July 19, 2012 / 10:43 AM / 5 years ago

UPDATE 2-Nexen profit falls on charge related to failed well

July 19 (Reuters) - Canadian oil and gas explorer Nexen Inc’s second-quarter profit fell 57 percent as it took a charge on a failed exploration well in the Gulf of Mexico.

The company, Canada’s sixth-largest independent oil company, said however that it was on track to meet its production forecast for the second half of the year.

Nexen said in May that it had abandoned its Kakuna exploratory well after failing to find oil or natural gas in commercial quantities.

The company, which has operations in Canada, the Gulf of Mexico, the North Sea and offshore West Africa, said the well had cost about C$120 million.

Nexen has been trying to win back investor favor by emphasizing the operational reliability of projects such as the Long Lake oil sands development in Alberta and the Buzzard offshore oil venture in the North Sea.

The company said last month that it had taken less time than expected to start producing at a section of its Long Lake project.

Production at Long Lake averaged 33,700 barrels per day in the quarter, up 21 percent from a year earlier, Nexen said on Thursday.

Cash flow, an indication of the company’s ability to fund drilling and other projects, rose 18 percent to C$707 million ($712 million), or C$1.34 per share, from C$598 million, or C$1.13 per share, a year earlier.

Nexen, whose operational performance has been improving this year under interim Chief Executive Kevin Reinhart, earned C$109 million, or 19 Canadian cents per share, in the quarter, down from C$252 million, or 45 Canadian cents per share, a year earlier.

Analysts on average had expected the company to earn 27 Canadian cents per share, according to Thomson Reuters I/B/E/S.

Net sales rose 10 percent to C$1.66 billion.

Second-quarter average production rose 4 percent to 213,000 barrels of oil equivalent per day (boe/d) before royalties, the company said.

Nexen shares closed at C$17.43 on the Toronto Stock Exchange on Wednesday. The stock has fallen 23 percent in the past year.

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