CALGARY, Alberta (Reuters) - Nexen Inc NXY.TO says it will zero in on boosting output at the troublesome Long Lake oil sands project in Alberta and keeping its Buzzard oil field in the North Sea running reliably as keys to getting back on track after a bumpy 2011 that culminated in the departure of its chief executive.
Nexen, which reported a sharp drop in fourth-quarter profit on Thursday, due partly to changes in its oil sands strategy, said it did not have a firm timetable for hiring a CEO to replace Marvin Romanow, who left abruptly last month.
“The board has a search committee with respect to the CEO,” interim chief Kevin Reinhart said in during a conference call. “They have engaged a search firm, and they’re going through the process right now of defining what they would like in a CEO relative to what they believe Nexen needs at this point in time.”
Despite the continued search for a boss, shares in Nexen jumped 4 percent after the company reported it was meeting production targets and showing some progress with Long Lake, Buzzard, the impending startup of the Usan field off Nigeria and Gulf of Mexico exploration, said Lanny Pendill, an analyst at Edward Jones.
“Nexen’s had a horrible time meeting guidance and most of the recent quarters in the past had disappointed,” Pendill said. “So here we come out with a fairly clean result relative to expectations, but more importantly I think the tone of the call overall, to me, felt more positive than past calls.”
The company’s shares were up 70 Canadian cents at C$19.64 on the Toronto Stock Exchange on Thursday. They had been down more than 20 percent in the past 12 months.
Problems at Long Lake, the C$6.1 billion ($6.1 billion) oil sands production and upgrading development, have plagued Calgary-based Nexen since it started up more than three years ago. It was just one of a host of problems that pressured the stock in the company in 2011.
The company said on Thursday that the plant, which has a capacity of 58,500 barrels a day, has been producing 35,000 bpd recently, up from 31,500 in the fourth quarter.
The upgrader turns bitumen from the oil sands into refinery-ready light oil. Filling it has been a focus for Nexen and its minority partner, China’s CNOOC Ltd (0883.HK).
Last year, Nexen set a plan to drill dozens of wells to allow it to do so. Twelfth and 13th “pads”, or groupings of wells to inject steam into the ground and pump oil to the surface, are expected to start producing before the end of the year.
They are aimed at tapping rich deposits after earlier efforts hit “lean zones” that led to disappointing production.
“The drilling is done. And that confirmed that we’re in the good quality reservoir that we had expected to be at,” Reinhart said.
Nexen has shifted its plans for Long Lake to keep bitumen production growing, but not necessarily match it in lockstep with upgrading capacity as the returns for such processing have weakened since Long Lake began operations. That led to a hefty charge to earnings.
At Buzzard, the largest oil field in the British sector of the North Sea, production is averaging about 185,000 barrels a day, representing up-time of about 85 percent. The company aims to push that to 90 percent over the next two years after lengthy unplanned outages in 2011.
In the fourth quarter, Nexen earned C$43 million, or 8 Canadian cents a share, down from year-earlier C$160 million, or 30 Canadian cents a share.
The results were hampered by a drop in production and one-time charges totaling C$317 million. They included a C$190 million charge from the shift in its oil sands upgrading plans and C$127 million impairment charge related to its natural gas assets in Canada and the United States as prices from the fuel languish.
Cash flow, a glimpse into the company’s ability to fund operations, rose 5 percent to C$585 million, or C$1.11 a share.
Average daily production, before royalties, fell 15 percent to 208,000 barrels of oil equivalent a day in the quarter, matching expectations.
Additional reporting by Aftab Ahmed in Bangalore; Editing by Peter Galloway