Calgary independent Nexen Inc., which has been dealing with some internal strife after CEO Marvin Romanow abruptly resigned in January, on Thursday reported that quarterly profits were impacted by lower production and natural gas prices.

Net profits fell to C$43 million (C8 cents/share) in 4Q2011 from year-ago earnings of C$160 million (C30 cents). Cash flow rose 5% to C$585 million (C11 cents/share), and revenues totaled C$1.7 billion versus C$1.56 billion a year ago. The latest results were hampered by C$127 million for impairments on Canadian gas properties, and C$190 million in charges for the Alberta-based Long Lake oilsands project.

“2012 is going to be a pivotal year for Nexen,” said interim CEO Kevin Reinhart. The company’s current management team spoke with financial analysts during an earnings conference call. Reinhart, who had been CFO, was appointed the interim chief following Romanow’s departure (see Daily GPI, Jan. 11).

Nexen continues to search for a permanent replacement to fill the top job, as well as several other management positions, said Reinhart. “The board has a search committee for CEO…to secure the best possible candidate…They are not driven by any particular timeline here and are following the proper process.”

Canadian operations chief Gary Nieuwenburg also resigned last month and Reinhart was asked when that position would be filled. Once the CEO is selected, “he or she can build a team,” Reinhart said. “That’s a decision of the future CEO and not a decision that needs to be taken at this time.”

Missed production guidance and technical challenges have weighed on the company, and in particular, Long Lake, which “clearly” has been an issue, said Reinhart. Original partner Opti Canada filed for court protection from creditors last summer and later was acquired by China National Offshore Oil Co. (CNOOC), which now owns a 35% stake. Nexen operates and owns 65% of Long Lake.

However, Nexen appears to have solved funding issues in northeastern British Columbia (BC), where it has about 300,000 net acres, as well as in the Gulf of Mexico (GOM).

Late last year Nexen sold a 40% stake in the properties to a consortium led by Japan’s Inpex Corp. The partnership, in which Nexen would remain the operator, is to develop unconventional gas in the Horn River, Cordova and Liard basins. Nexen began to look for a partner after it doubled its holdings in the area in 2010 (see Daily GPI, July 16, 2010).

“There have been challenges in respect to North American gas supply and therefore price, so one of the key focus items in our partner selection process was to find somebody that had an interest in accessing the global market,” explained Reinhart. Several liquefied natural gas (LNG) export projects are on the drawing board for BC’s west coast (see Daily GPI, Feb. 10). “We wanted a partner that understood that.”

Nexen also was looking “someone with some technical capabilities with the resource and we found that in Inpex…which is actively engaged in two LNG projects and is a financially strong partner. We met virtually all the objectives [with Inpex] to make sure our interest and theirs would be very much aligned with resource development…”

During the final three months of 2011 Nexen started up a nine-well pad in Horn River and “early production results are meeting expectations. Preliminary results indicate initial rates up to 18 MMcf/d per well. We are currently producing at our facility capacity of 50 MMcf/d.” Work also continues on the company’s 18-well pad in the basin “and we remain on-time and on-budget. We anticipate production from this pad will begin in the fourth quarter, in conjunction with an increase in our facility capacity. This is expected to bring our total gross production capacity to 175 MMcf/d.”

Nexen in late November also sealed a partnership agreement for some of GOM leases with CNOOC, its Long Lake partner (see Daily GPI, Dec. 1, 2011). The deal includes a stake in up to six of Nexen’s prospective deepwater exploration wells.

Last year Nexen invested C$2.5 billion in oil and gas activities. It added 73 million boe of proved reserves, which replaced 96% of production. On a proved plus probable basis, reserves increased 8%.

Una Power, senior vice president of corporate planning and business development, has been appointed interim CFO. Nexen also has confirmed Catherine Hughes as executive vice president of international operations, and Alan O’Brien as senior vice president, general counsel and secretary.

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