Nexen announced its Q1/08 operating and financial results beating the Street’s estimates.
Cash Flow
First quarter operating cash flows were up 74% year-over-year. The
company reported operating CFPS (fd) of $1.93 versus consensus of $1.91 nd and
Earnings
Operating EPS (fd) of $1.17 versus consensus of $0.96
Nexen beat estimates primarily due to higher production, higher realized prices and
lower general and administrative expenses during the quarter. Production during the
quarter averaged 267,000 boe/d compared with our estimate of 262,000 boe/d. The
difference was mainly due to solid performance at Buzzard (NXY 43.2%), with gross
production averaging approximately 212,000 boe/d, 12,000 boe/d higher than Buzzard’s
nameplate capacity.
Heavy oil differentials narrowed during Q1/08, with realized Canadian heavy oil prices
averaging $65.94 during Q1/08. At Long Lake, bitumen production volumes averaged
approximately 6,200 b/d, with peak rates to date in excess of 7,500 b/d. During the
quarter construction of the upgrader was completed, and, with commissioning
approximately 50% complete, Nexen plans to introduce hydrocarbons into key
processing units in May. In Q1/08, the first cogeneration unit was started and has been
producing power in excess of 80 megawatts. The second cogeneration unit was recently
started and is expected to be fully operational shortly.
In the Gulf of Mexico, Nexen sanctioned the development of the Longhorn discovery
(NXY 25%). Development will consist of three subsea wells being tied back to the nonoperated
Crystal facility. First production is expected in 2009 with a peak gross
production rate of 200 mmcf/d. The company also made significant progress at Ettrick in the North Sea and had positive drill results from its Horn River play in northeast BC,
