Nexen extends turnaround story in second quarter

Thu Jul 19, 2012 1:31pm EDT
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Nexen Inc NXY.TO on Thursday extended its record of meeting financial targets under its interim chief with gains in second-quarter cash flow and production, partly on the startup of a new oil project off Nigeria.

Profit at Canada's No. 6 independent oil explorer fell a steeper-than-expected 57 percent in the quarter, though it said much of the drop was due to a charge for a previously announced unsuccessful exploration well in the Gulf of Mexico.

Analysts have been impressed with interim CEO Kevin Reinhart, who since taking over early this year has emphasized reliability of operations at Nexen following years of missed targets due to mechanical problems at such developments as the Long Lake oil sands project in Alberta and Buzzard oil field in the North Sea.

Many have said they believe Reinhart, who was previously the finance chief, could be named full-fledged boss now that he has three positive quarterly financial reports under his belt.

However, the shares remain under pressure, having fallen 23 percent in the past year. They were down 23 Canadian cents at C$17.20 on the Toronto Stock Exchange on Thursday.

"Historically they had always over-promised and under-delivered. Since Kevin has been serving as interim CEO, they're three-for-three on meeting or exceeding the expectations that they've laid out," said Lanny Pendill, analyst at Edward Jones.

"I think a lot of the discount in the stock has to do with the Street not having a lot of confidence in the story. But now we've got three consecutive quarters, and that's starting to support that maybe the Street needs to take a different look."

In the second quarter, overall production rose 4 percent to 213,000 barrels of oil equivalent per day before royalties, as output from the Total SA-operated (TOTF.PA: Quote) Usan field off the Nigerian Coast factored into results for the first time, netting Nexen 20,000 barrels a day.   Continued...