Nexen Inc.
TSX : NXY
NYSE : NXY

Nexen Inc.

September 03, 2009 06:30 ET

Nexen Announces Golden Eagle Area Resource Size and Step-out Development Success at Scott/Telford

CALGARY, ALBERTA--(Marketwire - Sept. 3, 2009) - Nexen continues its significant growth in the UK North Sea, announcing the discovery of substantial additional resource and the start up of new production.

Golden Eagle Area Contains Significant Recoverable Contingent Resource

Based on our assessment of the data acquired to date, including three exploration wells, nine appraisal wells, three drill-stem tests, one injectivity test and extensive core data, we estimate that the Golden Eagle area contains between 150 and 275 million boe of gross recoverable contingent resource and is becoming a major development project. The Golden Eagle area includes our 34% operated interest in both the Golden Eagle and Hobby discoveries and our 46% operated interest in the Pink discovery.

We expect to continue appraisal drilling in the area for the remainder of the year. We are evaluating development options as we move towards project sanction.

"The Golden Eagle area is shaping up to be a significant development for Nexen and after Buzzard, it is the largest oil find in the UK North Sea in the last decade," commented Marvin Romanow, Nexen's President and Chief Executive Officer. "Not only are the economics attractive at oil prices as low as US$40/bbl but with Buzzard at peak rates for the next five years or so, this development allows us to keep growing our presence in the North Sea."

Significant Scott/Telford Development Area Well

In the Scott/Telford development area, we recently completed drilling a new step-out development well which encountered 254 feet of high quality net oil pay. We are currently assessing the results to determine ultimate reserve additions and whether additional drilling is required to delineate the area further. The well will be tied into our Scott platform and is expected to add incremental production of approximately 10,000-15,000 boe/d to us by year end. We have a 72% operated working interest in the field.

Ettrick Field On Stream

The Ettrick field began producing in mid August at an initial rate of 20,000 boe/d (16,000 boe/d net to us). We have recently produced at rates approximating 30,000 boe/d (gross), which allowed us to test the design capacity of the floating production, storage and offloading vessel (FPSO). As production rates stabilize, we will optimize production from the field. In addition, we have a nearby discovery at Blackbird which could be a future tie-back to Ettrick, further enhancing the economics of this development. We operate both Ettrick and Blackbird, with a 79.73% working interest in each.

Planned Buzzard Shutdown Underway

At Buzzard, the four week shutdown is underway for jacket installation and tie in preparation relating to the fourth platform. Work is proceeding as planned and the platform jacket was successfully installed earlier this week. We expect to have production back on stream by mid September. In 2010, we will install the topsides and begin operating the fourth platform which will allow us to handle higher levels of hydrogen sulphide over the life of the field.

Nexen Inc. is an independent, Canadian-based global energy company, listed on the Toronto and New York stock exchanges under the symbol NXY. We are uniquely positioned for growth in the North Sea, Western Canada (including the Athabasca oil sands of Alberta and unconventional gas resource plays such as shale gas), deep-water Gulf of Mexico, offshore West Africa and the Middle East. We add value for shareholders through successful full-cycle oil and gas exploration and development and leadership in ethics, integrity, governance and environmental protection.

Information with respect to forward-looking statements and cautionary notes is set out below.

Forward-Looking Statements

Certain statements in this report constitute "forward-looking statements" (within the meaning of the United States Private Securities Litigation Reform Act of 1995) or "forward-looking information" (within the meaning of applicable Canadian securities legislation). Such statements or information (together "forward-looking statements") are generally identifiable by the forward-looking terminology used such as "anticipate", "believe", "intend", "plan", "expect", "estimate", "budget", "outlook", "forecast" or other similar words and include statements relating to or associated with individual wells, regions or projects. Any statements as to possible future crude oil, natural gas or chemicals prices, future production levels, future cost recovery oil revenues from our Yemen operations, future capital expenditures and their allocation to exploration and development activities, future earnings, future asset dispositions, future sources of funding for our capital program, future debt levels, availability of committed credit facilities, possible commerciality, development plans or capacity expansions, future ability to execute dispositions of assets or businesses, future cash flows and their uses, future drilling of new wells, ultimate recoverability of current and long-term assets, ultimate recoverability of reserves or resources, expected finding and development costs, expected operating costs, future demand for chemicals products, estimates on a per share basis, sales, future expenditures and future allowances relating to environmental matters and dates by which certain areas will be developed, come on stream, or reach expected operating capacity and changes in any of the foregoing are forward-looking statements. Statements relating to "reserves" or "resources" are forward-looking statements, as they involve the implied assessment, based on estimates and assumptions that the reserves and resources described exist in the quantities predicted or estimated, and can be profitably produced in the future.

The forward-looking statements are subject to known and unknown risks and uncertainties and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Such factors include, among others: market prices for oil and gas and chemicals products; our ability to explore, develop, produce, upgrade and transport crude oil and natural gas to markets; ultimate effectiveness of design modifications to facilities; the results of exploration and development drilling and related activities; volatility in energy trading markets; foreign-currency exchange rates; economic conditions in the countries and regions in which we carry on business; governmental actions including changes to taxes or royalties, changes in environmental and other laws and regulations; renegotiations of contracts; results of litigation, arbitration or regulatory proceedings; and political uncertainty, including actions by terrorists, insurgent or other groups, or other armed conflict, including conflict between states. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are interdependent, and management's future course of action would depend on our assessment of all information at that time.

Although we believe that the expectations conveyed by the forward-looking statements are reasonable based on information available to us on the date such forward-looking statements were made, no assurances can be given as to future results, levels of activity and achievements. Undue reliance should not be placed on the statements contained herein, which are made as of the date hereof and, except as required by law, Nexen undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement. Readers should also refer to Items 1A and 7A in our 2008 Annual Report on Form 10-K for further discussion of the risk factors.

Cautionary Note to US Investors

The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to discuss only proved reserves that are supported by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. In this disclosure, we may refer to "recoverable reserves", "probable reserves", "recoverable resources" and "recoverable contingent resources" which are inherently more uncertain than proved reserves. These terms are not used in our filings with the SEC. Our reserves and related performance measures represent our working interest before royalties, unless otherwise indicated. Please refer to our Annual Report on Form 10-K available from us or the SEC for further reserve disclosure.

In addition, under SEC regulations, the Syncrude oil sands operations are considered mining activities rather than oil and gas activities. Production, reserves and related measures in this release include results from the Company's share of Syncrude. Under SEC regulations, we are required to recognize bitumen reserves rather than the upgraded premium synthetic crude oil we will produce and sell from Long Lake.

Cautionary Note to Canadian Investors

Nexen is an SEC registrant and a voluntary Form 10-K (and related forms) filer. Therefore, our reserves estimates and securities regulatory disclosures follow SEC requirements. In Canada, National Instrument 51-101-Standards of Disclosure for Oil and Gas Activities (NI 51-101) prescribes that Canadian companies follow certain standards for the preparation and disclosure of reserves and related information. Nexen reserves disclosures are made in reliance upon exemptions granted to Nexen by Canadian securities regulators from certain requirements of NI 51-101 which permits us to:

- prepare our reserves estimates and related disclosures in accordance with SEC disclosure requirements, generally accepted industry practices in the US and the standards of the Canadian Oil and Gas Evaluation Handbook (COGE Handbook) modified to reflect SEC requirements;

- substitute those SEC disclosures for much of the annual disclosure required by NI 51-101; and

- rely upon internally-generated reserves estimates and the Standardized Measure of Discounted Future Net Cash Flows and Changes Therein, included in the Supplementary Financial Information, without the requirement to have those estimates evaluated or audited by independent qualified reserves evaluators.

As a result of these exemptions, Nexen's disclosures may differ from other Canadian companies and Canadian investors should note the following fundamental differences in reserves estimates and related disclosures contained herein:

- SEC registrants apply SEC reserves definitions and prepare their proved reserves estimates in accordance with SEC requirements and generally accepted industry practices in the US whereas NI 51-101 requires adherence to the definitions and standards promulgated by the COGE Handbook;

- the SEC mandates disclosure of proved reserves and the Standardized Measure of Discounted Future Net Cash Flows and Changes Therein calculated using year-end constant prices and costs only whereas NI 51-101 requires disclosure of reserves and related future net revenues using forecast prices;

- the SEC mandates disclosure of proved and proved developed reserves by geographic region only whereas NI 51-101 requires disclosure of more reserve categories and product types;

- the SEC does not prescribe the nature of the information required in connection with proved undeveloped reserves and future development costs whereas NI 51-101 requires certain detailed information regarding proved undeveloped reserves, related development plans and future development costs;

- the SEC does not require disclosure of finding and development (F&D) costs per boe of proved reserves additions whereas NI 51-101 requires that various F&D costs per boe be disclosed. NI 51-101 requires that F&D costs be calculated by dividing the aggregate of exploration and development costs incurred in the current year and the change in estimated future development costs relating to proved reserves by the additions to proved reserves in the current year. However, this will generally not reflect full cycle finding and development costs related to reserve additions for the year;

- the SEC leaves the engagement of independent qualified reserves evaluators to the discretion of a company's board of directors whereas NI 51-101 requires issuers to engage such evaluators and to file their reports;

- the SEC does not consider the upgrading component of our integrated oil sands project at Long Lake as an oil and gas activity, and therefore permits recognition of bitumen reserves only. NI 51-101 specifically includes such activity as an oil and gas activity and recognizes synthetic oil as a product type, and therefore permits recognition of synthetic reserves. At year end, we have recognized 285 million barrels before royalties of proved bitumen reserves (282 million barrels after royalties) under SEC requirements, whereas under NI 51-101 we would have recognized 233 million barrels before royalties of proved synthetic reserves (231 million barrels after royalties);

- the SEC considers our Syncrude operation as a mining activity rather than an oil and gas activity, and therefore does not permit related reserves to be included with oil and gas reserves. NI 51-101 specifically includes such activity as an oil and gas activity and recognizes synthetic oil as a product type, and therefore permits them to be included with oil and gas reserves. We have provided a separate table showing our share of the Syncrude proved reserves as well as the additional disclosures relating to mining activities required by SEC requirements; and

- any reserves data in this document reflects our estimates of reserves. While we obtain an independent assessment of a portion of our reserves estimates, no independent qualified reserves evaluator or auditor was involved in the preparation of the reserves data disclosed in this Form 10-K.

The foregoing is a general description of the principal differences only. Please note that the differences between SEC requirements and NI 51-101 may be material.

NI 51-101 requires that we make the following disclosures:

- we use oil equivalents (boe) to express quantities of natural gas and crude oil in a common unit. A conversion ratio of 6 mcf of natural gas to 1 barrel of oil is used. Boe may be misleading, particularly if used in isolation. The conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead; and

- because reserves data are based on judgments regarding future events actual results will vary and the variations may be material. Variations as a result of future events are expected to be consistent with the fact that reserves are categorized according to the probability of their recovery.

Resources

Nexen's estimates of contingent resources are based on definitions set out in the Canadian Oil and Gas Evaluation Handbook which generally describe contingent resources as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Such contingencies may include, but are not limited to, factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. Specific contingencies precluding these contingent resources being classified as reserves include but are not limited to: future drilling program results, stakeholder and regulatory approval of future drilling and infrastructure plans, access to required infrastructure, and near-term development plans, and general uncertainties associated with this early stage of evaluation. The estimated range of contingent resources reflects conservative and optimistic likelihoods of recovery. However, there is no certainty that it will be commercially viable to produce any portion of these contingent resources.

Nexen's estimates of discovered resources (equivalent to discovered petroleum initially-in-place) are based on definitions set out in the Canadian Oil and Gas Evaluation Handbook which generally describe discovered resources as those quantities of petroleum estimated, as of a given date, to be contained in known accumulations prior to production. Discovered resources do not represent recoverable volumes. We disclose additional information regarding resource estimates in accordance with NI 51-101. These disclosures can be found on our website and on SEDAR.

Cautionary statement: In the case of discovered resources or a subcategory of discovered resources other than reserves, there is no certainty that it will be commercially viable to produce any portion of the resources. In the case of undiscovered resources or a subcategory of undiscovered resources, there is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

Contact Information

  • Mike Harris, CA
    Vice President, Investor Relations
    (403) 699-4688
    or
    Lavonne Zdunich, CA
    Manager, Investor Relations
    (403) 699-5821
    or
    Tim Chatten, P.Eng
    Analyst, Investor Relations
    (403) 699-4244
    or
    Nexen Inc.
    801 - 7th Ave SW
    Calgary, Alberta, Canada T2P 3P7
    Website: www.nexeninc.com