CALGARY — Canadian oil producers’ operating profits climbed 68% from the first quarter to the second, but their capital spending rose far more slowly, according to a new Deloitte Canada report.The report points to sharp swings in crude prices amid the war in the Middle East. Brent crude, the international benchmark, moved between US$68 and US$105 per barrel in July and August. Higher prices helped make oil and gas the largest contributor to non-financial industry profits in the second quarter, Statistics Canada data show.Capital spending increased by about 7% over the same period, reaching $11 billion, according to separate Statistics Canada figures. Canadian drilling activity was up 17% in the second quarter compared with a year earlier, citing Baker Hughes rig count data, Deloitte said.Producers are directing drilling toward shorter-cycle projects in the Montney, Duvernay and Clearwater formations, the report said, rather than committing to more expensive projects with longer timelines.“Producers view the current price environment as temporary, or uncertain, rather than rooted in a fundamental supply-demand shift,” Deloitte said.The firm expects West Texas Intermediate crude to average US$76.50 per barrel in 2027, down from its projected 2026 average of US$90.Andrew Botterill, who leads Deloitte Canada’s oil, gas and chemicals practice, said producers have spent much of the past five to eight years under pressure to control spending and debt. The COVID-19 pandemic and accompanying price collapse hit the sector while it was still recovering from the 2014-15 downturn..Cenovus to acquire Athabasca Oil in $5.7 billion oil sands deal.Now, Botterill said, companies see room for greater growth. A proposed pipeline that could carry one million barrels of oil per day to British Columbia’s coast, along with federal moves to streamline regulation and offer tax incentives for spending, could help open the way for new projects.“We could see significant growth coming from Canada,” Botterill said.He expects producers to spend the coming year weighing where to make larger commitments for the medium and long term.Recent deals may help companies position themselves for that growth, Botterill said. Cenovus Energy announced an agreement this week to buy Athabasca Oil for $5.7 billion, while Suncor Energy reached a $1.2-billion deal to sell some of its Atlantic Canada offshore holdings as it focuses on its oilsands operations.Botterill described the transactions as “preparatory steps” for companies considering growth over a longer horizon.“Where would we be more likely to play that capital and let’s make sure we get our portfolio in that direction,” he said.Alberta’s natural gas prices have averaged less than C$2 per thousand cubic feet so far this year, despite rising exports from the LNG Canada facility in Kitimat, BC, which began operating in mid-2025. Production averaged 20 billion cubic feet per day in the second quarter, about 5% higher than in the same period last year.Deloitte said producers have continued increasing output while pursuing higher-value natural gas liquids, including propane, which are produced alongside natural gas.Botterill said Alberta prices held relatively steady through August and September, which are usually among the weakest months for gas prices.“That shows you that there is natural gas demand building in Canada,” he said. “The ability to export off our West Coast is making a difference.”Deloitte expects Alberta gas prices to average C$1.75 per thousand cubic feet this year, rise to $2.15 next year and exceed $3 after 2029.The report also examined artificial intelligence in the energy sector, building on a Deloitte study published in February. It found that 72% of energy, resource and industrial companies use “physical” AI to some extent, such as through machines and control systems. However, only 16% said they use AI extensively, with many companies struggling to expand beyond pilot projects.“Oil and gas companies are used to capital intensive investments, with the oilsands as a prime example of making big bets. Simply put: it’s a business that isn’t afraid of risk,” the report said.“But to compete with capital that is designated to core operations for development, expansion and optimization projects, the value proposition for AI use cases needs to be well developed.”
