Canada’s oil and gas drilling industry is bracing for a modest increase in activity next year, following the release of the Canadian Association of Energy Contractors’ (CAOEC) annual State of the Industry report. The report forecasts a 3% uptick in the number of wells drilled, along with similar gains in drilling rig and service rig operating hours.

While not a dramatic rebound, the projected growth comes at a time when energy markets remain volatile and global forces and domestic policy heavily influence investment decisions. It also follows the announcement of a wide-reaching energy agreement between Alberta and the federal government, which some in the industry are calling a step in the right direction—even if its impacts won’t be felt immediately.

The CAOEC, which represents dozens of land and offshore drilling companies, expects 5,709 wells to be drilled across Canada in 2026 - up slightly from this year’s total. It’s a cautious outlook, reflecting ongoing uncertainty around commodity prices and broader macroeconomic conditions.

Mark Scholz, president and CEO of the CAOEC, said that while the industry remains hopeful about a more stable environment, the general tone remains one of “flat activity” heading into the new year. With natural gas prices expected to improve - particularly with the LNG Canada facility in Kitimat, B.C., ramping up - some producers may see better margins. But confidence is still tempered by global supply dynamics and regulatory uncertainty.

Another group, Enserva, which represents companies across energy services, supply, and manufacturing, has taken a more downbeat view. Its recent forecast suggests a 5.6% drop in sector spending this year and an additional 2.2% decline in 2026.

What’s generating the most buzz in industry circles is the recently announced memorandum of understanding (MOU) between the Alberta government and Ottawa. The agreement includes a series of policy changes, including the scrapping of the federal emissions cap, an equivalency deal on methane reductions, and revisions to anti-greenwashing legislation.

One of the more ambitious components of the accord is the proposal to enable a new pipeline capable of shipping at least one million barrels of oil per day to the West Coast for export to Asia. The Alberta government has committed $14 million to early work on the project, with hopes of eventually passing it to the private sector.

Industry players have expressed cautious optimism. While these policy shifts may not change 2026 forecasts right away, many see them as laying the groundwork for longer-term investment and expansion—assuming the promises materialize and regulatory clarity continues.

For now, much of the heavy lifting still lies ahead. Before any new pipeline moves forward, the route and endpoint must be finalized, and industry interest gauged through a formal “open season” process. Until then, many oil producers are likely to remain in a wait-and-see mode.

The federal policy changes are intended to reduce investor uncertainty and allow Canadian oil to compete more effectively on the global stage. However, it’s not yet clear how quickly companies will act on these signals - or whether global demand will support large-scale expansions.

Even among industry supporters, there’s recognition that improved policy alignment alone may not be enough to trigger a significant upswing in activity, especially given ongoing concerns around global oil prices, emissions targets, and market competitiveness.

Taken together, the slight increase in drilling activity and the long-term potential of the Alberta-Ottawa accord reflect a cautiously optimistic outlook for Canada’s energy sector. Progress is expected to be slow, with regulatory clarity and global pricing playing central roles in shaping future investment decisions.

While many industry leaders are hopeful that the policy shift marks the beginning of a more stable and competitive operating environment, the immediate forecast remains measured. For now, the focus is on steady operations, improved efficiency, and preparing for what could be bigger shifts in the years to come.