) fourth-quarter 2011 adjusted income from continuing operations of
66 US cents per share (68 Canadian cents) beat the Zacks Consensus
Estimate of 41 US cents and an income of 40 US cents (41 Canadian
cents) in the year-earlier quarter.
For full-year 2011, Nexen reported income from continuing
operations of 69 US cents per share (70 Canadian cents), which
lagged the Zacks Consensus Estimate of 1.71 US cents and 86 US
cents earned in the prior year.
Total revenue jumped nearly 10% to C$1,694 million (US$1,655.2
million) from the year-earlier level of C$1,542 million (US$1,521.5
million). The quarter's revenue surpassed the Zacks Consensus
Estimate of US$1,608 million.
In 2011, Nexen registered total revenue of C$6,464 million
(US$6,538.3 million) compared to C$5,819 million (US$5,647.3
million) in the prior year.
During the fourth quarter, production before royalties averaged
208 thousand barrels of oil equivalent per day (MBOE/d), or 193
MBOE/d net of royalties. Production before royalties fell 15% year
over year, and on a net-of-royalty basis, it decreased nearly
During the year, production before royalties averaged 207
thousand barrels of oil equivalent per day (MBOE/d), or 186 MBOE/d
net of royalties.
Production before royalties fell nearly 16% year over year, and
on a net-of-royalty basis, it decreased more than 15%. Production
decreased on an annual basis mainly due to natural declines of
fields and production interruptions at Buzzard due to unplanned
maintenance as well as the longer time taken to commission the
fourth platform at the Buzzard facility in the UK North Sea.
Nexen's average oil price realization was C$108.44 per barrel in
the fourth quarter, up 28.4% year over year. Natural gas average
price realization was C$3.63 per Mcf, down 12.7% year over
Nexen spent C$817 million on capital programs during the
quarter. As of December 31, 2011, the company had C$845 million in
cash and C$4,383 million in long-term debt, with a
debt-to-capitalization ratio of 34.4% (down from 34.7% in the
Nexen has given its 2012 full-year output (before royalties)
projection of 185−220 MBOE a day, while it has set its production
goal for first quarter of 2012 in the range of 180-220 MBOE/d.
Calgary-based Nexen's diversified portfolio of exploration and
production (E&P) assets includes high-impact exploration
prospects in the US Gulf of Mexico, offshore West Africa (primarily
Nigeria) and the North Sea. This provides the company with a
multi-year inventory of development projects and a positive
long-term, production-growth profile.
The company has been actively investing in its upstream assets
in recent years, significantly improving its long-term,
production-growth prospect. In the fourth quarter, Nexen's
production improved 12% from the previous quarter mainly as a
result of higher production from Buzzard and Long Lake and
generated positive cash flow. As the fourth platform at Buzzard
came online in the reported quarter, reliability improved
Nexen also expects its Usan project to reach its first oil in
the first half of 2012 and highlighted a number of growth
prospects. Nexen got all necessary approvals to begin development
activities and started construction in the Golden Eagle appraisal
well and Rochelle developments in the UK North Sea.
The completion of drilling at Appomattox has shown an oil
discovery in the northeast fault block and continuous drilling at
Kakuna exploration well in the deepwater Gulf of Mexico are
expected to show results in the next few months. The company also
has an industry-leading pace of drilling activities at its shale
gas operations in Horn River and enjoys strong interest in joint
However, in the reported quarter, Yemen and Gulf of Mexico
recorded lower production because of continued natural declines.
Further, production was impeded due to the expiry of the contract
for the Masila block in mid-December 2011.
Again, tough competition from peers such as
Suncor Energy Inc.
) and execution problems in the company's line-up of long-cycle
projects persist. Hence, we prefer to stay on the sidelines and
maintain our long-term Neutral recommendation. Nexen also holds a
Zacks #3 Rank, which is equivalent to a short-term Hold rating.
NEXEN INC (
): Free Stock Analysis Report
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