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OTTAWA — The Conference Board of Canada says lower oil prices will reduce profits in the country's oil extraction industry by almost 30 per cent this year, but earnings will remain high by historical standards
“Rapid production growth and record high prices led to soaring profits last year,” Conference Board economist Michael Burt said Wednesday. “But with oil prices down from their 2006 peak, industry profits are expected to weaken this year, before growing again beginning in 2008.”
The Conference Board report says profits in the oil extraction industry grew overall by 26.4 per cent in 2006 over the previous year, reaching a record $15-billion.
In line with lower oil prices, profits this year are expected to decline, but at $10.6-billion they will still be high by historical standards.
Some of Canada's largest oil and gas producers have recently reported record earnings for 2006, although there have also been declines.
Imperial Oil, Canada's largest integrated oil company, had its highest-ever annual profit of $3.04-billion in 2006, The previous record profit of $2.6-billion was achieved in 2005.
Natural gas producer EnCana Corp. recorded the largest annual corporate profit in Canadian history in 2006, $5.65-billion (U.S.).
Nexen Inc.'s profit posted net profit of $601-million for 2006, roughly half of the $1.14-billion the gas producer earned the previous year.
And Precision Drilling Trust's profit dropped by $1-billion last year and Canada's largest oil and gas drilling company warned last week that a continuing slowdown in the natural gas sector will lead to more challenges going forward.
Gains in production and improvements in productivity will allow profits to increase again starting in 2008, the Conference Board said.
Oil production in Canada is expected to rise by about 10 per cent in 2007, following an increase of just over five per cent in 2006.
Production growth will remain strong in the coming years thanks to ongoing development of Canada's oil sands resources, the report says.
