Nexen Cash Flow Dips, Canada

Nexen reported third quarter operating and financial results and provided an update on strategic priorities.

Production volumes averaged 181,000 barrels of oil equivalent per day (boe/d), a decrease from second quarter production of 213,000 boe/d. This reflects the scheduled downtime associated with the turnarounds at Buzzard, Long Lake and Scott.

Cash flow from operations decreased to $560 million ($1.06/share) from $707 million ($1.34/share) in the second quarter, primarily due to the lower production and higher operating costs associated with the planned turnarounds. Net income decreased to $59 million ($0.11/share) from $109 million ($0.20/share) in the second quarter. This reflects lower cash flow associated with the scheduled turnarounds and the impact of several non-recurring items.

The company continues to make good progress on our strategic priorities:

• Buzzard operations were strong prior to the turnaround with a production efficiency of 88% versus the company’s plan of 85%.
• Offshore West Africa, the company brought on two additional wells at Usan and increased current production to approximately 120,000 barrels per day (bbls/d) (24,000 bbls/d net to Nexen).

The planned major turnaround at Long Lake was completed without any significant issues. Bitumen production is back to approximately 34,000 bbls/d and the upgrader is producing PSCTM. Pad 12 continues to ramp-up and steaming continues at pad 13. First production is expected from pad 13 over the next several weeks.

In the Gulf of Mexico, the company completed a successful appraisal of the south fault block at Appomattox and currently drills a sidetrack to test additional resource potential in the northwest fault block.

Company’s previously announced shale gas joint venture with INPEX Gas British Columbia closed in August and Nexen received $821 million of cash upon closing. As well,  the company’s 18-well pad in the Horn River achieved start up in late September ahead of schedule.

A number of exploration wells are in progress including North Uist and Bardolph in the UK North Sea. The Owowo West prospect, offshore West Africa is currently being evaluated.

“In the third quarter, we announced a plan to accelerate shareholder value while remaining focused on executing our plan and advancing strategic priorities across our operations,” said Kevin Reinhart, Nexen’s interim President & CEO. “We completed major turnarounds at Buzzard and Long Lake, met production guidance for the fourth consecutive quarter, and remained on-track to meet our production guidance for the year. Our ability to maintain focus and make continued strong progress in key areas of our operations is a testament to the talent and exceptional dedication of Nexen employees.”

[mappress]
LNG World News Staff, October 26, 2012; Image: Nexen