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 Usan field off the Nigerian Coast factored into results for the first time, netting Nexen 20,000 barrels a day.
The Buzzard field operated at an 88 percent reliability rate. Last year, frequent outages at the 200,000 barrel a day field, the North Sea’s largest, led to missed output targets.
Nexen said the Long Lake steam-driven oil sands project, where it has struggled for years to build up production to capacity, pumped out 33,700 barrels a day, up 21 percent from the second quarter of 2011.
It cautioned that a six-week maintenance outage at Long Lake is due to start in the middle of next month, spelling lower output in the third quarter.
Also in Canada, Nexen expects to close its C$700 million ($690 million) joint venture at the massive Horn River shale gas deposit in British Columbia with a group led by Japan’s Inpex Corp 1605.T by the end of this month, it said. The group will study liquefied natural gas export opportunities for the supply.
In the second quarter, Nexen earned C$109 million, or 19 Canadian cents a share, down from year-earlier C$252 million, or 45 Canadian cents a share.
That lagged an average estimate among analysts of 27 Canadian cents a share, according to Thomson Reuters I/B/E/S.
Cash flow, an indication of the company’s ability to fund drilling and other projects, rose 18 percent to C$707 million, or C$1.34 per share, from C$598 million, or C$1.13 per share. ($1=$1.01 Canadian)
Additional reporting by Ankur Banerjee; Editing by Andrew Hay