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Doug Horner, President of Treasury Board and Minister of Finance of Alberta, leaves the podium after discussing Alberta's 2013-14 first-quarter fiscal update in Edmonton on Thursday, August 29, 2013.JASON FRANSON/The Canadian Press

Richer-than-expected energy prices helped Alberta generate a $1.1-billion operating surplus midway through its fiscal year, though its Finance Minister warns that a recent return to deeply discounted crude oil and more spending to come on flood recovery will temper full-year results.

Still, the budget, from an operating standpoint, should be close to balanced by the end of March, even with return of the wide spread between the price of oil sands-derived crude and international benchmark oil, Finance Minister Doug Horner said on Tuesday.

The surplus compares with a forecast of a $58-million second-quarter deficit in the initial 2013-14 budget, when the government sounded the alarm about weak prices for heavy oil and their revenue-sapping impact on the Alberta's finances. The discount on bitumen narrowed considerably in the spring and summer, but in recent months it has widened again.

A strong economic outlook, including nation-leading growth, would cushion the blow, Mr. Horner said in his second-quarter update.

"I expect operational results should be balanced by the end of the 2013-2014 fiscal year. Let me be clear here: We should be pretty much balanced even with spending for flood recovery and even with the return of the bitumen bubble," he said, referring to the spread in oil prices.

He now expects a range of $250-million on either side of the balance, depending on economic conditions. That is compared with the budget forecast of a $451-million deficit, he said.

The Progressive Conservative government of Premier Alison Redford has come under fire from the opposition Wildrose Party and other fiscal conservatives for returning this year to debt markets to fund infrastructure projects such as roads. It borrowed $1.7-billion by the end of the second quarter, according to the update.

For this year's budget, the government also separated operating and capital spending, which made it tricky to compare results against prior years.

As a result, the Wildrose Party contends that the deficit forecast remains at $3-billion to $4-billion.

"Alberta has literally never had as much revenue as it does today and this PC government still can't stay out of debt or balance the books," Wildrose finance critic Rob Anderson said. "This fiscal update is very much the same old, same old: record revenues, more deficits, more debt and questionable accounting."

The government said revenue in the second quarter was $20.3-billion, up from a projection of about $19-billion. Of that, non-renewable resource revenue was $4.5-billion, $1-billion more than the budget expectation.

Meanwhile, operating expenses were $19.3-billion, up from the forecast $19-billion.

The Redford government has made bolstering market access for Alberta's oil a top priority as a way to boost returns for producers. Currently, tight pipeline capacity and a lack of infrastructure to regions such as the U.S. Gulf Coast and Asia have kept the province's oil from fetching higher international prices.

The discount on heavy oil narrowed at times to around $15 (U.S.) a barrel under West Texas Intermediate crude during the summer as supplies rose at a slower-than-expected clip and shipments by rail increased, though the spread has recently ballooned to as much as $40 a barrel.

The government said it now expects the differential between Western Canada Select heavy crude and WTI to average 21 per cent, down from the budget projection of 23 per cent.

By the end of September, the province had spent $351-million for recovery from June's devastating floods in southern Alberta, but Mr. Horner cautioned that much more would be spent by the end of the fiscal year.