Desjardins Securities predicts strong fourth-quarter results for oil-weighted Canadian producers.

But the investment firm also anticipates Canadian integrateds — companies like Imperial Oil Ltd. (IMO) and Husky Energy Inc. [HSE/TSX] that produce oil and also refine it into fuel products — will feel the effects of refining margins falling off as much as 55% between the third quarter and fourth quarter.

Oilpatch results from Q4 will begin rolling in this week when large, integrated oilsands producer, Suncor Energy Inc. (SU), reports on Tuesday.

Increases in all of the upstream benchmarks tracked by Desjardins have offset the negative impact of the rising Canadian dollar, which eats into revenues of firms that produce in Canada.

Prospects for oil producers look good in the months ahead. Desjardins boosted its 2008 average oil price estimate from $75.68 for a barrel of benchmark West Texas Intermediate to $80.

BP rose on plans to venture into the Canadian oil sands on Tuesday amid a surge in energy stocks on tight oil inventories and plans by OPEC to hold production steady.

"Our upgrade is essentially a valuation call and is driven by the nearly 11% drop in unit prices since early November despite fundamentals remaining unchanged," Citi said.

Anyone who invested in EnCana Corp. (ECA) during its periodic dips over the past 12 months must be smiling now that the energy stock has risen to within pennies of a new record high. But what is it going to take to keep investors smiling?

Donnie Lewis says he'd quit the coldest, dirtiest job he's ever known -- drilling in Canada's oil-rich bogs for Suncor Energy Inc. -- if it wasn't for the free private room, maid service and five-course meals.

``I wouldn't do it if I had to share a room with six other fellows, all snoring and making a racket when you're trying to get a few winks,'' says Lewis, 41, who doubled his wages from his last job. ``The oil companies really take care of you and do everything they can to make your time here easy.''

Workers like Lewis have become a precious commodity for energy producers such as Suncor, Royal Dutch Shell Plc and Exxon Mobil Corp. Faced with a worldwide shortage of skilled labor, oil companies are reinventing the work camp. The drafty trailers and communal showers of a decade ago are giving way to resort-style housing that includes private rooms with flat-screen televisions.

The posh accommodations are raising costs for companies already squeezed by higher prices for pipe and drilling rigs, says Peter Tertzakian, who helps manage $1.4 billion at ARC Financial Corp. in Calgary.

Suncor, the second-largest producer in Canada's oil sands region, cited labor costs as one reason for a 48 percent drop in profit in the fourth quarter of last year. Higher crude oil and natural-gas prices are another result, as increased expenses delay projects that could help global energy supplies get ahead of surging demand.

Exploration and production costs are 53 percent higher than two years ago, according to an index developed by Cambridge Energy Research Associates in Cambridge, Massachusetts, to track labor, engineering, steel and equipment prices.

Desolate Wilderness
``Oil is getting more and more expensive to find and pump for a whole host of reasons, not the least of which is that you usually only find it in the middle of a desolate wilderness,'' Tertzakian says. ``No one wants to go there, so you have to pay people more. And then it costs substantial sums to take care of them once they're there.''

Wages for drilling engineers surged 20 percent in the past six months to $172,000 a year, according to Think Resources Inc., an Atlanta-based recruiting firm.

Pay increases and $15,000 bonuses are luring new workers to forbidding places such as the oil sands around Fort McMurray, Alberta. A work camp for 2,500 people costs about $120 million, the same as Exxon Mobil or Shell spends to drill a new well in the Gulf of Mexico.

Lewis quit his job as a diesel mechanic on Prince Edward Island in November to cross the continent and take a position operating machinery that vacuums up drilling fluids at Suncor's oil sands development north of Fort McMurray.

Hockey Rink and Pub
Shell, the world's second-biggest publicly traded oil producer, recognizes the need to pamper workers enough to take their minds off their bleak surroundings, says Ramzi Fawaz, a vice president in charge of oil-sands projects.

Shell, based in The Hague, is building a lodge for 2,500 workers complete with an indoor hockey rink and an oak-paneled pub in the heart of Canada's tar sands region, home to the world's second-largest oil reserve behind Saudi Arabia. Thirty- two kilometers (20 miles) away, Exxon Mobil, the world's biggest oil company, is planning soccer fields and indoor basketball courts for 1,300 workers at its Kearl oil-sands project, where construction is scheduled to begin later this year.

Old Style
For most of the 150-year history of the petroleum industry, living conditions for roughnecks and tool-pushers at remote fields were utilitarian at best, says Mark Little, development manager for Exxon's Kearl project.

Crews hauling drilling rigs, fuel and food to well sites along the shore of the Arctic Ocean in Canada's Northwest Territories in the 1970s and 1980s slept six to a room in old trailers atop sledges hauled across the tundra by bulldozers, says Shane Stampe, president of the work camp and catering business at Calgary-based Horizon North Logistics Inc. Meals were served in a mess hall next to the toilets.

Joe Cosgrove, who builds camps for energy, mining and smelting companies as senior project manager for Calgary-based Atco Ltd., recalls sleeping eight men to a room at a BP Plc camp in Algeria.

``I've stayed in some of those camps, and let me tell you, you don't want to stick around any longer than it takes to get the job done,'' Cosgrove says.

Demand for upscale digs is growing so fast that Houston- based Oil States International Inc.'s PTI unit budgeted $58.2 million this year to expand two Canadian oil camps and build a third from scratch to house 1,257 more welders and engineers.

Seven Eggs a Day
Dean Aiken, executive chef at PTI's Beaver River lodge, 50 kilometers north of Fort McMurray, hired a Quebecois pastry chef to make tarte au sucre, a traditional dessert adored by engineers and geologists from the Francophone province.

As Aiken sat before a dining room window describing the duck and lamb dishes that typically appear on the evening menu, a wolf trotted into view in the parking lot outside, sniffed the air and jumped a snow bank back into the woods.

Oilfield workers -- mostly men and a few women -- won't tolerate mediocre cuisine, and bad cooks can spark mutinies, says Stampe. Roughnecks drilling wells above the Artic Circle typically eat 7,000 calories a day, almost three times more than normal, because they spend most of their 12-hour shifts doing heavy labor outdoors in a region where minus 45 degrees Celsius (minus 49 Fahrenheit) is not uncommon in the winter months. Between omelets and baked goods, they consume an average of seven eggs per person per day, Stampe says.

Tahiti
The trend toward fancier lodgings extends from Canada's Arctic region to the Gulf of Mexico, Norway, Nigeria, Algeria and Russia. In Nigeria, Shell built a golf course and tennis courts for the camp at a liquefied natural gas plant on Bonny Island off the country's southeast coast.

San Ramon, California-based Chevron Corp. is building a production platform for the 500-million-barrel Tahiti field in the Gulf of Mexico that includes private bedrooms, an Internet café and a movie theater. The structure is being built in two pieces in shipyards in Finland and Texas and will be assembled in the water in July.

``We need a good camp to attract the skilled workers we need for ongoing projects and to keep them on board for future projects 20 or 25 years from now,'' says Shell's Fawaz.

Grizzly Visit
The grungy work camps of the past still exist where the construction of new digs hasn't kept pace with demand. Thirty- four Chevron workers drilling exploratory wells 260 kilometers above the Arctic Circle in Canada's Northwest Territories last month took up residence in a 35-year-old trailer complex with four wall-mounted wooden bunks in each room. The facility has a billiards table with stained felt and no television.

A grizzly bear tore a door off its hinges two summers ago when the camp was deserted and proceeded to destroy furniture and claw the walls. ``He did a tremendous amount of damage,'' says Cliff McDonald, who runs Horizon North's camp-catering business in the Canadian Arctic.

Lewis, who gets five days' leave for every 24 worked, says he gets bored after awhile. Despite the fine food and getting his bed made, laundry done and room vacuumed every day, he longs for a chair at the table in his kitchen back home.

Flying home takes almost 24 hours, counting layovers in Toronto and Halifax. The tab is covered by his employer, Edmonton-based Eveready Industrial Services Corp., a contractor working for Suncor, based in Calgary.

``No one's really living here,'' says Lewis, whose crew drills holes to evaluate the depth of the oil-bearing sands from which Suncor extracts heavy crude. ``You can see it in people's faces that they don't want to be here, that they'd rather be at home with their families. But it's a money hunt.''

Canadian stocks dropped for the second time in three days as energy stocks including Suncor Energy Inc. retreated along with crude oil prices.

Losses in the market were limited after Abitibi-Consolidated Inc. agreed to merge with rival Bowater Inc. to create the continent's third-biggest paper and forest-products company. The Standard & Poor's/TSX Composite Index slipped 33.30, or 0.3 percent, to 12,945.96 in Toronto.

``I don't know where we'd be without the deals and the deal rumors,'' said Stephen Gauthier, a partner in Montreal-based investment firm Gauthier & Cie., which oversees about $17 million. ``Maybe a thousand points lower? Oil prices are falling. We are getting deals, but Abitibi's not enough.''

Crude oil for March delivery fell 2.5 percent to $54.01 a barrel in New York, the lowest since Jan. 22, on speculation U.S. inventories are adequate to meet increased heating demand during the next weeks. Prices are 20 percent lower than a year ago.

Suncor Energy Inc. fell 90 cents to C$86.95.

The world's second-biggest oil-sands miner last week reported that fourth-quarter profit fell by half, as operating and royalty costs increased, while oil and gas prices slid. The company, which plans to boost daily oil output from Alberta's tar-like deposits by about 30 percent by 2008, faces higher costs because of a shortage of personnel and equipment as oil-sands development booms.

EnCana Corp., Canada's biggest natural-gas producer, fell 26 cents to C$55.08. Talisman Energy Inc., which produces oil and gas in the North Sea, retreated 24 cents to C$20.16.

A gauge of energy shares accounting for more than a quarter of the S&P/TSX's value declined 0.3 percent. Last week, the group added 2.7 percent as oil prices rebounded from a 19-month low and takeover speculation boosted shares such as Suncor.

Results a `Disaster'

``Operating costs for oil companies are through the roof,'' Gauthier said. ``Suncor results were a real disaster -- much worse than anyone expected. Without the deal speculation, energy stocks would probably be 10 percent to 15 percent lower.''

Phone companies fell 1.3 percent as a group.

Rogers Communications Inc., Canada's biggest mobile phone and cable television company, declined 93 cents to C$37.15.

Abitibi-Consolidated, North America's largest newsprint maker, jumped 83 cents, or 27 percent, to C$3.94. Abitibi and rival Bowater agreed to merge in a stock transaction to create AbitibiBowater Inc. The new entity will have annual revenue of $7.9 billion, and annual cost savings will be about $250 million, the companies said today in a statement.

Catalyst Paper Corp., another newsprint maker, added 48 cents, or 13 percent, to C$4.14.

Sino-Forest Corp. gained 62 cents, or 6.6 percent, to C$9.99. The owner of timberland in China said earlier this month that it has been approached by various parties interested in acquiring the company or making an investment.

Potash Corp. of Saskatchewan Inc., the biggest fertilizer maker, gained C$9.24, or 5.3 percent, to a record C$183.25.

A measure or raw-materials producers added 0.2 percent. MDS Inc. shares gained 32 cents to C$20.42. The medical-services company will acquire Sunnyvale, California-based Molecular Devices Corp. for $615 million, or $35.50 a share to add instruments, software and chemicals used in drug research, according to a statement distributed by PRNewswire. The bid is 49 percent higher than Molecular Devices' closing price on Jan. 26

``There are some pretty good premiums being paid,'' said Peter Hodson, senior portfolio manager at Sprott Asset Management Inc., which manages $3.52 billion in Toronto. ``The M&A activity will remind people of all the liquidity out there.''

Patheon Inc. rose 22 cents, or 4.2 percent, to C$5.47. The drugmaker put itself up for sale in September.

An index of health-care companies added 0.6 percent.

The following shares had unusual price changes. Stock symbols are in parentheses.

Occulogix Inc. (OC CN) added 31 cents, or 17 percent, to C$2.11. The developer of eye treatments said in a statement that the U.S. Food and Drug Administration cleared it to begin phase III trials for its RHEO (AMD) treatment for age-related macular degeneration.

QLT Inc. (QLT CN) climbed 53 cents, or 5.1 percent, to C$10.86. The company, another Canadian maker of eye treatments, was raised to ``buy'' from ``market perform'' by analyst David Dean at Sprott Securities in Toronto.