December 10, 2008 / 3:15 PM / in 10 years

Nexen trims capital spending budget for 2009

TORONTO, Dec 10 (Reuters) - Nexen Inc NXY.TO, the Canadian oil explorer that has been the subject of recent takeover speculation, said it plans to spend C$2.6 billion ($2.1 billion) in 2009, a drop from 2008, to boost its output by 10 percent.

Nexen said it expects to produce 220,000-235,000 barrels of oil equivalent a day next year after royalties, with the largest volumes from its North Sea operations, where it operates the Buzzard oil field.

Nexen, Canada’s fourth-largest independent oil and gas explorer, started 2008 with a budget of C$2.4 billion, but said midway through the year it would increase it by C$500 million as energy prices hit record highs. Oil prices have since fallen by more than $100 a barrel to just above $44.

Numerous oil and gas producers have cut spending to cope with downturn.

Nexen predicted its cash flow would be between C$2.3 billion and C$2.9 billion in 2009, assuming a U.S. oil price of $50-$65 a barrel.

The company has earmarked C$400 million for North Sea development, including C$160 million for its Ettrick field.

The company aims to generate up to 18,000 barrels a day from the C$6.1 billion Long Lake oil sands project, which is now in start-up mode.

Canadian spending has been scaled back as the company plans to concentrate less on conventional assets. Long Lake will be the target of about C$100 million.

Nexen said it will spend C$690 million on exploration, as it moves development of its Horn River, British Columbia, shale gas assets forward and drills up to 14 exploration and appraisal wells in the Gulf of Mexico, North Sea and offshore West Africa.

Last week, reports surfaced in the British press that French oil major Total SA (TOTF.PA) was eyeing Nexen for a takeover, but the speculation has since died down.

Nexen shares closed on Tuesday at C$20.88 on the Toronto Stock Exchange, less than half their 52-week high.

$1=$1.25 Canadian Reporting by Jeffrey Jones; editing by Peter Galloway

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