* Production rises at Usan, Buzzard, Long Lake
* Third straight quarter of meeting production targets
* Analysts see Reinhart as strong CEO candidate
By Jeffrey Jones
CALGARY, Alberta, July 19 Nexen Inc on
Thursday extended its record of meeting financial targets under
its interim chief with gains in second-quarter cash flow and
production, partly on the startup of a new oil project off
Profit at Canada's No. 6 independent oil explorer fell a
steeper-than-expected 57 percent in the quarter, though it said
much of the drop was due to a charge for a previously announced
unsuccessful exploration well in the Gulf of Mexico.
Analysts have been impressed with interim CEO Kevin
Reinhart, who since taking over early this year has emphasized
reliability of operations at Nexen following years of missed
targets due to mechanical problems at such developments as the
Long Lake oil sands project in Alberta and Buzzard oil field in
the North Sea.
Many have said they believe Reinhart, who was previously the
finance chief, could be named full-fledged boss now that he has
three positive quarterly financial reports under his belt.
However, the shares remain under pressure, having fallen 23
percent in the past year. They were down 23 Canadian cents at
C$17.20 on the Toronto Stock Exchange on Thursday.
"Historically they had always over-promised and
under-delivered. Since Kevin has been serving as interim CEO,
they're three-for-three on meeting or exceeding the expectations
that they've laid out," said Lanny Pendill, analyst at Edward
"I think a lot of the discount in the stock has to do with
the Street not having a lot of confidence in the story. But now
we've got three consecutive quarters, and that's starting to
support that maybe the Street needs to take a different look."
In the second quarter, overall production rose 4 percent to
213,000 barrels of oil equivalent per day before royalties, as
output from the Total SA-operated Usan field off the
Nigerian Coast factored into results for the first time, netting
Nexen 20,000 barrels a day.
The Buzzard field operated at an 88 percent reliability
rate. Last year, frequent outages at the 200,000 barrel a day
field, the North Sea's largest, led to missed output targets.
Nexen said the Long Lake steam-driven oil sands project,
where it has struggled for years to build up production to
capacity, pumped out 33,700 barrels a day, up 21 percent from
the second quarter of 2011.
It cautioned that a six-week maintenance outage at Long Lake
is due to start in the middle of next month, spelling lower
output in the third quarter.
Also in Canada, Nexen expects to close its C$700 million
($690 million) joint venture at the massive Horn River shale gas
deposit in British Columbia with a group led by Japan's Inpex
Corp by the end of this month, it said. The group will
study liquefied natural gas export opportunities for the supply.
In the second quarter, Nexen earned C$109 million, or 19
Canadian cents a share, down from year-earlier C$252 million, or
45 Canadian cents a share.
That lagged an average estimate among analysts of 27
Canadian cents a share, according to Thomson Reuters I/B/E/S.
Cash flow, an indication of the company's ability to fund
drilling and other projects, rose 18 percent to C$707 million,
or C$1.34 per share, from C$598 million, or C$1.13 per share.