Global News Edmonton has reported:

Canadian oil producers’ operating profits rose 68 per cent between the first and second quarters of this year, while capital spending increased only modestly, according to a new Deloitte Canada report released Thursday. Deloitte says producers are directing more drilling toward projects with shorter development timelines as they weigh whether recent high prices will last.

The report cites considerable oil price volatility in recent months amid the war in the Middle East. Brent, the international light crude benchmark, ranged from US$68 to US$105 per barrel in July and August alone.

Higher prices made the oil sector the largest contributor to non-financial industry profits in the second quarter, Statistics Canada data show. Separate capital expenditure figures from the agency indicate spending rose about seven per cent from the first quarter, reaching $11 billion in the second.

Canadian drilling activity was up 17 per cent in the second quarter compared with the same period a year earlier, based on Baker Hughes rig count data cited by Deloitte. The firm said companies are directing work toward plays such as the Montney, Duvernay and Clearwater, where economics can be efficient and projects can produce results sooner.

“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. “Producers view the current price environment as temporary, or uncertain, rather than rooted in a fundamental supply-demand shift.”

Deloitte projects West Texas Intermediate, the benchmark for light oil produced from U.S. fields, will average US$76.50 per barrel in 2027. That compares with the firm’s projected average of US$90 for 2026.

Andrew Botterill, who leads Deloitte Canada’s oil, gas and chemicals practice, said investors have pressed companies to control spending and debt over the past five to eight years. The COVID-19 pandemic and the accompanying price collapse hit oilpatch finances before they had fully recovered from the 2014-2015 downturn.

Botterill said the sector now has a sense of “we could be much more.” A proposed export pipeline capable of carrying one million barrels per day to the British Columbia coast could support growth, while Prime Minister Mark Carney’s government has taken steps to simplify the regulatory process, roll back environmental policies introduced under former prime minister Justin Trudeau and expand investment tax incentives.

“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?'”

Recent corporate deals could help companies position their portfolios for that longer horizon, Botterill said. Earlier this week, oilsands producer Cenovus Energy Inc. announced an agreement to acquire smaller peer Athabasca Oil Corp. for $5.7 billion.

Suncor Energy Inc. said it had reached a $1.2-billion deal to sell some of its offshore holdings in Atlantic Canada as it concentrates on its core oilsands business. Botterill called the transactions “preparatory steps” for companies considering 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.”

The report also examined Alberta’s natural gas market. Prices there averaged below C$2 per thousand cubic feet year to date, despite rising exports from the LNG Canada terminal in Kitimat, B.C., which began operating in mid-2025.

Natural gas output averaged 20 billion cubic feet per day in the second quarter, about five per cent higher than in the same period of 2025. Companies continued to increase production while pursuing more valuable natural gas liquids, including propane, which are brought up with dry natural gas.

Botterill said Alberta prices remained relatively steady in August and September, months that are usually the weakest of the year for the province’s natural gas market, rather than falling sharply as they often do.

“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, rise to $2.15 next year and exceed $3 after 2029.

The report also revisited artificial intelligence use in the oilpatch, following a separate Deloitte study published in February. It found 72 per cent of energy, resource and industrial companies use “physical” AI through machines and control systems to some degree, but many have difficulty expanding beyond pilot projects. Only 16 per cent said they use 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.”