Higher prices drive rebound in Canadian oil extraction profits

Higher prices and production will drive revenues to outpace costs, pushing pre-tax profits in Canada's oil extraction industry to 8 billion Canadian dollars (8 billion U.S. dollars) this year, according to a report issued Thursday.

This is a 66 percent increase from 2009 levels, but well below the industry's 2008 peak, reports the "Conference Board of Canada's Canadian Industrial Outlook: Canada's Oil Extraction Industry -- Winter 2010."

"Higher prices have prompted increased investment in non-conventional activities. However, weaker conventional production and rising cost pressures mean industry profits will not return to pre-recession levels until the end of the forecast in 2014," economist Todd Crawford said.

Oil prices had risen significantly over the past 12 months, but remained well below their record highs of 2008, the report said. Global demand would continue to grow over the forecast, driving up prices. Oil prices were forecast to increase to 114 U.S. dollars by 2014.

Given the current forecast for oil prices, Canadian companies were expected to invest significantly in non-conventional production capacity, it said. Non-conventional production was expected to grow by 6.7 percent this year and continue to expand over the forecast period, reaching 2.1 million barrels a day by 2014.

The report said industry revenues were expected to increase an average of more than 14 percent annually over the next four years, thanks to steady production growth and rising prices. However, rising material and labour costs in western Canada would slow the industry's pace of recovery in profitability.

Source:Xinhua