Limited
    
    
    0Restricted stock units ofImperial Oil Limited
    
    
    0Shares of Exxon MobilCorporation(6)
    
    
    59,641T.J. (Tim) Hearn
    
    President,
    
    January 1, 2002
    
    Common shares ofChairman, president and
    
    Imperial Oil Limited
    
    
    
    Imperial Oil Limited
    
    
    92,597chief executive officer,
    
    
    
    
    
    Deferred share units ofImperial Oil Limited
    
    
    
    
    
    Imperial Oil Limited
    
    
    305Restricted stock units ofImperial Oil Limited
    
    
    681,400Shares ofExxon Mobil Corporation
    
    
    10,106J.M. (Jack) Mintz
    
    
    
    April 21, 2005
    
    Common shares ofProfessor, Joseph L. Rotman
    
    
    
    
    
    Imperial Oil Limited
    
    
    1,000School of Management,
    
    
    
    
    
    Deferred share unitsUniversity of Toronto (1)(2)
    
    
    
    
    
    of Imperial Oil Limited
    
    
    394Restricted stock unitsof Imperial Oil Limited
    
    
    6,000Shares ofExxon Mobil Corporation
    
    
    0R. (Roger) Phillips
    
    
    
    April 23, 2002
    
    Common shares ofRetired president and
    
    
    
    
    
    Imperial Oil Limited
    
    
    9,000chief executive officer,
    
    
    
    
    
    Deferred share units ofIPSCO Inc.
    
    
    
    
    
    Imperial Oil Limited
    
    
    13,503(steel manufacturing)(1)(2)
    
    
    
    
    
    Restricted stock unitsof Imperial Oil Limited
    
    
    11,625Shares ofExxon Mobil Corporation
    
    
    2,000
  37




---



##### Table of Contents



Last majorposition or office with theName and current principal
    
    company or Exxon Mobiloccupation or employment
    
    Corporation
    
    Director since
    
    Holdings(3)(4)(5)J.F. (Jim) Shepard
    
    
    
    October 21, 1997
    
    Common shares ofRetired chairman and
    
    
    
    
    
    Imperial Oil Limited
    
    
    9,000chief executive officer,
    
    
    
    
    
    Deferred share units ofFinning International Inc.
    
    
    
    
    
    Imperial Oil Limited
    
    
    21,428(sale, lease, repair and
    
    
    
    
    
    Restricted stock units offinancing of heavy
    
    
    
    
    
    Imperial Oil Limited
    
    
    11,625equipment)(1)(2)
    
    
    
    
    
    Shares ofExxon Mobil Corporation
    
    
    0P.A. (Paul) Smith
    
    Corporate finance manager,
    
    February 1, 2002
    
    Common shares ofController and
    
    Exxon Mobil Corporation
    
    
    
    Imperial Oil Limited
    
    
    13,371senior vice-president,
    
    
    
    
    
    Deferred share units offinance and administration,
    
    
    
    
    
    Imperial Oil Limited
    
    
    0Imperial Oil Limited(2)
    
    
    
    
    
    Restricted stock units ofImperial Oil Limited
    
    
    192,000Shares ofExxon Mobil Corporation
    
    
    1,190S.D. (Sheelagh) Whittaker
    
    
    
    April 19, 1996
    
    Common shares ofRetired managing director,
    
    
    
    
    
    Imperial Oil Limited
    
    
    9,000Electronic Data Systems
    
    
    
    
    
    Deferred share units ofLimited (business and
    
    
    
    
    
    Imperial Oil Limited
    
    
    28,957information technology
    
    
    
    
    
    Restricted stock units ofservices)(1)(2)
    
    
    
    
    
    Imperial Oil Limited
    
    
    11,625Shares ofExxon Mobil Corporation
    
    
    0V.L. (Victor) Young
    
    
    
    April 23, 2002
    
    Common shares ofCorporate director of several
    
    
    
    
    
    Imperial Oil Limited
    
    
    10,250corporations (1)(2)
    
    
    
    
    
    Deferred share units ofImperial Oil Limited
    
    
    4,961Restricted stock unitsof Imperial Oil Limited
    
    
    11,625Shares of Exxon MobilCorporation
    
    
    0
 
 (1)
    
    Member of audit committee; member of environment, health and safety committee;
member of executive resources committee; and member of nominations and corporate
governance committee.(2)
    
    Member of Imperial Oil Foundation board of directors(3)
    
    The information includes the beneficial ownership of common shares of Imperial Oil
Limited and shares of Exxon Mobil Corporation, which information not being within the
knowledge of the company, has been provided by the nominees individually.(4)
    
    The companys plans for deferred share units and restricted stock units for selected
employees and nonemployee directors are described on page 45 and pages 46 and 47,
respectively.(5)
    
    The numbers for restricted stock units and deferred share units represent the total of
the restricted stock units and deferred share units received in 2006 after the
three-for-one share split in May 2006, plus three times the number of restricted stock
units and deferred share units granted before the share split and still held by the
director.(6)
    
    R.L. Broiles holds 16,641 common shares and 43,000 restricted shares of Exxon Mobil
Corporation.
   38




---



##### Table of Contents



Name and Office
    
    Office held sinceTimothy J. Hearn
    
    April 23, 2002chairman of the board, presidentand chief executive officerPaul A. Smith
    
    February 1, 2002controller and senior vice-president,finance and administrationRandy L. Broiles
    
    July 1, 2005senior vice-president, resources divisionRob F. Lipsett
    
    October 1, 1999vice-president, human resourcesJohn F. Kyle
    
    June 1, 1991vice-president and treasurer
  Audit committee
  Audit committee financial expert
  Code of ethics
  
 Item 11. Executive Compensation.
 Composition of the companys compensation committee
  39




---



##### Table of Contents



Executive Resources Committee Report on Executive Compensation
 Compensation Discussion and Analysis
     Base Salary
  Cash Bonus
   Medium/Long-Term Incentive Compensation
  40




---



##### Table of Contents



CEO compensation
     Directors compensation
    41




---



##### Table of Contents



Senior executive compensation
 Summary Compensation Table
  Annual Compensation
    
    
    Long-Term CompensationAwards
    
    PayoutsShares or
    
    
    Shares orSecurities
    
    
    Units
    
    
    Unitsunder
    
    
    Subject to
    
    
    Subject toOther Annual
    
    
    options/
    
    
    Resale
    
    
    Resale
    
    
    LTIP
    
    
    All Other
    
    
    TotalName and
    
    
    
    
    
    
    
    
    
    Bonus
    
    
    Compensation
    
    
    SARs
    
    
    Restrictions
    
    
    Restrictions
    
    
    Payouts
    
    
    Compensation
    
    
    CompensationPrincipal
    
    
    
    
    
    Salary
    
    
    (2)
    
    
    (3)
    
    
    Granted (4)
    
    
    (5)(6)
    
    
    (5)(6)
    
    
    (7)
    
    
    (8)
    
    
    (9)Position
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    (#)
    
    
    (#)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)T.J.Hearn
    
    
    2006
    
    
    
    1,140,000
    
    
    
    1,000,050
    
    
    
    562,665
    
    
    
    
    
    
    
    130,000
    
    
    
    5,623,800
    
    
    
    900,000
    
    
    
    34,200
    
    
    
    9,260,801Chairman,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedpresident and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock unitschief executive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    86officer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    deferredshare units2005
    
    
    
    1,100,000
    
    
    
    900,000
    
    
    
    385,028
    
    
    
    
    
    
    
    193,200
    
    
    
    7,432,404
    
    
    
    870,000
    
    
    
    33,000
    
    
    
    10,720,52restrictedstock units3
    
    
    
    94deferredshare units2004
    
    
    
    1,000,000
    
    
    
    872,266
    
    
    
    246,249
    
    
    
    
    
    
    
    193,200
    
    
    
    4,582,060
    
    
    
    750,000
    
    
    
    30,000
    
    
    
    7,487,609restrictedstock units300
    
    
    
    7,034deferredshare unitsP.A. Smith
    
    
    2006
    
    
    
    404,167
    
    
    
    197,267
    
    
    
    111,279
    
    
    
    
    
    
    
    35,100
    
    
    
    1,518,426
    
    
    
    193,050
    
    
    
    24,250
    
    
    
    2,448,439Controller and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedsenior vice-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock unitspresident,
    
    
    2005
    
    
    
    398,333
    
    
    
    193,675
    
    
    
    87,198
    
    
    
    
    
    
    
    55,200
    
    
    
    2,123,544
    
    
    
    193,125
    
    
    
    23,900
    
    
    
    3,019,775finance and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedadministration
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock units2004
    
    
    
    378,333
    
    
    
    193,600
    
    
    
    67,022
    
    
    
    
    
    
    
    57,900
    
    
    

    1,373,195
    
    
    
    183,000
    
    
    
    22,700
    
    
    
    2,217,850restrictedstock unitsR.L. Broiles (1)
    
    
    2006
    
    
    
    U.S. 325,083
    
    
    
    U.S. 159,200
    
    
    
    U.S. 421,481
    
    
    
    
    
    
    
    11,000
    
    
    
    U.S. 815,760
    
    
    
    U.S. 140,513
    
    
    
    U.S. 21,705
    
    
    
    U.S. 1,883,742Senior vice-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedpresident,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock unitsresources
    
    
    2005
    
    
    
    U.S. 159,000
    
    
    
    U.S. 140,500
    
    
    
    U.S. 112,214
    
    
    
    
    
    
    
    11,000
    
    
    
    U.S. 641,740
    
    
    
    U.S. 116,253
    
    
    
    U.S. 10,175
    
    
    
    U.S. 1,179,882division (from
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedJuly 1,2005)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock unitsR.F. Lipsett
    
    
    2006
    
    
    
    364,583
    
    
    
    191,406
    
    
    
    140,106
    
    
    
    
    
    
    
    28,800
    
    
    
    1,245,888
    
    
    
    178,650
    
    
    
    10,938
    
    
    
    2,131,571Vice-president,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedhuman
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock unitsresources
    
    
    2005
    
    
    
    360,000
    
    
    
    178,850
    
    
    
    107,810
    
    
    
    
    
    
    
    42,300
    
    
    
    1,627,281
    
    
    
    178,500
    
    
    
    10,800
    
    
    
    2,463,241restrictedstock units2004
    
    
    
    340,000
    
    
    
    179,000
    
    
    
    78,581
    
    
    
    
    
    
    
    47,100
    
    
    
    1,117,055
    
    
    
    166,700
    
    
    
    10,200
    
    
    
    1,891,536restrictedstock unitsJ.F. Kyle
    
    
    2006
    
    
    
    365,000
    
    
    
    119,145
    
    
    
    124,081
    
    
    
    
    
    
    
    20,800
    
    
    
    899,808
    
    
    
    112,500
    
    
    
    21,900
    
    
    
    1,642,434Vice-president
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedand treasurer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock units2005
    
    
    
    364,166
    
    
    
    112,500
    
    
    
    90,821
    
    
    
    
    
    
    
    33,900
    
    
    
    1,304,133
    
    
    
    171,375
    
    
    
    21,850
    
    
    
    2,064,845restrictedstock units2004
    
    
    
    359,583
    
    
    
    172,105
    
    
    
    74,585
    
    
    
    
    
    
    
    39,600
    
    
    
    939,180
    
    
    
    171,000
    
    
    
    21,575
    
    
    
    1,738,028restrictedstock units
 42




---



##### Table of Contents



(1)
    
    R.L. Broiles has been on a loan assignment from Exxon Mobil Corporation since July 1, 2005.
His compensation was paid to him directly by Exxon Mobil Corporation in United States
dollars, and is disclosed in United States dollars. Also, he received employee benefits
under Exxon Mobil Corporations employee benefit plans, and not under the companys employee
benefit plans. The company reimburses Exxon Mobil Corporation for the compensation paid and
employee benefits provided to him.(2)
    
    Any part of bonus elected to be received as deferred share units is excluded.(3)
    
    Amounts under Other Annual Compensation, except for R.L. Broiles, consist of dividend
equivalent payments on restricted stock units, interest paid in respect of deferred
payments of bonuses and earnings bonus units and any costs associated with the personal use
of the company aircraft. There is no tax assistance from the company for taxes related to
personal use of the company aircraft. In 2006, the dividend equivalent payments were
$195,792 for T.J. Hearn, $55,308 for P.A. Smith, $44,628 for R.F. Lipsett and $38,112 for
J.F. Kyle. In 2006, the interest paid in respect of deferred payments of bonuses and
earnings bonus units was $228,293 for T.J. Hearn, $10,971 for P.A. Smith, $58,746 for R.F.
Lipsett and $37,185 for J.F. Kyle. Also included is an earned benefits allowance. The
earned benefits allowance in 2006 was $90,000 for T.J. Hearn, $45,000 for P.A. Smith,
$35,000 for R.F. Lipsett and $35,000 for J.F. Kyle. For R.L. Broiles, the U.S. dollar
amounts are the net payments by Exxon Mobil Corporation on account of Canadian income taxes
and other compensation for assignment outside of the United States. Each year while on
assignment, R.L. Broiles paid to Exxon Mobil Corporation amounts that were approximate to
the income taxes that would have been imposed if he was resident in his originating country
of employment. For R.L. Broiles, the amount includes dividend equivalent payments on
restricted stock from Exxon Mobil Corporation.(4)
    
    The company has not granted stock options since 2002. The stock option plan is
described on page 46.(5)
    
    These values include the number of units granted under the companys restricted stock
unit plan and deferred share unit plan for selected executives described on pages 46 and 47
and page 45, respectively. The number of restricted stock units and deferred share units
for 2006 are the number of units actually received. The numbers shown for restricted stock
units and deferred share units for 2004 and 2005 represent three times the number of
restricted stock units and deferred share units received in those years before the
three-for-one share split in May 2006. The values of the restricted stock units shown are
the number of units multiplied by the closing price of the companys shares on the date of
grant. The closing price on the date of grant of the restricted stock units was $23.72 in
2004, $38.47 in 2005 and $43.26 for 2006 (all on a post-split basis). The values of the
deferred share units shown are the number of units multiplied by the closing price of the
companys shares for the five consecutive days before the grant of the deferred share unit.
T.J. Hearn is the only senior executive who holds deferred share units. R.L. Broiles
participates in Exxon Mobil Corporations restricted stock plan, which is similar to the
companys restricted stock unit plan. Under that plan, R.L. Broiles was granted 11,000
restricted shares in 2006, whose value on the date of grant (November 28, 2006) was
$815,760 U.S., based on a closing price of Exxon Mobil Corporation shares on the date of
grant of $74.16 U.S.(6)
    
    The table below shows the number and value of restricted stock units and deferred share
units held as of December 31, 2006. The numbers for restricted stock units and deferred
share units represent the total of the restricted stock units and deferred share units
received in 2006 after the three-for-one share split in May 2006, plus three times the
number of restricted stock units and deferred share units received before the share split
and still held by the employee. The closing price on December 31, 2006 was $42.93. R.L.
Broiles participates in Exxon Mobil Corporations restricted stock plan, which is similar
to the companys restricted stock unit plan. Under that plan, R.L. Broiles holds 43,000
restricted shares whose value on December 31, 2006 was $3,295,090 U.S. based on a closing
price for Exxon Mobil Corporation shares on December 31, 2006 of $76.63 U.S. Restricted Stock Units
    
    Deferred Share UnitsName
    
    Total (#)
    
    Total ($)
    
    Total (#)
    
    Total ($)T.J. Hearn
    
    
    681,400
    
    
    
    29,252,502
    
    
    
    305
    
    
    
    13,094P.A. Smith
    
    
    192,000
    
    
    
    8,242,560
    
    
    
    0
    
    
    
    0R.L. Broiles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    R.F. Lipsett
    
    
    154,650
    
    
    
    6,639,125
    
    
    
    0
    
    
    
    0J.F. Kyle
    
    
    127,300
    
    
    
    5,464,989
    
    
    
    0
    
    
    
    0
 
 (7)
    
    Payouts were from 2005 earnings bonus unit that reached maximum value of $4.50 per unit
in 2006. That plan is described on page 46. R.L. Broiles participates in Exxon Mobil
Corporations earnings bonus unit plan, which is similar to the companys earnings bonus
unit plan.(8)
    
    Amounts under All Other Compensation, except for R.L. Broiles, are the companys
contributions to the savings plan, which is a plan available to all employees. Under one of
the options of that plan to which the senior executives subscribe, except for R.L. Broiles,
the company matched employee contributions up to six percent of base salary per year;
however, an employee may elect to receive an enhanced pension under the companys pension
plan by foregoing three percent of the companys matching contributions. The plan is
intended to be primarily for retirement savings, although employees may withdraw their
contributions prior to retirement. For R.L. Broiles, the amount is Exxon Mobil
Corporations contributions to its employee savings plan.(9)
    
    Total Compensation for each of 2004, 2005 and 2006 consists of the total dollar value
of Salary, Bonus, Other Annual Compensation, Shares or Units Subject to Resale
Restrictions, LTIP Payouts and All Other Compensation for each such year. 43




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##### Table of Contents



Earnings Bonus Unit Plan  awards in most recently completed financial year
  PerformanceSecurities
    
    or Other
    
    Estimated Future Payouts UnderUnits or
    
    Period Until
    
    Non-Securities-Price Based PlansOther Rights
    
    Maturation or
    
    Threshold
    
    Target
    
    MaximumName
    
    (#)
    
    Payout (1)
    
    ($)
    
    ($)(2)
    
    ($)(2)T.J. Hearn
    
    
    571,400
    
    
    Nov. 20, 2011
    
    
    0
    
    
    
    1.75
    
    
    
    1.75P.A. Smith
    
    
    112,700
    
    
    Nov. 20, 2011
    
    
    0
    
    
    
    1.75
    
    
    
    1.75R.L. Broiles(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    R.F. Lipsett
    
    
    109,200
    
    
    Nov. 20, 2011
    
    
    0
    
    
    
    1.75
    
    
    
    1.75J.F. Kyle
    
    
    68,000
    
    
    Nov. 20, 2011
    
    
    0
    
    
    
    1.75
    
    
    
    1.75
 
 (1)
    
    Payment will be made earlier when the cumulative net earnings per outstanding common
share reach the maximum settlement value per unit prior to the fifth anniversary of the
grant date.(2)
    
    This is the maximum settlement value payable per earnings bonus unit granted in 2006.(3)
    
    R.L. Broiles participates in Exxon Mobil Corporations earnings bonus unit plan which
is similar to the companys earnings bonus unit plan. In 2006, R.L Broiles was granted
37,474 units under that plan for which the maximum settlement value payable per earnings
bonus unit is $4.25 U.S. Aggregated option/SAR exercises during the most recently completed financial year and
financial year end option/SAR values
  Value ofUnexercisedUnexercised
    
    in-the-MoneyOptions/SARs
    
    Options/SARsat Financial
    
    at FinancialSecurities
    
    Aggregate
    
    Year End
    
    Year EndAcquired
    
    Value
    
    (#)
    
    ($)on Exercise
    
    Realized
    
    
    
    
    
    Unexercisable
    
    
    
    
    
    UnexercisableName
    
    (#)
    
    ($)
    
    Exercisable
    
    (1)
    
    Exercisable
    
    (1)T.J. Hearn
    
    
    
    
    
    
    948,300
    
    
    
    90,000
    
    
    
    0
    
    
    
    2,693,700
    
    
    
    0P.A. Smith
    
    
    
    
    
    
    0
    
    
    
    135,000
    
    
    
    0
    
    
    
    4,202,550
    
    
    
    0R.L. Broiles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    R.F. Lipsett
    
    
    
    
    
    
    1,103,750
    
    
    
    37,500
    
    
    
    0
    
    
    
    1,122,375
    
    
    
    0J.F. Kyle
    
    
    
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 
 (1)
    
    Unexercisable units are units for which the conditions for exercise have not been
met. 44




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##### Table of Contents



Value ofUnexercisedUnexercised
    
    in-the-MoneyOptions/SARs
    
    Options/SARsat Financial
    
    at FinancialSecurities
    
    Aggregate
    
    Year End
    
    Year EndAcquired
    
    Value
    
    (#) (1)
    
    ($)on Exercise
    
    Realized
    
    
    
    
    
    Unexercisable
    
    
    
    
    
    UnexercisableName
    
    (#) (1)
    
    ($)
    
    Exercisable
    
    (2)
    
    Exercisable
    
    (2)T.J. Hearn
    
    
    12,000
    
    
    
    296,948
    
    
    
    165,000
    
    
    
    0
    
    
    
    4,525,950
    
    
    
    0P.A. Smith
    
    
    0
    
    
    
    0
    
    
    
    75,000
    
    
    
    0
    
    
    
    2,057,250
    
    
    
    0R.L. Broiles (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    R.F. Lipsett
    
    
    0
    
    
    
    0
    
    
    
    75,000
    
    
    
    0
    
    
    
    2,057,250
    
    
    
    0J.F. Kyle
    
    
    30,000
    
    
    
    871,083
    
    
    
    57,000
    
    
    
    0
    
    
    
    1,563,510
    
    
    
    0
 
 (1)
    
    The number for the stock options represents three times the number of stock options
granted before the three-for-one share split in May 2006 and still held by the employee.(2)
    
    Unexercisable units are units for which the conditions for exercise have not been met.(3)
    
    At the end of 2006, R.L. Broiles held options to acquire 111,994 Exxon Mobil
Corporation shares of which all options were exercisable. The value of R.L. Broiles
exercisable options was $4,390,984 U.S. at the end of 2006. In 2006, R.L. Broiles exercised
11,078 options and realized an aggregate value of $479,265 U.S. Details of long-term and medium-term incentive compensation
      45




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##### Table of Contents



46




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##### Table of Contents



Payments to Employees Who Retire
 Remuneration fordeterminingpayments
    
    Estimated undiscounted payments on retirementon retirement
    
    at the age of 65 after years of service indicated below ($)($)
    
    20 Years
    
    25 Years
    
    30 Years
    
    35 Years
    
    40 Years
    
    45 Years100,000
    
    
    32,000
    
    
    
    40,000
    
    
    
    48,000
    
    
    
    56,000
    
    
    
    64,000
    
    
    
    72,000200,000
    
    
    64,000
    
    
    
    80,000
    
    
    
    96,000
    
    
    
    112,000
    
    
    
    128,000
    
    
    
    144,000300,000
    
    
    96,000
    
    
    
    120,000
    
    
    
    144,000
    
    
    
    168,000
    
    
    
    192,000
    
    
    
    216,000400,000
    
    
    128,000
    
    
    
    160,000
    
    
    
    192,000
    
    
    
    224,000
    
    
    
    256,000
    
    
    
    288,000500,000
    
    
    160,000
    
    
    
    200,000
    
    
    
    240,000
    
    
    
    280,000
    
    
    
    320,000
    
    
    
    360,000600,000
    
    
    192,000
    
    
    
    240,000
    
    
    
    288,000
    
    
    
    336,000
    
    
    
    384,000
    
    
    
    432,000800,000
    
    
    256,000
    
    
    
    320,000
    
    
    
    384,000
    
    
    
    448,000
    
    
    
    512,000
    
    
    
    576,0001,000,000
    
    
    320,000
    
    
    
    400,000
    
    
    
    480,000
    
    
    
    560,000
    
    
    
    640,000
    
    
    
    720,0001,500,000
    
    
    480,000
    
    
    
    600,000
    
    
    
    720,000
    
    
    
    840,000
    
    
    
    960,000
    
    
    
    1,080,0002,000,000
    
    
    640,000
    
    
    
    800,000
    
    
    
    960,000
    
    
    
    1,120,000
    
    
    
    1,280,000
    
    
    
    1,440,0002,500,000
    
    
    800,000
    
    
    
    1,000,000
    
    
    
    1,200,000
    
    
    
    1,400,000
    
    
    
    1,600,000
    
    
    
    1,800,0003,000,000
    
    
    960,000
    
    
    
    1,200,000
    
    
    
    1,440,000
    
    
    
    1,680,000
    
    
    
    1,920,000
    
    
    
    2,160,0003,500,000
    
    
    1,120,000
    
    
    
    1,400,000
    
    
    
    1,680,000
    
    
    
    1,960,000
    
    
    
    2,240,000
    
    
    
    2,520,0004,000,000
    
    
    1,280,000
    
    
    
    1,600,000
    
    
    
    1,920,000
    
    
    
    2,240,000
    
    
    
    2,560,000
    
    
    
    2,880,000
    47




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##### Table of Contents



Executive Pension Value Disclosure
 Accrued
    
    Annual PensionCurrent 2006
    
    Obligations at
    
    Benefit Payable at
    
    Age
    
    
    
    
    
    NormalService Cost ($)
    
    Dec. 31, 2006
    
    age 65
    
    (at Dec. 31,
    
    Credited
    
    RetirementName
    
    (3)
    
    (4)
    
    (5)
    
    2006)
    
    Service
    
    AgeT.J. Hearn
    
    
    593,000
    
    
    
    25,575,000
    
    
    
    2,185,400
    
    
    
    62
    
    
    
    40
    
    
    
    65P.A. Smith
    
    
    144,100
    
    
    
    3,930,000
    
    
    
    481,600
    
    
    
    53
    
    
    
    26
    
    
    
    65R.L. Broiles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    27
    
    
    
    65R.F. Lipsett
    
    
    144,200
    
    
    
    5,618,000
    
    
    
    509,100
    
    
    
    60
    
    
    
    37
    
    
    
    65J.F. Kyle
    
    
    91,900
    
    
    
    3,706,000
    
    
    
    298,900
    
    
    
    64
    
    
    
    30
    
    
    
    65
 
 (1)
    
    Pension benefits reflected in these tables do not vest until the named
executive officer reaches age 55. In the case of T.J. Hearn, R.F. Lipsett and J.F. Kyle,
their accrued pension to date is already vested.(2)
    
    Amounts shown include pension benefits under Imperial Oil Limiteds registered pension
plan and supplemental retirement plans, other than for R.L. Broiles, who participates in
Exxon Mobil Corporations pension plan and supplemental pension plan. Under Exxon Mobil
Corporations pension plan and supplemental pension plan, R.L. Broiles current 2006
service cost was $139,963 U.S., the accrued obligations at December 31, 2006 with respect
to R.L. Broiles was $1,232,150 U.S. and his annual pension benefit payable at age 65 will
be $412,000 U.S.(3)
    
    Service cost is the value of the projected pension for the calendar year 2006. Amounts
shown are consistent with disclosure in Note 6 of the 2006 Consolidated Financial
Statements.(4)
    
    Accrued obligation is the value of the projected pension earned for service to December
31, 2006. The accrued obligation increases with age and is significantly impacted by
changes in the discount rate. Amounts shown are consistent with disclosure in Note 6 of
the 2006 Consolidated Financial Statements.(5)
    
    Amounts in this column are based on current compensation levels and assume accrued
years of service to age 65 for each of the named executive officers. 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
    48




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##### Table of Contents



Equity Compensation Plan Information
  Number of securitiesNumber of securities to
    
    
    
    
    
    remaining available for futurebe issued upon exercise
    
    Weighted-average
    
    issuance under equityof outstanding options,
    
    exercise price of
    
    compensation plans (excludingwarrants and
    
    outstanding options,
    
    securities reflected inrights
    
    warrants and rights
    
    column (a))(3)
    
    ($)
    
    (3)Plan category
    
    (a)
    
    (b)
    
    (c)Equity compensation
plans approved by
security holders (1)
    
    
    5,527,665
    
    
    
    15.50
    
    
    
    0Equity compensation
plans not approved
by security holders (2)
    
    
    6,236,404
    
    
    
    
    
    
    
    4,263,596Total
    
    
    11,764,069
    
    
    
    15.50
    
    
    
    4,263,596
 
 (1)
    
    This is a stock option plan, which is described on page 46.(2)
    
    This is a restricted stock unit plan, which is described on page 46 and 47.(3)
    
    The number of securities reserved for the stock option plan represents three times the
number of stock options granted before the three-for-one share split in May 2006 and still
outstanding. The number of securities reserved for the restricted stock unit plan represent
the securities reserved for restricted stock units issued in 2006 after the three-for-one
share split in May 2006, plus three times the number of securities reserved for restricted
stock units issued before the share split and still outstanding. The weighted average
exercise price of the outstanding stock options of $15.50 was determined on a post share
split basis. 
 Item 13. Certain Relationships and Related Transactions.
    49




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##### Table of Contents



Item 14. Principal Accountant Fees and Services.
 Auditor Fees
  Dollars (thousands)
    
    2006
    
    
    2005Audit Fees
    
    
    1,117
    
    
    
    1,117Audit-Related Fees
    
    
    62
    
    
    
    64Tax Fees
    
    
    815
    
    
    
    770All Other Fees
    
    Nil
    
    
    NilTotal Fees
    
    
    1,994
    
    
    
    1,951
       50




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##### Table of Contents



PART IV
 Item 15. Exhibits and Financial Statement Schedules.
   (3)
    
    (i)
    
    Restated certificate and articles of incorporation of the company (Incorporated herein by
reference to Exhibit (3.1) to the companys Form 8-K filed
on May 3, 2006 (File No. 0-12014)).(ii)
    
    By-laws of the company (Incorporated herein by reference to Exhibit (3)(ii) to the companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 0-12014)).(4)
    
    The companys long term debt authorized under any instrument does not exceed 10 percent of
the companys consolidated assets. The company agrees to furnish to the Commission upon
request a copy of any such instrument.(10)
    
    (ii)
    
    
    (1
    )
    
    Alberta Crown Agreement, dated February 4, 1975, relating to the participation
of the Province of Alberta in Syncrude (Incorporated herein by reference to Exhibit 13(a) of
the companys Registration Statement on Form S-1, as filed with the Securities and Exchange
Commission on August 21, 1979 (File No. 2-65290)).(2
    )
    
    Amendment to Alberta Crown Agreement, dated January 1, 1983 (Incorporated herein by reference
to Exhibit (10)(ii)(2) of the companys Annual Report on Form 10-K for the year ended December
31, 1983 (File No. 2-9259)).(3
    )
    
    Syncrude Ownership and Management Agreement, dated February 4, 1975 (Incorporated herein by
reference to Exhibit 13(b) of the companys Registration Statement on Form S-1, as filed with
the Securities and Exchange Commission on August 21, 1979 (File No. 2-65290)).(4
    )
    
    Letter Agreement, dated February 8, 1982, between the Government of Canada and Esso Resources
Canada Limited, amending Schedule C to the Syncrude Ownership and Management Agreement filed
as Exhibit (10)(ii)(2) (Incorporated herein by reference to Exhibit (20) of the companys
Annual Report on Form 10-K for the year ended December 31, 1981 (File No. 2-9259)).(5
    )
    
    Norman Wells Pipeline Agreement, dated January 1, 1980, relating to the operation, tolls and
financing of the pipeline system from the Norman Wells field (Incorporated herein by reference
to Exhibit 10(a)(3) of the companys Annual Report on Form 10-K for the year ended December
31, 1981 (File No. 2-9259)).(6
    )
    
    Norman Wells Pipeline Amending Agreement, dated April 1, 1982 (Incorporated herein by
reference to Exhibit (10)(ii)(5) of the companys Annual Report on Form 10-K for the year
ended December 31, 1982 (File No. 2-9259)).(7
    )
    
    Letter Agreement clarifying certain provisions to the Norman Wells Pipeline Agreement, dated
August 29, 1983 (Incorporated herein by reference to Exhibit (10)(ii)(7) of the companys
Annual Report on Form 10-K for the year ended December 31, 1983 (File No. 2-9259)).(8
    )
    
    Norman Wells Pipeline Amending Agreement, made as of February 1, 1985, relating to certain
amendments ordered by the National Energy Board (Incorporated herein by reference to Exhibit
(10)(ii)(8) of the companys Annual Report on Form 10-K for the year ended December 31, 1986
(File No. 0-12014)).(9
    )
    
    Norman Wells Pipeline Amending Agreement, made as of April 1, 1985, relating to the
definition of Operating Year (Incorporated herein by reference to Exhibit (10)(ii)(9) of the
companys Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 0-12014)).(10
    )
    
    Norman Wells Expansion Agreement, dated October 6, 1983, relating to the prices and royalties
payable for crude oil production at Norman Wells (Incorporated herein by reference to Exhibit
(10)(ii)(8) of the companys Annual Report on Form 10-K for the year ended December 31, 1983
(File No. 2-9259)).(11
    )
    
    Alberta Cold Lake Crown Agreement, dated June 25, 1984, relating to the royalties payable and
the assurances given in respect of the Cold Lake production project (Incorporated herein by
reference to Exhibit (10)(ii)(11) of the companys Annual Report on Form 10-K for the year
ended December 31, 1986 (File No. 0-12014)).(12
    )
    
    Amendment to Alberta Crown Agreement, dated January 1, 1986 (Incorporated herein by reference
to Exhibit (10)(ii)(12) of the companys Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 0-12014)).
 51




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##### Table of Contents



(13
    )
    
    Amendment to Alberta Crown Agreement, dated November 25, 1987 (Incorporated herein by
reference to Exhibit (10)(ii)(13) of the companys Annual Report on Form 10-K for the year
ended December 31, 1987 (File No. 0-12014)).(14
    )
    
    Amendment to Syncrude Ownership and Management Agreement, dated March 10, 1982 (Incorporated
herein by reference to Exhibit (10)(ii)(14) of the companys Annual Report on Form 10-K for
the year ended December 31, 1989 (File No. 0-12014)).(15
    )
    
    Amendment to Alberta Crown Agreement, dated August 1, 1991 (Incorporated herein by reference
to Exhibit (10)(ii)(15) of the companys Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 0-12014)).(16
    )
    
    Norman Wells Settlement Agreement, dated July 31, 1996. (Incorporated herein by reference to
Exhibit (10)(ii)(16) of the companys Annual Report on Form 10-K for the year ended December
31, 1996 (File No. 0-12014)).(17
    )
    
    Amendment to Alberta Crown Agreement, dated January 1, 1997. (Incorporated herein by
reference to Exhibit (10)(ii)(17) of the companys Annual Report on Form 10-K for the year
ended December 31, 1996 (File No. 0-12014)).(18
    )
    
    Norman Wells Pipeline Amending Agreement, dated December 12, 1997. (Incorporated herein by
reference to Exhibit (10)(ii)(18) of the companys Annual Report on Form 10-K for the year
ended December 31, 1998 (File No. 0-12014)).(19
    )
    
    Norman Wells Pipeline 1999 Amending Agreement, dated May 1, 1999. (Incorporated herein by
reference to Exhibit (10)(ii)(19) of the companys Annual Report on Form 10-K for the year
ended December 31, 1999 (File No. 0-12014)).(20
    )
    
    Alberta Cold Lake Transition Agreement, effective January 1, 2000, relating to the royalties
payable in respect of the Cold Lake production project and terminating the Alberta Cold Lake
Crown Agreement. (Incorporated herein by reference to Exhibit (10)(ii)(20) of the companys
Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 0-12014)).(21
    )
    
    Amendment to Alberta Crown Agreement effective January 1, 2001 (Incorporated herein by
reference to Exhibit (10)(ii)(21) of the companys Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 (File No. 0-12014)).(22
    )
    
    Amendment to Syncrude Ownership and Management Agreement effective January 1, 2001
(Incorporated herein by reference to Exhibit (10)(ii)(22) of the companys Quarterly Report on
Form 10-Q for the quarter ended June 30, 2002 (File No. 0-12014)).(23
    )
    
    Amendment to Syncrude Ownership and Management Agreement effective September 16, 1994
(Incorporated herein by reference to Exhibit (10)(ii)(23) of the companys Quarterly Report on
Form 10-Q for the quarter ended June 30, 2002 (File No. 0-12014)).(24
    )
    
    Amendment to Alberta Crown Agreement dated November 29, 1995 (Incorporated herein by
reference to Exhibit (10)(ii)(24) of the companys Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 (File No. 0-12014)).(iii)
    
    
    (A)
    (1)
    
    Form of Letter relating to Supplemental Retirement Income (Incorporated herein
by reference to Exhibit (10)(c)(3) of the companys Annual Report on Form 10-K for the year
ended December 31, 1980 (File No. 2-9259)).(2)
    
    Incentive Share Unit Plan and Incentive Share Units granted in 2001 are incorporated herein
by reference to Exhibit (10)(iii)(A)(2) of the companys Annual Report on Form 10-K for the
year ended December 31, 2001. Units granted in 2000 are incorporated herein by reference to
Exhibit (10)(iii)(A)(2) of the companys Annual Report on Form 10-K for the year ended
December 31, 2000 (File No. 0-12014); units granted in 1999 are incorporated herein by
reference to Exhibit (10)(iii)(A)(3) of the companys Annual Report on Form 10-K for the year
ended December 31, 1999 (File No. 0-12014); units granted in 1998 are incorporated herein by
reference to Exhibit (10)(iii)(A)(3) of the companys Annual Report on Form 10-K for the year
ended December 31, 1998 (File No. 0-12014); units granted in 1997 are incorporated herein by
reference to Exhibit (10)(iii)(A)(3) of the companys Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 0-12014).
 52




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##### Table of Contents



(3)
    
    Deferred Share Unit Plan. (Incorporated herein by reference to
Exhibit(10)(iii)(A)(5) of the companys Annual Report on Form 10-K for the year
ended December 31, 1998 (File No. 0-12014)).(4)
    
    Deferred Share Unit Plan for Nonemployee Directors. (Incorporated herein
by reference to Exhibit (10)(iii)(A)(6) of the companys Annual Report on Form 10-K
for the year ended December 31, 1998 (File No. 0-12014)).(5)
    
    Form of Earnings Bonus Units (Incorporated herein by reference to Exhibit
(10)(iii)(A)(5) of the companys Annual Report on Form 10-K for the year ended
December 31, 2003 (File No. 0-12014)) and Earnings Bonus Unit Plan (Incorporated
herein by reference to Exhibit (10)(iii)(A)(5) of the companys Annual Report on
Form 10-K for the year ended December 31, 2002 (File No. 0-12014)).(6)
    
    Incentive Stock Option Plan and Incentive Stock Options granted in 2002
(Incorporated herein by reference to Exhibit (10)(iii)(A)(6) of the companys
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No.
0-12014)).(7)
    
    Restricted Stock Unit Plan and Restricted Stock Units granted in 2002
(Incorporated herein by reference to Exhibit (10)(iii)(A)(7) of the companys Annual
Report on Form 10-K for the year ended December 31, 2002 (File No. 0-12014)).(8)
    
    Restricted Stock Unit Plan and Restricted Stock Units granted in 2003
(Incorporated herein by reference to Exhibit (10)(iii)(A)(8) of the companys Annual
Report on Form 10-K for the year ended December 31, 2003 (File No. 0-12014)).(9)
    
    Restricted Stock Unit Plan and general form for Restricted Stock Units,
as amended effective December 31, 2004 (Incorporated herein by reference to Exhibit
99.1 of the companys Form 8-K dated December 31, 2004 (File No. 0-12014)).(10)
    
    Amended Restricted Stock Unit Plan with respect to Restricted Stock
Units granted in 2002, as amended effective August 4, 2006 (Incorporated herein by
reference to Exhibit 99.10(III)(A)(1) of the companys Quarterly Report on Form 10-Q
for the quarter ended September 30, 2006 (File No. 0-12014)).(11)
    
    Amended Restricted Stock Unit Plan with respect to Restricted Stock
Units granted in 2003, as amended effective August 4, 2006 (Incorporated herein by
reference to Exhibit 99.10(III)(A)(2) of the companys Quarterly Report on Form 10-Q
for the quarter ended September 30, 2006 (File No. 0-12014)).(12)
    
    Amended Restricted Stock Unit Plan with respect to Restricted Stock
Units granted in 2004 and 2005, as amended effective August 4, 2006 (Incorporated
herein by reference to Exhibit 99.10(III)(A)(3) of the companys Quarterly Report on
Form 10-Q for the quarter ended September 30, 2006 (File No. 0-12014)).(13)
    
    Amended Restricted Stock Unit Plan with respect to Restricted Stock
Units granted in 2006 and subsequent years, as amended effective August 4, 2006
(Incorporated herein by reference to Exhibit 99.10(III)(A)(4) of the companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No.
0-12014)).(14)
    
    Amended Restricted Stock Unit Plan with respect to Restricted Stock
Units granted in 2002, as amended effective February 1, 2007 (Incorporated herein by
reference to Exhibit 99.1 of the companys Form 8-K filed on February 2, 2007 (File
No. 0-121014)).
 (21)
    
    Imperial Oil Resources Limited, McColl-Frontenac Petroleum Inc., Imperial Oil Resources
N.W.T. Limited and Imperial Oil Resources Ventures Limited, all incorporated in Canada, are
wholly-owned subsidiaries of the company. The names of all other subsidiaries of the company
are omitted because, considered in the aggregate as a single subsidiary, they would not
constitute a significant subsidiary as of December 31, 2006.
 (23)
    
    (ii) (A) Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP).(31.1)
    
    Certification by principal executive officer of Periodic Financial Report pursuant to Rule 13a-14(a).(31.2)
    
    Certification by principal financial officer of Periodic Financial Report pursuant to Rule 13a-14(a).(32.1)
    
    Certification by chief executive officer of Periodic Financial Report pursuant to Rule
13a-14(b) and 18 U.S.C. Section 1350.(32.2)
    
    Certification by chief financial officer of Periodic Financial Report pursuant to Rule
13a-14(b) and 18 U.S.C. Section 1350.
  53




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##### Table of Contents



SIGNATURES
  Imperial Oil LimitedBy
    
    /s/ T.J. Hearn(Timothy J. Hearn, Chairman of the Board,President and Chief Executive Officer)
  Signature
    
    Title/s/ T.J. Hearn

(Timothy J. Hearn)
    
    Chairman of the Board, President,
Chief Executive Officer and Director
(Principal Executive Officer)/s/ Paul A. Smith

(Paul A. Smith)
    
    Controller and Senior Vice-President,
Finance and Administration and Director
(Principal Accounting Officer and
Principal Financial Officer)/s/ R.L. Broiles

(Randy L. Broiles)
    
    Director/s/ J.M. Mintz

(Jack M. Mintz)
    
    Director/s/ Roger Phillips

(Roger Phillips)
    
    Director/s/ J.F. Shepard

(James F. Shepard)
    
    Director/s/ Sheelagh D. Whittaker

(Sheelagh D. Whittaker)
    
    Director/s/ V.L. Young
    
    Director(Victor L. Young)
 54




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
 Pages in thisReportManagements report on internal control over financial reporting
    
    F-2Report of independent registered public accounting firm
    
    F-2Financial statements:Consolidated statement of income for the years 2004, 2005 and 2006
    
    F-3Consolidated statement of cash flows for the years 2004, 2005 and 2006
    
    F-4Consolidated balance sheet as at December 31, 2005 and 2006
    
    F-5Consolidated statement of shareholders equity as at December 31, 2004, 2005 and 2006
    
    F-6Notes to the consolidated financial statements
    
    F-7  F-20
 F-1




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##### Table of Contents



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 Internal Control -
Integrated Framework
  /s/ T.J. Hearn
    
    /s/ Paul A. SmithT.J. Hearn
    
    P.A. SmithChairman, president and chief executive officer
    
    Controller and senior vice-president, finance and administration(Principal accounting officer and principal financial officer)
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the
Shareholders of Imperial Oil Limited
  Consolidated financial statements
  Internal control over financial reporting
 Internal Control  Integrated Framework Internal
Control  Integrated Framework
   /s/ PricewaterhouseCoopers LLP

Chartered AccountantsCalgary, Alberta, CanadaFebruary 27, 2007
 F-2




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##### Table of Contents



Consolidated statement of income
 millions of Canadian dollarsFor the years ended December 31
    
    2006
    
    
    2005
    
    
    2004Revenues and other incomeOperating revenues (a)(b)(c)
    
    
    24,505
    
    
    
    27,797
    
    
    
    22,408Investment and other income (note 10)(d)
    
    
    283
    
    
    
    417
    
    
    
    52Total revenues and other income
    
    
    24,788
    
    
    
    28,214
    
    
    
    22,460ExpensesExploration
    
    
    32
    
    
    
    43
    
    
    
    59Purchases of crude oil and products (b)(e)
    
    
    13,793
    
    
    
    17,168
    
    
    
    13,094Production and manufacturing (f)
    
    
    3,446
    
    
    
    3,327
    
    
    
    2,820Selling and general
    
    
    1,284
    
    
    
    1,577
    
    
    
    1,281Federal excise tax (a)
    
    
    1,274
    
    
    
    1,278
    
    
    
    1,264Depreciation and depletion
    
    
    831
    
    
    
    895
    
    
    
    908Financing costs (note 14)(g)
    
    
    28
    
    
    
    8
    
    
    
    7Total expenses
    
    
    20,688
    
    
    
    24,296
    
    
    
    19,433Income before income taxes
    
    
    4,100
    
    
    
    3,918
    
    
    
    3,027Income taxes(note 5)
    
    
    1,056
    
    
    
    1,318
    
    
    
    975Net income
    
    
    3,044
    
    
    
    2,600
    
    
    
    2,052Per-share information(Canadian dollars)Net income per common share  basic (note 12)
    
    
    3.12
    
    
    
    2.54
    
    
    
    1.92Net income per common share  diluted (note 12)
    
    
    3.11
    
    
    
    2.53
    
    
    
    1.91Dividends
    
    
    0.32
    
    
    
    0.31
    
    
    
    0.29
 (a)
    
    Operating revenues include federal excise tax of $1,274 million (2005  $1,278 million,
2004  $1,264 million).(b)
    
    Amounts included in operating revenues for purchase/sale contracts with the same counterparty
(associated costs are included in purchases of crude oil and products resulting in no impact
to net income) are nil (2005  $4,894 million, 2004  $3,584 million), (note 1).(c)
    
    Operating revenues include amounts from related parties of $1,927 million (2005  $1,325
million, 2004  $1,142 million), (note 15).(d)
    
    Investment and other income include amounts from related parties of $31 million (2005  $24
million, 2004  $23 million), (note 15).(e)
    
    Purchases of crude oil and products include amounts from related parties of $4,119 million
(2005  $3,650 million, 2004  $3,169 million), (note 15).(f)
    
    Production and manufacturing expenses include amounts to related parties of $219 million
(2005  $175 million, 2004  $43 million), (note 15).(g)
    
    Financing costs include amounts to related parties of $33 million (2005  $22 million, 2004 -
$20 million), (note 15).  F-3




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##### Table of Contents



Consolidated statement of cash flows
 millions of Canadian dollarsInflow/(outflow)For the years ended December 31
    
    2006
    
    
    2005
    
    
    2004Operating activitiesNet income
    
    
    3,044
    
    
    
    2,600
    
    
    
    2,052Adjustments for non-cash items:Depreciation and depletion
    
    
    831
    
    
    
    895
    
    
    
    908(Gain)/loss
on asset sales, after tax
    
    (96
    )
    
    
    (233
    )
    
    
    (32
    )Deferred income taxes and other
    
    
    254
    
    
    
    (116
    )
    
    
    (90
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    203
    
    
    
    (414
    )
    
    
    (311
    )Inventories and prepaids
    
    
    (97
    )
    
    
    (67
    )
    
    
    (32
    )Income taxes payable
    
    
    (225
    )
    
    
    304
    
    
    
    462Accounts payable
    
    
    (86
    )
    
    
    644
    
    
    
    308All other items  net (a)
    
    
    (241
    )
    
    
    (162
    )
    
    
    47Cash from operating activities
    
    
    3,587
    
    
    
    3,451
    
    
    
    3,312Investing activitiesAdditions to property, plant and equipment and intangibles
    
    
    (1,177
    )
    
    
    (1,432
    )
    
    
    (1,376
    )Proceeds from asset sales
    
    
    212
    
    
    
    440
    
    
    
    102Loans to equity company
    
    
    
    
    
    
    
    
    
    
    (32
    )Cash from (used in) investing activities
    
    
    (965
    )
    
    
    (992
    )
    
    
    (1,306
    )Financing activitiesShort-term debt  net
    
    
    72
    
    
    
    18
    
    
    
    9Repayment of long-term debt
    
    
    (74
    )
    
    
    (21
    )
    
    
    (8
    )Issuance of common shares under stock option plan
    
    
    10
    
    
    
    38
    
    
    
    13Common shares purchased (note 12)
    
    
    (1,818
    )
    
    
    (1,795
    )
    
    
    (872
    )Dividends paid
    
    
    (315
    )
    
    
    (317
    )
    
    
    (317
    )Cash from (used in) financing activities
    
    
    (2,125
    )
    
    
    (2,077
    )
    
    
    (1,175
    )Increase (decrease) in cash
    
    
    497
    
    
    
    382
    
    
    
    831Cash at beginning of year
    
    
    1,661
    
    
    
    1,279
    
    
    
    448Cash at end of year(b)
    
    
    2,158
    
    
    
    1,661
    
    
    
    1,279
 (a)
    
    Includes contribution to registered pension plans of $395 million (2005  $350 million,
2004  $114 million).(b)
    
    Cash is composed of cash in bank and cash equivalents at cost. Cash equivalents are all
highly liquid securities with maturity of three months or less when purchased.  F-4




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##### Table of Contents



Consolidated balance sheet
 millions of Canadian dollarsAt December 31
    
    2006
    
    
    2005AssetsCurrent assetsCash
    
    
    2,158
    
    
    
    1,661Accounts receivable, less estimated doubtful amounts
    
    
    1,871
    
    
    
    2,073Inventories of crude oil and products (note 13)
    
    
    556
    
    
    
    481Materials, supplies and prepaid expenses
    
    
    151
    
    
    
    130Deferred income tax assets (note 5)
    
    
    573
    
    
    
    654Total current assets
    
    
    5,309
    
    
    
    4,999Investments and other long-term assets
    
    
    104
    
    
    
    94Property, plant and equipment,
less accumulated depreciation and depletion (note 3)
    
    
    10,457
    
    
    
    10,132Goodwill (note 3)
    
    
    204
    
    
    
    204Other intangible assets, net
    
    
    67
    
    
    
    153Total assets(note 3)
    
    
    16,141
    
    
    
    15,582LiabilitiesCurrent liabilitiesShort-term debt
    
    
    171
    
    
    
    99Accounts payable and accrued liabilities (a)
    
    
    3,080
    
    
    
    3,170Income taxes payable
    
    
    1,190
    
    
    
    1,399Current portion of long-term debt (b)
    
    
    907
    
    
    
    477Total current liabilities
    
    
    5,348
    
    
    
    5,145Long-term debt (note 4)(c)
    
    
    359
    
    
    
    863Other long-term obligations (note 7)
    
    
    1,683
    
    
    
    1,728Deferred income tax liabilities (note 5)
    
    
    1,345
    
    
    
    1,213Commitments and contingent liabilities (note 11)Total liabilities
    
    
    8,735
    
    
    
    8,949Shareholders equityCommon shares at stated value (note 12)(d)
    
    
    1,677
    
    
    
    1,747Earnings reinvested
    
    
    6,462
    
    
    
    5,466Accumulated other nonowner changes in equity
    
    
    (733
    )
    
    
    (580
    )Total shareholders equity
    
    
    7,406
    
    
    
    6,633Total liabilities and shareholders equity
    
    
    16,141
    
    
    
    15,582
 
 (a)
    
    Accounts payable and accrued liabilities include amounts to related parties of $151
million (2005  $224 million), (note 15).(b)
    
    Current portion of long-term debt includes amounts to related parties of $500 million (2005 -
Nil), (note 4).(c)
    
    Long-term debt includes amounts to related parties of $318 million (2005  $818 million),
(note 4).(d)
    
    Number of common shares outstanding was 953 million (2005  998 million), (note 12).   /s/ T.J. Hearn
    
    /s/ Paul A. SmithChairman, president and
    
    Controller and senior vice-president,chief executive officer
    
    finance and administration
 F-5




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##### Table of Contents



Consolidated statement of shareholders equity
 millions of Canadian dollarsAt December 31
    
    2006
    
    
    2005
    
    
    2004Common shares at stated value(note 12)At beginning of year
    
    
    1,747
    
    
    
    1,801
    
    
    
    1,859Issued under the stock option plan
    
    
    10
    
    
    
    38
    
    
    
    13Share purchases at stated value
    
    
    (80
    )
    
    
    (92
    )
    
    
    (71
    )At end of year
    
    
    1,677
    
    
    
    1,747
    
    
    
    1,801Earnings reinvestedAt beginning of year
    
    
    5,466
    
    
    
    4,889
    
    
    
    3,952Net income for the year
    
    
    3,044
    
    
    
    2,600
    
    
    
    2,052Share purchases in excess of stated value
    
    
    (1,737
    )
    
    
    (1,703
    )
    
    
    (801
    )Dividends
    
    
    (311
    )
    
    
    (320
    )
    
    
    (314
    )At end of year
    
    
    6,462
    
    
    
    5,466
    
    
    
    4,889Accumulated other nonowner changes in equityAt beginning of year
    
    
    (580
    )
    
    
    (368
    )
    
    
    (266
    )Minimum pension liability adjustment (note 6)
    
    
    580
    
    
    
    (212
    )
    
    
    (102
    )Post-retirement benefit liability adjustment (note 6)
    
    
    (733
    )
    
    
    
    
    
    
    At end of year
    
    
    (733
    )
    
    
    (580
    )
    
    
    (368
    )Shareholders equity at end of year
    
    
    7,406
    
    
    
    6,633
    
    
    
    6,322Nonowner changes in equity for the yearNet income for the year
    
    
    3,044
    
    
    
    2,600
    
    
    
    2,052Other nonowner changes in equityMinimum pension liability adjustment
    
    
    580
    
    
    
    (212
    )
    
    
    (102
    )Post-retirement benefit liability adjustment
    
    
    (733
    )
    
    
    
    
    
    
    Total nonowner changes in equity for the year
    
    
    2,891
    
    
    
    2,388
    
    
    
    1,950
  F-6




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##### Table of Contents



Notes to consolidated financial statements
 1.
    
    Summary of significant accounting policies
   Principles of consolidation
  Inventories
   Investments
   Property, plant and equipment
        F-7




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##### Table of Contents



Interest capitalization
  Goodwill and other intangible assets
   Asset retirement obligations and other environmental liabilities
   Foreign-currency translation
  Financial instruments
   Revenues
   F-8




---



##### Table of Contents



Share-based compensation
    Consumer taxes
  2.
    
    Accounting change for defined benefit post-retirement plans
  3.
    
    Business segments
     F-9




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##### Table of Contents



Natural
resources(a)
    Petroleum products
    
    
    
    
    
    
     Chemicalsmillions of dollars
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
     2006
    
    
     2005
    
    
     2004Revenues and other incomeExternal sales (b)
    
    
    4,619
    
    
    
    4,702
    
    
    
    3,689
    
    
    
    18,527
    
    
    
    21,793
    
    
    
    17,503
    
    
    
    1,359
    
    
    
    1,302
    
    
    
    1,216Intersegment sales
    
    
    3,837
    
    
    
    3,487
    
    
    
    2,891
    
    
    
    2,256
    
    
    
    2,224
    
    
    
    1,666
    
    
    
    345
    
    
    
    363
    
    
    
    293Investment and other income
    
    
    111
    
    
    
    331
    
    
    
    45
    
    
    
    105
    
    
    
    60
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    8,567
    
    
    
    8,520
    
    
    
    6,625
    
    
    
    20,888
    
    
    
    24,077
    
    
    
    19,211
    
    
    
    1,704
    
    
    
    1,665
    
    
    
    1,509ExpensesExploration
    
    
    32
    
    
    
    43
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchases of crude oil and products
    
    
    2,841
    
    
    
    2,837
    
    
    
    2,110
    
    
    
    16,178
    
    
    
    19,212
    
    
    
    14,769
    
    
    
    1,209
    
    
    
    1,191
    
    
    
    1,064Production and manufacturing
    
    
    1,994
    
    
    
    1,931
    
    
    
    1,581
    
    
    
    1,266
    
    
    
    1,203
    
    
    
    1,064
    
    
    
    189
    
    
    
    195
    
    
    
    176Selling and general (c)
    
    
    13
    
    
    
    36
    
    
    
    9
    
    
    
    1,018
    
    
    
    1,096
    
    
    
    1,043
    
    
    
    76
    
    
    
    81
    
    
    
    88Federal excise tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,274
    
    
    
    1,278
    
    
    
    1,264
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and depletion
    
    
    584
    
    
    
    651
    
    
    
    633
    
    
    
    233
    
    
    
    230
    
    
    
    257
    
    
    
    11
    
    
    
    12
    
    
    
    13Financing costs (note 14)
    
    
    2
    
    
    
    
    
    
    
    1
    
    
    
    6
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Total expenses
    
    
    5,466
    
    
    
    5,498
    
    
    
    4,393
    
    
    
    19,975
    
    
    
    23,021
    
    
    
    18,399
    
    
    
    1,485
    
    
    
    1,479
    
    
    
    1,341Income before income taxes
    
    
    3,101
    
    
    
    3,022
    
    
    
    2,232
    
    
    
    913
    
    
    
    1,056
    
    
    
    812
    
    
    
    219
    
    
    
    186
    
    
    
    168Income taxes(note 5)Current
    
    
    602
    
    
    
    955
    
    
    
    771
    
    
    
    174
    
    
    
    409
    
    
    
    314
    
    
    
    60
    
    
    
    69
    
    
    
    61Deferred
    
    
    123
    
    
    
    59
    
    
    
    (56
    )
    
    
    115
    
    
    
    (47
    )
    
    
    (58
    )
    
    
    16
    
    
    
    (4
    )
    
    
    (2
    )Total income tax expense
    
    
    725
    
    
    
    1,014
    
    
    
    715
    
    
    
    289
    
    
    
    362
    
    
    
    256
    
    
    
    76
    
    
    
    65
    
    
    
    59Net income
    
    
    2,376
    
    
    
    2,008
    
    
    
    1,517
    
    
    
    624
    
    
    
    694
    
    
    
    556
    
    
    
    143
    
    
    
    121
    
    
    
    109Cash flow from (used in) operating activities
    
    
    3,024
    
    
    
    2,440
    
    
    
    2,331
    
    
    
    507
    
    
    
    799
    
    
    
    908
    
    
    
    161
    
    
    
    94
    
    
    
    126Capital and exploration expenditures
    
    
    787
    
    
    
    937
    
    
    
    1,113
    
    
    
    361
    
    
    
    478
    
    
    
    283
    
    
    
    13
    
    
    
    19
    
    
    
    15Property, plant and equipmentCost
    
    
    14,926
    
    
    
    14,229
    
    
    
    13,538
    
    
    
    6,581
    
    
    
    6,350
    
    
    
    6,078
    
    
    
    702
    
    
    
    701
    
    
    
    682Accumulated depreciation and depletion
    
    
    (8,255
    )
    
    
    (7,780
    )
    
    
    (7,337
    )
    
    
    (3,178
    )
    
    
    (3,037
    )
    
    
    (2,959
    )
    
    
    (484
    )
    
    
    (474
    )
    
    
    (459
    )Net property, plant and equipment(d)(e)
    
    
    6,671
    
    
    
    6,449
    
    
    
    6,201
    
    
    
    3,403
    
    
    
    3,313
    
    
    
    3,119
    
    
    
    218
    
    
    
    227
    
    
    
    223Total assets
    
    
    7,513
    
    
    
    7,289
    
    
    
    6,822
    
    
    
    6,450
    
    
    
    6,257
    
    
    
    5,509
    
    
    
    504
    
    
    
    500
    
    
    
    490
 Corporate and other
    
    
    
    
    Eliminations
    
    
    
    
    
    
    Consolidatedmillions of dollars
    
     2006
    
    
     2005
    
    
     2004
    
    
     2006
    
    
     2005
    
    
     2004
    
    
     2006
    
    
     2005
    
    
     2004Revenues and other incomeExternal sales (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,505
    
    
    
    27,797
    
    
    
    22,408Intersegment sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,438
    )
    
    
    (6,074
    )
    
    
    (4,850
    )
    
    
    
    
    
    
    
    
    
    
    Investment and other income
    
    
    67
    
    
    
    26
    
    
    
    (35
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    283
    
    
    
    417
    
    
    
    5267
    
    
    
    26
    
    
    
    (35
    )
    
    
    (6,438
    )
    
    
    (6,074
    )
    
    
    (4,850
    )
    
    
    24,788
    
    
    
    28,214
    
    
    
    22,460ExpensesExploration
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    43
    
    
    
    59Purchases of crude oil and products
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,435
    )
    
    
    (6,072
    )
    
    
    (4,849
    )
    
    
    13,793
    
    
    
    17,168
    
    
    
    13,094Production and manufacturing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    3,446
    
    
    
    3,327
    
    
    
    2,820Selling and general (c)
    
    
    177
    
    
    
    364
    
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,284
    
    
    
    1,577
    
    
    
    1,281Federal excise tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,274
    
    
    
    1,278
    
    
    
    1,264Depreciation and depletion
    
    
    3
    
    
    
    2
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    831
    
    
    
    895
    
    
    
    908Financing costs (note 14)
    
    
    20
    
    
    
    6
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    8
    
    
    
    7Total expenses
    
    
    200
    
    
    
    372
    
    
    
    150
    
    
    
    (6,438
    )
    
    
    (6,074
    )
    
    
    (4,850
    )
    
    
    20,688
    
    
    
    24,296
    
    
    
    19,433Income before income taxes
    
    
    (133
    )
    
    
    (346
    )
    
    
    (185
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,100
    
    
    
    3,918
    
    
    
    3,027Income taxes(note 5)Current
    
    
    (60
    )
    
    
    (72
    )
    
    
    (43
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    776
    
    
    
    1,361
    
    
    
    1,103Deferred
    
    
    26
    
    
    
    (51
    )
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    280
    
    
    
    (43
    )
    
    
    (128
    )Total income tax expense
    
    
    (34
    )
    
    
    (123
    )
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,056
    
    
    
    1,318
    
    
    
    975Net income
    
    
    (99
    )
    
    
    (223
    )
    
    
    (130
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,044
    
    
    
    2,600
    
    
    
    2,052Cash flow from (used in) operating activities
    
    
    (105
    )
    
    
    118
    
    
    
    (53
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,587
    
    
    
    3,451
    
    
    
    3,312Capital and exploration expenditures
    
    
    48
    
    
    
    41
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,209
    
    
    
    1,475
    
    
    
    1,445Property, plant and equipmentCost
    
    
    269
    
    
    
    246
    
    
    
    205
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,478
    
    
    
    21,526
    
    
    
    20,503Accumulated depreciation and depletion
    
    
    (104
    )
    
    
    (103
    )
    
    
    (101
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,021
    )
    
    
    (11,394
    )
    
    
    (10,856
    )Net property, plant and equipment(d)(e)
    
    
    165
    
    
    
    143
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,457
    
    
    
    10,132
    
    
    
    9,647Total assets
    
    
    2,145
    
    
    
    1,959
    
    
    
    1,504
    
    
    
    (471
    )
    
    
    (423
    )
    
    
    (298
    )
    
    
    16,141
    
    
    
    15,582
    
    
    
    14,027
 F-10




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##### Table of Contents



(a)
    
    A significant portion of activities in the natural resources segment is conducted
jointly with other companies. The segment includes the companys share of undivided
interest in such activities as follows:
 millions of dollars
    
     2006
    
    
     2005
    
    
     2004Total external and intersegment sales
    
    
    3,303
    
    
    
    3,687
    
    
    
    2,744Total expenses
    
    
    1,966
    
    
    
    1,805
    
    
    
    1,598Net income, after income tax
    
    
    1,148
    
    
    
    1,249
    
    
    
    780Total current assets
    
    
    516
    
    
    
    245
    
    
    
    367Long-term assets
    
    
    4,833
    
    
    
    4,742
    
    
    
    4,140Total current liabilities
    
    
    810
    
    
    
    967
    
    
    
    948Other long-term obligations
    
    
    344
    
    
    
    382
    
    
    
    243Cash flow from operating activities
    
    
    1,229
    
    
    
    1,223
    
    
    
    1,211Cash (used in) investing activities
    
    
    (403
    )
    
    
    (403
    )
    
    
    (858
    )
 (b)
    
    Includes export sales to the United States, as follows:
 millions of dollars
    
     2006
    
    
     2005
    
    
     2004Natural resources
    
    
    1,936
    
    
    
    1,633
    
    
    
    1,360Petroleum products
    
    
    869
    
    
    
    856
    
    
    
    1,074Chemicals
    
    
    793
    
    
    
    750
    
    
    
    678Total export sales
    
    
    3,598
    
    
    
    3,239
    
    
    
    3,112
 (c)
    
    Consolidated selling and general expenses include delivery costs from final storage
areas to customers of $316 million in 2006 (2005  $310 million, 2004  $307 million).
 (d)
    
    Includes property, plant and equipment under construction of $782 million (2005 -
$954 million).
 (e)
    
    All goodwill has been assigned to the petroleum products segment. There have been no
goodwill acquisitions, impairment losses or write-offs due to sales in the past three
years.
 4.
    
    Long-term debt
 2006
    
    
     2005Issued
    
    Maturity date

    
    Interest rate
    
    
    Millions of dollars2003
    
    $250 million due May 26, 2007 and$250 million due August 26, 2007     (a)

    
    Variable
    
    
    
    
    
    
    5002003
    
    January 19, 2008     (a)

    
    Variable
    
    
    318
    
    
    
    318Long-term debt(b)
    
    
    
    
    
    
    
    
    
    318
    
    
    
    818Capital leases(c)
    
    
    
    
    
    
    
    
    
    41
    
    
    
    45Total long-term debt(d) (e)
    
    
    
    
    
    
    
    
    
    359
    
    
    
    863
 
 (a)
    
    These are long-term variable-rate loans from an affiliated company of Exxon Mobil
Corporation at interest equivalent to Canadian market rates.(b)
    
    The average effective rate for the loans was 4.2 percent for 2006 (2005  2.8
percent).(c)
    
    These obligations primarily relate to the capital lease for marine services, which
are provided by the lessor commencing in 2004 for a period of 10 years, extendable for an
additional five years. The average imputed rate was 10.7 percent in 2006 (2005 -10.5
percent).(d)
    
    Principal payments on long-term loans of $500 million are due in 2007 and $318
million are due in 2008. Principal payments on capital leases of approximately $3.6
million a year are due in each of the next five years.(e)
    
    These amounts exclude that portion of long-term debt, totalling $907 million (2005 
$477 million), which matures within one year and is included in current liabilities. 5.
    
    Income taxes
 millions of dollars
    
     2006
    
    
     2005
    
    
     2004Current income tax expense
    
    
    776
    
    
    
    1,361
    
    
    
    1,103Deferred income tax expense (a)
    
    
    280
    
    
    
    (43
    )
    
    
    (128
    )Total income tax expense(b)
    
    
    1,056
    
    
    
    1,318
    
    
    
    975Statutory corporate tax rate (percent)
    
    
    32.8
    
    
    
    35.6
    
    
    
    37.0Increase/(decrease) resulting from:Non-deductible royalty payments to governments
    
    
    
    
    
    
    3.8
    
    
    
    3.9Resource allowance in lieu of royalty deduction
    
    
    
    
    
    
    (5.2
    )
    
    
    (7.0
    )Manufacturing and processing credit
    
    
    
    
    
    
    
    
    
    
    Enacted tax rate change
    
    
    (2.7
    )
    
    
    
    
    
    
    (1.8
    )Other
    
    
    (4.3
    )
    
    
    (0.6
    )
    
    
    0.1Effective income tax rate
    
    
    25.8
    
    
    
    33.6
    
    
    
    32.2
 
 (a)
    
    The deferred income tax expense for the year is the difference in net deferred
income tax liabilities at the beginning and end of the year. The provisions for
deferred income taxes in 2006 include net (charges)/credits for the effect of
changes in tax laws and rates of $81 million (2005  nil; 2004  $25 million).(b)
    
    Cash outflow from income taxes, plus investment credits earned, was $1,000
million in 2006 (2005  $1,024 million; 2004  $641 million). F-11




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##### Table of Contents



millions of dollars
    
     2006
    
    
     2005Depreciation and amortization
    
    
    1,588
    
    
    
    1,470Successful drilling and land acquisitions
    
    
    263
    
    
    
    319Pension and benefits (a)
    
    
    (311
    )
    
    
    (354
    )Site restoration
    
    
    (161
    )
    
    
    (171
    )Net tax loss carryforwards (b)
    
    
    (42
    )
    
    
    (49
    )Capitalized interest
    
    
    50
    
    
    
    26Other
    
    
    (42
    )
    
    
    (28
    )Deferred income tax liabilities
    
    
    1,345
    
    
    
    1,213LIFO inventory valuation
    
    
    (448
    )
    
    
    (487
    )Other
    
    
    (125
    )
    
    
    (167
    )Deferred income tax assets
    
    
    (573
    )
    
    
    (654
    )Valuation allowance
    
    
    
    
    
    
    Net deferred income tax liabilities
    
    
    772
    
    
    
    559
 (a)
    
    Income taxes charged directly to shareholders equity related to
post-retirement benefit liability adjustment were $66 million benefit in 2006 and
those related to minimum pension liability adjustment were $105 million benefit
and $41 million benefit in 2005 and 2004, respectively.(b)
    
    Tax losses can be carried forward indefinitely.  6.
    
    Employee retirement benefits
     Other post-retirementPension Benefits
    
    
     benefits2006
    
    
     2005
    
    
     2006
    
    
     2005Assumptions used to determine benefit obligations
at December 31 (percent)Discount rate
    
    
    5.25
    
    
    
    5.00
    
    
    
    5.25
    
    
    
    5.00Long-term rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50millions of dollarsChange in projected benefit obligationProjected benefit obligation at January 1
    
    
    4,784
    
    
    
    4,260
    
    
    
    458
    
    
    
    436Current service cost
    
    
    100
    
    
    
    86
    
    
    
    8
    
    
    
    7Interest cost
    
    
    238
    
    
    
    239
    
    
    
    23
    
    
    
    24Amendments
    
    
    
    
    
    
    20
    
    
    
    (2
    )
    
    
    Actuarial loss/(gain)
    
    
    (122
    )
    
    
    549
    
    
    
    (19
    )
    
    
    26Other
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    (13
    )Benefits paid (a)
    
    
    (284
    )
    
    
    (282
    )
    
    
    (27
    )
    
    
    (22
    )Projected benefit obligation at December 31
    
    
    4,716
    
    
    
    4,784
    
    
    
    441
    
    
    
    458
 F-12




---



##### Table of Contents



Other post-retirementPension Benefits
    
    
    benefitsmillions of dollars
    
     2006
    
    
     2005
    
    
     2006
    
    
     2005Accumulated benefit obligation at December 31
    
    
    4,207
    
    
    
    4,261Change in plan assetsFair value at January 1
    
    
    3,419
    
    
    
    2,984Actual return on plan assets
    
    
    514
    
    
    
    370Company contributions
    
    
    395
    
    
    
    350Other
    
    
    
    
    
    
    (59
    )Benefits paid (b)
    
    
    (239
    )
    
    
    (226
    )Fair value at December 31
    
    
    4,089
    
    
    
    3,419Plan assets in excess of/(less than) projected benefit obligation
at December 31Funded plans
    
    
    (294
    )
    
    
    (984
    )
    
    
    
    
    
    
    Unfunded plans
    
    
    (333
    )
    
    
    (381
    )
    
    
    (441
    )
    
    
    (458
    )Total (c)
    
    
    (627
    )
    
    
    (1,365
    )
    
    
    (441
    )
    
    
    (458
    )
 
 (a)
    
    Benefit payments for funded and unfunded plans.(b)
    
    Benefit payments for funded plan only.(c)
    
    Fair value of assets less projected benefit obligation shown above.  Pension Benefits
    
    Other post-retirement benefitsmillions of dollars
    
     2006
    
    
     2005
    
    
     2004
    
    
     2006
    
    
     2005
    
    
     2004Amounts recorded in the consolidated balance sheet consist of:Other intangible assets, net
    
    
    
    
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    Current liabilities
    
    
    (28
    )
    
    
    (24
    )
    
    
    
    
    
    
    (23
    )
    
    
    (23
    )Other long-term obligations
    
    
    (599
    )
    
    
    (818
    )
    
    
    
    
    
    
    (418
    )
    
    
    (334
    )Total
    
    
    (627
    )
    
    
    (749
    )
    
    
    
    
    
    
    (441
    )
    
    
    (357
    )Cumulative amounts recorded in other nonowner
changes in equity consist of:Net actuarial loss/(gain)
    
    
    947
    
    
    
    875
    
    
    
    
    
    
    
    73
    
    
    
    Prior service cost
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,021
    
    
    
    875
    
    
    
    
    
    
    
    73
    
    
    
    Assumptions used to determine net periodic benefit
cost for years ended December 31 (percent)Discount rate
    
    
    5.00
    
    
    
    5.75
    
    
    
    6.25
    
    
    
    5.00
    
    
    
    5.75
    
    
    
    6.25Long-term rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50Long-term rate of return on funded assets
    
    
    8.25
    
    
    
    8.25
    
    
    
    8.25
    
    
    
    
    
    
    
    
    
    
    
    millions of dollarsComponents of net periodic benefit costCurrent service cost
    
    
    100
    
    
    
    86
    
    
    
    76
    
    
    
    8
    
    
    
    7
    
    
    
    6Interest cost
    
    
    238
    
    
    
    239
    
    
    
    237
    
    
    
    23
    
    
    
    24
    
    
    
    24Expected return on plan assets
    
    
    (299
    )
    
    
    (257
    )
    
    
    (223
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    20
    
    
    
    25
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    Recognized actuarial loss/(gain)
    
    
    114
    
    
    
    83
    
    
    
    68
    
    
    
    8
    
    
    
    7
    
    
    
    4Net periodic benefit cost
    
    
    173
    
    
    
    176
    
    
    
    185
    
    
    
    39
    
    
    
    38
    
    
    
    34Changes in amounts recorded in other
nonowner changes in equityNet actuarial loss/(gain)
    
    
    72
    
    
    
    317
    
    
    
    143
    
    
    
    73
    
    
    
    
    
    
    
    Prior service cost
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total recorded in other nonowner changes in equity
    
    
    146
    
    
    
    317
    
    
    
    143
    
    
    
    73
    
    
    
    
    
    
    
    Total recorded in net periodic benefit cost and other
nonowner changes in equity, before tax
    
    
    319
    
    
    
    493
    
    
    
    328
    
    
    
    112
    
    
    
    38
    
    
    
    34
  F-13




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##### Table of Contents



Total pension and otherpost-retirement benefitsmillions of dollars
    
     2006
    
    
     2005
    
    
     2004(Charge)/credit to accumulated other nonowner
changes in equity, before tax
    
    
    (219
    )
    
    
    (317
    )
    
    
    (143
    )Deferred income tax (charge)/credit (note 5)
    
    
    66
    
    
    
    105
    
    
    
    41(Charge)/credit to accumulated other nonowner
changes in equity, after tax
    
    
    (153
    )
    
    
    (212
    )
    
    
    (102
    )
  Pre - SFAS 158 withminimum pensionliability
    
    
     SFAS 158 adoptionmillions of dollars
    
     adjustment
    
    
     adjustments
    
    
     Post - SFAS 158Other intangible assets, net
    
    
    73
    
    
    
    (6
    )
    
    
    67Total assets
    
    
    16,147
    
    
    
    (6
    )
    
    
    16,141Other long-term obligations
    
    
    990
    
    
    
    693
    
    
    
    1,683Deferred income tax liabilities
    
    
    1,557
    
    
    
    (212
    )
    
    
    1,345Accumulated other nonowner changes in equity
    
    
    (246
    )
    
    
    (487
    )
    
    
    (733
    )Total liabilities and shareholders equity
    
    
    16,147
    
    
    
    (6
    )
    
    
    16,141
    Target
    
    Percentage of plan assets atallocation
    
    December 31Asset category (percent)
    
    
    
    2007
    

    2006
    
    
    2005Equity securities
    
    
    
    50 - 75
    
    
    64
    
    
    
    62Debt securities
    
    
    
    25 - 50
    
    
    36
    
    
    
    38Other
    
    
    
    0 - 10
    
    
    
    
    
    
    
   Pension benefitsmillions of dollars
    
     2006
    
    
     2005For funded pension plans with accumulated benefit
obligations in excess of plan assets:Projected benefit obligation
    
    
    375
    
    
    
    4,403Accumulated benefit obligation
    
    
    308
    
    
    
    3,908Fair value of plan assets
    
    
    239
    
    
    
    3,419Accumulated benefit obligation less fair value of plan assets
    
    
    69
    
    
    
    489For unfunded plans covered by book reserves:Projected benefit obligation
    
    
    333
    
    
    
    381Accumulated benefit obligation
    
    
    314
    
    
    
    353
 F-14




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##### Table of Contents



Estimated 2007 amortization from accumulated
    
    
    
    
    
     Otherother nonowner changes in equity
    
    
    
    
    
     post-retirementmillions of dollars
    
     Pension benefits
    
    
     benefitsNet actuarial loss/(gain) (a)
    
    
    76
    
    
    
    6Prior service cost (b)
    
    
    19
    
    
    
    
 
 (a)
    
    The company amortizes the net balance of actuarial loss/(gain) over the average
remaining service period of active plan participants.(b)
    
    The company amortizes prior service cost on a straight-line basis as permitted under
SFAS 87. Cash flows
 Other post-retirementmillions of dollars
    
     Pension benefits
    
    
     benefits2007
    
    
    245
    
    
    
    232008
    
    
    248
    
    
    
    242009
    
    
    252
    
    
    
    242010
    
    
    257
    
    
    
    242011
    
    
    264
    
    
    
    242012 - 2016
    
    
    1,465
    
    
    
    123
  Sensitivities
  Increase/(decrease)
    
     One percent
    
    
     One percentmillions of dollars
    
     increase
    
    
     decreaseRate of return on plan assets:Effect on net benefit cost
    
    
    (40
    )
    
    
    40Discount rate:Effect on net benefit cost
    
    
    (60
    )
    
    
    70Effect on benefit obligation
    
    
    (590
    )
    
    
    730Rate of pay increases:Effect on net benefit cost
    
    
    40
    
    
    
    (35
    )Effect on benefit obligation
    
    
    185
    
    
    
    (150
    )
  Increase/(decrease)
    
     One percent
    
    
     One percentmillions of dollars
    
     increase
    
    
     decreaseEffect on service and interest cost components
    
    
    4
    
    
    
    (3
    )Effect on benefit obligation
    
    
    45
    
    
    
    (35
    )
 7.
    
    Other long-term obligations
 millions of dollars
    
     2006
    
    
     2005Employee retirement benefits (note 6)(a)
    
    
    1,017
    
    
    
    1,152Asset retirement obligations and other environmental liabilities (b)
    
    
    438
    
    
    
    423Other obligations
    
    
    228
    
    
    
    153Total other long-term obligations
    
    
    1,683
    
    
    
    1,728
 
 (a)
    
    Total recorded employee retirement benefit obligations also include $51 million in
current liabilities (2005  $47 million).(b)
    
    Total asset retirement obligations and other environmental liabilities also include
$97 million in current liabilities (2005  $76 million).  millions of dollars
    
     2006
    
    
     2005Asset retirement obligations liability at January 1
    
    
    367
    
    
    
    328Additions
    
    
    61
    
    
    
    53Accretion
    
    
    22
    
    
    
    20Settlement
    
    
    (28
    )
    
    
    (34
    )Asset retirement obligations liability at December 31
    
    
    422
    
    
    
    367
 F-15




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##### Table of Contents



8.
    
    Derivatives and financial instruments
   9.
    
    Share-based incentive compensation programs
  Incentive share units, deferred share units and restricted stock units
       Incentive share
    
    
     Deferred share
    
    
     Restrictedunits
    
    
     units
    
    
     stock units(a)
    
    
     (a)
    
    
     (a)Outstanding at January 1, 2006
    
    
    10,884,891
    
    
    
    138,567
    
    
    
    10,556,730Granted
    
    
    
    
    
    
    6,662
    
    
    
    1,935,658Exercised
    
    
    (1,797,141
    )
    
    
    (60,781
    )
    
    
    (2,488,047
    )Cancelled or adjusted
    
    
    (16,500
    )
    
    
    
    
    
    
    (7,951
    )Outstanding at December 31, 2006
    
    
    9,071,250
    
    
    
    84,448
    
    
    
    9,996,390
 
 (a)
    
    Reflects number of units granted after the share split in 2006, plus the number of
units granted prior to the share split in 2006 as adjusted for the share splits that
occurred in 1998 and 2006.   F-16




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##### Table of Contents



Incentive stock options
       Exercise
    
    
     Remainingprice
    
    
     contractual termUnits (a)
    
    
     (dollars) (b)
    
    
     (years)Incentive stock optionsOutstanding at January 1, 2006
    
    
    6,135,000
    
    
    
    15.50Granted
    
    
    Exercised
    
    
    (628,335
    )
    
    
    15.50Cancelled or adjusted
    
    
    21,000Outstanding at December 31, 2006
    
    
    5,527,665
    
    
    
    15.50
    
    
    
    5.3
 
 (a)
    
    Reflects number of units granted, as adjusted for any share splits.(b)
    
    Adjusted to reflect the three-for-one share split. 10.
    
    Investment and other income
  millions of dollars
    
     2006
    
    
     2005
    
    
     2004Proceeds from asset sales
    
    
    212
    
    
    
    440
    
    
    
    102Book value of assets sold
    
    
    78
    
    
    
    96
    
    
    
    59Gain/(loss) on asset sales, before tax(a)
    
    
    134
    
    
    
    344
    
    
    
    43Gain/(loss) on asset sales, after tax(a)
    
    
    96
    
    
    
    233
    
    
    
    32
 
 (a)
    
    2005 included a gain of $251 million ($163 million, after tax) from the sale of the
wholly owned Redwater and interests in the North Pembina fields. 11.
    
    Commitments and contingent liabilities
  Aftermillions of dollars
    
     2007
    
    
     2008
    
    
     2009
    
    
     2010
    
    
     2011
    
    
     2011Operating leases (a)
    
    
    53
    
    
    
    51
    
    
    
    46
    
    
    
    40
    
    
    
    35
    
    
    
    48Unconditional purchase obligations (b)
    
    
    58
    
    
    
    58
    
    
    
    57
    
    
    
    26
    
    
    
    26
    
    
    
    40Firm capital commitments (c)
    
    
    149
    
    
    
    11
    
    
    
    17
    
    
    
    1
    
    
    
    
    
    
    
    Other long-term agreements (d)
    
    
    271
    
    
    
    238
    
    
    
    164
    
    
    
    147
    
    
    
    128
    
    
    
    240
 
 (a)
    
    Total rental expense incurred for operating leases in 2006 was $79 million (2005 
$83 million; 2004  $104 million) which included minimum rental expenditures of $66
million (2005  $63 million; 2004  $77 million). Related rental income was not
material.(b)
    
    Unconditional purchase obligations are those long-term commitments that are
non-cancellable or cancellable only under certain conditions. These mainly pertain to
pipeline throughput agreements. Total payments under unconditional purchase
obligations were $100 million in 2006 (2005  $104 million; 2004  $117 million).(c)
    
    Firm capital commitments related to capital projects, shown on an undiscounted
basis, totalled approximately $178 million at the end of 2006 (2005  $232 million).
Commitments of $136 million were associated with the companys share of upstream
capital projects; the largest commitment of $41 million related to Syncrude.(d)
    
    Other long-term agreements include primarily raw material supply and
transportation services agreements. Total payments under other long-term agreements
were $441 million in 2006 (2005  $448 million; 2004  $355 million). Payments under
other long-term agreements related to the companys share of undivided interest in
activities conducted jointly with other companies are approximately $103 million per
year.  F-17




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##### Table of Contents



12.
    
    Common shares
 As at
    
    
     As atthousands of shares
    
     Dec. 31 2006
    
    
     Dec. 31 2005Authorized (prior period data have not been restated)
    
    
    1,100,000
    
    
    
    450,000
   Purchased shares
    
    
     Millions ofYear
    
     (thousands)
    
    
     dollars1995 to 2004
    
    
    697,582
    
    
    
    6,8402005
    
    
    52,527
    
    
    
    1,7952006
    
    
    45,514
    
    
    
    1,818Cumulative purchases to date
    
    
    795,623
    
    
    
    10,453
    Thousands of shares
    
    
     Millions of dollarsBalance as at January 1, 2004
    
    
    1,087,959
    
    
    
    1,859Issued for cash under the stock option plan
    
    
    822
    
    
    
    13Purchases
    
    
    (40,821
    )
    
    
    (71
    )Balance as at December 31, 2004
    
    
    1,047,960
    
    
    
    1,801Issued for cash under the stock option plan
    
    
    2,442
    
    
    
    38Purchases
    
    
    (52,527
    )
    
    
    (92
    )Balance as at December 31, 2005
    
    
    997,875
    
    
    
    1,747Issued for cash under the stock option plan
    
    
    627
    
    
    
    10Purchases
    
    
    (45,514
    )
    
    
    (80
    )Balance as at December 31, 2006
    
    
    952,988
    
    
    
    1,677
  2006
    
    
     2005
    
    
     2004Net income per common share  basicNet income (millions of dollars)
    
    
    3,044
    
    
    
    2,600
    
    
    
    2,052Weighted average number of common shares outstanding (thousands of shares)
    
    
    975,128
    
    
    
    1,024,119
    
    
    
    1,070,502Net income per common share (dollars)
    
    
    3.12
    
    
    
    2.54
    
    
    
    1.92Net income per common share  dilutedNet income (millions of dollars)
    
    
    3,044
    
    
    
    2,600
    
    
    
    2,052Weighted average number of common shares outstanding (thousands of shares)
    
    
    975,128
    
    
    
    1,024,119
    
    
    
    1,070,502Effect of employee stock-based awards (thousands of shares)
    
    
    4,460
    
    
    
    4,179
    
    
    
    2,454Weighted average number of common shares outstanding,
assuming dilution (thousands of shares)
    
    
    979,588
    
    
    
    1,028,298
    
    
    
    1,072,956Net income per common share (dollars)
    
    
    3.11
    
    
    
    2.53
    
    
    
    1.91
 F-18




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##### Table of Contents



13.
    
    Miscellaneous financial information
  million of dollars
    
     2006
    
    
     2005Crude oil
    
    
    211
    
    
    
    174Petroleum products
    
    
    277
    
    
    
    234Chemical products
    
    
    54
    
    
    
    63Natural gas and other
    
    
    14
    
    
    
    10Total inventories of crude oil and products
    
    
    556
    
    
    
    481
   14.
    
    Financing costs
 millions of dollars
    
     2006
    
    
     2005
    
    
     2004Debt-related interest
    
    
    63
    
    
    
    45
    
    
    
    37Capitalized interest
    
    
    (48
    )
    
    
    (41
    )
    
    
    (34
    )Net interest expense
    
    
    15
    
    
    
    4
    
    
    
    3Other interest
    
    
    13
    
    
    
    4
    
    
    
    4Total financing costs (a)
    
    
    28
    
    
    
    8
    
    
    
    7
 (a)
    
    Cash interest payments in 2006 were $71 million (2005  $45 million; 2004  $41
million). The weighted average interest rate on short-term borrowings in 2006 was 4.1
percent (2005  2.7 percent). 15.
    
    Transactions with related parties
     F-19




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##### Table of Contents



16. Net payments/payables to governments
 millions of dollars
    
     2006
    
    
     2005
    
    
     2004Current income tax expense (note 5)
    
    
    776
    
    
    
    1,361
    
    
    
    1,103Federal excise tax
    
    
    1,274
    
    
    
    1,278
    
    
    
    1,264Property taxes included in expenses
    
    
    100
    
    
    
    99
    
    
    
    85Payroll and other taxes included in expenses
    
    
    46
    
    
    
    52
    
    
    
    50GST/QST/HST collected (a)
    
    
    2,715
    
    
    
    2,703
    
    
    
    2,297GST/QST/HST input tax credits (a)
    
    
    (2,293
    )
    
    
    (2,344
    )
    
    
    (1,948
    )Other consumer taxes collected for governments
    
    
    1,667
    
    
    
    1,613
    
    
    
    1,670Crown royalties
    
    
    904
    
    
    
    620
    
    
    
    472Total paid or payable to governments
    
    
    5,189
    
    
    
    5,382
    
    
    
    4,993Less investment tax credits and other receipts
    
    
    11
    
    
    
    9
    
    
    
    14Net paid or payable to governments
    
    
    5,178
    
    
    
    5,373
    
    
    
    4,979Net paid or payable to:Federal government
    
    
    2,352
    
    
    
    2,736
    
    
    
    2,472Provincial governments
    
    
    2,726
    
    
    
    2,538
    
    
    
    2,422Local governments
    
    
    100
    
    
    
    99
    
    
    
    85Net paid or payable to governments
    
    
    5,178
    
    
    
    5,373
    
    
    
    4,979
 (a)
    
    The abbreviations refer to the federal goods and services tax, the Quebec sales
tax and the federal/provincial harmonized sales tax, respectively. The HST is
applicable in the provinces of Nova Scotia, New Brunswick and Newfoundland and
Labrador. F-20