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Canadian oil company profits to return next year, conference board predicts

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Canadian oil producers will return to profitability in 2016 as companies cut costs amid lower prices, the Conference Board of Canada said in a report Wednesday.

The industry will record a pretax profit of $713 million next year versus a projected loss of $2.13 billion this year, according to the report. The industry’s costs will fall by 15 per cent in 2015 amid job cuts, wage reductions and reduced expenses in operations.

“Cost-cutting efforts will begin to bear fruit,” the conference board said. “The industry will return to a modest level of profitability even as prices remain low compared with previous years.”

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Oil has plunged to about $43 US a barrel from a high of almost $108 last year as the Organization of Petroleum Exporting Countries kept up production to preserve market share amid a surge of U.S. output. U.S. crude prices will rise to $70 a barrel by 2019 from $50 a barrel this year as growth in world output slows amid reduced investment, the Conference Board said.

Canadian oil companies’ revenue will drop by 22 per cent this year before rising 4.9 per cent in 2016, according to the report. Production increases, a weaker Canadian dollar and producer hedging have “softened the blow” to revenue.

Even amid lower oil prices, Canadian producers will add more than 840,000 barrels a day of oilsands capacity by 2019, boosting output to three million barrels a day, according to the report.

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