* Marvin Romanow replaced by interim CEO Kevin Reinhart
* Head of Canadian unit also leaving company
* Shares rise 7.8 pct to C$18.40 in Toronto (Adds detail and comment; closes shares.)
By Scott Haggett
CALGARY, Alberta, Jan 10 (Reuters) - Shares of Nexen Inc surged nearly 8 percent on Tuesday, as investors bet that a management shakeup would solve lingering operational woes at the Canadian oil and gas company
Nexen shares rose C$1.33 to C$18.40 on the Toronto Stock Exchange a day after the company announced it was replacing Chief Executive Marvin Romanow and the head of its domestic operations.
The rise underscored investor expectations that the beaten-down shares would push even higher under new management, after Romanow failed to live up to promises he could fix a number of costly operational issues.
“Investors had lost faith in the company,” said Andrew Potter, an analyst with CIBC World Markets. “A lot of this is about credibility and being able to believe the plans management puts forward. That improves with a new management team coming in.”
Romanow, 55, was installed as chief executive at the beginning of 2009 after serving 11 years as chief financial officer of the company, which operates in Canada, the Gulf of Mexico, the North Sea and elsewhere.
After Romanow took over, Nexen was plagued by a series of operating problems, though many were outside management’s control. The setbacks included a delay in developing its promising Gulf of Mexico discoveries in the wake of 2010’s BP Plc disaster. As well, it was forced to abandon a key Yemen oilfield after civil unrest hampered negotiations on renewing its operating license.
But Nexen’s biggest problem has been its poorly performing Long Lake oil sands project in northern Alberta.
The C$6.1 billion ($6 billion) project has suffered through a series of operating and technical difficulties and Romanow was unable to boost production to anywhere near its 72,000 barrel per day capacity, despite spending hundreds of million of dollars to fix the glitches.
Nexen holds 65 percent of Long Lake, while China’s top offshore oil company, CNOOC Ltd, holds the remaining stake.
Operational upsets at the company-operated Buzzard field in the North Sea also contributed to Nexen missing production targets.
“There have been disappointments on a number of fronts,” said Chris Feltin, an analyst at Macquarie Capital Markets. “It’s easy to pick on Long Lake ... But there’s been underperformance in the North Sea and the Gulf of Mexico, issues that have resulted in growth being below expectations and a disappointing performance overall.”
Nexen shares had fallen 22 percent over the past 12 months, underperforming a 13 percent drop in the Toronto Stock Exchange’s oil and gas group index. A year ago it was Canada’s fifth most-valuable independent oil and gas producer but has since dropped into eighth place.
Romanow said last month that Nexen explored putting itself up for sale to boost the share price but concluded it was better off fixing its Long Lake problems. Some analysts speculate his removal could mean that a sale is possible, though others doubt Nexen will look for a buyer.
“Although some may speculate that the changes make a sale process more likely, we do not think the departures are a signal that the company is for sale,” Thomas Driscoll, an analyst at Barclays Capital, wrote in a research note.
Nexen spokesman Pierre Alvarez declined to say why Nexen’s board of directors replaced Romanow and offered no details on the search for a new chief executive.
Kevin Reinhart, the company’s chief financial officer, has been appointed interim CEO until a permanent replacement is found.
“We see Kevin Reinhart as capable, knowledgeable about his business and very genuine,” George Toriola, an analyst with UBS Securities, wrote in a note to clients.
“In our meetings with him, we always came away with a deeper understanding of the issues, the challenges, and the opportunities. We expect this to be well received by shareholders.”
Gary Nieuwenburg, executive vice-president of Nexen Canada, is also leaving the company, effective immediately, Nexen said late on Monday.
In November, Nexen forecast 2012 output of 185,000-220,000 barrels of oil equivalent a day before royalties, compared with 200,000-215,000 bpd in 2011.
$1=$1.02 Canadian Editing by Rob Wilson