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Nexen Readies for Oilsands Startup, Sells E&P Assets for C$946M

Calgary-based independent Nexen Inc. is finalizing agreements with four undisclosed buyers to sell conventional oil and gas properties in southeast Saskatchewan, northwest Saskatchewan, northeast British Columbia and the Alberta foothills for C$946 million (US$762 million) to pay down debt and get ready for startup of its 50%-owned Long Lake oilsands project late next year.

The properties to be sold had proved reserves of approximately 49 MMboe and proved plus probable reserves of 64 MMboe at Dec. 31, 2004. In 1Q2005, the properties produced 18,300 boe/d and generated approximately C$47 million of cash flow. The sales are expected to close this summer with a gain totaling approximately C$300 million (before tax) in the third quarter. No current taxes will be payable on these transactions.

The transaction comes on the heels of Nexen's announcement early in the week to spin off its chemicals business into an income trust.

"We are pleased with the value for the oil and gas assets and the progress on monetizing of our chemicals division," said CEO Charlie Fischer. "Proceeds will reduce the debt we incurred when purchasing Buzzard and other assets in the North Sea in late 2004."

Nexen, a former unit of Occidental Petroleum, has moved to grow its international business and oilsands production in recent years. The Buzzard field is expected to come onstream in late 2006, and at its peak will add approximately 85,000 boe/d of production and C$1.4 billion in annual cash flow, assuming a West Texas Intermediate price of US$40/bbl.

The C$3.4 billion Long Lake project, under construction by Nexen and OPTI Canada, is a heavy oil extraction and processing project in northern Alberta. Nexen also is a minority owner of the established Syncrude Canada Ltd. oilsands consortium.

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