Canadian oil producers saw a 68 per cent surge in operating profits between the first and second quarters of this year, but capital spending hasn’t kept anywhere near the same pace, says a new report from Deloitte Canada.
The consulting firm notes that crude prices have experienced “considerable volatility” in recent months due to the Middle East war, with the international light benchmark, Brent, fluctuating between US$68 and US$105 per barrel in July and August alone.
High prices have created a windfall for Canada’s oil producers, with that sector the biggest contributor to non-financial industry profits during the second quarter, according to Statistics Canada.
Separate capital expenditure data from StatCan, meanwhile, has shown only modest movement recently, rising about seven per cent to $11 billion in the second quarter versus the first. Citing Baker Hughes rig count data, Deloitte says drilling in Canada was up 17 per cent during the second quarter compared to the same time a year earlier.
“It’s clear that producers are prioritizing drilling programs in plays which offer efficient, short-cycle economics, such as in the Montney, Duvernay and Clearwater, rather than pursue long-cycle, capital-intensive projects,” Deloitte said in the report released Thursday.
“Producers view the current price environment as temporary, or uncertain, rather than rooted in a fundamental supply-demand shift.”
Deloitte is forecasting West Texas Intermediate oil prices — the benchmark for light oil produced from U.S. fields — to average US$76.50 per barrel in 2027, down from a projected 2026 average of US$90.
Andrew Botterill, who leads Deloitte Canada’s oil, gas and chemicals practice, said over the past five to eight years, companies have been under pressure from investors to keep spending and debt in check. The COVID-19 pandemic, and the price collapse that accompanied it, ravaged oilpatch finances when they had barely recovered from the 2014-2015 bust.
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But now, Botterill said, there’s a sense of “we could be much more” in the sector. A new million-barrel-per-day export pipeline has been proposed to the British Columbia coast, and Prime Minister Mark Carney’s government has made moves to simplify the regulatory process, roll back Trudeau-era environmental policies and expand investment tax perks.
“We could see significant growth coming from Canada,” Botterill said.
“And I think what we are going to see play out over the coming year is companies are going start to look at, ‘Where are we going to make our bets? Where are we going to start to make bigger capital spends for … the medium and long term?’”
Earlier this week, oilsands giant Cenovus Energy Inc. announced an agreement to buy smaller peer Athabasca Oil Corp. for $5.7 billion. Fellow energy heavyweight Suncor Energy Inc., meanwhile, said it reached a deal to sell some of its Atlantic Canada offshore holdings for $1.2 billion as it focuses on its core oilsands business.
Botterill said those transactions are “preparatory steps” for companies looking at growth over a long time horizon.
“Where would we be more likely to play that capital and let’s make sure we get our portfolio in that direction.”
On the natural gas side, the Deloitte report said prices in Alberta have averaged below an anemic C$2 per thousand cubic feet year-to-date, despite increasing exports from the LNG Canada terminal in Kitimat, B.C., which started up in mid-2025.
Output averaged 20 billion cubic feet per day during the second quarter, about five per cent above the same period in 2025. Companies kept growing production as they chased more valuable natural gas liquids, like propane, which come out of the ground along with dry natural gas.
Botterill said in August and September, typically the weakest time of year for Alberta natural gas, prices did not see sharp declines like they usually do, but stayed relatively steady.
“What that shows you is that there is natural gas demand building in Canada. The ability to export off our West Coast is making a difference,” he said.
“We’re much more structurally sound on the natural gas market than we were say, a year ago.”
Deloitte expects Alberta gas prices to average C$1.75 per thousand cubic feet this year, climbing to $2.15 next year and well above $3 post-2029.
The report also touched on artificial intelligence adoption in the oilpatch, which was detailed in another study Deloitte published in February.
It said 72 per cent of energy, resource and industrial companies use “physical” AI — through machines and control systems — to some extent.
However, many struggle to level up from pilot projects to enterprise-wide use, and only 16 per cent of companies reported using AI extensively.
“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.”
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