Alberta’s credit rating was raised one level by S&P Global Ratings on expectations that strong oil prices and measures to manage expenses will keep the Canadian province’s debt burden in check.

The oil-rich province’s credit rating was lifted to AA-, the fourth-highest available, from A+, S&P said in a note Monday. The outlook on the rating was “stable,” the firm said.

Alberta is benefiting from strong oil prices with bitumen royalties expected to be about $1.8 billion more than initially expected in the current fiscal year, according to a recent budget update. That helped swell the provincial government’s projected fiscal surplus to $5.5 billion. 

“We expect that Alberta will be able to carry this momentum into the next two years as it continues to produce after-capital surpluses,” S&P said.

Those surpluses should limit Alberta’s debt burden to about 127 per cent of operating revenue, helping the province fully service its debt with internal liquidity, the credit rating firm said. Risks to the forecast include recession, a “significant” drop in oil prices, unexpected shifts in policies or ineffective financial management, according to S&P.

The ratings firm also said that it could raise Alberta’s ratings in the next two years if the province could “meaningfully diversify its economy and decrease its dependence on resource revenues,” though it deemed it unlikely.

Though oil prices have slid 9.6 per cent this year amid swelling global supplies and weaker-than-expected demand, they’re still up sharply from the lows seen at the onset of the COVID-19 pandemic.