Could the Edmonton Oilers survive a $4MM drop in the salary cap?

Peter Chiarelli2

The drop in the Canadian dollar is doing unpleasant things to NHL revenue, and those unpleasant things are going to be reflected in the new league salary cap this summer. According to reporter Jimmy Murphy, sources within both the NHL and NHLPA are saying that the number could fall by as much as $4.0 million.

What would that do to the Edmonton Oilers?

If the cap drops that far—and as James Mirtle notes, much will depend on the NHLPA’s willingness to use a cap inflator—then a lot of teams are going to be in trouble.
That list does not include the Oilers, who might not like a $67.4 million salary cap but would be able to comply with it without too much difficulty.

Using NHLNumbers.com and a little bit of forecasting we can create a hypothetical Oilers roster composed entirely of players currently under contract/restricted free agents likely to be signed.

Team-8

Left Wing Centre Right Wing Left Defence Right Defence Goal
T. Hall L. Draisaitl N. Yakupov O. Klefbom B. Davidson* C. Talbot
$6,000,000 $3,400,000 $2,500,000 $4,167,000 $900,000 $4,166,666
B. Pouliot C. McDavid J. Eberle A. Sekera M. Fayne L. Brossoit*
$4,000,000 $3,775,000 $6,000,000 $5,500,000 $3,625,000 $692,124
J. Khaira R. Nugent-Hopkins Z. Kassian* D. Nurse A. Clendening*  
$894,166 $6,000,000 $2,000,000 $1,713,000 $798,000  
M. Hendricks M. Letestu I. Pakarinen* D. Musil* A. Ference*  
$1,850,000 $1,800,000 $885,150 $938,874 $1,080,000  
L. Korpikoski A. Lander        
$2,500,000 $987,500      

The total cost of the above roster comes out to just under $66.2 million, and includes the following assumptions (each marked with an asterisk):

  • A one-year qualifying offer for Zack Kassian at his current salary of $2,000,000.
  • A one-year qualifying offer for Iiro Pakarinen including a five percent raise to a salary of $885,150.
  • A two-year contract for Brandon Davidson at $900,000, based on this list of comparables.
  • A one-year qualifying offer for Adam Clendening including a five percent raise to a salary of $798,000.
  • A one-year qualifying offer for David Musil including a five percent raise to a salary of $938,874.
  • A buyout for Andrew Ference.
  • A one-year qualifying offer for Laurent Brossoit including a five percent raise to a salary of $692,124.

8-Reinhart-2

Griffin Reinhart is not included because the Oilers have so many entry-level deals (McDavid, Draisiatl, Nurse, possibly Slepyshev and Kessy) with a bonus component. They thus can’t count on having any bonus cushion next year and at $3.4 million Reinhart is too overpriced to keep in the NHL at a $67.4 million cap.

The roster above is an approximation and in some ways an exaggeration, because the Oilers may be able to shave off more money. Several cost saving approaches could be taken:

  • Players on two-way qualifying offers or in danger of falling out of the NHL altogether could well be offered one-way deals at a lower cap hit. Would players like Clendening, Musil or Brossoit really turn down one-year, one-way $600,000 contracts? Would Pakarinen turn his nose up at a one-year, $800,000 offer? That’s $700,000 in savings right there.
  • Korpikoski isn’t worth the money he’s getting paid, and a buyout (by my math) would reduce his cap hit to just $500,000 next season and $1,000,000 in 2017-18. Assuming that he can be replaced in free agency for $600,000, that’s $1.4 million in savings.
  • Alternately, Edmonton could run with a 22-man roster, keeping just one spare forward and one spare defenceman. That would nix the $600,000 we just added to the books with a Korpikoski replacement.

Those cost-saving approaches could leave Edmonton with nearly $4.0 million to play with, easily enough to bring in an upgrade (or, alternately, to recall Reinhart). At a $67.4 million cap, probably half the league would be in serious cap trouble and looking for a way out of it, and the Oilers would be one of the few teams in a position to take some of that money on.

RECENTLY BY JONATHAN WILLIS

    • The problem with the inflator is that it increases escrow if revenue doesn’t rise with it. This seems to be an increasingly contentious issue within the NHLPA, because while it helps free agents it hurts every player who currently has a contract.

      • Kevwan

        I cannot see the NHLPA and the NHL letting the cap drop that much, it would show a lack of viability to NHL investors (TV, radio, etc)

        That being said, if the Oilers can get rid of as much dead cap space as they can at the deadline; Fayne, Korpikoski in particular, they would be poised to make a HUGE move in the off-season.

      • Craig1981

        True, but there is also the fact it brings buyouts and trades into the equation for players with contracts. Plus it would hurt players a year away too. And the players that signed a long term contract last year owe it to the ones this year not to drop it

        I could see it drop at one point, but I think this year proves that it won’t drop drastic if it does.

        • Essentially, yes. I haven’t really thought a lot about this since the 2013 CBA came out, but as I recall it works like this:

          The salary cap is designed to force player salaries to fall in line with revenue, but it doesn’t work perfectly. You can’t know how much revenue the league actually makes until the end of the year.

          That’s the purpose of escrow. If the sum of all player salaries exceeds the percentage of revenue that’s supposed to go to the players, they kick money back to ownership. To ensure the money’s there, pay is placed in an escrow account, and at the end of the year when the final dollars come in the players get whatever percentage of that escrow which they are entitled to back.

          The reverse is also possible: If revenues exceed expenditures, owners kick money into escrow, which could result in a player getting more than the face value of his contract.

          That rarely if ever happens, though. Generally it’s players seeing a significant portion of their salaries clawed back by ownership.

  • Dwayne Roloson 35

    Worst case Ontario, we buy out Korpikoski, Ference and Fayne.

    I feel like the NHL would step in and give teams some cap relief though if things got too out of hand.

    When do the expansion teams come into play? that might level things out a bit.

  • Anton CP

    So far I’ve liked the bets Chiarelli has made. I like the Talbot trade, I can live with over paying a little bit for Sekera, I even can accept the Reinhart trade but the one that I can not understand and still gives me “kick the cat, throw a bottle at the TV” is the Korpikoski trade. Why would you trade a useful NHL centre with one year on his contract for a left winger who has two more years, coming off a terrible back to back seasons, that will cost the team more… This is indeed a case for Agent Mulder and Scully to figure out. Was it Chiarelli that made the deal or an alien that was pissed off at MacT and KLowe?

    GXL

  • The last two years the $ going into escrow has increased and last year the hold was 12%. So players are taking home 12% less than their $ figure on their contracts. I saw one rumour suggesting escrow will be 18% next year if C$ stays at around .70 US$. And that is without the NHLPA exercising the right to use the escalator. Another figure I have seen estimates that the league gets apron 37% of revenue from the 7 Canadian teams.

    This makes it even more important to shed those bad contracts. Jonathan if you can shed light on any of these figures I’d appreciate it.

  • Gadgets

    I think if Chiarelli can, he should move out several from the past 3-4-5 years. And i don’t care who they are. If they think they are leaders, trade them, if you can. Because they’ve lead this team nowhere positive. Entitlement is not part of leadership qualities.

    You are going to get good players back for good players going out. Bring in solid hardworking people, who understand their role. Help accomplish
    something winners thrive for. Accomplishments

    The new kids need to be given the reins now. Draisaitl and McDavid are great players. The are determined. They work hard. They are committed to team values. They share the puck. They make players better. And without the the inflated egos that surround them now, they will be even better players. Because they will have/need to be. And they won’t be stepping on anyone’s toes.

    Don’t take a chance on infesting these kids with the “ok to lose” mentality.

    Clean this house up now.

    Just one persons opinion.

    • Seriously Bored

      So who did they surround Hall/ebs/nuge with that gave them the chance to succeed? I’m assuming that is who you are talking about. Is it really a great plan to trade all your established players and go with the youth again? Granted mcdavid is amazing but he can’t play all game.

      I get that the current crop of draft picks haven’t led the oilers anywhere but they were given a very poor chance of succeeding. Trade one for a d-man but all three would be absolute suicide.

      • They didn’t surround them with anyone. But they did have one person here who could have been a continuing influence on those kids. But the fan-base wanted him out of here because of his inflated salary. Sometimes it’s not the amount of positives gained from on the ice that make the contract acceptable, it’s the teaching, respect for fellow players, respect for the community, respect for the people who pay you(the fans). Respect for themselves.

        Out of the three you mentioned, I personally

        would like them to find a way/reason to keep Hopkins. He has flaws, but I believe he’s a team player, and an insurance policy for center. I also believe he would be a much better player, if he had less burden. I understand the contract, and I understand if he’s moved out.

        As I see it, trading for one d-man, and expecting that d-man to convert this group into a winner, is suicide in itself. And just prolongs the process. In fact, I don’t see one top d-man changing the culture here.

        The culture needs to be changed in order to make progress.
        It’s not the fault of the three kids that you mentioned. But I believe two of them are tainted. Maybe beyond repair if they remain.

        Again, my opinion.

    • Gadgets

      Listen to your nonsense

      “You will get good players back”. Tell me the last time that happened with the Oilers. You are more likely to get fleeced and end up with nothing.

      The new kids need the Reins cause the last kids were losers? How about grow a team past 24 years old. Give them veteran support. Get defence and complimentary players. This isn’t on the kids. Every one of them will kick the Oilers ass on a bettEr NHL team.

      Our defensive woes are due to trades- we got worse! All d troubles have come from trying to fix d troubles!

  • Jaxon

    If the Oilers have 3 healthy scoring lines next year:

    Hall / Draisaitl / Kassian

    Pouliot / McDavid / Eberle

    Slepyshev? / Nugent-Hopkins / Yakupov

    then the 4th line, which should only get 5 or 6 minutes a game does not need to be paid $6.15M as Hendricks / Letestu / Korpikoski are now.

    With so few minutes, you’d be better off going with Khaira / Lander / Pakarinen at $2.76M, for a savings of $3.38M!

    Korpikoski sucks and I’m not really impressed with Letestu either. I love Hendricks but if he’s only playing 5 or 6 minutes a night, then a similar player from within the organization or a free agent (like Michael Raffl or Brad Malone) can be found in the $0.9M to $1.1M range. Plus, I think Hendricks value will never be as high as it is now. He’s is a useful utility guy to go to battle in a playoff run who is coming off his best year and captained team US at the Worlds, so he may fetch a decent return.

    Which of these lines is better?

    Khaira / Lander / Pakarinen

    Hendricks / Letestu / Korpikoski

    Raffl / Malone / Pakarinen

    I think they’re close enough that it would be crazy to spend the extra $3.38M.

    • HockeyRulz

      Over at lowetide yak is the talk.I love the player but man is he ever lost out there.Would you trade Yak for Lazar?Both 3rd line right wingers and both could use a new lease on their careers.Throw out the trashes but this arm chair GM makes the move.

      • Gadgets

        I think the answer to your question is, would the sens trade yak for Lazar? I don’t think they would.

        The harder part of the answer is, what would Lazar bring to the oilers that they don’t already have or that would help the team?

        I don’t think there’s any trade out there that involves yak that helps the team. He doesn’t have much value right now and any trade you make with him would be nothing more than getting rid of him. Nobody is gonna give any sort of value for him. I believe the best value you can get from yak is by utilizing his skill set. Right now, he’s being thrown away playing with players that simply doesn’t suit his game.

  • Seriously Bored

    Which is why big buff didn’t test free agency, he wanted to get in now and sign while he could. Could be a terrible year to be a UFA.

    ALSO, Hamonic’s value just rose. Good D man on a great CAP hit.

  • Gadgets

    Interesting discussion. Good to see the number being looked at are realistic, unlike Gregor who wanted to sign Gryba and Davidson for 4 million.

    If this were to happen, I wish we were actually in better shape though. There would be teams desperate to move good players and we still wouldn’t have the flexibility to add those players. That extra couple of million will be valuable to the Oilers

      • Gadgets

        With Willis’ estimates we would be about one million below the cap. Is there’s a team like Chicago last year that need to move out players to get under the cap, we wouldn’t have the room to add a guy like that without moving out our own significant dollars elsewhere.

        But if the cap is coming in at 70-71 million, we now have that room. Make sense? Seriously, make sense?

        • Gadgets

          I’m not sure yet… Is your argument that if Gryba and Davidson came in at a 4m cap hit, that would be the camel that broke our back and prevent us from icing a competitive team? I’m not sure those guys would cost that much, but even if they did it would still be the least of the oilers problems. You do realize that that would still be less than nikitin this year right?

          On a team that has terrible defence, 4 mil for 2 NHL calibre defenceman is the last thing to worry about

  • Puckluck

    Great breakdown on the numbers Mr Willis. Do you have a prediction on how the management is going to prepare/create cap space for McDavids big jump in contract$?

    I bet the GM is eyeballing at least one of those 6Mil contracts to trade away by the deadline this season either way.

    • sesame_oil

      There does not need to be a trading away of a 6mil cap player to make way for McDavid contract this year.That does not need to happen for at least 2 more seasons after this year. Just what kind of contract do you think Conner will command after just a 40 games season anyway? Settle down and just enjoy the games for awhile. Do you really think McDavid needs to be the highest paid player in hockey after just 40 games. Jeeezzzzz.

    • sesame_oil

      There does not need to be a trading away of a 6mil cap player to make way for McDavid contract this year.That does not need to happen for at least 2 more seasons after this year. Just what kind of contract do you think Conner will command after just a 40 games season anyway? Settle down and just enjoy the games for awhile. Do you really think McDavid needs to be the highest paid player in hockey after just 40 games. Jeeezzzzz.

    • All the teams do pay with U.S. dollars.

      The problem is that when you buy tickets, or when Sportsnet pays for its TV rights, the payment comes in Canadian dollars (for obvious reasons). If the Canadian dollar is on par with the American dollar, that’s great, but when the Canadian dollar drops to 70 cents U.S. it’s equivalent to losing 30 percent of that Canadian revenue.

      Since the salary cap is linked to revenue, the cap falls.

  • toprightcorner

    This could be a league disaster with a lot of buyouts and buring guys in the minors. The teams with lots of cap space could really come out smelling like a rose as free agents will be way cheaper and can take so good players for picks like Snow did with Boychuck and Leddy. 2 years of poor Canadian dollar and some bargain 2 year contracts will be out there for good players just trying to keep employed.

    I haugh at all the teams with multiple players with $7+ mill contracts, they are screwed. This years stanley cup contenders will be playing with 2 AHL lines next year.

    • sesame_oil

      Unfortunately for the oilers we have 3 6 mill players plus mcdavid and dry to sign. How bad is it when the oilers have been so bad for a decade and are to the cap?

      On the yak discussion, he seems to going the mps route. The oilers really do a good job at ruining careers since 2006

  • sesame_oil

    I find it quite ridiculous how the character of Hall and Eberle is being questioned. The insinuation that these players are self entitled and non team players is absolutely absurd! At minimum 25% of all NHL players are self entitled and errogant! This doesnt mean they are bad team players! Quite the contrary is some cases…Pronger was a decent player, Seguin seems to be having some success, Crosby is ripping it up! They may have some good PR skills but dont think they dont feel they are pretty special. I mean just ask all Pronger’s mistresses around North America!

    What it boils down to is someone in the core group probably has to go and it is easier for people to swallow and justify if they can vilify these core players. Hall went from untouchable to tradable in a matter of weeks! The Fickleness of some fans blows me away! If anyone has proved they will always recover from inevitable slumps it has been Eberle and yet even as he is coming back into form he is still catching flack and his ability to find the back of the net is being credited entirely to McDavid. Don’t get me wrong McDavid does make Eberle better but Eberle has been an active contributer to this line and not just along for the ride. He deserves some cred.

    My point is that you can appreciate these guys (hall, ebs, rnh) and accept the fact that one of them may not be here. Which one is up for debate but they are all great players who have had to pave their own road with very little help, this season included in terms of defensive support. That considered they have done a pretty amazing job over their careers!

  • toprightcorner

    PC is in a great position to restructure the team. a couple buyouts and some shuffling of the bottom 6 to lower those salaries and maybe you can pick up a Yandle, Ladd, Backes, Lucic, Eriksson or Brouwer, all 29-32 to cheaper 3-4 year deals because they would want security long term in case of injury problems after a year and are out of the game. Then in a couple years, you improve your bottom 6 easily with cap space and a flood of players. Get a solid top 6, top 3-4 dmen and fill the rest with low price options. Teams with cap issues won’t be able to do that and in 2-3 years the Oilers will truly be a contending team and average salaries will come down and correct themselves after a few years of stupid inflation of salary cap all put into the star players. Would be great if the rates for great players fell by 30% right when we need to resign them.

  • sesame_oil

    How does it effect the top salary earners like Teows, Kane & Kopitar. Does their salary get reduced based on the maximum percent of cap that an individual player can make?

  • Anton CP

    Still amazed to me that other 3 major leagues are generating money like never before and somehow NHL is losing revenues.

    I understand that cheap owners in NHL like Bettman because he is helping them to stump on players but at the same time that NHL owners should take a look at other sports and realize how horrible of a job Bettman is doing to market it. NHL was having higher ratings than MLB and NBA in early 90s but never capitalize and eventually Jordan took all viewers away to NBA. NBA understood how hurtful that losing any games during season due to lockout can hurt the revenues and welling to compromise for greater good but NHL just can’t seem to understand that. 2012 lockout can be completely avoid but they have to drag it on and losing fans and viewers.

    Bettman, fans aren’t booing you because you are a commisioner, even Goodell wasn’t booed like you are during Super Bowl hand out. Silver has actually received more positive reactions from fans. I have always believed that Bettman is an assaassin sent by Stern from NBA to kill the NHL.

  • camdog

    Wow the Oilers may not even have the cap to keep Reinhart in the line up even if they wanted too. If they get a top 5 draft pick they may not have salary to play them next season either…