Driven by high oil prices, Nexen Inc. had a record-setting third quarter, with net income more than doubling from 3Q2007 and the highest quarterly cash flow from operations in its history, the company said last Wednesday.
The Calgary-based producer reported net income of C$886 million (C$1.68/share) in 3Q2008, up 120% from C$403 million (C77 cents/share) in 2Q2007 and the highest in the company's history. Cash flow from operations was C$1.69 billion (C$3.20/share) in 3Q2008, up from C$868 million (C$1.65/share) in 3Q2007.
"With no hedges in place and over 85% of our production weighted to crude oil, we were able to realize significant benefits from high oil prices," the company said. "Even though oil prices started to fall towards the end of the third quarter, a strengthening U.S. dollar relative to the Canadian dollar has kept our price realizations high."
"In this marketplace, cash is king and we have substantial liquidity," said CEO Charlie Fischer. "We are slowing capital expenditures to build cash during this period of global financial uncertainty and to ensure that the projects we undertake continue to generate attractive full-cycle returns."
Simultaneous with the financial good news, Fischer announced that he will retire at the end of the year. Fischer joined Nexen in 1994, became COO in 1997 and was appointed CEO in 2001. Marvin Romanow, the company's executive vice president since 2001, has been appointed CEO effective Jan. 1.
"The company is in tremendous shape and well positioned for the future," Fischer said. "I am confident it will continue to grow and be very successful."
Nexen reported natural gas production volumes of 133 MMcf/d in Canada (compared to 111 MMcf/d in 3Q2007) and 70 MMcf/d in the United States (compared to 98 MMcf/d in 3Q2007). Hurricanes Gustav and Ike caused significant damage to a number of the company's properties and to surrounding infrastructure, and Gulf of Mexico (GOM) production was negatively impacted, Fischer said.
In the days after Gustav and Ike delivered their one-two punch, Nexen forecast substantially lower oil and natural gas output because of the hurricanes' damage (see NGI, Sept. 29). The producer forecast 4Q2008 output in the GOM to range between 10,000 boe/d and 20,000 boe/d. Prior to Ike and Gustav, Nexen was producing around 30,000 boe/d total in the GOM.
Nexen ranked eighth in NGI's latest survey of North America's natural gas traders with 7.3 Bcf/d of physical sales in 2Q2008 (see NGI, Sept. 22).
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