##### Table of Contents



FORM 10-K
 
 For the fiscal year ended December 31, 2007
    
    Commission file number: 0-12014
 IMPERIAL OIL LIMITED
  CANADA
(State or other jurisdiction of 
incorporation or organization)
    
    98-0017682
(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:
 Name of each exchange onTitle of each class 
None
    
    which registered
None
 Securities registered pursuant to Section 12(g) of the Act:
Common Shares (without par value)
 
 (Title of Class)
  ü
  ü
  ü
  ü
  ü
  ü




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##### 



PagePART IItem 1.
    
    BusinessFinancial Information by Operating Segments
    
    
    3Natural Resources
    
    
    4Petroleum and Natural Gas Production
    
    
    4Land Holdings
    
    
    9Exploration and Development
    
    
    9Petroleum Products
    
    
    11Supply
    
    
    11Refining
    
    
    11Distribution
    
    
    11Marketing
    
    
    11Chemicals
    
    
    12Research
    
    
    12Environmental Protection
    
    
    12Human Resources
    
    
    13Competition
    
    
    13Government Regulation
    
    
    13The Company Online
    
    
    14Item 1A.
    
    Risk Factors
    
    
    14Item 1B.
    
    Unresolved Staff Comments
    
    
    16Item 2.
    
    Properties
    
    
    16Item 3.
    
    Legal Proceedings
    
    
    16Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    16PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    17Item 6.
    
    Selected Financial Data
    
    
    18Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    29Item 8.
    
    Financial Statements and Supplementary Data
    
    
    29Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    34Item 9A.
    
    Controls and Procedures
    
    
    34PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    35Item 11.
    
    Executive Compensation
    
    
    38Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    46Item 13.
    
    Certain Relationships and Related Transactions
    
    
    47Item 14.
    
    Principal Accountant Fees and Services
    
    
    48PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    49Index 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.
  2007
    
    2006
    
    2005
    
    2004
    
    2003(dollars)Rate at end of period
    
    
    1.0120
    
    
    
    0.8582
    
    
    
    0.8579
    
    
    
    0.8310
    
    
    
    0.7738Average rate during period
    
    
    0.9376
    
    
    
    0.8844
    
    
    
    0.8276
    
    
    
    0.7702
    
    
    
    0.7186High
    
    
    1.0908
    
    
    
    0.9100
    
    
    
    0.8690
    
    
    
    0.8493
    
    
    
    0.7738Low
    
    
    0.8437
    
    
    
    0.8528
    
    
    
    0.7872
    
    
    
    0.7158
    
    
    
    0.6349
  2




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##### Table of Contents



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)
 2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003External sales (1):
    
    (millions of dollars)Natural resources
    
    
    4,539
    
    
    
    4,619
    
    
    
    4,702
    
    
    
    3,689
    
    
    
    3,390Petroleum products
    
    
    19,230
    
    
    
    18,527
    
    
    
    21,793
    
    
    
    17,503
    
    
    
    14,710Chemicals
    
    
    1,300
    
    
    
    1,359
    
    
    
    1,302
    
    
    
    1,216
    
    
    
    994Corporate and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,069
    
    
    
    24,505
    
    
    
    27,797
    
    
    
    22,408
    
    
    
    19,094Intersegment sales:Natural resources
    
    
    4,146
    
    
    
    3,837
    
    
    
    3,487
    
    
    
    2,891
    
    
    
    2,224Petroleum products
    
    
    2,305
    
    
    
    2,256
    
    
    
    2,224
    
    
    
    1,666
    
    
    
    1,294Chemicals
    
    
    335
    
    
    
    345
    
    
    
    363
    
    
    
    293
    
    
    
    238Net income (2):Natural resources
    
    
    2,369
    
    
    
    2,376
    
    
    
    2,008
    
    
    
    1,517
    
    
    
    1,174Petroleum products
    
    
    921
    
    
    
    624
    
    
    
    694
    
    
    
    556
    
    
    
    462Chemicals
    
    
    97
    
    
    
    143
    
    
    
    121
    
    
    
    109
    
    
    
    44Corporate and other (3)/eliminations
    
    
    (199)
    
    
    
    (99)
    
    
    
    (223)
    
    
    
    (130)
    
    
    
    253,188
    
    
    
    3,044
    
    
    
    2,600
    
    
    
    2,052
    
    
    
    1,705Identifiable assets at December 31 (4):Natural resources
    
    
    8,171
    
    
    
    7,513
    
    
    
    7,289
    
    
    
    6,822
    
    
    
    6,397Petroleum products
    
    
    6,727
    
    
    
    6,450
    
    
    
    6,257
    
    
    
    5,509
    
    
    
    5,225Chemicals
    
    
    476
    
    
    
    504
    
    
    
    500
    
    
    
    490
    
    
    
    433Corporate and other/eliminations
    
    
    1,251
    
    
    
    1,674
    
    
    
    1,536
    
    
    
    1,206
    
    
    
    28216,287
    
    
    
    16,141
    
    
    
    15,582
    
    
    
    14,027
    
    
    
    12,337Capital and exploration expenditures:Natural resources
    
    
    744
    
    
    
    787
    
    
    
    937
    
    
    
    1,113
    
    
    
    1,007Petroleum products
    
    
    187
    
    
    
    361
    
    
    
    478
    
    
    
    283
    
    
    
    478Chemicals
    
    
    11
    
    
    
    13
    
    
    
    19
    
    
    
    15
    
    
    
    41Corporate and other
    
    
    36
    
    
    
    48
    
    
    
    41
    
    
    
    34
    
    
    
    33978
    
    
    
    1,209
    
    
    
    1,475
    
    
    
    1,445
    
    
    
    1,559
 
 (1)
    
    Export sales are reported in note 3 to the consolidated financial statements on page
F-10. Total external sales include $4,894 million for 2005, $3,584 million for 2004, and
$2,851 million for 2003 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, and $89 million for 2003. 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
  2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Conventional (including natural gas liquids):
    
    (thousands a day)Barrels
    
     Gross (1)
    
    
    45
    
    
    
    55
    
    
    
    69
    
    
    
    76
    
    
    
    74 Net (2)
    
    
    33
    
    
    
    42
    
    
    
    54
    
    
    
    59
    
    
    
    57Heavy Oil (3):Barrels
    
     Gross (1)
    
    
    154
    
    
    
    152
    
    
    
    139
    
    
    
    126
    
    
    
    129 Net (2)
    
    
    130
    
    
    
    127
    
    
    
    124
    
    
    
    112
    
    
    
    116Oil Sands (4):Barrels
    
     Gross (1)
    
    
    76
    
    
    
    65
    
    
    
    53
    
    
    
    60
    
    
    
    53 Net (2)
    
    
    65
    
    
    
    58
    
    
    
    53
    
    
    
    59
    
    
    
    52Total:Barrels
    
     Gross (1)
    
    
    275
    
    
    
    272
    
    
    
    261
    
    
    
    262
    
    
    
    256 Net (2)
    
    
    228
    
    
    
    227
    
    
    
    231
    
    
    
    230
    
    
    
    225
 
 (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 and 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.
   2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(millions a day)Sales (1):Cubic feet
    
    
    407
    
    
    
    513
    
    
    
    536
    
    
    
    520
    
    
    
    460Gross Production (2):Cubic feet
    
    
    458
    
    
    
    556
    
    
    
    580
    
    
    
    569
    
    
    
    513Net Production (2):Cubic feet
    
    
    404
    
    
    
    496
    
    
    
    514
    
    
    
    518
    
    
    
    457
 
 (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.
 4




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2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Average Sales Price:Crude oil and natural gas liquids:Dollars per barrel
    
    
    45.16
    
    
    
    45.13
    
    
    
    37.21
    
    
    
    32.95
    
    
    
    28.92Natural gas:Dollars per thousand cubic feet
    
    
    6.95
    
    
    
    7.24
    
    
    
    9.00
    
    
    
    6.78
    
    
    
    6.60Average Production Costs PerUnit of Net Production (1)(2):Dollars per barrel
    
    
    12.75
    
    
    
    11.08
    
    
    
    10.78
    
    
    
    9.25
    
    
    
    9.66
 
 (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.
      Crude Oil
    
    
    Natural Gas
    
    
    TotalGross (1)
    
    
    Net (2)
    
    
    Gross (1)
    
    
    Net (2)
    
    
    Gross (1)
    
    
    Net (2)Conventional wells
    
    
    1,139
    
    
    
    756
    
    
    
    5,090
    
    
    
    2,773
    
    
    
    6,229
    
    
    
    3,529Heavy Oil wells
    
    
    4,143
    
    
    
    4,143
    
    
    
    
    
    
    
    
    
    
    
    4,143
    
    
    
    4,143
 
 (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
   5




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Cold Lake
      Other Heavy Oil Activity
   Syncrude Mining Operations
  6




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7




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##### Table of Contents



2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Total mined overburden (1)
millions of cubic yards
    
    
    132.2
    
    
    
    128.2
    
    
    
    97.1
    
    
    
    100.3
    
    
    
    109.2Mined overburden to oil sands ratio (1)
    
    
    1.06
    
    
    
    1.18
    
    
    
    1.02
    
    
    
    0.94
    
    
    
    1.15Oil sands mined
millions of tons
    
    
    221.0
    
    
    
    195.5
    
    
    
    168.0
    
    
    
    188.0
    
    
    
    168.0Average
bitumen grade (weight percent)
    
    
    11.6
    
    
    
    11.4
    
    
    
    11.1
    
    
    
    11.1
    
    
    
    11.0Crude bitumen in mined oil sands
millions of tons
    
    
    25.6
    
    
    
    22.2
    
    
    
    18.6
    
    
    
    20.9
    
    
    
    18.5Average
extraction recovery (percent)
    
    
    91.8
    
    
    
    90.3
    
    
    
    89.1
    
    
    
    87.3
    
    
    
    88.6Crude bitumen production (2)
millions of barrels
    
    
    132.5
    
    
    
    111.6
    
    
    
    94.2
    
    
    
    103.3
    
    
    
    92.3Average
upgrading yield (percent)
    
    
    84.3
    
    
    
    84.9
    
    
    
    85.3
    
    
    
    85.5
    
    
    
    86.0Gross synthetic crude oil produced
millions of barrels
    
    
    113.0
    
    
    
    95.5
    
    
    
    79.3
    
    
    
    88.4
    
    
    
    78.4Companys net share (3)
millions of barrels
    
    
    23.7
    
    
    
    21.3
    
    
    
    19.3
    
    
    
    21.6
    
    
    
    19.1
 
 (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
   8




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##### Table of Contents



Land Holdings
  AcresDeveloped
    
    
    Undeveloped
    
    
    Total2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Western Provinces
    
    
    
    
    
    
    
    
    
    (thousands)Conventional Gross (1)
    
    
    2,529
    
    
    
    2,550
    
    
    
    371
    
    
    
    382
    
    
    
    2,900
    
    
    
    2,932Net (2)
    
    
    995
    
    
    
    1,006
    
    
    
    223
    
    
    
    235
    
    
    
    1,218
    
    
    
    1,241Heavy Oil Gross (1)
    
    
    102
    
    
    
    102
    
    
    
    429
    
    
    
    429
    
    
    
    531
    
    
    
    531Net (2)
    
    
    102
    
    
    
    102
    
    
    
    258
    
    
    
    258
    
    
    
    360
    
    
    
    360Oil Sands Gross (1)
    
    
    116
    
    
    
    116
    
    
    
    293
    
    
    
    294
    
    
    
    409
    
    
    
    410Net (2)
    
    
    29
    
    
    
    29
    
    
    
    134
    
    
    
    134
    
    
    
    163
    
    
    
    163Canada Lands (3):Conventional Gross (1)
    
    
    78
    
    
    
    78
    
    
    
    1,302
    
    
    
    794
    
    
    
    1,380
    
    
    
    872Net (2)
    
    
    8
    
    
    
    8
    
    
    
    496
    
    
    
    242
    
    
    
    504
    
    
    
    250Atlantic OffshoreConventional Gross (1)
    
    
    65
    
    
    
    42
    
    
    
    6,343
    
    
    
    6,425
    
    
    
    6,408
    
    
    
    6,467Net (2)
    
    
    6
    
    
    
    4
    
    
    
    1,513
    
    
    
    1,524
    
    
    
    1,519
    
    
    
    1,528Total (4):Gross (1)
    
    
    2,890
    
    
    
    2,888
    
    
    
    8,738
    
    
    
    8,324
    
    
    
    11,628
    
    
    
    11,212Net (2)
    
    
    1,140
    
    
    
    1,149
    
    
    
    2,624
    
    
    
    2,393
    
    
    
    3,764
    
    
    
    3,542
 
 (1)
    
    Gross acres include the interests of others.(2)
    
    Net acres exclude the interests of others.(3)
    
    Canada Lands include the Arctic Islands, Beaufort Sea/Mackenzie Delta, and other
Northwest Territories, Nunavut and Yukon regions.(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
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Western and Atlantic Provinces:ConventionalExploratory Oil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gas
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    3Dry Holes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Development Oil
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    4Gas
    
    
    183
    
    
    
    192
    
    
    
    155
    
    
    
    207
    
    
    
    89Dry Holes
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    3Heavy Oil (Cold Lake and other)Development Oil
    
    
    188
    
    
    
    174
    
    
    
    87
    
    
    
    218
    
    
    
    118Total
    
    
    371
    
    
    
    368
    
    
    
    245
    
    
    
    432
    
    
    
    218
  9




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Western Provinces
  Beaufort Sea/Mackenzie Delta
       Arctic Islands
  Atlantic Offshore
      10




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##### Table of Contents



Petroleum Products
 
 Supply
    
 Refining
    Average Daily Volumes of
    
    
    Daily RatedRefinery Throughput (1)
    
    
    Capacities atYear Ended December 31
    
    
    December 31 (2)2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2007
    
    
    2002(thousands of barrels)Strathcona, Alberta
    
    
    170
    
    
    
    160
    
    
    
    174
    
    
    
    170
    
    
    
    174
    
    
    
    187
    
    
    
    184Sarnia, Ontario
    
    
    103
    
    
    
    111
    
    
    
    106
    
    
    
    108
    
    
    
    92
    
    
    
    121
    
    
    
    121Dartmouth, Nova Scotia
    
    
    69
    
    
    
    77
    
    
    
    79
    
    
    
    80
    
    
    
    82
    
    
    
    82
    
    
    
    82Nanticoke, Ontario
    
    
    100
    
    
    
    94
    
    
    
    108
    
    
    
    109
    
    
    
    102
    
    
    
    112
    
    
    
    112Total
    
    
    442
    
    
    
    442
    
    
    
    466
    
    
    
    467
    
    
    
    450
    
    
    
    502
    
    
    
    499
 
 (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
    11




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##### Table of Contents



2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(thousands of cubic metres a day)Gasolines
    
    
    33.1
    
    
    
    32.7
    
    
    
    33.4
    
    
    
    33.2
    
    
    
    33.0Heating, Diesel and Jet Fuels
    
    
    26.0
    
    
    
    26.4
    
    
    
    26.9
    
    
    
    27.3
    
    
    
    26.2Heavy Fuel Oils
    
    
    5.2
    
    
    
    5.1
    
    
    
    6.0
    
    
    
    5.9
    
    
    
    5.4Lube Oils and Other Products
    
    
    6.9
    
    
    
    7.7
    
    
    
    7.6
    
    
    
    7.0
    
    
    
    5.8Net petroleum product sales
    
    
    71.2
    
    
    
    71.9
    
    
    
    73.9
    
    
    
    73.4
    
    
    
    70.4
  2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    200394.8
    %
    
    
    95.1
    %
    
    
    95.3
    %
    
    
    93.0
    %
    
    
    93.3
    %
  
 Chemicals
   2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(thousands of tonnes a day)Petrochemicals
    
    
    3.1
    
    
    
    3.0
    
    
    
    3.0
    
    
    
    3.3
    
    
    
    3.3
 
 Research
     
 Environmental Protection
  12




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##### Table of Contents



Human Resources
  
 Competition
  
 Government Regulation
 Petroleum and Natural Gas Rights
  Crude Oil
 Production
  Exports
  Natural Gas
 Production
  Exports
   Royalties
   13




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##### Table of Contents



Investment Canada Act
   
 The Company Online
  
 Item 1A. Risk Factors.
 Volatility of Oil and Natural Gas Prices
    Competitive Factors
   Environmental Risks
   14




---



##### Table of Contents



Climate Change
    Other Regulatory Risk
  Need to Replace Reserves
  Other Business Risks
  Uncertainty of Reserve Estimates
  15




---



##### Table of Contents



Project Factors
  Market Risk Factors
  
 Item 1B Unresolved Staff Comments.
  
 Item 2.   Properties.
  
 Item 3.   Legal Proceedings.
  
 Item 4.   Submission of Matters to a Vote of Security Holders.
  16




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##### 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
 2007
    
    
    
    2006three months ended
    
    
    
    three months endedMar. 31
    
    
Jun. 30
    
    
    Sep. 30
    
    
Dec. 31
    
    
    Mar. 31
    
    Jun. 30
    Sep. 30
    Dec. 31Financial data
    
    (millions of dollars)
    
    (millions of dollars)Total revenues and other income
    
    
    5,934
    
    
    
    6,339
    
    
    
    6,430
    
    
    
    6,740
    
    
    
    5,818
    
    
    
    6,688
    
    
    
    6,651
    
    
    
    5,631Total expenses
    
    
    4,819
    
    
    
    5,319
    
    
    
    5,240
    
    
    
    5,686
    
    
    
    4,928
    
    
    
    5,604
    
    
    
    5,421
    
    
    
    4,735Income before income taxes
    
    
    1,115
    
    
    
    1,020
    
    
    
    1,190
    
    
    
    1,054
    
    
    
    890
    
    
    
    1,084
    
    
    
    1,230
    
    
    
    896Income taxes
    
    
    (341
    )
    
    
    (308
    )
    
    
    (374
    )
    
    
    (168
    )
    
    
    (299)
    
    
    
    (247)
    
    
    
    (408)
    
    
    
    (102)Net income
    
    
    774
    
    
    
    712
    
    
    
    816
    
    
    
    886
    
    
    
    591
    
    
    
    837
    
    
    
    822
    
    
    
    794Per-share information(a)
    
    (dollars)
    
    (dollars)Net earnings  basic
    
    
    0.82
    
    
    
    0.76
    
    
    
    0.88
    
    
    
    0.97
    
    
    
    0.60
    
    
    
    0.85
    
    
    
    0.84
    
    
    
    0.83Net earnings  diluted
    
    
    0.81
    
    
    
    0.76
    
    
    
    0.88
    
    
    
    0.96
    
    
    
    0.59
    
    
    
    0.85
    
    
    
    0.84
    
    
    
    0.83Dividends (declared quarterly)
    
    
    0.08
    
    
    
    0.09
    
    
    
    0.09
    
    
    
    0.09
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08
    
    
    
    0.08Share prices(a)
    
    (dollars)
    
    (dollars)Toronto Stock ExchangeHigh
    
    
    43.75
    
    
    
    54.70
    
    
    
    51.90
    
    
    
    56.26
    
    
    
    42.28
    
    
    
    43.33
    
    
    
    45.20
    
    
    
    44.80Low
    
    
    37.40
    
    
    
    41.77
    
    
    
    40.86
    
    
    
    45.57
    
    
    
    35.36
    
    
    
    36.18
    
    
    
    35.33
    
    
    
    34.31Close
    
    
    42.80
    
    
    
    49.59
    
    
    
    49.29
    
    
    
    54.26
    
    
    
    41.91
    
    
    
    40.78
    
    
    
    37.47
    
    
    
    42.93American
Stock Exchange
    
    ($U.S.)
    
    ($U.S.)High
    
    
    38.29
    
    
    
    50.35
    
    
    
    50.95
    
    
    
    61.48
    
    
    
    36.67
    
    
    
    39.64
    
    
    
    40.38
    
    
    
    38.93Low
    
    
    31.87
    
    
    
    36.90
    
    
    
    37.99
    
    
    
    46.43
    
    
    
    30.54
    
    
    
    32.50
    
    
    
    31.64
    
    
    
    29.99Close
    
    
    37.12
    
    
    
    46.34
    
    
    
    49.56
    
    
    
    54.78
    
    
    
    35.85
    
    
    
    36.50
    
    
    
    33.55
    
    
    
    36.83
 
 (a)
    
    Adjusted to reflect the May 2006 three-for-one share split.
    17




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##### Table of Contents



Issuer purchases of equity securities (1)
 Period
    
    
    (a) Total number
    
    
    (b) Average price
    
    
    (c) Total number of
    
    
    (d) Maximum numberof shares
    
    
    paid per share
    
    
    shares purchased as
    
    
    (or approximate dollar value)(or units)
    
    
    (or unit)
    
    
    part of publicly
    
    
    of shares that may yet bepurchased
    
    
    
    
    
    
    
    announced plans or
    
    
    purchased under the plans orprograms
    
    
    programsOctober 2007(October 1 - October 31)
    
    
    
    1,498,890
    
    
    
    $
    48.00
    
    
    
    
    1,498,890
    
    
    
    
    30,445,586November 2007(November 1 - November 30)
    
    
    
    6,656,699
    
    
    
    $
    51.45
    
    
    
    
    6,656,699
    
    
    
    
    23,737,240December 2007(December 1 - December 31)
    
    
    
    2,971,920
    
    
    
    $
    51.70
    
    
    
    
    2,971,920
    
    
    
    
    20,714,852
 
 (1)
    
    The purchases were pursuant to a 12 month normal course share purchase program that was
renewed on June 25, 2007 under which the company may purchase up to 46,459,967 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 24,
2008.
 
 Item 6. Selected Financial Data.
 2007
    
    2006
    
    2005
    
    2004
    
    2003(millions of dollars)Total operating revenues (a)
    
    
    25,069
    
    
    
    24,505
    
    
    
    27,797
    
    
    
    22,408
    
    
    
    19,094Net income
    
    
    3,188
    
    
    
    3,044
    
    
    
    2,600
    
    
    
    2,052
    
    
    
    1,705Total assets
    
    
    16,287
    
    
    
    16,141
    
    
    
    15,582
    
    
    
    14,027
    
    
    
    12,337Long term debt
    
    
    38
    
    
    
    359
    
    
    
    863
    
    
    
    367
    
    
    
    859Other long term obligations
    
    
    1,914
    
    
    
    1,683
    
    
    
    1,728
    
    
    
    1,525
    
    
    
    1,314(dollars)Net income/share  basic (b)
    
    
    3.43
    
    
    
    3.12
    
    
    
    2.54
    
    
    
    1.92
    
    
    
    1.53Net income/share  diluted (b)
    
    
    3.41
    
    
    
    3.11
    
    
    
    2.53
    
    
    
    1.91
    
    
    
    1.53Cash dividends/share (b)
    
    
    0.35
    
    
    
    0.32
    
    
    
    0.31
    
    
    
    0.29
    
    
    
    0.29
 
 (a)
    
    Total operating revenues include $4,894 million for 2005, $3,584 million for 2004, and
$2,851 million for 2003 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
    18




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##### Table of Contents



Business environment and risk assessment
 Long-term business outlook
      Natural resources
   Petroleum products
     Chemicals
  19




---



##### Table of Contents



Results of operations
  Natural resources
  Financial statistics
 2007
    
    2006
    
    2005
    
    2004
    
    2003(millions of dollars)Net income
    
    
    2,369
    
    
    
    2,376
    
    
    
    2,008
    
    
    
    1,517
    
    
    
    1,174Operating revenues
    
    
    8,685
    
    
    
    8,456
    
    
    
    8,189
    
    
    
    6,580
    
    
    
    5,584
    Average realizations and prices
 2007
    
    2006
    
    2005
    
    2004
    
    2003(Canadian dollars)Conventional crude oil realizations (a barrel)
    
    
    71.70
    
    
    
    68.58
    
    
    
    64.48
    
    
    
    48.96
    
    
    
    40.10Natural gas liquids realizations (a barrel)
    
    
    47.92
    
    
    
    40.75
    
    
    
    40.00
    
    
    
    33.78
    
    
    
    32.09Natural gas realizations (a thousand cubic feet)
    
    
    6.95
    
    
    
    7.24
    
    
    
    9.00
    
    
    
    6.78
    
    
    
    6.60Par crude oil price at Edmonton (a barrel)
    
    
    77.67
    
    
    
    73.75
    
    
    
    69.86
    
    
    
    53.26
    
    
    
    43.93Heavy oil price at Hardisty (Bow River, a barrel)
    
    
    53.87
    
    
    
    51.90
    
    
    
    45.62
    
    
    
    37.98
    
    
    
    33.00
      20




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##### Table of Contents



Crude oil and NGLs  production and sales (a)
 2007
    
    2006
    
    2005
    
    2004
    
    2003gross
    
    net
    
    gross
    
    net
    
    gross
    
    net
    
    gross
    
    net
    
    gross
    
    net(thousands of barrels a day)Cold Lake
    
    
    154
    
    
    
    130
    
    
    
    152
    
    
    
    127
    
    
    
    139
    
    
    
    124
    
    
    
    126
    
    
    
    112
    
    
    
    129
    
    
    
    116Syncrude
    
    
    76
    
    
    
    65
    
    
    
    65
    
    
    
    58
    
    
    
    53
    
    
    
    53
    
    
    
    60
    
    
    
    59
    
    
    
    53
    
    
    
    52Conventional crude oil
    
    
    29
    
    
    
    21
    
    
    
    31
    
    
    
    23
    
    
    
    38
    
    
    
    29
    
    
    
    43
    
    
    
    33
    
    
    
    46
    
    
    
    35Total crude oil production
    
    
    259
    
    
    
    216
    
    
    
    248
    
    
    
    208
    
    
    
    230
    
    
    
    206
    
    
    
    229
    
    
    
    204
    
    
    
    228
    
    
    
    203NGLs available for sale
    
    
    16
    
    
    
    12
    
    
    
    24
    
    
    
    19
    
    
    
    31
    
    
    
    25
    
    
    
    33
    
    
    
    26
    
    
    
    28
    
    
    
    22Total crude oil and NGL production
    
    
    275
    
    
    
    228
    
    
    
    272
    
    
    
    227
    
    
    
    261
    
    
    
    231
    
    
    
    262
    
    
    
    230
    
    
    
    256
    
    
    
    225Cold Lake sales, including diluent (b)
    
    
    200
    
    
    
    
    
    
    
    198
    
    
    
    
    
    
    
    183
    
    
    
    
    
    
    
    167
    
    
    
    
    
    
    
    170NGL sales
    
    
    20
    
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    39
 Natural
gas  production and sales (a)
 2007
    
    2006
    
    2005
    
    2004
    
    2003gross
    
    net
    
    gross
    
    net
    
    gross
    
    net
    
    gross
    
    net
    
    gross
    
    net(millions of cubic feet a day)Production (c)
    
    
    458
    
    
    
    404
    
    
    
    556
    
    
    
    496
    
    
    
    580
    
    
    
    514
    
    
    
    569
    
    
    
    518
    
    
    
    513
    
    
    
    457Sales
    
    
    407
    
    
    
    
    
    
    
    513
    
    
    
    
    
    
    
    536
    
    
    
    
    
    
    
    520
    
    
    
    
    
    
    
    460
 
 (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
  Financial statistics
 2007
    
    2006
    
    2005
    
    2004
    
    2003(millions of dollars)Net income
    
    
    921
    
    
    
    624
    
    
    
    694
    
    
    
    556
    
    
    
    462Operating revenues (a)
    
    
    21,535
    
    
    
    20,783
    
    
    
    24,017
    
    
    
    19,169
    
    
    
    16,004
 Sale of petroleum products
 2007
    
    2006
    
    2005
    
    2004
    
    2003(millions of litres a day (b))Gasolines
    
    
    33.1
    
    
    
    32.7
    
    
    
    33.4
    
    
    
    33.2
    
    
    
    33.0Heating, diesel and jet fuels
    
    
    26.0
    
    
    
    26.4
    
    
    
    26.9
    
    
    
    27.3
    
    
    
    26.2Heavy fuel oils
    
    
    5.2
    
    
    
    5.1
    
    
    
    6.0
    
    
    
    5.9
    
    
    
    5.4Lube oils and other products
    
    
    6.9
    
    
    
    7.7
    
    
    
    7.6
    
    
    
    7.0
    
    
    
    5.8Net petroleum product sales
    
    
    71.2
    
    
    
    71.9
    
    
    
    73.9
    
    
    
    73.4
    
    
    
    70.4Total domestic sales of petroleum products (percent)
    
    
    94.8
    
    
    
    95.1
    
    
    
    95.3
    
    
    
    93.0
    
    
    
    93.3
 21




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##### Table of Contents



Refinery utilization
 2007
    
    2006
    
    2005
    
    2004
    
    2003(thousands of barrels a day (b))Total refinery throughput (c)
    
    
    442
    
    
    
    442
    
    
    
    466
    
    
    
    467
    
    
    
    450Refinery capacity at December 31
    
    
    502
    
    
    
    502
    
    
    
    502
    
    
    
    502
    
    
    
    502Utilization of total refinery capacity (percent)
    
    
    88
    
    
    
    88
    
    
    
    93
    
    
    
    93
    
    
    
    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-7.(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
 2007
    
    2006
    
    2005
    
    2004
    
    2003(millions of dollars)Net income
    
    
    97
    
    
    
    143
    
    
    
    121
    
    
    
    109
    
    
    
    44Operating revenues
    
    
    1,635
    
    
    
    1,704
    
    
    
    1,665
    
    
    
    1,509
    
    
    
    1,232
 Sales
 2007
    
    2006
    
    2005
    
    2004
    
    2003(thousands of tonnes a day (a))Polymers and basic chemicals
    
    
    2.2
    
    
    
    2.2
    
    
    
    2.1
    
    
    
    2.4
    
    
    
    2.4Intermediate and others
    
    
    0.9
    
    
    
    0.8
    
    
    
    0.9
    
    
    
    0.9
    
    
    
    0.9Total chemicals
    
    
    3.1
    
    
    
    3.0
    
    
    
    3.0
    
    
    
    3.3
    
    
    
    3.3
 
 (a)
    
    Calculated by dividing total volumes for the year by the number of days in the year.
    Corporate and other
  22




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##### Table of Contents



Liquidity and capital resources
 Sources and uses of cash
 2007
    
    2006(millions of dollars)Cash provided by/(used in)Operating activities
    
    
    3,626
    
    
    
    3,587Investing activities
    
    
    (620)
    
    
    
    (965)Financing activities
    
    
    (3,956)
    
    
    
    (2,125)Increase/(decrease) in cash and cash equivalents
    
    
    (950)
    
    
    
    497Cash and cash equivalents at end of year
    
    
    1,208
    
    
    
    2,158
    Cash flow from operating activities
  Cash flow from investing activities
  Capital and exploration expenditures
    2007
    
    2006
    
    2005
    
    2004
    
    2003(millions of dollars)Heavy oil and oil sands
    
    
    489
    
    
    
    518
    
    
    
    662
    
    
    
    819
    
    
    
    769Production
    
    
    150
    
    
    
    237
    
    
    
    232
    
    
    
    234
    
    
    
    181Exploration
    
    
    105
    
    
    
    32
    
    
    
    43
    
    
    
    60
    
    
    
    57Total capital and exploration expenditures
    
    
    744
    
    
    
    787
    
    
    
    937
    
    
    
    1,113
    
    
    
    1,007
  23




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##### Table of Contents



2007
    
    2006
    
    2005
    
    2004
    
    2003(millions of dollars)Refining and supply
    
    
    120
    
    
    
    248
    
    
    
    368
    
    
    
    178
    
    
    
    369Marketing
    
    
    63
    
    
    
    97
    
    
    
    91
    
    
    
    85
    
    
    
    91Other (a)
    
    
    4
    
    
    
    16
    
    
    
    19
    
    
    
    20
    
    
    
    18Total capital expenditures
    
    
    187
    
    
    
    361
    
    
    
    478
    
    
    
    283
    
    
    
    478
 
 (a)
    
    Consists primarily of real estate purchases.
    2007
    
    2006
    
    2005
    
    2004
    
    2003(millions of dollars)Capital expenditures
    
    
    11
    
    
    
    13
    
    
    
    19
    
    
    
    15
    
    
    
    41
    Cash flow from financing activities
   24




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##### Table of Contents



Financial percentages and ratios
 2007
    
    2006
    
    2005
    
    2004
    
    2003Total debt as a percentage of capital (a)
    
    
    2
    
    
    
    17
    
    
    
    18
    
    
    
    19
    
    
    
    21Interest coverage ratiosEarnings basis (b)
    
    
    72
    
    
    
    66
    
    
    
    88
    
    
    
    83
    
    
    
    64Cash-flow basis (c)
    
    
    82
    
    
    
    77
    
    
    
    101
    
    
    
    108
    
    
    
    80
 
 (a)
    
    Current and long-term portions of debt (page F-5) and the companys share of equity
company debt, 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.
  Commitments
  Financial
    
    
    
    
    
    Payment due by periodStatementNote Reference
    
    
    
    
    
    2009 to
    
    
    2013 and
    
    
    Total2008
    
    
    2012
    
    
    beyond
    
    
    Amount(millions of dollars)Long-term debt (a)
    
    Note 4
    
    
    3
    
    
    
    15
    
    
    
    23
    
    
    
    41Operating leases (b)
    
    Note 15
    
    
    55
    
    
    
    138
    
    
    
    39
    
    
    
    232Unconditional purchase obligations (c)
    
    Note 11
    
    
    99
    
    
    
    345
    
    
    
    38
    
    
    
    482Firm capital commitments (d)
    
    
    
    
    
    
    250
    
    
    
    43
    
    
    
    63
    
    
    
    356Pension and other post-retirement obligations (e)
    
    Note 6
    
    
    218
    
    
    
    194
    
    
    
    601
    
    
    
    1,013Asset retirement obligations (f)
    
    Note 7
    
    
    33
    
    
    
    199
    
    
    
    256
    
    
    
    488Other long-term purchase agreements (g)
    
    
    
    
    
    
    215
    
    
    
    590
    
    
    
    200
    
    
    
    1,005
 
 (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 are those long-term commitments that are
non-cancelable and that third parties have used to secure financing for the facilities that
will provide the contracted goods and services. They 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 2007 was $126 million associated with the
companys off-shore exploration projects.(e)
    
    The amount by which the 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 2008 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 purchase agreements are non-cancelable, long-term commitments other
than unconditional purchase obligations. They include primarily raw material supply and
transportation services agreements.
 25




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##### Table of Contents



Litigation and other contingencies
   Recently issued Statements of Financial Accounting Standards
 Fair Value Measurements
  Critical accounting policies
  Hydrocarbon reserves
   26




---



##### Table of Contents



Impact of reserves on depreciation
  Impact of reserves and prices on testing for impairment
      27




---



##### Table of Contents



Pension benefits
  Asset retirement obligations and other environmental liabilities
    Tax Contingencies
   28




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
      Earnings sensitivities
 millions of dollars after taxNine dollars (U.S.) a barrel change in crude oil prices
    
    +(-)
    
    
    330Sixty cents a thousand cubic feet change in natural gas prices
    
    +(-)
    
    
    6One cent (U.S) a litre change in sales margins for total petroleum products
    
    +(-)
    
    
    182One cent (U.S.) a pound change in sales margins for polyethylene
    
    +(-)
    
    
    6Ten 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 2007.
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
  29




---



##### Table of Contents



Synthetic Crude OilBase mine and
    
    Aurora mine
    
    TotalNorth mine(millions of barrels)Beginning of year 2005
    
    
    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
    
    
    
    718Revision of previous estimate
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (11)
    
    
    
    (13)
    
    
    
    (24)End of year 2007
    
    
    188
    
    
    
    506
    
    
    
    694
 Oil and Gas Producing Activities
  Results of operations
 2007
    
    2006
    
    2005(millions of dollars)Sales to customers (1)
    
    
    2,383
    
    
    
    2,601
    
    
    
    2,739Intersegment sales (1)(2)
    
    
    1,131
    
    
    
    1,251
    
    
    
    1,0133,514
    
    
    
    3,852
    
    
    
    3,752Production expenses
    
    
    1,074
    
    
    
    1,016
    
    
    
    1,035Exploration expenses
    
    
    100
    
    
    
    32
    
    
    
    31Depreciation and depletion
    
    
    371
    
    
    
    467
    
    
    
    583Income taxes
    
    
    526
    
    
    
    564
    
    
    
    716Results of operations
    
    
    1,443
    
    
    
    1,773
    
    
    
    1,387
 Capital and exploration expenditures
 2007
    

    2006
    

    2005(millions of dollars)Property costs (3)Proved
    
    
    
    
    
    
    
    
    
    
    Unproved
    
    
    1
    
    
    
    
    
    
    
    7Exploration costs
    
    
    100
    
    
    
    32
    
    
    
    37Development costs
    
    
    437
    
    
    
    496
    
    
    
    330Total capital and exploration expenditures
    
    
    538
    
    
    
    528
    
    
    
    374
 30




---



##### Table of Contents



Property, plant and equipment
 2007
    
    
    
    2006(millions of dollars)Property costs (3)Proved
    
    
    3,167
    
    
    
    3,226Unproved
    
    
    148
    
    
    
    139Producing assets
    
    
    6,706
    
    
    
    6,392Support facilities
    
    
    180
    
    
    
    184Incomplete construction
    
    
    579
    
    
    
    595Total cost
    
    
    10,780
    
    
    
    10,536Accumulated depreciation and depletion
    
    
    7,505
    
    
    
    7,326Net property, plant and equipment
    
    
    3,275
    
    
    
    3,210
 
 (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. Oil and Gas Reserves
 Proved developed and undeveloped reserves (1)
 Crude oil and natural gas liquids
    
    Natural GasConventional
    
    


Heavy Oil (2)
    
    
    Total
    
    
    
    Total(millions of barrels)
    
    (billions ofcubic feet)Beginning of year 2005
    
    
    115
    
    
    
    232
    
    
    
    347
    
    
    
    791Revisions
    
    
    
    
    
    
    350
    
    
    
    350
    
    
    
    137Improved recovery
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    4
    
    
    
    236
    
    
    
    240
    
    
    
    140Improved recovery
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Sale)/purchase of reserves in place
    
    
    (1)
    
    
    
    
    
    
    
    (1)
    
    
    
    (6)Discoveries and extensions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Production
    
    
    (15)
    
    
    
    (46)
    
    
    
    (61)
    
    
    
    (181)End of year 2006
    
    
    71
    
    
    
    741
    
    
    
    812
    
    
    
    710Revisions
    
    
    24
    
    
    
    (27)
    
    
    
    (3)
    
    
    
    75Improved recovery
    
    
    
    
    
    
    6
    
    
    
    6
    
    
    
    1(Sale)/purchase of reserves in place
    
    
    (1)
    
    
    
    
    
    
    
    (1)
    
    
    
    (12)Discoveries and extensions
    
    
    
    
    
    
    44
    
    
    
    44
    
    
    
    8Production
    
    
    (12)
    
    
    
    (47)
    
    
    
    (59)
    
    
    
    (147)End of year 2007
    
    
    82
    
    
    
    717
    
    
    
    799
    
    
    
    635
 (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.   31




---



##### Table of Contents



Net proved developed and undeveloped reserves of crude oil and natural gas as of December 31 (1)
 2007
    
    2006
    
    2005
    
    2004
    
    2003Crude Oil (millions)ConventionalBarrels
    
    
    82
    
    
    
    71
    
    
    
    83
    
    
    
    115
    
    
    
    126Heavy OilBarrels
    
    
    717
    
    
    
    741
    
    
    
    551
    
    
    
    232
    
    
    
    763TotalBarrels
    
    
    799
    
    
    
    812
    
    
    
    634
    
    
    
    347
    
    
    
    889Natural Gas (billions)Cubic feet
    
    
    635
    
    
    
    710
    
    
    
    747
    
    
    
    791
    
    
    
    1,023
 
 (1)
    
    Net reserves are the companys share of reserves after deducting the shares of mineral
owners or governments or both.
 32




---



##### Table of Contents



Net proved developed reserves of crude oil and natural gas as of December 31 (1
 2007
    
    2006
    
    2005
    
    2004
    
    2003Crude Oil (millions)ConventionalBarrels
    
    
    82
    
    
    
    71
    
    
    
    81
    
    
    
    111
    
    
    
    121Heavy OilBarrels
    
    
    483
    
    
    
    501
    
    
    
    368
    
    
    
    232
    
    
    
    398TotalBarrels
    
    
    565
    
    
    
    572
    
    
    
    449
    
    
    
    343
    
    
    
    519Natural Gas (billions)Cubic feet
    
    
    539
    
    
    
    608
    
    
    
    643
    
    
    
    704
    
    
    
    859
 
 (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 cash flows
  Standardized measure of discounted future net cash flows related to proved oil and gas reserves
 2007
    
    
    2006
    
    
    2005(millions of dollars)Future cash flows
    
    
    32,415
    
    
    
    36,751
    
    
    
    21,911Future production costs
    
    
    (14,475)
    
    
    
    (16,290)
    
    
    
    (11,376)Future development costs
    
    
    (3,548)
    
    
    
    (2,633)
    
    
    
    (2,039)Future income taxes
    
    
    (3,655)
    
    
    
    (5,039)
    
    
    
    (2,777)Future net cash flows
    
    
    10,737
    
    
    
    12,789
    
    
    
    5,719Annual discount of 10 percent for estimated timing of cash flows
    
    
    (4,487)
    
    
    
    (6,374)
    
    
    
    (1,405)Discounted future cash flows
    
    
    6,250
    
    
    
    6,415
    
    
    
    4,314
 Changes in standardized measure of discounted future net cash flows related to proved oil and gas reserves
 2007
    
    
    2006
    
    
    2005(millions of dollars)Balance at beginning of year
    
    
    6,415
    
    
    
    4,314
    
    
    
    3,317Changes resulting from:Sales and transfers of oil and gas produced, net of production costs
    
    
    (2,430)
    
    
    
    (2,839)
    
    
    
    (2,650)Net changes in prices, development costs and production costs
    
    
    (625)
    
    
    
    4,221
    
    
    
    3,343Extensions, discoveries, additions and improved recovery, less related costs
    
    
    164
    
    
    
    (4)
    
    
    
    (513)Development costs incurred during the year
    
    
    412
    
    
    
    411
    
    
    
    272Revisions of previous quantity estimates
    
    
    1,285
    
    
    
    87
    
    
    
    660Accretion of discount
    
    
    710
    
    
    
    568
    
    
    
    417Net change in income taxes
    
    
    319
    
    
    
    (343)
    
    
    
    (532)Net change
    
    
    (165)
    
    
    
    2,101
    
    
    
    997Balance at end of year
    
    
    6,250
    
    
    
    6,415
    
    
    
    4,314
  33




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
     34




---



##### 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
Senior vice-president,
resources division,
Imperial Oil Limited
    
    
    Global planning manager,
ExxonMobil Production
Company
    
    
    July 21, 2005
    
    
    Common shares of
Imperial Oil Limited
Deferred share units of
Imperial Oil Limited
Restricted stock units of
Imperial Oil Limited
Shares of
Exxon Mobil Corporation (6)
    
    
    7,500
0
0
66,229Krystyna T. Hoeg
Retired president and
chief executive officer
of Corby Distilleries
Limited
    
    
    
    
    
    Not currently a
member of the board
    
    
    Common shares of
Imperial Oil Limited
Deferred share units of
Imperial Oil Limited
Restricted stock units of
Imperial Oil Limited
Shares of
Exxon Mobil Corporation
    
    
    0
0
0
0Bruce H. March
President,
Imperial Oil Limited
    
    
    Director, refining
Europe/Africa/Middle East,
ExxonMobil Petroleum &
Chemicals, Brussels,
Belgium
    
    
    January 1, 2008
    
    
    Common shares of
Imperial Oil Limited
Deferred share units of
Imperial Oil Limited
Restricted stock units of
Imperial Oil Limited
Shares of
Exxon Mobil Corporation (6)
    
    
    5,000
0
0
70,929J.M. (Jack) Mintz
Palmer Chair in Public
Policy for the
University of Calgary
(1)(2)
    
    
    
    
    

April 21, 2005
    
    
    Common shares of
Imperial Oil Limited
Deferred share units
of Imperial Oil Limited
Restricted stock units
of Imperial Oil Limited
Shares of
Exxon Mobil Corporation
    
    
    1,000
1,684
8,000
0
  35




---



##### 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)R. (Roger) Phillips
Retired president and
chief executive officer,
IPSCO Inc.
(steel manufacturing) (1)(2)
    
    
    
    
    
    April 23, 2002
    
    
    Common shares of
Imperial Oil Limited
Deferred share units of
Imperial Oil Limited
Restricted stock units
of Imperial Oil Limited
Shares of
Exxon Mobil Corporation
    
    
    9,000
14,887
12,125
2,000P.A. (Paul) Smith
Senior vice-president, 

finance and administration, 

and treasurer 

Imperial Oil Limited (2)
    
    
    Controller and senior
vice-president, finance
and administration
    
    
    February 1, 2002
    
    
    Common shares of
Imperial Oil Limited
Deferred share units of
Imperial Oil Limited
Restricted stock units of
Imperial Oil Limited
Shares of
Exxon Mobil Corporation
    
    
    13,337
0
190,250
1,662S.D. (Sheelagh) Whittaker
Retired managing director,
Electronic Data Systems
Limited (business and
information technology
services)
 (1)(2)
    
    
    
    
    
    April 19, 1996
    
    
    Common shares of
Imperial Oil Limited
Deferred share units of
Imperial Oil Limited
Restricted stock units of
Imperial Oil Limited
Shares of
Exxon Mobil Corporation
    
    
    9,000
30,452
12,125
0V.L. (Victor) Young
Corporate director of
several corporations (1)(2)
    
    
    
    
    
    April 23, 2002
    
    
    Common shares of
Imperial Oil Limited
Deferred share units of
Imperial Oil Limited
Restricted stock units
of Imperial Oil Limited
Shares of
Exxon Mobil Corporation
    
    
    10,250
5,320
12,125
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 43 and page 44 respectively.(5)
    
    The numbers for the companys restricted stock units and deferred share units represent
the total of the restricted stock units and deferred share units received in 2006 and 2007
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 17,729 common shares and 48,500 restricted shares of Exxon Mobil
Corporation. B.H. March holds 20,679 common shares and 50,250 restricted shares and
restricted stock units of Exxon Mobil Corporation.
 36




---



##### Table of Contents



Name and Office
    
    Office held sinceTimothy J. Hearn
chairman of the board
and chief executive officer
    
    January 1, 2008Bruce H. March 
president
    
    January 1, 2008Paul A. Smith
senior vice-president,
finance and administration,
and treasurer
    
    February 1, 2008Randy L. Broiles 
senior vice-president, resources division
    
    July 1, 2005Brian W. Livingston
vice-president, general counsel and corporate secretary
    
    August 1, 2004
  Audit committee
  Audit committee financial expert
  Code of ethics
  37




---



##### Table of Contents



Item 11. Executive Compensation.
 Composition of the companys compensation committee
  
  Executive Resources Committee Report on Executive Compensation
 Compensation Discussion and Analysis
     Base Salary
  Cash Bonus
   Medium/Long-Term Incentive Compensation
  38




---



##### Table of Contents



CEO compensation
    Directors compensation
    39




---



##### Table of Contents



Senior executive compensation  Summary Compensation Table
  Annual Compensation
    
    
    Long-Term CompensationAwards
    
    
    
    
    
    
    
    PayoutsShares or
    
    
    Shares orSecurities
    
    
    Units
    
    
    UnitsUnder
    
    
    Subject to
    
    
    Subject toName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Annual
    
    
    Options/
    
    
    Resale
    
    
    Resale
    
    
    LTIP
    
    
    All Other
    
    
    TotalPrincipal
    
    
    
    
    
    
    
    
    
    
    
    
    Bonus
    
    
    Compensation
    
    
    SARs
    
    
    Restrictions
    
    
    Restrictions
    
    
    Payouts
    
    
    Compensation
    
    
    CompensationPosition at the
    
    
    
    
    
    
    
    Salary
    
    
    (2)
    
    
    (3)
    
    
    Granted (4)
    
    
    (5) (6)
    
    
    (5) (6)
    
    
    (7)
    
    
    (8)
    
    
    (9)end of 2007
    
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    (#)
    
    
    (#)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)T.J. Hearn
    
    
    
    2007
    
    
    
    
    1,200,000
    
    
    
    
    1,000,050
    
    
    
    
    671,855
    
    
    
    
    
    
    
    
    
    130,000
    
    
    
    
    6,464,900
    
    
    
    
    999,950
    
    
    
    
    36,000
    
    
    
    
    10,372,755Chairman,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedpresident and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock unitschief executive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    109officer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    deferred2006
    
    
    
    
    1,140,000
    
    
    
    
    1,000,050
    
    
    
    
    562,665
    
    
    
    
    
    
    
    
    share units 130,000
    
    
    
    5,623,800
    
    
    
    
    900,000
    
    
    
    
    34,200
    
    
    
    
    9,260,801restrictedstock units2
    
    
    
    
    86deferred share units2005
    
    
    
    
    1,100,000
    
    
    
    
    900,000
    
    
    
    
    385,028
    
    
    
    
    
    
    
    
    
    193,200
    
    
    
    
    7,432,404
    
    
    
    
    870,000
    
    
    
    
    33,000
    
    
    
    
    10,720,526restricted stockunits3
    
    
    
    
    115deferred share unitsP.A. Smith
    
    
    
    2007
    
    
    
    
    412,500
    
    
    
    
    181,233
    
    
    
    
    125,486
    
    
    
    
    
    
    
    
    
    27,200
    
    
    
    
    1,352,656
    
    
    
    
    197,225
    
    
    
    
    24,750
    
    
    
    
    2,293,850Controller and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedsenior
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock unitsvice-president,
    
    
    
    2006
    
    
    
    
    404,167
    
    
    
    
    197,267
    
    
    
    
    111,279
    
    
    
    
    
    
    
    
    
    35,100
    
    
    
    
    1,518,426
    
    
    
    
    193,050
    
    
    
    
    24,250
    
    
    
    
    2,448,439finance and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedadministration
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock units2005
    
    
    
    
    398,333
    
    
    
    
    193,675
    
    
    
    
    87,198
    
    
    
    
    
    
    
    
    55,200 restricted
    
    
    
    2,123,544
    
    
    
    
    193,125
    
    
    
    
    23,900
    
    
    
    
    3,019,775stock unitsR.L. Broiles (1)
    
    
    
    2007
    
    
    

    U.S. 345,000

    
    

    U.S. 159,000

    
    

    U.S. 206,336

    
    
    
    
    
    
    
    
    11,000
    
    
    

U.S. 967,120

    
    

U.S. 159,265

    
    

U.S. 22,950

    
    

    U.S. 1,859,671Senior
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedvice-president,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    sharesresources division
    
    
    
    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. 1,883,742(from July 1, 2005)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedshares2005
    
    
    
         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. 1,179,882restrictedsharesB.W. Livingston
    
    
    
    2007
    
    
    
    
    342,916
    
    
    
    
    157,574
    
    
    
    
    75,274
    
    
    
    
    
    
    
    
    
    22,000
    
    
    
    
    1,094,060
    
    
    
    
    158,900
    
    
    
    
    10,287
    
    
    
    
    1,839,011Vice-president,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedgeneral counsel
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock unitsand
corporate
    
    
    
    2006
    
    
    
    
    318,750
    
    
    
    
    159,088
    
    
    
    
    83,236
    
    
    
    
    
    
    
    
    22,000
    
    
    
    951,720
    
    
    
    
    153,450
    
    
    
    
    9,562
    
    
    
    
    1,675,806secretary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedstock units2005
    
    
    
    
    303,750
    
    
    
    
    154,330
    
    
    
    
    66,401
    
    
    
    
    
    
    
    
    
    33,000
    
    
    
    
    1,269,510
    
    
    
    
    128,625
    
    
    
    
    9,112
    
    
    
    
    1,931,648restrictedstock unitsJ.F. Kyle
    
    
    
    2007
    
    
    
    
    366,166
    
    
    
    
    122,083
    
    
    
    
    103,405
    
    
    
    
    
    
    
    
    
    19,000
    
    
    
    
    944,870
    
    
    
    
    119,000
    
    
    
    
    21,970
    
    
    
    
    1,677,494Vice-president
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    restrictedand treasurer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    stock units2006
    
    
    
    
    365,000
    
    
    
    
    119,145
    
    
    
    
    124,081
    
    
    
    
    
    
    
    
    
    20,800
    
    
    
    
    899,808
    
    
    
    
    112,500
    
    
    
    
    21,900
    
    
    
    
    1,642,434restrictedstock units2005
    
    
    
    
    364,166
    
    
    
    
    112,500
    
    
    
    
    90,821
    
    
    
    
    
    
    
    
    
    33,900
    
    
    
    
    1,304,133
    
    
    
    
    171,375
    
    
    
    
    21,850
    
    
    
    
    2,064,845restrictedstock units
 40




---



##### 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 ExxonMobil 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 2007, the dividend equivalent payments were
$228,476 for T.J. Hearn, $64,476 for P.A. Smith, $38,285 for B.W. Livingston and $42,986
for J.F. Kyle. In 2007, the interest paid in respect of deferred payments of bonuses and
earnings bonus units was $335,446 for T.J. Hearn, $6,010 for P.A. Smith, $21,989 for B.W.
Livingston and $30,420 for J.F. Kyle. Also included is an earned benefits allowance. The
earned benefits allowance in 2007 was $70,000 for T.J. Hearn, $45,000 for P.A. Smith,
$15,000 for B.W. Livingston and $30,000 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 44.(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 44 and 43
respectively. The number of restricted stock units and deferred share units for 2006 and
2007 are the number of units actually received. The numbers shown for restricted stock
units and deferred share units for 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 $38.47 in 2005, $43.26 for
2006 and $49.73 for 2007 (all on a post-split basis). T.J. Hearn is the only senior
executive who holds deferred share units and he received additional deferred shares from
dividends on his existing deferred shares. The values of the deferred share units shown are
the number of such additional deferred share units multiplied by the year-end closing
price. R.L. Broiles participates in Exxon Mobil Corporations restricted stock plan under
which the grantee may receive restricted stock or restricted stock units (both of which are
referred to herein as restricted stock or restricted shares), which plan is similar to the
companys restricted stock unit plan. Under that plan, R.L. Broiles was granted 11,000
restricted shares in 2007, whose value on the date of grant (November 28, 2007) was
$967,120 U.S., based on a closing price of Exxon Mobil Corporation shares on the date of
grant of $87.92 U.S.(6)
    
    The table below shows the number and value of restricted stock units and deferred share
units held as of December 31, 2007. 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 and 2007 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, 2007 was $54.62.
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
48,500 restricted shares whose value on December 31, 2007 was $4,543,965 U.S. based on a
closing price for Exxon Mobil Corporation shares on December 31, 2007 of $93.69 U.S. Restricted Stock Units
    
    
    Deferred Share UnitsName
    
    
    Total (#)
    
    
    Total ($)
    
    
    Total (#)
    
    
    Total ($)T.J. Hearn
    
    
    714,800
    
    
    39,042,376
    
    
    306
    
    
    16,714P.A. Smith
    
    
    190,250
    
    
    10,391,455
    
    
    0
    
    
    0R.L. Broiles
    
    
    
    
    
    
    
    
    
    
    
    B.W. Livingston
    
    
    119,750
    
    
    6,540,745
    
    
    0
    
    
    0J.F. Kyle
    
    
    126,500
    
    
    6,909,430
    
    
    0
    
    
    0
 
 (7)
    
    Payouts were from 2006 earnings bonus units that reached maximum value of $1.75 per
unit in 2007. That plan is described on page 44. 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 2005, 2006 and 2007 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. 
 41




---



##### Table of Contents



Earnings
Bonus Unit Plan  awards in most recently completed financial year
  PerformanceSecurities
    
    
    or Other
    
    
    Estimated Future Payouts UnderName
    
    
    Units or
    
    
    Period Until
    
    
    Non-Securities-Price Based PlansOther Rights
    
    
    Maturation or(#)
    
    
    Payout (1)
    
    
    Threshold
    
    
    Target
    
    
    Maximum($)
    
    
    ($) (2)
    
    
    ($) (2)T.J. Hearn
    
    
    444,400
    
    
    Nov 20, 2012
    
    
    0
    
    
    2.25
    
    
    2.25P.A. Smith
    
    
    80,500
    
    
    Nov 20, 2012
    
    
    0
    
    
    2.25
    
    
    2.25R.L. Broiles (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    B.W. Livingston
    
    
    70,000
    
    
    Nov 20, 2012
    
    
    0
    
    
    2.25
    
    
    2.25J.F. Kyle
    
    
    54,200
    
    
    Nov 20, 2012
    
    
    0
    
    
    2.25
    
    
    2.25
 (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 2007.(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 2007, R.L Broiles was granted
31,800 units under that plan for which the maximum settlement value payable per earnings
bonus unit is $5.00 U.S.
 Aggregated option/SAR exercises during the most recently completed financial year and financial
year end option/SAR values
  Securities
    
    
    Aggregate
    
    
    Unexercised
    
    
    Value ofAcquired
    
    
    Value
    
    
    Options/SARs
    
    
    UnexercisedName
    
    
    on Exercise
    
    
    Realized
    
    
    at Financial
    
    
    in-the-Money(#)
    
    
    ($)
    
    
    Year End
    
    
    Options/SARs(#)
    
    
    at FinancialYear End($)Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    Unexercisable(1)
    
    
    
    
    
    (1)T.J. Hearn
    
    
    
    
    
    2,711,250
    
    
    0
    
    
    0
    
    
    0
    
    
    0P.A. Smith
    
    
    
    
    
    596,100
    
    
    120,000
    
    
    0
    
    
    5,115,900
    
    
    0R.L. Broiles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    B.W. Livingston
    
    
    
    
    
    0
    
    
    0
    
    
    0
    
    
    0
    
    
    0J.F. Kyle
    
    
    
    
    
    0
    
    
    0
    
    
    0
    
    
    0
    
    
    0
  (1)
    
    Unexercisable units are units for which the conditions for exercise have not been met.
 42




---



##### Table of Contents



Securities
    
    
    Aggregate
    
    
    Unexercised
    
    
    Value ofAcquired
    
    
    Value
    
    
    Options/SARs
    
    
    UnexercisedName
    
    
    on Exercise
    
    
    Realized
    
    
    at Financial
    
    
    in-the-Money(#) (1)
    
    
    ($)
    
    
    Year End
    
    
    Options/SARs(#) (1)
    
    
    at FinancialYear
End($)Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    Unexercisable(2)
    
    
    
    
    
    (2)T.J. Hearn
    
    
    10,002
    
    
    296,272
    
    
    154,998
    
    
    0
    
    
    6,063,522
    
    
    0P.A. Smith
    
    
    
    
    
    
    
    
    75,000
    
    
    0
    
    
    2,934,000
    
    
    0R.L. Broiles (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    B.W. Livingston
    
    
    15,000
    
    
    512,255
    
    
    30,000
    
    
    0
    
    
    1,173,600
    
    
    0J.F. Kyle
    
    
    57,000
    
    
    1,790,530
    
    
    0
    
    
    0
    
    
    0
    
    
    0
  (1)
    
    The number for the stock options represents three times the number of stock options
granted in 2002 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 2007, R. L. Broiles held options to acquire 56,398 Exxon Mobil
Corporation shares of which all options were exercisable. The value of R.L. Broiles
exercisable options was $ 2,976,628 U.S. at the end of 2007. In 2007, R.L. Broiles
exercised 55,598 options and realized an aggregate value of $ 2,463,063 U.S.. Details of long-term and medium-term incentive compensation
     43




---



##### Table of Contents



44




---



##### Table of Contents



Payments to Employees Who Retire
 Remuneration fordetermining
    
    
    Estimated undiscounted payments on retirementpayments
    
    
    at the age of 65 after years of service indicated below ($) (1)on retirement($)
    
    
    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
  (1)
    
    Payment calculations exclude the effect of integration with CPP/QPP and OAS.    45




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##### Table of Contents



Executive Pension Value Disclosure
 Accrued
    
    
    Annual PensionCurrent 2007
    
    
    Obligations at
    
    
    Benefit Payable at
    
    
    Age
    
    
    
    
    
    NormalService Cost
    
    
    Dec. 31, 2007
    
    
    age 65
    
    
    (at Dec. 31,
    
    
    Credited
    
    
    RetirementName
    
    
    ($)(3)
    
    
    (4)
    
    
    (5)
    
    
    2007)
    
    
    Service
    
    
    AgeT.J. Hearn
    
    
    515,200
    
    
    24,482,600
    
    
    2,144,400
    
    
    63
    
    
    41
    
    
    65P.A. Smith
    
    
    133,600
    
    
    3,624,900
    
    
    474,000
    
    
    54
    
    
    27
    
    
    65R.L. Broiles
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    28
    
    
    65B.W. Livingston
    
    
    122,000
    
    
    2,522,900
    
    
    382,800
    
    
    53
    
    
    23
    
    
    65J.F. Kyle
    
    
    90,100
    
    
    3,535,400
    
    
    298,800
    
    
    64
    
    
    31
    
    
    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 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 2007
service cost was $237,418 U.S., the accrued obligations at December 31, 2007 with respect
to R.L. Broiles was $1,469,568 U.S. and his annual pension benefit payable at age 65 will
be $450,425 U.S.(3)
    
    Service cost is the actuarial value of benefits earned under the pension benefit
formula for the calendar year 2007. Amounts shown are consistent with disclosure in Note 6
of the 2007 Consolidated Financial Statements.(4)
    
    Accrued obligation is the value of the projected benefit obligation for pension earned
for service to December 31, 2007. 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 2007 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.
    46




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##### Table of Contents



Equity Compensation Plan Information
  Plan category
    
    
    Number of securities to
    
    
    Weighted-average
    
    
    Number of securitiesbe issued upon exercise
    
    
    exercise price of
    
    
    remaining available for futureof outstanding options,
    
    
    outstanding options,
    
    
    issuance under equitywarrants and rights
    
    
    warrants and rights
    
    
    compensation plans (excluding(3)
    
    
    ($)
    
    
    securities reflected incolumn (a))(3)(a)
    
    
    (b)
    
    
    (c)Equity compensation
    
    
    4,728,780
    
    
    15.50
    
    
    0plans approved by
security holders (1)Equity compensation
    
    
    7,074,314
    
    


    
    
    3,425,686plans not approved
by security holders (2)Total
    
    
    11,803,094
    
    
    15.50
    
    
    3,425,686
  (1)
    
    This is a stock option plan, which is described on page 44.(2)
    
    This is a restricted stock unit plan, which is described on page 44.(3)
    
    The number of securities reserved for the stock option plan represents three times the
number of stock options granted in 2002 before the three-for-one share split in May 2006
and still outstanding. The number of securities reserved for the restricted stock unit plan
represents the securities reserved for restricted stock units issued in 2006 and 2007 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.
    47




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##### Table of Contents



Item 14. Principal Accountant Fees and Services.
 Auditor Fees
  Dollars (thousands)
    
    2007
    
    2006Audit Fees
    
    
    1,117
    
    
    
    1,117Audit-Related Fees
    
    
    62
    
    
    
    62Tax Fees
    
    
    942
    
    
    
    815All Other Fees
    
    
       Nil
    

    
    
       NilTotal Fees
    
    
    2,121
    
    
    
    1,994
   
   48




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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-Q 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)).
 49




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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).
 50




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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.
  51




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##### Table of Contents



SIGNATURES
  Imperial Oil LimitedBy
    
    /s/ T.J. Hearn(Timothy J. Hearn, Chairman of the Boardand Chief Executive Officer)
  Signature
    
    TitleChairman of the Board and/s/ T.J. Hearn
    
    Chief Executive Officer and Director(Timothy J. Hearn)
    
    (Principal Executive Officer)Senior Vice-President,/s/ Paul A. Smith
    
    Finance and Administration, and Treasurer(Paul A. Smith)
    
    and  Director(Principal Accounting Officer andPrincipal Financial Officer)/s/ R.L. Broiles
    
    Director(Randy L. Broiles)/s/ B.H. March
    
    Director(Bruce H. March)/s/ J.M. Mintz
    
    Director(Jack M. Mintz)/s/ Roger Phillips
    
    Director(Roger Phillips)/s/ J.F. Shepard
    
    Director(James F. Shepard)/s/ Sheelagh D. Whittaker
    
    Director(Sheelagh D. Whittaker)/s/ V.L. Young
    
    Director(Victor L. Young)
 52




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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 2005, 2006 and 2007
    
    F-3Consolidated
statement of cash flows for the years 2005, 2006 and 2007
    
    F-4Consolidated balance sheet as at December 31, 2006 and 2007
    
    F-5Consolidated statement of shareholders equity as at December 31, 2005, 2006 and 2007
    
    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 and chief executive officer
    
    
    
    Senior vice-president, finance and administration, and treasurer(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
   /s/ PricewaterhouseCoopers LLPChartered AccountantsCalgary, Alberta, CanadaFebruary 26, 2008
 F-2




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##### Table of Contents



Consolidated statement of income
 millions of Canadian dollarsFor the years ended December 31
    
    2007
    
    
    2006
    
    
    2005Revenues and other incomeOperating revenues (a)(b)(c)
    
    
    25,069
    
    
    
    24,505
    
    
    
    27,797Investment and other income (note 10)
    
    
    374
    
    
    
    283
    
    
    
    417Total revenues and other income
    
    
    25,443
    
    
    
    24,788
    
    
    
    28,214ExpensesExploration
    
    
    106
    
    
    
    32
    
    
    
    43Purchases of crude oil and products (b)(d)
    
    
    14,026
    
    
    
    13,793
    
    
    
    17,168Production and manufacturing (e)
    
    
    3,474
    
    
    
    3,446
    
    
    
    3,327Selling and general
    
    
    1,335
    
    
    
    1,284
    
    
    
    1,577Federal excise tax (a)
    
    
    1,307
    
    
    
    1,274
    
    
    
    1,278Depreciation and depletion
    
    
    780
    
    
    
    831
    
    
    
    895Financing costs (note 14)(f)
    
    
    36
    
    
    
    28
    
    
    
    8Total expenses
    
    
    21,064
    
    
    
    20,688
    
    
    
    24,296Income before income taxes
    
    
    4,379
    
    
    
    4,100
    
    
    
    3,918Income taxes(note 5)
    
    
    1,191
    
    
    
    1,056
    
    
    
    1,318Net income
    
    
    3,188
    
    
    
    3,044
    
    
    
    2,600Per-share information (Canadian dollars)Net income per common share - basic (note 12)
    
    
    3.43
    
    
    
    3.12
    
    
    
    2.54Net income per common share - diluted (note 12)
    
    
    3.41
    
    
    
    3.11
    
    
    
    2.53Dividends
    
    
    0.35
    
    
    
    0.32
    
    
    
    0.31
 (a)
    
    Operating revenues include federal excise tax of $1,307 million (2006 - $1,274 million, 2005
 - $1,278 million).(b)
    
    Operating revenues in 2005 included $4,894 million 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 with no
resulting impact on net income, (note 1).(c)
    
    Operating revenues include amounts from related parties of $1,772 million (2006 - $1,955
million, 2005 - $1,346 million), (note 16).(d)
    
    Purchases of crude oil and products include amounts from related parties of $3,331 million
(2006 - $3,937 million, 2005 - $3,887 million), (note 16).(e)
    
    Production and manufacturing expenses include amounts to related parties of $194 million
(2006 - $156 million, 2005 - $102 million), (note 16).(f)
    
    Financing costs include amounts to related parties of $32 million (2006 - $33 million, 2005 -
$22 million), (note 16).
  F-3




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Consolidated statement of cash flows
 millions of Canadian dollarsInflow/(outflow)For the years ended December 31
    
    2007
    
    
    2006
    
    
    2005Operating activitiesNet income
    
    
    3,188
    
    
    
    3,044
    
    
    
    2,600Adjustments for non-cash items:Depreciation and depletion
    
    
    780
    
    
    
    831
    
    
    
    895(Gain)/loss on asset sales, after tax
    
    
    (156)
    
    
    
    (96)
    
    
    
    (233)Deferred income taxes and other
    
    
    16
    
    
    
    254
    
    
    
    (116)Changes in operating assets and liabilities:Accounts receivable
    
    
    (261)
    
    
    
    203
    
    
    
    (414)Inventories and prepaids
    
    
    13
    
    
    
    (97)
    
    
    
    (67)Income taxes payable
    
    
    (77)
    
    
    
    (225)
    
    
    
    304Accounts payable
    
    
    250
    
    
    
    (86)
    
    
    
    644All other
items - net (a)
    
    
    (127)
    
    
    
    (241)
    
    
    
    (162)Cash from operating activities
    
    
    3,626
    
    
    
    3,587
    
    
    
    3,451Investing activitiesAdditions to property, plant and equipment and intangibles
    
    
    (899)
    
    
    
    (1,177)
    
    
    
    (1,432)Proceeds from asset sales
    
    
    279
    
    
    
    212
    
    
    
    440Cash from (used in) investing activities
    
    
    (620)
    
    
    
    (965)
    
    
    
    (992)Financing activitiesShort-term
debt - net
    
    
    (65)
    
    
    
    72
    
    
    
    18Repayment of long-term debt
    
    
    (1,726)
    
    
    
    (74)
    
    
    
    (21)Long-term debt issued
    
    
    500
    
    
    
    
    
    
    
    Issuance of common shares under stock option plan
    
    
    12
    
    
    
    10
    
    
    
    38Common shares purchased (note 12)
    
    
    (2,358)
    
    
    
    (1,818)
    
    
    
    (1,795)Dividends paid
    
    
    (319)
    
    
    
    (315)
    
    
    
    (317)Cash from (used in) financing activities
    
    
    (3,956)
    
    
    
    (2,125)
    
    
    
    (2,077)Increase (decrease) in cash
    
    
    (950)
    
    
    
    497
    
    
    
    382Cash at beginning of year
    
    
    2,158
    
    
    
    1,661
    
    
    
    1,279Cash at end of year(b)
    
    
    1,208
    
    
    
    2,158
    
    
    
    1,661
 (a)
    
    Includes contribution to registered pension plans of $163 million (2006 - $395 million, 2005
 - $350 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
    
    2007
    
    
    2006AssetsCurrent assetsCash
    
    
    1,208
    
    
    
    2,158Accounts receivable, less estimated doubtful amounts
    
    
    2,132
    
    
    
    1,871Inventories of crude oil and products (note 13)
    
    
    566
    
    
    
    556Materials, supplies and prepaid expenses
    
    
    128
    
    
    
    151Deferred income tax assets (note 5)
    
    
    660
    
    
    
    573Total current assets
    
    
    4,694
    
    
    
    5,309Long-term receivables, investments and other long-term assets
    
    
    766
    
    
    
    104Property, plant and equipment,
less accumulated depreciation and depletion (note 3)
    
    
    10,561
    
    
    
    10,457Goodwill (note 3)
    
    
    204
    
    
    
    204Other intangible assets, net
    
    
    62
    
    
    
    67Total assets(note 3)
    
    
    16,287
    
    
    
    16,141LiabilitiesCurrent liabilitiesShort-term debt
    
    
    105
    
    
    
    171Accounts payable and accrued liabilities (a)
    
    
    3,335
    
    
    
    3,080Income taxes payable
    
    
    1,498
    
    
    
    1,190Current portion of long-term debt (b)
    
    
    3
    
    
    
    907Total current liabilities
    
    
    4,941
    
    
    
    5,348Long-term debt (note 4)(c)
    
    
    38
    
    
    
    359Other long-term obligations (note 7)
    
    
    1,914
    
    
    
    1,683Deferred income tax liabilities (note 5)
    
    
    1,471
    
    
    
    1,345Total liabilities
    
    
    8,364
    
    
    
    8,735Commitments and contingent liabilities (note 11)Shareholders equityCommon shares at stated value (note 12)(d)
    
    
    1,600
    
    
    
    1,677Earnings reinvested
    
    
    7,071
    
    
    
    6,462Accumulated other comprehensive income
    
    
    (748)
    
    
    
    (733)Total shareholders equity
    
    
    7,923
    
    
    
    7,406Total liabilities and shareholders equity
    
    
    16,287
    
    
    
    16,141
 (a)
    
    Accounts payable and accrued liabilities include amounts to related parties of $260 million
(2006 - $151 million), (note 16).(b)
    
    Current portion of long-term debt in 2006 included $500 million to related parties. There is
no current portion of long-term debt to related parties in 2007, (note 4).(c)
    
    Long-term debt in 2006 included $318 million to related parties. There is no long-term debt
to related parties in 2007, (note 4).(d)
    
    Number of common shares outstanding was 903 million (2006 - 953 million), (note 12).
   /s/ T.J. Hearn
    
    /s/ Paul A. SmithChairman, and
    
    Senior vice-president,chief executive officer
    
    finance and administration, and treasurer
 F-5




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##### Table of Contents



Consolidated statement of shareholders equity
 millions of Canadian dollarsAt December 31
    
    2007
    
    
    2006
    
    
    2005Common shares at stated value(note 12)At beginning of year
    
    
    1,677
    
    
    
    1,747
    
    
    
    1,801Issued under the stock option plan
    
    
    12
    
    
    
    10
    
    
    
    38Share purchases at stated value
    
    
    (89)
    
    
    
    (80)
    
    
    
    (92)At end of year
    
    
    1,600
    
    
    
    1,677
    
    
    
    1,747Earnings reinvestedAt beginning of year
    
    
    6,462
    
    
    
    5,466
    
    
    
    4,889Cumulative effect of accounting change (note 2)
    
    
    14
    
    
    
    
    
    
    
    Net income for the year
    
    
    3,188
    
    
    
    3,044
    
    
    
    2,600Share purchases in excess of stated value
    
    
    (2,269)
    
    
    
    (1,737)
    
    
    
    (1,703)Dividends
    
    
    (324)
    
    
    
    (311)
    
    
    
    (320)At end of year
    
    
    7,071
    
    
    
    6,462
    
    
    
    5,466Accumulated other comprehensive incomeAt beginning of year
    
    
    (733)
    
    
    
    (580)
    
    
    
    (368)Post-retirement benefits liability adjustment (note 6)
    
    
    (87)
    
    
    
    (733)
    
    
    
    Amortization
of post-retirement benefits liability adjustment included in net periodic benefit cost
    
    
    72
    
    
    
    
    
    
    
    Minimum pension liability adjustment (note 6)
    
    
    
    
    
    
    580
    
    
    
    (212)At end of year
    
    
    (748)
    
    
    
    (733)
    
    
    
    (580)Shareholders equity at end of year
    
    
    7,923
    
    
    
    7,406
    
    
    
    6,633Comprehensive income for the yearNet income for the year
    
    
    3,188
    
    
    
    3,044
    
    
    
    2,600Post-retirement benefits liability adjustment (note 18)
    
    
    (15)
    
    
    
    
    
    
    
    Minimum pension liability adjustment (note 18)
    
    
    
    
    
    
    334
    
    
    
    (212)Total comprehensive income for the year
    
    
    3,173
    
    
    
    3,378
    
    
    
    2,388
  F-6




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##### Table of Contents



Notes to consolidated financial statements
 The accompanying consolidated financial statements and the supporting and supplemental material
are the responsibility of the management of Imperial Oil Limited.The companys principal business is energy, involving the exploration, production,
transportation and sale of crude oil and natural gas and the manufacture, transportation and
sale of petroleum products. The company is also a major manufacturer and marketer of
petrochemicals.The consolidated financial statements have been prepared in accordance with generally accepted
accounting principles in the United States of America. The financial statements include certain
estimates that reflect managements best judgment. Certain reclassifications to prior years have
been made to conform to the 2007 presentation. All amounts are in Canadian dollars unless
otherwise indicated.1.
    
    Summary of significant accounting policiesPrinciples of consolidation
The consolidated financial statements include the accounts of Imperial Oil Limited and its
subsidiaries. Intercompany accounts and transactions are eliminated. Subsidiaries include those
companies in which Imperial has both an equity interest and the continuing ability to
unilaterally determine strategic, operating, investing and financing policies. Significant
subsidiaries included in the consolidated financial statements include Imperial Oil Resources
Limited, Imperial Oil Resources N.W.T. Limited, Imperial Oil Resources Ventures Limited and
McColl-Frontenac Petroleum Inc. All of the above companies are wholly owned. A significant
portion of the companys activities in natural resources is conducted jointly with other
companies. The accounts reflect the companys share of undivided interest in such activities,
including its 25 percent interest in the Syncrude joint venture and its nine percent interest in
the Sable offshore energy project.Inventories
Inventories are recorded at the lower of cost or net realizable value. The cost of crude oil and
products is determined primarily using the last-in, first-out (LIFO) method. LIFO was selected
over the alternative first-in, first-out and average cost methods because it provides a better
matching of current costs with the revenues generated in the period.Inventory costs include expenditures and other charges, including depreciation, directly or
indirectly incurred in bringing the inventory to its existing condition and final storage prior
to delivery to a customer. Selling and general expenses are reported as period costs and
excluded from inventory costs.Investments
The principal investments in companies other than subsidiaries are accounted for using the
equity method. They are recorded at the original cost of the investment plus Imperials share of
earnings since the investment was made, less dividends received. Imperials share of the
after-tax earnings of these companies is included in investment and
other income in the consolidated statement of income. Other investments are recorded at cost.
Dividends from these other investments are included in investment and
other income.These investments represent interests in non-publicly traded pipeline companies that facilitate
the sale and purchase of crude oil and natural gas in the conduct of company operations. Other
parties who also have an equity interest in these companies share in the risks and rewards
according to their percentage of ownership. Imperial does not invest in these companies in order
to remove liabilities from its balance sheet.Property, plant and equipment
Property, plant and equipment are recorded at cost. Investment tax credits and other similar
grants are treated as a reduction of the capitalized cost of the asset to which they apply.The company uses the successful-efforts method to account for its exploration and development
activities. Under this method, costs are accumulated on a field-by-field basis with certain
exploratory expenditures and exploratory dry holes being expensed as incurred. The company
carries as an asset exploratory well costs if (a) the well found a sufficient quantity of
reserves to justify its completion as a producing well and (b) the company is making sufficient
progress assessing the reserves and the economic and operating viability of the project.
Exploratory well costs not meeting these criteria were charged to expense. Costs of productive
wells and development dry holes are capitalized and amortized on the unit-of-production method
for each field. The company uses this accounting policy instead of the full-cost method because
it provides a more timely accounting of the success or failure of the companys exploration and
production activities.Maintenance and repair costs, including planned major maintenance, are expensed as incurred.
Improvements that increase or prolong the service life or capacity of an asset are capitalized.Production costs are expensed as incurred. Production involves lifting the oil and gas to the
surface and gathering, treating, field processing and field storage of the oil and gas. The
production function normally terminates at the outlet valve on the lease or field production
storage tank. Production costs are those incurred to operate and maintain the companys wells
and related equipment and facilities. They become part of the cost of oil and gas produced.
These costs, sometimes referred to as lifting costs, include such items as labour cost to
operate the wells and related equipment; repair and maintenance costs on the wells and
equipment; materials, supplies and energy costs required to operate the wells and related
equipment; and administrative expenses related to the production activity.Depreciation and depletion for assets associated with producing properties begin at the time
when production commences on a regular basis. Depreciation for other assets begins when the
asset is in place and ready for its intended use. Assets under construction are not depreciated
or depleted. Acquisition costs of proved properties are amortized using a unit-of-production
method, computed on the basis of total proved oil and gas reserves. Unit-of-production
depreciation is applied to those wells, plant and equipment assets associated with productive
depletable properties and the unit-of-production rates are based on the amount of proved
developed reserves of oil and gas. Depreciation of other plant and equipment is calculated using
the straight-line method, based on the estimated service life of the asset. In general,
refineries are depreciated over 25 years; other major assets, including chemical plants and
service stations, are depreciated over 20 years.Proved oil and gas properties held and used by the company are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amounts may not be recoverable.
Assets are grouped at the lowest level for which there are identifiable cash flows that are
largely independent of the cash flows of other groups of assets.
 F-7




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##### Table of Contents



The company estimates the future undiscounted cash flows of the affected properties to judge the
recoverability of carrying amounts. Cash flows used in impairment evaluations are developed
using annually updated corporate plan investment evaluation assumptions for crude oil commodity
prices and foreign-currency exchange rates. Annual volumes are based on individual field
production profiles, which are also updated annually. Prices for natural gas and other products
sold under contract are based on corporate plan assumptions developed annually by major
contracts and also for investment evaluation purposes.In general, impairment analyses are based on proved reserves. Where probable reserves exist, an
appropriately risk-adjusted amount of these reserves may be included in the impairment
evaluation. An asset would be impaired if the undiscounted cash flows were less than its
carrying value. Impairments are measured by the amount by which the carrying value exceeds its
fair value.Acquisition costs for the companys oil sands(a) operation are capitalized as incurred. Oil
sands exploration costs are expensed as incurred. The capitalization of project development
costs begins when there are no major uncertainties that exist which would preclude management
from making a significant funding commitment within a reasonable time period. The company
expenses stripping costs during the production phase as incurred.Depreciation of oil sands assets begins at the time when production commences on a regular
basis. Assets under construction are not depreciated. Investments in extraction facilities,
which separate the crude from sand, as well as the upgrading facilities, are depreciated on a
unit-of-production method based on proven developed reserves. Investments in mining and
transportation systems are generally depreciated on a straight-line basis over a 15-year life.Oil sands assets held and used by the company are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amounts are not recoverable. The impairment
evaluation for oil sands assets is based on a comparison of undiscounted cash flows to book
carrying value.Gains or losses on assets sold are included in investment and other income in the consolidated
statement of income.(a) Oil sands are a semi-solid material composed of bitumen, sand, water and clays, and are
recovered through surface mining methods. Currently, the companys oil sands production volumes
and reserves are the companys share of production volumes and reserves in the Syncrude joint
venture.Interest capitalization
Interest costs relating to major capital projects under construction are capitalized as part of
property, plant and equipment. The project construction phase commences with the development of
the detailed engineering design and ends when the constructed assets are ready for their
intended use.Goodwill and other intangible assets
Goodwill is not subject to amortization. Goodwill is tested for impairment annually or more
frequently if events or circumstances indicate it might be impaired. Impairment losses are
recognized in current period earnings. The evaluation for impairment of goodwill is based on a
comparison of the carrying values of goodwill and associated operating assets with the estimated
present value of net cash flows from those operating assets.Intangible assets with determinable useful lives are amortized over the estimated service lives
of the assets. Computer software development costs are amortized over a maximum of 15 years and
customer lists are amortized over a maximum of 10 years. The amortization is included in
depreciation and depletion in the consolidated statement of income.Asset retirement obligations and other environmental liabilities
Legal obligations associated with site restoration on the retirement of assets with determinable
useful lives are recognized when they are incurred, which is typically at the time the assets
are installed. These obligations primarily relate to soil remediation and decommissioning and
removal costs of oil and gas wells and related facilities. The obligations are initially
measured at fair value and discounted to present value. A corresponding amount equal to that of
the initial obligation is added to the capitalized costs of the related asset. Over time the
discounted asset retirement obligation amount will be accreted for the change in its present
value, and the initial capitalized costs will be depreciated over the useful lives of the
related assets.No asset retirement obligations are set up for those manufacturing, distribution and marketing
facilities with an indeterminate useful life. Asset retirement obligations for these facilities
generally become firm at the time the facilities are permanently shut down and dismantled. These
obligations may include the costs of asset disposal and additional soil remediation. However,
these sites have indeterminate lives based on plans for continued operations, and as such, the
fair value of the conditional legal obligations cannot be measured, since it is impossible to
estimate the future settlement dates of such obligations. Provision for environmental
liabilities of these assets is made when it is probable that obligations have been incurred and
the amount can be reasonably estimated. These liabilities are not discounted. Asset retirement
obligations and other provisions for environmental liabilities are determined based on
engineering estimated costs, taking into account the anticipated method and extent of
remediation consistent with legal requirements, current technology and the possible use of the
location.Foreign-currency translation
Monetary assets and liabilities in foreign currencies have been translated at the rates of
exchange prevailing on December 31. Any exchange gains or losses are recognized in income.Financial instruments
The fair values of cash, accounts receivable and current liabilities approximate recorded
amounts because of the short period to receipt or payment of cash. The fair value of the
companys long-term debt is estimated based on quoted market prices for the same or similar
issues or on the current rates offered to the company for debt of the same duration to maturity.
The fair values of the companys other financial instruments, which are mainly long-term
receivables, are estimated primarily by discounting future cash flows, using current rates for
similar financial instruments under similar credit risk and maturity conditions.The company does not use financing structures for the purpose of altering accounting outcomes or
removing debt from the balance sheet. The company does not use derivative instruments to
speculate on the future direction of currency or commodity prices and does not sell forward any
part of production from any business segment.Revenues
Revenues associated with sales of crude oil, natural gas, petroleum and chemical products and
other items are recorded when the products are delivered. Delivery occurs when the customer has
taken title and has assumed the risks and rewards of ownership, prices are fixed or determinable
and collectibility is reasonably assured. The company does not enter into ongoing arrangements
whereby it is required to repurchase its products, nor does the company provide the customer
with a right of return.Revenues include amounts billed to customers for shipping and handling. Shipping and handling
costs incurred up to the point of final storage prior to delivery to a customer are included in
purchases of crude oil and products in the consolidated statement of income. Delivery costs
from final storage to customer are recorded as a marketing expense in selling and general
expenses.
 F-8




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##### Table of Contents



Effective January 1, 2006, the company adopted the Emerging Issues Task Force (EITF) consensus
on Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same
Counterparty. The EITF concluded that purchases and sales of inventory with the same
counterparty that are entered into in contemplation of one another should be combined and
recorded as exchanges measured at the book value of the item sold. In prior periods, the company
recorded certain crude oil, natural gas, petroleum product and chemical sales and purchases
contemporaneously negotiated with the same counterparty as revenues and purchases. As a result
of the EITF consensus, beginning in 2006, the companys accounts operating revenues and
purchases of crude oil and products on the consolidated statement of income have been reduced
by associated amounts with no impact on net income. All operating segments were affected by this
change, with the largest impact in the petroleum products segment.Share-based compensation
The company awards share-based compensation to employees in the form of restricted stock units.
Compensation expense is measured each reporting period based on the companys current stock
price and is recorded as selling and general expenses in the consolidated statement of income
over the requisite service period of each award. See note 9 to the consolidated financial
statements for further details.Consumer taxes
Taxes levied on the consumer and collected by the company are excluded from the consolidated
statement of income. These are primarily provincial taxes on motor fuels and the federal goods
and services tax.2.
    
    Accounting change for uncertainty in income taxesEffective January 1, 2007, the company adopted the FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes. FIN 48 is an interpretation of FASB Statement No.
109, Accounting for Income Taxes and prescribes a comprehensive model for recognizing,
measuring, presenting and disclosing in the financial statements uncertain tax positions that
the company has taken or expects to take in its income tax returns. Upon the adoption of FIN 48,
the company recognized a transition gain of $14 million in shareholders equity, reflected as
cumulative effect of accounting change in the consolidated statement of shareholders equity.
The gain reflected the recognition of several refund claims with associated interest, partly
offset by increased income tax reserves. FIN 48 also resulted in a reclassification of amounts
previously reported net on the balance sheet. The balance sheet reclassification resulted in a
$534 million increase to long-term receivables, investments and other long-term assets; a $363
million increase to income taxes payable; a $142 million increase to other long-term
obligations; and a $15 million increase to deferred tax liabilities. See note 5, Income taxes,
for additional disclosures.3.
    
    Business segmentsThe company operates its business in Canada. The natural resources, petroleum products and
chemicals functions best define the operating segments of the business that are reported
separately. The factors used to identify these reportable segments are based on the nature of
the operations that are undertaken by each segment and the structure of the companys internal
organization. The natural resources segment is organized and operates to explore for and
ultimately produce crude oil and its equivalent, and natural gas. The petroleum products segment
is organized and operates to refine crude oil into petroleum products and the distribution and
marketing of these products. The chemicals segment is organized and operates to manufacture and
market hydrocarbon-based chemicals and chemical products. The above segmentation has been the
long-standing practice of the company and is broadly understood across the petroleum and
petrochemical industries.These functions have been defined as the operating segments of the company because they are the
segments (a) that engage in business activities from which revenues are earned and expenses are
incurred; (b) whose operating results are regularly reviewed by the companys chief operating
decision maker to make decisions about resources to be allocated to each segment and assess its
performance; and (c) for which discrete financial information is available.Corporate and other includes assets and liabilities that do not specifically relate to business
segments  primarily cash, long-term debt and liabilities associated with incentive compensation
and post-retirement benefits liability adjustment. Net income in this segment primarily includes
financing costs, interest income and incentive compensation expenses.Segment accounting policies are the same as those described in the summary of significant
accounting policies. Natural resources, petroleum products and chemicals expenses include
amounts allocated from the corporate and other segment. The allocation is based on a
combination of fee for service, proportional segment expenses and a three-year average of
capital expenditures. Transfers of assets between segments are recorded at book amounts.
Intersegment sales are made essentially at prevailing market prices. Assets and liabilities that
are not identifiable by segment are allocated.
 F-9




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##### Table of Contents



Natural resources (a)
    
    
    Petroleum products
    
    
    Chemicalsmillions of dollars
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Revenues and other incomeExternal sales (b)
    
    
    4,539
    
    
    
    4,619
    
    
    
    4,702
    
    
    
    19,230
    
    
    
    18,527
    
    
    
    21,793
    
    
    
    1,300
    
    
    
    1,359
    
    
    
    1,302Intersegment sales
    
    
    4,146
    
    
    
    3,837
    
    
    
    3,487
    
    
    
    2,305
    
    
    
    2,256
    
    
    
    2,224
    
    
    
    335
    
    
    
    345
    
    
    
    363Investment and other income
    
    
    233
    
    
    
    111
    
    
    
    331
    
    
    
    52
    
    
    
    105
    
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    8,918
    
    
    
    8,567
    
    
    
    8,520
    
    
    
    21,587
    
    
    
    20,888
    
    
    
    24,077
    
    
    
    1,635
    
    
    
    1,704
    
    
    
    1,665ExpensesExploration
    
    
    106
    
    
    
    32
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchases of crude oil and products
    
    
    3,113
    
    
    
    2,841
    
    
    
    2,837
    
    
    
    16,469
    
    
    
    16,178
    
    
    
    19,212
    
    
    
    1,230
    
    
    
    1,209
    
    
    
    1,191Production and manufacturing
    
    
    2,057
    
    
    
    1,994
    
    
    
    1,931
    
    
    
    1,232
    
    
    
    1,266
    
    
    
    1,203
    
    
    
    185
    
    
    
    189
    
    
    
    195Selling and general (c)
    
    
    8
    
    
    
    13
    
    
    
    36
    
    
    
    987
    
    
    
    1,018
    
    
    
    1,096
    
    
    
    71
    
    
    
    76
    
    
    
    81Federal excise tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,307
    
    
    
    1,274
    
    
    
    1,278
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and depletion
    
    
    519
    
    
    
    584
    
    
    
    651
    
    
    
    244
    
    
    
    233
    
    
    
    230
    
    
    
    12
    
    
    
    11
    
    
    
    12Financing costs (note 14)
    
    
    4
    
    
    
    2
    
    
    
    
    
    
    
    1
    
    
    
    6
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Total expenses
    
    
    5,807
    
    
    
    5,466
    
    
    
    5,498
    
    
    
    20,240
    
    
    
    19,975
    
    
    
    23,021
    
    
    
    1,498
    
    
    
    1,485
    
    
    
    1,479Income before income taxes
    
    
    3,111
    
    
    
    3,101
    
    
    
    3,022
    
    
    
    1,347
    
    
    
    913
    
    
    
    1,056
    
    
    
    137
    
    
    
    219
    
    
    
    186Income taxes(note 5)Current
    
    
    682
    
    
    
    602
    
    
    
    955
    
    
    
    491
    
    
    
    174
    
    
    
    409
    
    
    
    42
    
    
    
    60
    
    
    
    69Deferred
    
    
    60
    
    
    
    123
    
    
    
    59
    
    
    
    (65)
    
    
    
    115
    
    
    
    (47)
    
    
    
    (2)
    
    
    
    16
    
    
    
    (4)Total income tax expense
    
    
    742
    
    
    
    725
    
    
    
    1,014
    
    
    
    426
    
    
    
    289
    
    
    
    362
    
    
    
    40
    
    
    
    76
    
    
    
    65Net income
    
    
    2,369
    
    
    
    2,376
    
    
    
    2,008
    
    
    
    921
    
    
    
    624
    
    
    
    694
    
    
    
    97
    
    
    
    143
    
    
    
    121Cash flow from (used in) operating activities
    
    
    2,411
    
    
    
    3,024
    
    
    
    2,440
    
    
    
    1,151
    
    
    
    507
    
    
    
    799
    
    
    
    109
    
    
    
    161
    
    
    
    94Capital and exploration expenditures
    
    
    744
    
    
    
    787
    
    
    
    937
    
    
    
    187
    
    
    
    361
    
    
    
    478
    
    
    
    11
    
    
    
    13
    
    
    
    19Property, plant and equipmentCost
    
    
    15,285
    
    
    
    14,926
    
    
    
    14,229
    
    
    
    6,655
    
    
    
    6,581
    
    
    
    6,350
    
    
    
    718
    
    
    
    702
    
    
    
    701Accumulated depreciation and depletion
    
    
    (8,474)
    
    
    
    (8,255)
    
    
    
    (7,780)
    
    
    
    (3,320)
    
    
    
    (3,178)
    
    
    
    (3,037)
    
    
    
    (496)
    
    
    
    (484)
    
    
    
    (474)Net property, plant and equipment(d)(e)
    
    
    6,811
    
    
    
    6,671
    
    
    
    6,449
    
    
    
    3,335
    
    
    
    3,403
    
    
    
    3,313
    
    
    
    222
    
    
    
    218
    
    
    
    227Total assets
    
    
    8,171
    
    
    
    7,513
    
    
    
    7,289
    
    
    
    6,727
    
    
    
    6,450
    
    
    
    6,257
    
    
    
    476
    
    
    
    504
    
    
    
    500
 Corporate and other
    
    
    Eliminations
    
    
    Consolidatedmillions of dollars
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Revenues and other incomeExternal sales (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,069
    
    
    
    24,505
    
    
    
    27,797Intersegment sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,786)
    
    
    
    (6,438)
    
    
    
    (6,074)
    
    
    
    
    
    
    
    
    
    
    
    Investment and other income
    
    
    89
    
    
    
    67
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    374
    
    
    
    283
    
    
    
    41789
    
    
    
    67
    
    
    
    26
    
    
    
    (6,786)
    
    
    
    (6,438)
    
    
    
    (6,074)
    
    
    
    25,443
    
    
    
    24,788
    
    
    
    28,214ExpensesExploration
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    32
    
    
    
    43Purchases of crude oil and products
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,786)
    
    
    
    (6,435)
    
    
    
    (6,072)
    
    
    
    14,026
    
    
    
    13,793
    
    
    
    17,168Production and manufacturing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3)
    
    
    
    (2)
    
    
    
    3,474
    
    
    
    3,446
    
    
    
    3,327Selling and general (c)
    
    
    269
    
    
    
    177
    
    
    
    364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,335
    
    
    
    1,284
    
    
    
    1,577Federal excise tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,307
    
    
    
    1,274
    
    
    
    1,278Depreciation and depletion
    
    
    5
    
    
    
    3
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    780
    
    
    
    831
    
    
    
    895Financing costs (note 14)
    
    
    31
    
    
    
    20
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    28
    
    
    
    8Total expenses
    
    
    305
    
    
    
    200
    
    
    
    372
    
    
    
    (6,786)
    
    
    
    (6,438)
    
    
    
    (6,074)
    
    
    
    21,064
    
    
    
    20,688
    
    
    
    24,296Income before income taxes
    
    
    (216)
    
    
    
    (133)
    
    
    
    (346)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,379
    
    
    
    4,100
    
    
    
    3,918Income taxes(note 5)Current
    
    
    (52)
    
    
    
    (60)
    
    
    
    (72)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,163
    
    
    
    776
    
    
    
    1,361Deferred
    
    
    35
    
    
    
    26
    
    
    
    (51)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    280
    
    
    
    (43)Total income tax expense
    
    
    (17)
    
    
    
    (34)
    
    
    
    (123)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,191
    
    
    
    1,056
    
    
    
    1,318Net income
    
    
    (199)
    
    
    
    (99)
    
    
    
    (223)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,188
    
    
    
    3,044
    
    
    
    2,600Cash flow from (used in) operating activities
    
    
    (45)
    
    
    
    (105)
    
    
    
    118
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,626
    
    
    
    3,587
    
    
    
    3,451Capital and exploration expenditures
    
    
    36
    
    
    
    48
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    978
    
    
    
    1,209
    
    
    
    1,475Property, plant and equipmentCost
    
    
    304
    
    
    
    269
    
    
    
    246
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,962
    
    
    
    22,478
    
    
    
    21,526Accumulated depreciation and depletion
    
    
    (111)
    
    
    
    (104)
    
    
    
    (103)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,401)
    
    
    
    (12,021)
    
    
    
    (11,394)Net property, plant and equipment(d)(e)
    
    
    193
    
    
    
    165
    
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,561
    
    
    
    10,457
    
    
    
    10,132Total assets
    
    
    1,251
    
    
    
    2,145
    
    
    
    1,959
    
    
    
    (338)
    
    
    
    (471)
    
    
    
    (423)
    
    
    
    16,287
    
    
    
    16,141
    
    
    
    15,582
 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
    
    2007
    
    
    2006
    
    
    2005Total external and intersegment sales
    
    
    3,923
    
    
    
    3,303
    
    
    
    3,687Total expenses
    
    
    2,394
    
    
    
    1,966
    
    
    
    1,805Net income, after income tax
    
    
    1,224
    
    
    
    1,148
    
    
    
    1,249Total current assets
    
    
    1,211
    
    
    
    516
    
    
    
    245Long-term assets
    
    
    4,868
    
    
    
    4,833
    
    
    
    4,742Total current liabilities
    
    
    705
    
    
    
    810
    
    
    
    967Other long-term obligations
    
    
    485
    
    
    
    344
    
    
    
    382Cash flow from operating activities
    
    
    697
    
    
    
    1,229
    
    
    
    1,223Cash (used in) investing activities
    
    
    (131)
    
    
    
    (403)
    
    
    
    (403)
 (b)
    
    Includes export sales to the United States, as follows:
 millions of dollars
    
    2007
    
    
    2006
    
    
    2005Natural resources
    
    
    2,013
    
    
    
    1,936
    
    
    
    1,633Petroleum products
    
    
    922
    
    
    
    869
    
    
    
    856Chemicals
    
    
    768
    
    
    
    793
    
    
    
    750Total export sales
    
    
    3,703
    
    
    
    3,598
    
    
    
    3,239
 (c)
    
    Consolidated selling and general expenses include delivery costs from final storage
areas to customers of $318 million in 2007 (2006 - $316 million, 2005 - $310 million).(d)
    
    Includes property, plant and equipment under construction of $951 million (2006 -
$782 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
 millions of dollars
    
    2007
    
    
    2006Long-term debt (a)(b)(c)
    
    
    
    
    
    
    318Capital leases (d)
    
    
    38
    
    
    
    41Total long-term debt(e)(f)
    
    
    38
    
    
    
    359
 (a)
    
    At 2006 year-end, the company had $818 million long-term variable-rate loans from an
affiliated company of Exxon Mobil Corporation at interest equivalent to Canadian market
rates. $500 million of these long-term loans was due in 2007 and included in current
liabilities and $318 million was due on January 19, 2008 and included as long-term debt at
2006 year-end.(b)
    
    In the second and third quarter of 2007, two variable-rate loans totaling $500
million matured and were replaced with two long-term variable-rate loans totaling $500
million from an affiliated company of Exxon Mobil Corporation at interest equivalent to
Canadian market rates. Both loans were due in 2009. In the fourth quarter of 2007, the
company retired the entire $818 million of long-term loans.(c)
    
    The average effective rate for long-term loans was 4.5 percent for 2007.(d)
    
    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 10.9 percent in 2007 (2006 - 10.7
percent).(e)
    
    Principal payments on capital leases of approximately $4 million a year are due in
each of the next five years.(f)
    
    These amounts exclude that portion of long-term debt, totaling $3 million (2006 
$907 million), which matures within one year
and is included in current liabilities.
 5.  Income taxes
 millions of dollars
    
    2007
    
    
    2006
    
    
    2005Current income tax expense
    
    
    1,163
    
    
    
    776
    
    
    
    1,361Deferred income tax expense (a)
    
    
    28
    
    
    
    280
    
    
    
    (43)Total income tax expense(b)
    
    
    1,191
    
    
    
    1,056
    
    
    
    1,318Statutory corporate tax rate (percent)
    
    
    30.1
    
    
    
    32.8
    
    
    
    35.6Increase/(decrease) resulting from:Non-deductible royalty payments to governments
    
    
    
    
    
    
    
    
    
    
    3.8Resource allowance in lieu of royalty deduction
    
    
    
    
    
    
    
    
    
    
    (5.2)Enacted tax rate change
    
    
    (2.2)
    
    
    
    (2.7)
    
    
    
    Other
    
    
    (0.7)
    
    
    
    (4.3)
    
    
    
    (0.6)Effective income tax rate
    
    
    27.2
    
    
    
    25.8
    
    
    
    33.6
 (a)
    
    The provisions for deferred income taxes in 2007 include net (charges)/credits for
the effect of changes in tax laws and rates of $90 million (2006 - $81 million, 2005 -
nil).(b)
    
    Cash outflow from income taxes, plus investment credits earned, was $1,395 million in
2007 (2006  $1,000 million,2005  $1,024 million).
 F-11




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##### Table of Contents



millions of dollars
    
    2007
    
    
    2006
    
    
    2005Post-retirement benefits liability adjustment:Net actuarial loss/(gain)
    
    
    21Amortization of net actuarial loss/(gain)
    
    
    (24)Prior service cost
    
    
    13Amortization of prior service cost
    
    
    (6)Total post-retirement benefits liability adjustment
    
    
    4
    
    
    
    212
    
    
    
    Minimum pension liability adjustment
    
    
    
    
    
    
    (146)
    
    
    
    105
  millions of dollars
    
    2007
    
    
    2006Depreciation and amortization
    
    
    1,624
    
    
    
    1,588Successful drilling and land acquisitions
    
    
    276
    
    
    
    263Pension and benefits
    
    
    (249)
    
    
    
    (311)Site restoration
    
    
    (156)
    
    
    
    (161)Net tax loss carryforwards (a)
    
    
    (37)
    
    
    
    (42)Capitalized interest
    
    
    49
    
    
    
    50Other
    
    
    (36)
    
    
    
    (42)Deferred income tax liabilities
    
    
    1,471
    
    
    
    1,345LIFO inventory valuation
    
    
    (547)
    
    
    
    (448)Other
    
    
    (113)
    
    
    
    (125)Deferred income tax assets
    
    
    (660)
    
    
    
    (573)Valuation allowance
    
    
    
    
    
    
    Net deferred income tax liabilities
    
    
    811
    
    
    
    772
  Unrecognized tax benefits
 The change in the amount of unrecognized tax benefits is as follows:
 millions of dollars
    
    2007January 1 balance
    
    
    142Additions for prior years tax positions
    
    
    28December 31 balance
    
    
    170
    6. Employee retirement benefits
     F-12




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##### Table of Contents



Other post-retirementPension Benefits
    

    
    

    
    benefits2007
    
    
    2006
    
    
    
    
    
    

    2007
    
    
    2006Assumptions used to determine benefit obligations
at December 31 (percent)Discount rate
    
    
    5.75
    
    
    
    5.25
    

    
    
    
    

    
    
    5.75
    
    
    
    5.25Long-term rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    
    
    
    
    3.50
    
    
    
    3.50millions of dollarsChange in projected benefit obligationProjected benefit obligation at January 1
    
    
    4,716
    
    
    
    4,784
    
    
    
    
    
    
    

    441
    
    
    
    458Current service cost
    
    
    100
    
    
    
    100
    
    
    
    
    
    

    

    6
    
    
    
    8Interest cost
    
    
    246
    
    
    
    238
    
    
    
    
    
    
    

    23
    
    
    
    23Amendments
    
    
    41
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    (2)Actuarial loss/(gain)
    
    
    (131)
    
    
    
    (122)
    
    

    
    
    
    
    
    (25)
    
    
    
    (19)Benefits paid (a)
    
    
    (287)
    
    
    
    (284)
    
    
    
    
    

    
    
    (19)
    
    
    
    (27)Projected benefit obligation at December 31
    
    
    4,685
    
    
    
    4,716
    
    

    
    
    
    
    
    426
    
    
    
    441Accumulated benefit obligation at December 31
    
    
    4,208
    
    
    
    4,207Change in plan assetsFair value at January 1
    
    
    4,089
    
    
    
    3,419Actual return on plan assets
    
    
    93
    
    
    
    514Company contributions
    
    
    163
    
    
    
    395Benefits paid (b)
    
    
    (247)
    
    
    
    (239)Fair value at December 31
    
    
    4,098
    
    
    
    4,089Plan assets in excess of/(less than) projected benefit obligation
at December 31Funded plans
    
    
    (213)
    
    
    
    (294)
    
    
    
    
    
    

    
    
    
    
    
    Unfunded plans
    
    
    (374)
    
    
    
    (333)
    
    
    
    
    
    

    
    (426)
    
    
    
    (441)Total (c)
    
    
    (587)
    
    
    
    (627)
    
    
    
    
    
    

    
    (426)
    
    
    
    (441)(a) Benefit payments for funded and unfunded plans.
(b) Benefit payments for funded plans only.
(c) Fair value of assets less projected benefit obligation shown above.Effective December 31, 2006, the company adopted Statement of Financial Accounting Standards
No. 158 (SFAS 158), Employers Accounting for Defined Benefit Pension and Other
Post-retirement Plans, an amendment to FASB Statements No. 87, 88, 106 and 132(R), which
requires an employer to recognize the overfunded or underfunded status of a defined benefit
post-retirement plan as an asset or liability in its balance sheet and to recognize changes in
that funded status in the year in which the changes occur through other comprehensive income.Pension Benefits
    
    
    Other post-retirement benefitsmillions of dollars
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Amounts recorded in the consolidatedbalance sheet consist of:Current liabilities
    
    
    (34)
    
    
    
    (28)
    
    
    
    
    
    
    
    (25)
    
    
    
    (23)Other long-term obligations
    
    
    (553)
    
    
    
    (599)
    
    
    
    
    
    
    
    (401)
    
    
    
    (418)Total recorded
    
    
    (587)
    
    
    
    (627)
    
    
    
    
    
    
    
    (426)
    
    
    
    (441)Amounts recorded in accumulated othercomprehensive income
consist of:Net actuarial loss/(gain)
    
    
    977
    
    
    
    947
    
    
    
    
    
    
    
    42
    
    
    
    73Prior service cost
    
    
    95
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    Total recorded in accumulated other comprehensive income,
before tax
    
    
    1,072
    
    
    
    1,021
    
    
    
    
    
    
    
    42
    
    
    
    73Assumptions used to determine net periodic benefitbenefit
cost for years ended December 31 (percent)Discount rate
    
    
    5.25
    
    
    
    5.00
    
    
    
    5.75
    
    
    
    5.25
    
    
    
    5.00
    
    
    
    5.75Long-term rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50Long-term rate of return on funded assets
    
    
    8.00
    
    
    
    8.25
    
    
    
    8.25
    
    
    
    
    
    
    
    
    
    
    
    
 F-13




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##### Table of Contents



Pension Benefits
    
    
    
    Other post-retirement benefitsmillions of dollars
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Components of net periodic benefit costCurrent service cost
    
    
    100
    
    
    
    100
    
    
    
    86
    
    
    
    6
    
    
    
    8
    
    
    
    7Interest cost
    
    
    246
    
    
    
    238
    
    
    
    239
    
    
    
    23
    
    
    
    23
    
    
    
    24Expected return on plan assets
    
    
    (329)
    
    
    
    (299)
    
    
    
    (257)
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    20
    
    
    
    20
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    Recognized actuarial loss/(gain)
    
    
    76
    
    
    
    114
    
    
    
    83
    
    
    
    6
    
    
    
    8
    
    
    
    7Net periodic benefit cost
    
    
    113
    
    
    
    173
    
    
    
    176
    
    
    
    35
    
    
    
    39
    
    
    
    38Changes in amounts recorded inaccumulated
other comprehensive incomeNet actuarial loss/(gain)
    
    
    105
    
    
    
    72
    
    
    
    317
    
    
    
    (25)
    
    
    
    73
    
    
    
    Amortization of net actuarial loss/(gain)
included in net periodic
benefit cost
    
    
    (76)
    
    
    
    
    
    
    
    
    
    
    
    (6)
    
    
    
    
    
    
    
    Prior service cost
    
    
    41
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
included in net periodic
benefit cost
    
    
    (20)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total recorded in accumulated other
comprehensive income
    
    
    50
    
    
    
    146
    
    
    
    317
    
    
    
    (31)
    
    
    
    73
    
    
    
    Total recorded in net
periodic benefit cost and other
accumulated other
comprehensive income, before tax
    
    
    163
    
    
    
    319
    
    
    
    493
    
    
    
    4
    
    
    
    112
    
    
    
    38
   Total pension and otherpost-retirement benefitsmillions of dollars
    
    2007
    
    
    2006
    
    
    2005(Charge)/credit to accumulated other comprehensive
income,
before tax
    
    
    (19)
    
    
    
    (219)
    
    
    
    (317)Deferred income tax (charge)/credit (note 5)
    
    
    4
    
    
    
    66
    
    
    
    105(Charge)/credit to accumulated other comprehensive

income, after tax
    
    
    (15)
    
    
    
    (153)
    
    
    
    (212)
    Target
    
    
    Percentage of plan assets atallocation
    
    
    December 31Asset category (percent)
    
    2008
    
    
    2007
    
    
    2006Equity securities
    
    
    50  75
    
    
    
    61
    
    
    
    64Debt securities
    
    
    25  50
    
    
    
    38
    
    
    
    36Other
    
    
    0  10
    
    
    
    1
    
    
    
    
  F-14




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##### Table of Contents



Pension benefitsmillions of dollars
    
    2007
    
    
    2006For funded pension plans with accumulated benefit
obligations in excess of plan assets:Projected benefit obligation
    
    
    398
    
    
    
    375Accumulated benefit obligation
    
    
    318
    
    
    
    308Fair value of plan assets
    
    
    254
    
    
    
    239Accumulated benefit obligation less fair value of plan assets
    
    
    64
    
    
    
    69For unfunded plans covered by book reserves:Projected benefit obligation
    
    
    373
    
    
    
    333Accumulated benefit obligation
    
    
    347
    
    
    
    314
 Estimated 2008 amortization from accumulated
    
    
    
    
    
    Other post-other comprehensive income
    
    Pension
    
    
    retirementmillions of dollars
    
    benefits
    
    
    benefitsNet actuarial loss/(gain) (a)
    
    
    81
    
    
    
    4Prior service cost (b)
    
    
    18
    
    
    
    
 (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 and SFAS 106.
 Cash flows
 Other post-Pension
    
    
    retirementmillions of dollars
    
    benefits
    
    
    benefits2008
    
    
    261
    
    
    
    242009
    
    
    265
    
    
    
    242010
    
    
    268
    
    
    
    242011
    
    
    273
    
    
    
    242012
    
    
    279
    
    
    
    252013 - 2017
    
    
    1,505
    
    
    
    126
  Sensitivities
 One
    
    
    OneIncrease/(decrease)
    
    percent
    
    
    percentmillions of dollars
    
    increase
    
    
    decreaseRate of return on plan assets:Effect on net benefit cost, before tax
    
    
    (40
    )
    
    
    40Discount rate:Effect on net benefit cost, before tax
    
    
    (60
    )
    
    
    70Effect on benefit obligation
    
    
    (555
    )
    
    
    680Rate of pay increases:Effect on net benefit cost, before tax
    
    
    45
    
    
    
    (35
    )Effect on benefit obligation
    
    
    160
    
    
    
    (140
    )
  One
    
    
    OneIncrease/(decrease)
    
    percent
    
    
    percentmillions of dollars
    
    increase
    
    
    decreaseEffect on service and interest cost components
    
    
    4
    
    
    
    (3
    )Effect on benefit obligation
    
    
    44
    
    
    
    (35
    )
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##### Table of Contents



7.
    
    Other long-term obligations
 millions of dollars
    
    2007
    
    
    2006Employee retirement benefits (note 6)(a)
    
    
    954
    
    
    
    1,017Asset retirement obligations and other environmental liabilities (b)
    
    
    522
    
    
    
    438Share-based incentive compensation liabilities (note 9)
    
    
    210
    
    
    
    128Other obligations
    
    
    228
    
    
    
    100Total other long-term obligations
    
    
    1,914
    
    
    
    1,683
 (a)
    
    Total recorded employee retirement benefit obligations also include $59 million in
current liabilities (2006  $51 million).(b)
    
    Total asset retirement obligations and other environmental liabilities also include
$74 million in current liabilities (2006  $97 million).
  millions of dollars
    
    2007
    
    
    2006January 1 balance
    
    
    422
    
    
    
    367Additions
    
    
    71
    
    
    
    61Accretion
    
    
    25
    
    
    
    22Settlement
    
    
    (30
    )
    
    
    (28
    )December 31 balance
    
    
    488
    
    
    
    422
 8.
    
    Derivatives and financial instrumentsThe company did not enter into any energy derivatives, foreign-exchange forward contracts or
currency and interest-rate swaps in the past three years. The company maintains a system of
controls that includes a policy covering the authorization, reporting and monitoring of
derivative activity.The fair value of the companys financial instruments is determined by reference to various
market data and other appropriate valuation techniques. There are no material differences
between the fair values of the companys financial instruments and the recorded book value.9.
    
    Share-based incentive compensation programsShare-based incentive compensation programs are designed to retain selected employees, reward
them for high performance and promote individual contribution to sustained improvement in the
companys future business performance and shareholder value.Incentive share units, deferred share units and restricted stock units
Incentive share units have value if the market price of the companys common shares when the
unit is exercised exceeds the market value when the unit was issued, as adjusted for any share
splits. The issue price of incentive share units is the closing price of the companys shares
on the Toronto Stock Exchange on the grant date. Up to 50 percent of the units may be exercised
after one year from issuance; an additional 25 percent may be exercised after two years; and
the remaining 25 percent may be exercised after three years. Incentive share units are eligible
for exercise up to ten years from issuance. The units may expire earlier if employment is
terminated other than by retirement, death or disability.The deferred share unit plan is made available to selected executives and nonemployee
directors. The selected executives can elect to receive all or part of their performance bonus
compensation in units and the nonemployee directors can elect to receive all or part of their
directors fees in units. The number of units granted to executives is determined by dividing
the amount of the bonus elected to be received as deferred share units by the average of the
closing prices of the companys shares on the Toronto Stock Exchange for the five consecutive
trading days immediately prior to the date that the bonus would have been paid. The number of
units granted to a nonemployee director is determined at the end of each calendar quarter by
dividing the amount of directors fees for the calendar quarter that the nonemployee director
elected to receive as deferred share units by the average closing price of the companys shares
for the five consecutive trading days immediately prior to the last day of the calendar
quarter. Additional units are granted based on the cash dividend payable on the companys
 shares divided by the average closing price immediately prior to the payment date for that
dividend and multiplying the resulting number by the number of deferred share units held by the
recipient, as adjusted for any share splits.Deferred share units cannot be exercised until after termination of employment with the company
or resignation as a director and must be exercised no later than December 31 of the year
following termination or resignation. On the exercise date, the cash value to be received for
the units is determined based on the average closing price of the companys shares for the five
consecutive trading days immediately prior to the date of exercise, as adjusted for any share
splits.Under the restricted stock unit plan, each unit entitles the recipient to the conditional right
to receive from the company, upon exercise, an amount equal to the five-day average of the
closing price of the companys common shares on the Toronto Stock Exchange on and immediately
prior to the exercise dates. Fifty percent of the units are exercised three years following the
grant date, and the remainder are exercised seven years following the grant date. For units
granted in 2002 to 2005, the exercise date has been changed from December 31 to December 4 for
units exercised in 2006 and subsequent years. For units granted in 2002, 2003, 2004 and 2005 to
be exercised subsequent to the companys May 2006 three-for-one share split, the company has
indicated that it will increase the cash payment or number of shares issued per unit, as the
case may be, by a factor of three.All units require settlement by cash payments with one exception. The restricted stock unit
program was amended for units granted in 2002 and future years by providing that the recipient
may receive one common share of the company per unit or elect to receive the cash payment for
the units to be exercised in the seventh year following the grant date.In accordance with the Financial Accounting Standards Boards (FASB) revised statement of
Financial Accounting Standards No.123 (SFAS 123R), Share-based Payment, the company accounts
for these units by using the fair-value-based method. The fair value of awards in the form of
incentive share, deferred share and restricted stock units is the market price of the companys
stock. Under this method, compensation expense related to the units of these programs is
measured each reporting period based on the companys current stock price and is recorded in
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Incentive
    
    
    Deferred
    
    
    Restrictedshare units
    
    
    share units
    
    
    stock unitsOutstanding at January 1, 2007
    
    
    9,071,250
    
    
    
    84,448
    
    
    
    9,996,390Granted
    
    
    
    
    
    
    6,078
    
    
    
    1,713,488Exercised
    
    
    (2,316,300)
    
    
    
    
    
    
    
    (1,471,847)Cancelled or adjusted
    
    
    3,900
    
    
    
    
    
    
    
    (18,180)Outstanding at December 31, 2007
    
    
    6,758,850
    
    
    
    90,526
    
    
    
    10,219,851
   Incentive stock options
      2007Units
    
    
    Exercise
    
    
    Remainingprice
    
    
    contractual(dollars)
    
    
    term (years)Incentive stock optionsOutstanding at January 1, 2007
    
    
    5,527,665
    
    
    
    15.50Granted
    
    
    Exercised
    
    
    (791,385)
    
    
    
    15.50Cancelled or adjusted
    
    
    (7,500)Outstanding at December 31, 2007
    
    
    4,728,780
    
    
    
    15.50
    
    
    
    4.3
 10.
    
    Investment and other incomeInvestment and other income includes gains and losses on asset sales as follows:
 millions of dollars
    
    2007
    
    
    2006
    
    
    2005Proceeds from asset sales
    
    
    279
    
    
    
    212
    
    
    
    440Book value of assets sold
    
    
    64
    
    
    
    78
    
    
    
    96Gain/(loss) on asset sales, before tax(a)(b)
    
    
    215
    
    
    
    134
    
    
    
    344Gain/(loss) on asset sales, after tax(a)(b)
    
    
    156
    
    
    
    96
    
    
    
    233
 (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.(b)
    
    2007 included a gain of $200 million ($142 million, after tax) from the sale of
the companys interests in a natural gas producing property in British Columbia and
in the Willesden Green producing property.
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11.
    
    Litigation and other contingenciesA variety of claims have been made against Imperial Oil Limited and its subsidiaries in a
number of lawsuits. Management has regular litigation reviews, including updates from corporate
and outside counsel, to assess the need for accounting recognition or disclosure of these
contingencies. The company accrues an undiscounted liability for those contingencies where the
incurrence of a loss is probable and the amount can be reasonably estimated. If a range of
amounts can be reasonably estimated and no amount within the range is a better estimate than
any other amount, then the minimum of the range is accrued. The company does not record
liabilities when the likelihood that the liability has been incurred is probable but the amount
cannot be reasonably estimated or when the liability is believed to be only reasonably possible
or remote. For contingencies where an unfavourable outcome is reasonably possible and which are
significant, the company discloses the nature of the contingency and, where feasible, an
estimate of the possible loss. Based on a consideration of all relevant facts and
circumstances, the company does not believe the ultimate outcome of any currently pending
lawsuits against the company will have a material adverse effect on the companys operations or
financial condition.In 2007, the Alberta government proposed changes to the oil and gas and generic oil sands
royalty regime beginning in 2009. The company believes that this proposal could have an adverse
effect on future company investments in Alberta and the companys future financial results. The
magnitude of the potential impact will depend on the final form of enacted legislation and the
future prices of oil and gas and cannot be reasonably estimated at this time. The Syncrude
Joint Venture owners have a Crown Agreement with the Province of Alberta that codifies the
royalty rates through December 31, 2015. The Syncrude Joint Venture owners are in discussions
with the Alberta government to determine if an amended agreement can be negotiated that would
transition Syncrude to the new generic oil sands royalty regime before 2016.The company was contingently liable at December 31, 2007 for a maximum of $83 million relating
to guarantees for purchasing operating equipment and other assets from its rural marketing
associates upon expiry of the associate agreement or the resignation of the associate. The
company expects that the fair value of the operating equipment and other assets so purchased
would cover the maximum potential amount of future payment under the guarantees.Additionally, the company has other commitments arising in the normal course of business for
operating and capital needs, all of which are expected to be fulfilled with no adverse
consequences material to the companys operations or financial condition. Unconditional
purchase obligations, as defined by accounting standards, are those long-term commitments that
are non-cancelable or cancelable only under certain conditions and that third parties have used
to secure financing for the facilities that will provide the contracted goods and services.
 Payments due by periodmillions of dollars
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    After 2012
    
    
    TotalUnconditional purchase obligations(a)
    
    
    99
    
    
    
    96
    
    
    
    64
    
    
    
    64
    
    
    
    121
    
    
    
    38
    
    
    
    482
 (a)
    
    Undiscounted obligations of $482 million mainly pertain to pipeline throughput
agreements. Total payments under unconditional purchase obligations were $94 million (2006
- $100 million,2005 - $104 million). The present value of these commitments, excluding
imputed interest of $84 million, totaled $398 million.
 12.
    
    Common shares
 As at
    
    
    As atthousands of shares
    
    Dec. 31 2007
    
    
    Dec. 31 2006Authorized
    
    
    1,100,000
    
    
    
    1,100,000
 Effective May 23, 2006, the issued common shares of the company were split on a three-for-one
basis and the number of authorized shares was increased from 450 million to 1,100 million. The
prior period number of shares outstanding and shares purchased, as well as net income and
dividends per share, have been adjusted to reflect the three-for-one split.From 1995 to 2006, the company purchased shares under twelve 12-month normal course share
purchase programs, as well as an auction tender. On June 25, 2007, another 12-month normal
course share purchase program was implemented with an allowable purchase of 46.5 million shares
(five percent of the total at June 22, 2007), less any shares purchased by the employee savings
plan and company pension fund. The results of these activities are shown below.
 Purchased shares
    
    
    Millions ofYear
    
    (thousands)
    
    
    dollars1995 to 2005
    
    
    750,109
    
    
    
    8,6352006
    
    
    45,514
    
    
    
    1,8182007
    
    
    50,516
    
    
    
    2,358Cumulative purchases to date
    
    
    846,139
    
    
    
    12,811Exxon Mobil Corporations participation in the above maintained its ownership interest in
Imperial at 69.6 percent.The excess of the purchase cost over the stated value of shares purchased has been recorded as
a distribution of retained earnings.The companys common share activities are summarized below:Thousands of shares
    
    
    Millions of dollarsBalance as at January 1, 2005
    
    
    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
    
    
    
    1,677Issued for cash under the stock option plan
    
    
    791
    
    
    
    12Purchases
    
    
    (50,516)
    
    
    
    (89)Balance as at December 31, 2007
    
    
    903,263
    
    
    
    1,600
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The following table provides the calculation of basic and diluted earnings per share:
 2007
    
    
    2006
    
    
    2005Net
income per common share - basicNet income (millions of dollars)
    
    
    3,188
    
    
    
    3,044
    
    
    
    2,600Weighted average number of common shares outstanding (thousands of shares)
    
    
    928,527
    
    
    
    975,128
    
    
    
    1,024,119Net income per common share (dollars)
    
    
    3.43
    
    
    
    3.12
    
    
    
    2.54Net
income per common share - dilutedNet income (millions of dollars)
    
    
    3,188
    
    
    
    3,044
    
    
    
    2,600Weighted average number of common shares outstanding (thousands of shares)
    
    
    928,527
    
    
    
    975,128
    
    
    
    1,024,119Effect of employee stock-based awards (thousands of shares)
    
    
    5,811
    
    
    
    4,460
    
    
    
    4,179Weighted average number of common shares outstanding,
assuming dilution (thousands of shares)
    
    
    934,338
    
    
    
    979,588
    
    
    
    1,028,298Net income per common share (dollars)
    
    
    3.41
    
    
    
    3.11
    
    
    
    2.53
 13.
    
    Miscellaneous financial informationIn 2007, net income included an after-tax gain of $25 million (2006  $14 million gain, 2005 
$5 million gain) attributable to the effect of changes in last-in, first-out (LIFO)
inventories. The replacement cost of inventories was estimated to exceed their LIFO carrying
values at December 31, 2007 by $1,953 million (2006  $1,509 million). Inventories of crude oil
and products at year-end consisted of the following:
 million of dollars
    
    2007
    
    
    2006Crude oil
    
    
    211
    
    
    
    211Petroleum products
    
    
    298
    
    
    
    277Chemical products
    
    
    43
    
    
    
    54Natural gas and other
    
    
    14
    
    
    
    14Total inventories of crude oil and products
    
    
    566
    
    
    
    556
 Research and development costs in 2007 were $89 million (2006  $73 million, 2005  $68
million) before investment tax credits earned on these expenditures of $6 million (2006  $7
million, 2005  $10 million). Research and development costs are included in expenses due to
the uncertainty of future benefits.Cash flow from operating activities included dividends of $22 million received from equity
investments in 2007 (2006  $18 million, 2005  $21 million).14.
    
    Financing costs
 millions of dollars
    
    2007
    
    
    2006
    
    
    2005Debt-related interest
    
    
    62
    
    
    
    63
    
    
    
    45Capitalized interest
    
    
    (36)
    
    
    
    (48)
    
    
    
    (41)Net interest expense
    
    
    26
    
    
    
    15
    
    
    
    4Other interest
    
    
    10
    
    
    
    13
    
    
    
    4Total financing costs (a)
    
    
    36
    
    
    
    28
    
    
    
    8
 (a)
    
    Cash interest payments in 2007 were $80 million (2006 -
$71 million, 2005 - $45
million). The weighted average interest rate on short-term borrowings in 2007 was 5.1
percent (2006  4.1 percent).
 15.
    
    Leased facilitiesAt December 31, 2007, the company held non-cancelable operating leases covering office
buildings, rail cars, service stations and other properties with minimum undiscounted lease
commitments totaling $232 million as indicated in the following table:
 Payments due by periodAftermillions of dollars
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2012
    
    
    TotalLease payments under minimum commitments (a)
    
    
    55
    
    
    
    52
    
    
    
    45
    
    
    
    26
    
    
    
    15
    
    
    
    39
    
    
    
    232
 (a)
    
    Total rental expense incurred for operating leases in 2007
was $79 million (2006 - $79 million, 2005 - $83 million) which included minimum rental expenditures of $67 million
(2006 - $66 million, 2005 - $63 million). Related rental income was not material.
 16.
    
    Transactions with related partiesRevenues and expenses of the company also include the results of transactions with Exxon Mobil
Corporation and affiliated companies (ExxonMobil) in the normal course of operations. These
were conducted on terms as favourable as they would have been with unrelated parties and
primarily consisted of the purchase and sale of crude oil, natural gas, petroleum and chemical
products, as well as transportation, technical and engineering services. Transactions with
ExxonMobil also included amounts paid and received in connection with the companys
participation in a number of natural resources activities conducted jointly in Canada. The
company has existing agreements with affiliates of Exxon Mobil Corporation to provide computer
and customer support services to the company and to share common business and operational
support services that allow the companies to consolidate duplicate work and systems. The
company has a contractual agreement with an affiliate of Exxon Mobil Corporation in Canada to
operate the Western Canada production properties owned by ExxonMobil. This contractual
agreement is designed to
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provide organizational efficiencies and to reduce costs. No separate legal entities were
created from this arrangement. Separate books of account continue to be maintained for the
company and ExxonMobil. The company and ExxonMobil retain ownership of their respective assets
and there is no impact on operations or reserves. During 2007, the company entered into
agreements with Exxon Mobil Corporation and one of its affiliated companies that provide for
the delivery of management, business and technical services to Syncrude Canada Ltd. by
ExxonMobil.Certain charges from ExxonMobil have been capitalized; they are not material in the aggregate.As at December 31, 2007, the company had outstanding
loans of $33 million (2006 - $33 million)
to Montreal Pipe Line Limited, in which the company has an equity interest, for financing of
the equity companys capital expenditure programs and working capital requirements.17.
    
    Net payments/payables to governments
 millions of dollars
    
    2007
    
    
    2006
    
    
    2005Current income tax expense (note 5)
    
    
    1,163
    
    
    
    776
    
    
    
    1,361Federal excise tax
    
    
    1,307
    
    
    
    1,274
    
    
    
    1,278Property taxes included in expenses
    
    
    112
    
    
    
    100
    
    
    
    99Payroll and other taxes included in expenses
    
    
    56
    
    
    
    46
    
    
    
    52GST/QST/HST collected (a)
    
    
    2,573
    
    
    
    2,715
    
    
    
    2,703GST/QST/HST input tax credits (a)
    
    
    (2,095)
    
    
    
    (2,293)
    
    
    
    (2,344)Other consumer taxes collected for governments
    
    
    1,707
    
    
    
    1,667
    
    
    
    1,613Crown royalties
    
    
    1,016
    
    
    
    904
    
    
    
    620Total paid or payable to governments
    
    
    5,839
    
    
    
    5,189
    
    
    
    5,382Less investment tax credits and other receipts
    
    
    9
    
    
    
    11
    
    
    
    9Net paid or payable to governments
    
    
    5,830
    
    
    
    5,178
    
    
    
    5,373Net paid or payable to:Federal government
    
    
    2,682
    
    
    
    2,352
    
    
    
    2,736Provincial governments
    
    
    3,036
    
    
    
    2,726
    
    
    
    2,538Local governments
    
    
    112
    
    
    
    100
    
    
    
    99Net paid or payable to governments
    
    
    5,830
    
    
    
    5,178
    
    
    
    5,373
 (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.
 18.
    
    Additional SFAS 158 adoption disclosureIn its 2006 financial statements, the company reported the adjustment related to the adoption
of SFAS 158. Based on further regulatory guidance, this adjustment should have been reported as
an adjustment to ending 2006 accumulated other comprehensive income. The amount reported by the
company as 2006 comprehensive income (nonowner changes in equity) was $2,891 million. Excluding
the negative $487 million SFAS 158 adoption adjustment (which was separately disclosed in note
6 to the 2006 consolidated financial statements, Employee retirement benefits), the amount
would have been $3,378 million. The company has accordingly revised the presentation of 2006
comprehensive income (nonowner changes in equity) in its 2007 financial statements.
 F-20