Oilpatch profits vastly outpacing spending — at least for now: Deloitte

Canadian oil producers experienced a significant 68% increase in operating profits from the first to the second quarter of this year, according to a Deloitte Canada report. However, the report highlights that capital spending hasn't kept up with this growth. The fluctuating crude prices, particularly due to the Middle East war, have contributed to this windfall for oil producers.

While crude prices soared between US$68 and US$105 per barrel in July and August, capital expenditure in Canada rose by only about seven percent to $11 billion in the second quarter. Deloitte's analysis suggests that oil companies are prioritizing drilling programs in efficient, short-cycle plays like Montney, Duvernay, and Clearwater, rather than long-cycle, capital-intensive projects.

The report projects West Texas Intermediate oil prices to average US$76.50 per barrel in 2027, down from the projected 2026 average of US$90. Despite the challenging price environment, Deloitte's Andrew Botterill sees potential for significant growth in Canada's oil and gas sector, citing new export pipeline projects and government measures to simplify regulations.

In the natural gas sector, Alberta's prices have averaged below C$2 per thousand cubic feet year-to-date, with exports from the LNG Canada terminal in Kitimat contributing to increased production and demand for natural gas liquids.