* Cash flow per share C$0.85
* Production after royalties 208,000 boe/d
* Shares fall 7 percent (Adds analyst, executive comments)
By Jeffrey Jones
CALGARY, Alberta, July 16 (Reuters) - Nexen Inc’s NXY.TO second-quarter profit tumbled a worse-than-expected 95 percent as oil prices fell sharply and output dropped due to maintenance at two major projects, Canada’s No. 4 independent oil explorer said on Thursday.
Shares in Nexen, the first of the country’s big energy companies to report results for the period, sank C$1.61, or 7 percent, to C$21.54 on the Toronto Stock Exchange after investors were disappointed by the magnitude of the drops in earnings and cash flow.
A big jump in per-barrel operating costs at the Syncrude Canada oil sands venture in northern Alberta, where a processing unit was shut down for extended maintenance, and higher than expected taxes were major factors, FirstEnergy Capital Corp analyst Martin Molyneaux said.
“A lot of people are questioning whether this is the start of being negatively surprised with second-quarter financials,” Molyneaux said. “I don’t think so, but this certainly isn’t what we were expecting.”
Nexen said that more upkeep at projects in the North Sea, including the huge Buzzard oil field, and in the Gulf of Mexico will reduce output again in the third quarter.
Nexen, whose C$6.1 billion ($5.4 billion) Long Lake, Alberta, oil sands project recently started producing, earned C$20 million, or 4 Canadian cents a share, down from year-earlier C$380 million, or 72 Canadian cents a share.
Analysts, on average, had expected the company to earn 30 Canadian cents a share, before unusual items, according to Reuters Estimates.
Cash flow, a glimpse into an oil company’s ability to fund drilling and other projects, fell to C$443 million, or 85 Canadian cents a share, from C$946 million, or C$1.78 a share.
Revenue was C$1.2 billion, down from C$2.07 billion.
Oil prices averaged $59.79 a barrel in the period, down 52 percent from the year before, but up 38 percent from the first quarter. At $3.80 per million British thermal units, natural gas was 67 percent lower than in the second quarter of 2008.
Nexen’s production averaged 208,000 barrels of oil equivalent a day after royalties, down 1.4 percent from 211,000 a year earlier, due to a planned rig move at Buzzard and the coking unit turnaround at Syncrude.
In the third quarter, the company expects output to fall again as Buzzard undergoes a four-week shutdown, Scott/Telford, also in the North Sea, is down for five weeks of maintenance, and Long Lake bitumen volumes are affected by work at a water treatment plant.
Production of tar-like bitumen from the new development averaged 14,300 barrels a day in the quarter, up 7 percent from the first quarter, but still well off the capacity of 72,000.
Chief Executive Marvin Romanow said the facility is likely to be pumping 30,000 barrels a day by the end of the year.
“But that will have to depend on how the ramp-up goes here,” he told analysts. Production rates will rise and fall as the company gets used to operating the new equipment, he said.
Nexen expects overall production to jump again in the final quarter of the year with the start-up of the Ettrick Field in the North Sea and Longhorn in the U.S. Gulf, as well as new shale gas production from British Columbia’s Horn River basin.
$1=$1.12 Canadian Additional reporting by Chakradhar Adusumilli; editing by Rob Wilson