CALGARY — As calls grow louder for a speedy transition away from fossil fuels, oil and gas companies might seem like the has-beens of the Canadian economy, particularly amid the growth of electric vehicles and other technologies. 

But in their latest earnings season, which wrapped up Thursday with Canadian Natural Resources (CNRL) reporting, Canada’s heavy oil producers offered a stark reminder that the traditional energy sector still has plenty of juice. 

Here’s how they did—and what their profits mean for their net-zero promises. 

The results

In short, oil-sands companies across the board are taking in massive piles of cash. CNRL, the Calgary-based bitumen producer chaired by oil magnate Murray Edwards, generated $19.39 billion in cash flows from operations in 2022, more than the $17.66 billion generated by Canada’s big three telecom companies—Rogers, Telus and BCE—combined. CNRL posted a $10.9-billion profit over the 12 months ended December 2022. 

Oil-sands rival Suncor Energy’s profits more than doubled from $4.1 billion to $9.1 billion over the same period; annual cash flows jumped from $11.8 billion to $15.7 billion. Cenovus Energy, one of the three largest oil-sands producers alongside CNRL and Suncor, saw profits leap to $6.5 billion over the year, up from $587 million. 

Obviously, cash flows only tell part of the story, particularly in a capital-intensive business like the oil sands. And it was just a few years ago that plummeting oil demand due to the global COVID-19 pandemic blew a hole in energy companies’ bottom lines, leading to widespread write-downs and red ink. But post-pandemic economic growth and oil supply shortages stemming from Russia’s invasion of Ukraine have changed all of that, providing free cash flow rates not seen in years. 

After years of struggle, the Canadian companies who remained in northern Alberta following a mass exodus in 2015 are “now realizing the potential of that free cash flow and the margin that can come from it,” Kevin Birn, a Calgary-based energy analyst for S&P Global, said in an interview with The Logic. 

What comes next

The question is where companies will spend the windfall. Birn said companies are currently being pulled in three different directions: dividends, investments in existing operations to boost production, and decarbonization efforts, including investment in technologies like carbon-capture and storage. So far, much of it has gone back to the investors who suffered amid lower oil prices during the pandemic. 

“They’re using it to pay down debt, buy back shares and return dividends—so, effectively returning value to shareholders,” Birn said. 

Looming over all of this is oil companies’ promise to reach net-zero emissions by 2050, which they expect will cost around $75 billion in capital investment. That’s a massive hill to climb for one of Canada’s most emissions-intensive industries. But from the perspective of oil-sands companies (for now, at least) such targets must seem slightly more attainable from their perch atop a mountain of cash.