Canada’s oil producers and explorers are set to report mixed third quarter results, according to RBC analysts, with Athabasca Oil kicking things off on October 29 after market close.
“Our third-quarter funds from operations (FFO)/share estimates for our coverage group are generally mixed vis-a-vis FactSet consensus but may move more into line as formal corporate surveys are released,” RBC said, noting that FFO measures cash generated by operations before dividends and working capital changes.
Following planned turnarounds earlier in the year, Canada’s oil sands majors are expected to see a strong sequential improvement in free cash flow.
“Three of Canada’s oil sands weighted majors—Canadian Natural Resources Limited (TSX:CNQ), Suncor Energy Inc. (TSX:SU), and Imperial Oil Limited (TSX:IMO)—saw their free funds flow (before dividends and working capital movements) generation climb 38% sequentially ($1.3 billion) to $4.7 billion in the third quarter,” RBC wrote in a note to clients.
Share buybacks are expected to remain a key focus for the sector.
“Share buybacks totaled $2.5 billion in Q3, up $1.4 billion quarter-over-quarter inclusive of IMO’s resumption of share repurchases,” RBC wrote.
Among integrated oil producers, RBC continues to favor Suncor Energy, while Canadian Natural Resources stands out among upstream producers.
“Suncor Energy remains our favorite integrated oil in Canada (Global Energy Best Ideas list), with Canadian Natural Resources our favorite producer (Global Energy Best Ideas list),” RBC wrote. “Athabasca Oil, Baytex Energy (NYSE:BTE) and Cardinal Energy round out our Outperform roster.”
The analysts added that commodity prices supported revenue in the third quarter, with WTI averaging just over US$65 and Brent rising 2% to US$68.11.
“WTI-WCS differentials remained narrow in the third-quarter at US$10.38, reflective of western Canada’s much improved egress landscape,” RBC wrote.
Canadian Light and Synthetic Crude Oil traded close to WTI levels, at about US$86.54 and US$89, respectively. Natural gas markets were mixed, with Alberta spot prices plunging while US Henry Hub prices eased modestly.
“Alberta spot (AECO C) gas prices [fell] a whopping 64% to $0.62/mcf (vs. $1.74/mcf in the second-quarter) amid elevated basis vis-à-vis Henry Hub,” RBC wrote.
Downstream refining margins improved modestly across key US hubs, the analysts noted.
“Downstream inventory movements (LIFO-FIFO adjustments) may be relatively neutral in the third-quarter for companies following IFRS accounting policies, including Suncor,” RBC wrote.
RBC has updated its 2025 to 2026 operating earnings and FFO estimates to reflect Q3 pricing, share buybacks, and other fine-tuning adjustments.
“Our 2026 FFO estimates have risen substantially on the back of a 14% higher WTI outlook of US$60, with Henry Hub moving down 5% to US$3.80,” RBC wrote.
Looking further ahead, RBC released preliminary 2027 estimates with WTI at US$62.25 and Henry Hub at US$4.00/mmBtu.