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Nexen Announces Third Quarter 2012 Results & Progress on Strategic Priorities



Nexen Announces Third Quarter 2012 Results & Progress on Strategic Priorities

  PR Newswire

  CALGARY, Canada, October 25, 2012

CALGARY, Canada, October 25, 2012 /PRNewswire/ --

Met Third Quarter Production Guidance and On-Track to Meet Annual Production
Guidance

Nexen Inc. (TSX, NYSE: NXY) today reported third quarter operating and
financial results and provided an update on strategic priorities.

Production volumes averaged 181,000 barrels of oil equivalent per day (boe/d),
a decrease from second quarter production of 213,000 boe/d. This reflects the
scheduled downtime associated with the turnarounds at Buzzard, Long Lake and
Scott.

Cash flow from operations decreased to $560 million ($1.06/share) from $707
million ($1.34/share) in the second quarter, primarily due to the lower
production and higher operating costs associated with the planned turnarounds.
Net income decreased to $59 million ($0.11/share) from $109 million
($0.20/share) in the second quarter. This reflects lower cash flow associated
with the scheduled turnarounds and the impact of several non-recurring items.

We continue to make good progress on our strategic priorities:

  * Buzzard operations were strong prior to the turnaround with a production
    efficiency of 88% versus our plan of 85%.
  * Offshore West Africa, we brought on two additional wells at Usan and
    increased current production to approximately 120,000 barrels per day
    (bbls/d) (24,000 bbls/d net to Nexen).
  * The planned major turnaround at Long Lake was completed without any
    significant issues. Bitumen production is back to approximately 34,000
    bbls/d and the upgrader is producing PSC ^[ ^TM ^] . Pad 12 continues to
    ramp-up and steaming continues at pad 13. First production is expected
    from pad 13 over the next several weeks.
  * In the Gulf of Mexico, we completed a successful appraisal of the south
    fault block at Appomattox. We are currently drilling a sidetrack to test
    additional resource potential in the northwest fault block.
  * Our previously announced shale gas joint venture with INPEX Gas British
    Columbia Ltd. (IGBC) closed in August and we received $821 million of cash
    upon closing. As well, our 18-well pad in the Horn River achieved start up
    in late September ahead of schedule.
  * A number of exploration wells are in progress including North Uist and
    Bardolph in the UK North Sea. The Owowo West prospect, offshore West
    Africa is currently being evaluated.

"In the third quarter, we announced a plan to accelerate shareholder value
while remaining focused on executing our plan and advancing strategic
priorities across our operations," said Kevin Reinhart, Nexen's interim
President & CEO. "We completed major turnarounds at Buzzard and Long Lake, met
production guidance for the fourth consecutive quarter, and remained on-track
to meet our production guidance for the year. Our ability to maintain focus
and make continued strong progress in key areas of our operations is a
testament to the talent and exceptional dedication of Nexen employees."

CNOOC Limited Offer for Nexen

On July 23, 2012, Nexen entered into an Arrangement Agreement under which
CNOOC Limited proposes to acquire all of the outstanding common and preferred
shares of Nexen for approximately US$15 billion in cash. On September 20,
2012, holders of Nexen's common and preferred shares approved the Plan of
Arrangement, pursuant to the Arrangement Agreement. The closing of the
arrangement remains subject to the receipt of required regulatory approvals
and the satisfaction or waiver of the other customary closing conditions. We
continue to expect the arrangement to close in the fourth quarter of 2012.

Operational Update

Conventional

UK North Sea - Buzzard production efficiency was strong in the third quarter
prior to the turnaround, averaging 88% (86% year-to-date). This exceeds our
target of 85% efficiency, excluding planned downtime.

The scheduled major turnaround at Buzzard that began in early September was
completed with no significant issues discovered, although it did take longer
than expected. We are in the process of restarting the platform, and expect
production to ramp-up in the next week to 10 days.

The scheduled turnaround at Scott began in late July and was completed by the
end of August.

The Golden Eagle development continues to progress towards first oil in late
2014. The fabrication of the platform facilities is well underway and
construction is on-time and on-budget.

Drilling continues on our North Uist exploration prospect, which is located
west of the Shetland Islands. The well has experienced delays due to
mechanical issues, and results from the BP-operated well are now expected
around the end of 2012.

Drilling is underway on our Bardolph exploration prospect in the North Sea. We
have a 51% working interest in Bardolph. Results from this well are expected
in the fourth quarter. Drilling is also underway at East Rochelle. Once
drilling is completed, East Rochelle will be tied-back to our Scott platform.

Offshore   West Africa - In July, we spudded an exploration well at Owowo West
on block OPL-223. Drilling is now complete and we are evaluating the results.
This well is in close proximity to our oil discovery at Owowo South B.

Oil production from Usan started in late February on block OML-138, offshore
Nigeria. Nine wells are now on-stream, and during the quarter, daily
production rates ranged from 90,000 - 122,000 bbls/d (18,000 - 24,000 bbls/d
net to Nexen). We expect to bring on two additional wells over the next three
months.

Gulf of Mexico - Our top priority in the Gulf of Mexico is continuing our
exploration and appraisal program in the Norphlet play, including the
Appomattox structure, along with the operator, Shell Gulf of Mexico Inc.

At Appomattox, we have booked 65 million barrels of probable reserves in the
south fault block structure and added 50 million barrels of net contingent
resource in the northeast fault block. A successful appraisal well in the
south fault block of the structure confirmed reservoir quality at the upper
end of our expectations. We are currently drilling a sidetrack from the
appraisal well to test the incremental resource potential in the northwest
fault block. Results are expected by the end of the year.

We have five more exploration and appraisal targets in the Norphlet play that
we plan to test over the next twelve months. These wells will allow us to
progress a development plan for Appomattox and continue to test the potential
of the significant acreage position we have accumulated in the area.

We have a 20% interest in Appomattox, a 25% interest in Vicksburg and similar
interests in numerous other blocks in the Norphlet play. The remaining
interest is held by Shell.

During the third quarter we concluded negotiations around the Knotty Head-Pony
field unitization. Nexen was the operator of the Knotty Head portion of the
field and had a 25% working interest. Under the new equity agreement, Hess
Corporation is the operator of the expanded Knotty Head-Pony project and all
parties have a 20% working interest. 

Oil Sands

Long Lake   - Production from Long Lake was 21,400 bbls/d of bitumen (gross),
which was down from the second quarter due to the planned turnaround.

The scheduled turnaround began in mid-August and was completed by early
October. During the turnaround, we carried out all required regulatory
inspections, scheduled maintenance and preliminary preparation for future pads
as planned without any significant issues.

With the turnaround complete, production is currently around 34,000 bbls/d. At
pad 11, production continues to meet our expectations and recent weekly
averages estimated at 6,000 bbls/d are consistent with production rates during
the second quarter. At pad 12, we are currently producing from all nine wells.
The nine well pairs on pad 13 are continuing to receive steam and first
production is expected over the next several weeks.

The cash outflow during the quarter primarily reflects the impact of the
turnarounds, including the expensed portion of the related costs and reduced
production. Per-barrel operating costs were higher than normal due to the
lower volumes.

                              Long Lake Quarterly Operating Metrics
                Bitumen              Steam               Unit             Cash    Realized
           Production (Gross)  Injection (Gross)   Operating Cost[1]      Flow       Price
                (bbls/d)           (bbls/d)             ($/bbl)       ($ millions) ($/bbl)
    2012
      Q3         21,400             112,400               77[2]          (64)          80
      Q2         33,700             170,000               70                4          87
      Q1         34,500             163,000               69               18          94
    2011
      Q4         31,500             151,000               67               22          97
      Q3         29,500             144,000               85              (4)          94
      Q2         27,900             152,000               95                6         109
      Q1         25,500             146,000               89             (19)          90
    2010
      Q4         28,100             158,000               86              (9)          83
      Q3         25,700             146,000               85             (42)          71

 1. Unit operating costs and realized prices are before royalties and based on
    PSC™ and bitumen volumes sold and exclude activities related to
    third-party bitumen purchased, processed and sold. Unit operating cost
    includes energy costs.
 2. Excludes costs related to the scheduled turnaround.

We continue to make good progress towards filling the upgrader over the next
few years with additional wells in good-quality resource:

                     Number       Expected Peak
                  of Well Pairs   Rates bbls/d                       Status
                                                    Pad 12 is producing and pad 13 is being
                                                            converted to production.
    Pads 12 & 13       18        11,000 - 17,000       Ramp-up over 12 - 24 month period.
    Pads 14 & 15       11         4,000 - 7,000     Drilling underway. Steam in second
                                                                   half of 2013.
    Kinosis 1A         29        15,000 - 25,000         Drilling underway. Steam in 2014.

Nexen has a 65% working interest in both Long Lake and Kinosis and is the
operator. CNOOC Canada Inc. holds a 35% working interest in both Long Lake and
Kinosis.

Shale Gas

Northeast British Columbia   - Our previously announced joint venture
agreement with IGBC closed in August. We received $821 million of cash
comprised of the cash consideration, reimbursement of IGBC's share of costs
since July 1, 2011 (effective date) and IGBC's carry component of our costs
since July 1, 2011. There continues to be approximately $60 million of carry
remaining. Upon closing, we recognized an after-tax gain of $106 million.
Nexen and IGBC plan to develop our shale gas resource as economic conditions
permit. We have also agreed to jointly investigate the feasibility of LNG
export opportunities.

We continued our execution excellence in the Horn River with the completion of
our 18-well pad, setting an industry record of 6.3 fracs/day. Production
testing of this pad started in late September, ahead of schedule.

Production Summary

                            Average Daily Quarterly           Average Daily Quarterly
                          Production before Royalties       Production after Royalties
    Crude Oil, NGLs and
    Natural Gas (mboe/d)  Q3 2012  Q2 2012  Q3 2011      Q3 2012     Q2 2012      Q3 2011
    UK - Buzzard            60         84      49           60           84           49
    UK - Other              26         30      22           26           30           22
    Canada - Syncrude       23         17      22           22           17           21
    West Africa             20         20       -           18           18            -
    Canada - Oil & Gas      18         20      19           17           20           17
    United States           14         14      21           13           13           19
    Canada - In Situ        14         22      19           13           20           17
    Other Countries          6          6      34            3            5           19
    Total                   181       213     186          172          207          164

Production decreased 15% from the second quarter on a before-royalties basis
and 17% on an after-royalties basis. The decrease primarily reflects the
impact of scheduled turnarounds at Long Lake, Buzzard and Scott.

Guidance Update

                                       Average Daily Production before Royalties
                                                                       Q4 2012      Q4 2012
    Crude Oil, NGLs and  Q1 2012 Q2 2012 Q3 2012   Q3 2012  Original   Adjusted 2012 Annual
    Natural Gas (mboe/d) Actual  Actual  Estimate  Actual   Estimate   Estimate    Estimate
    UK - Buzzard            82       84   50 - 60      60    75 - 95    50 - 60     70 - 85
    UK - Other              29       30   20 - 26      26    25 - 32    25 - 32     24 - 32
    Canada - Syncrude       21       17   22 - 24      23    22 - 24    22 - 24     21 - 23
    West Africa              3       20   20 - 35      20    22 - 35    22 - 30     14 - 28
    Canada - Oil & Gas      22       20   15 - 17      18    15 - 20    15 - 20     15 - 19
    United States           16       14   13 - 17      14    15 - 17    15 - 17     15 - 19
    Canada - In Situ        22       22   14 - 18      14    22 - 28    22 - 28     19 - 25
    Other Countries          7        6      2          6       2          2           2
                           202      213 ~160 - 190    181 ~205 - 240  ~180 - 200 ~185 - 220

In the third quarter, production of 181,000 boe/d was at the upper end of our
production guidance primarily due to the timing of the Buzzard turnaround.

We are adjusting our fourth quarter guidance to 180,000 - 200,000 boe/d to
reflect the timing and the length of the turnaround at Buzzard, as well as our
updated expectations of production at Usan. Our expectations for our annual
production guidance at Buzzard and Usan remain unchanged. We are also on-track
to meet our annual production guidance of 185,000 - 220,000 boe/d. Buzzard,
Usan and Long Lake continue to be the critical drivers of our guidance range.

Financial Results

                                                Three Months Ended      Nine Months Ended
                                          Sept. 30  June 30  Sept. 30  Sept. 30   Sept. 30
    (Cdn$ millions unless noted)              2012     2012      2011      2012       2011
    Brent ($US/bbl)                         110.13   108.66    113.47    112.64     111.94
    WTI ($US/bbl)                            92.22    93.49     89.76     96.21      95.48
    NYMEX natural gas ($US/mmbtu)             2.90     2.35      4.06      2.58       4.21
    Nexen Average Realized
     Oil & Gas Price ($/boe)                 89.52    88.65     91.06     90.94      90.58
    Cash netback ($/boe)[1]                  48.90    44.51     38.67     46.32      39.43
    Average Daily Production (mboe/d)
                    Before Royalties           181      213       186       199        207
                     After Royalties           172      207       164       190        184
    Cash flow from operations[2 ]              560      707       516     1,937      1,783
           Per common share ($/share)         1.06     1.34      0.98      3.66       3.38
    Net income                                  59      109       200       339        654
           Per common share ($/share)         0.11     0.20      0.38      0.63       1.24
    Capital investment[3]                      831      743       729     2,331      1,758
    Net debt[4]                              2,367    3,136     3,454     2,367      3,454

 1. Cash netback is defined as our corporate average cash netback from oil and
    gas operations, after-tax. Excludes costs related to the scheduled
    turnaround at Long Lake.
 2. For reconciliation of this non-GAAP measure, see Cash Flow from Operations
    on pg. 8.
 3. Includes geological and geophysical expenditures.
 4. Net debt is defined as long-term debt and short-term borrowings less cash
    and cash equivalents.

The third quarter financial results were impacted by decreased production
volumes and higher operating costs resulting from the planned turnarounds at
Long Lake, Buzzard and Scott. Cash netbacks increased more than benchmark
prices due to narrowing of Canadian differentials and increased contribution
from our high-netback Usan production.

Net income decreased 46% from the prior quarter to $59 million ($0.11/share)
due to lower cash flow associated with the planned turnarounds and the impact
of several non-recurring items. These include an after-tax stock-based
compensation charge of $99 million as a result of our share price appreciation
following the CNOOC announcement and a deferred income tax charge of $63
million for changes to UK tax legislation. These charges were partially offset
by the after-tax gain of $106 million on the shale gas joint venture.

Net debt decreased compared to the second quarter primarily due to the
proceeds on closing of our shale gas joint venture.

Quarterly Dividends

The Board of Directors has declared the regular quarterly dividend of $0.05
per common share payable January 1, 2013 to shareholders of record on December
10, 2012.

Due to the previously announced transaction with CNOOC Limited, the Board of
Directors has determined not to declare the regular dividend on our Series 2
Preferred Shares at this time. This decision will have no effect on the amount
to which holders of the Preferred Shares are entitled. If the transaction
closes prior to December 31, 2012, holders of the Preferred Shares will
receive consideration equal to $26 plus an amount equal to all accrued and
unpaid dividends for each share held, up to but not including the date of
closing. If the transaction does not close prior to December 31, 2012, the
Board expects to declare a regular quarterly dividend to the shareholders of
record, on a record date to be subsequently determined.

About Nexen

Nexen Inc. is a Canadian-based global energy company, listed on the Toronto
and New York stock exchanges under the symbol NXY. Nexen is focused on three
growth strategies: oil sands and shale gas in western Canada and conventional
exploration and development primarily in the North Sea, offshore West Africa
and deepwater Gulf of Mexico. Nexen adds value for shareholders through
successful full-cycle oil and gas exploration and development, and leadership
in ethics, integrity, governance and environmental stewardship.

For further information on our shale gas joint venture, please refer to our
press release dated November 29, 2011. For more information on our estimates
of reserves, please refer to our 2011 Annual Information Form. For more
information on our estimates of resource, please refer to our press releases
dated November 15, 2010 and April 2, 2012.

Forward-Looking Statements

Certain statements in this Release constitute "forward-looking statements"
(within the meaning of the United States Private Securities Litigation Reform
Act of 1995, as amended) or "forward-looking information" (within the meaning
of applicable Canadian securities legislation). Such statements or information
(together "forward-looking statements") are generally identifiable by the
forward-looking terminology used such as "anticipate", "believe", "intend",
"plan", "expect", "estimate", "budget", "outlook", "forecast" or other similar
words and include statements relating to or associated with individual wells,
regions or projects. Any statements as to possible future crude oil or natural
gas prices; future production levels; future royalties and tax levels; future
capital expenditures, their timing and their allocation to exploration and
development activities; future earnings; future asset acquisitions or
dispositions; future sources of funding for our capital program; future debt
levels; availability of committed credit facilities; possible commerciality of
our projects; development plans or capacity expansions; the expectation that
we have the ability to substantially grow production at our oil sands
facilities through controlled expansions; the expectation of achieving the
production design rates from our oil sands facilities; the expectation that
our oil sands production facilities continue to develop better and more
sustainable practices; the expectation of cheaper and more technologically
advanced operations; the expected design size of our facilities; the expected
timing and associated production impact of facility turnarounds and
maintenance; the expectation that we can continue to operate our offshore
exploration, development and production facilities safely and profitably;
future ability to execute dispositions of assets or businesses; future sources
of liquidity, cash flows and their uses; future drilling of new wells;
ultimate recoverability of current and long-term assets; ultimate
recoverability of reserves or resources; expected finding and development
costs; expected operating costs; future cost recovery oil revenues from our
Yemen operations; the expectation of our ability to comply with the new safety
and environmental rules enacted in the US at a minimal incremental cost, and
of receiving necessary drilling permits for our US offshore operations;
estimates on a per share basis; future foreign currency exchange rates; future
expenditures and future allowances relating to environmental matters and our
ability to comply with them; dates by which certain areas will be developed,
come on stream or reach expected operating capacity; the timing and
anticipated receipt of required regulatory and court   approvals for the
arrangement with CNOOC Limited;   the ability of the parties to satisfy the
other conditions to, and to complete, the arrangement transaction; the
anticipated timing of the closing of the arrangement transaction; and changes
in any of the foregoing are forward-looking statements.

Statements relating to "reserves" or "resources" are forward-looking
statements, as they involve the implied assessment, based on estimates and
assumptions that the reserves and resources described exist in the quantities
predicted or estimated and can be profitably produced in the future.

All of the forward-looking statements in this Release are qualified by the
assumptions that are stated or inherent in such forward-looking statements.
Although we believe that these assumptions are reasonable based on the
information available to us on the date such assumptions were made, this list
is not exhaustive of the factors that may affect any of the forward-looking
statements and the reader should not place an undue reliance on these
assumptions and such forward-looking statements. The key assumptions that have
been made in connection with the forward-looking statements include the
following: that we will conduct our operations and achieve results of
operations as anticipated; that our development plans will achieve the
expected results; the general continuance of current or, where applicable,
assumed industry conditions; the continuation of assumed tax, royalty and
regulatory regimes; the accuracy of the estimates of our reserve volumes;
commodity price and cost assumptions; the continued availability of adequate
cash flow and debt and/or equity financing to fund our capital and operating
requirements as needed; the ability of the parties to the July 23 2012
Arrangement Agreement to receive, in a timely manner and on satisfactory
terms, the necessary regulatory, court, stock exchange and other third party
approvals, including but not limited to the receipt of applicable foreign
investment approval required in Canada, the United States and elsewhere and
the required approvals from the Government of the People's Republic of China
and in other foreign jurisdictions; the ability of the parties to the
Arrangement Agreement to satisfy, in a timely manner, the other conditions to
the closing of the transaction; other expectations and assumptions concerning
the arrangement transaction and the operations and capital expenditure plans
of Nexen following completion of the transaction;   and, the extent of our
liabilities. We believe the material factors, expectations and assumptions
reflected in the forward-looking statements are reasonable, but no assurance
can be given that these factors, expectations and assumptions will prove to be
correct.

Forward-looking statements are subject to known and unknown risks and
uncertainties and other factors, many of which are beyond our control and each
of which contributes to the possibility that our forward-looking statements
will not occur or that actual results, levels of activity and achievements may
differ materially from those expressed or implied by such statements. Such
factors include, among others: market prices for oil and gas; our ability to
explore, develop, produce, upgrade and transport crude oil and natural gas to
markets; ultimate effectiveness of design or design modifications to
facilities; the results of exploration and development drilling and related
activities; the cumulative impact of oil sands development on the environment;
the impact of technology on operations and processes and how new complex
technology may not perform as expected; the availability of pipeline and
global refining capacity; risks inherent to the operations of any large,
complex refinery units, especially the integration between production
operations and an upgrader facility; availability of third-party bitumen for
use in our oil sands production facilities; labour and material shortages;
risks related to accidents, blowouts and spills in connection with our
offshore exploration, development and production activities, particularly our
deep-water activities; direct and indirect risks related to the imposition of
moratoriums, suspensions or cancellations of our offshore exploration,
development and production operations, particularly our deep-water activities;
the impact   of severe weather on our offshore exploration, development and
production activities, particularly our deep-water activities; the
effectiveness and reliability of our technology in harsh and unpredictable
environments; risks related to the actions and financial circumstances of our
agents and contractors, counterparties and joint venture partners; volatility
in energy trading markets; foreign currency exchange rates; economic
conditions in the countries and regions in which we carry on business;
governmental actions including changes to taxes or royalties, changes in
environmental and other laws and regulations including without limitation,
those related to our offshore exploration, development and production
activities; renegotiations of contracts; results of litigation, arbitration or
regulatory proceedings; political uncertainty, including actions by
terrorists, insurgent or other groups, or other armed conflict, including
conflict between states; the possible failure of Nexen and CNOOC Limited to
obtain necessary regulatory, court and other third party approvals, including
those noted above, or to otherwise satisfy the conditions to the completion of
the transaction, in a timely manner or at all; if the arrangement transaction
is not completed and Nexen continues as an independent entity, there are risks
that the announcement of the transaction and the dedication of substantial
resources of Nexen to the completion of the transaction could have an impact
on Nexen's current business relationships (including with future and
prospective employees, customers, distributors, suppliers and partners) and
could have a material adverse effect on the current and further operations,
financial condition and prospects of Nexen; the possible failure of Nexen to
comply with the terms of the Arrangement Agreement may result in Nexen being
required to pay a fee to CNOOC Limited, the   result of which could have a
material and adverse effect on Nexen's   financial position and results of
operations and its ability to fund growth prospects and current operations;
and other factors, many of which are beyond our control.

These risks, uncertainties and other factors and their possible impact are
discussed more fully in the sections titled "Risk Factors" in our 2011 Annual
Information Form and "Quantitative and Qualitative Disclosures About Market
Risk" in our 2011 annual MD&A. The impact of any one risk, uncertainty or
factor on a particular forward-looking statement is not determinable with
certainty as these factors are interdependent, and management's future course
of action would depend on our assessment of all information at that time.
Although we believe that the expectations conveyed by the forward-looking
statements are reasonable based on information available to us on the date
such forward-looking statements were made, no assurances can be given as to
future results, levels of activity and achievements. Undue reliance should not
be placed on the forward-looking statements contained herein, which are made
as of the date hereof as the plans, intentions, assumptions or expectations
upon which they are based might not occur or come to fruition. Except as
required by applicable securities laws, Nexen undertakes no obligation to
update publicly or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. Included herein is information
that may be considered financial outlook and/or future-oriented financial
information (FOFI). Its purpose is to indicate the potential results of our
intentions and may not be appropriate for other purposes. The forward-looking
statements contained herein are expressly qualified by this cautionary
statement.

Note to Investors on Reserves and Resources

The reserves estimates in this disclosure were prepared with an effective date
of December 31, 2011.   The resource estimates were prepared on March 31,
2012.   These estimates have been internally prepared by an internal qualified
reserves evaluator in accordance with National Instrument 51-101 Standards of
Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and
Gas Evaluation Handbook ("COGE Handbook"). For more information on this
reserves estimate and Nexen's reserves estimation process please refer to our
2011 Annual Information Form. For more information on our   Appomattox  
resource estimate please refer to our press release dated April 2, 2012. Both
our Annual Information Form and news releases are available at
http://www.nexeninc.com and http://www.sedar.com .

Conversions of gas volumes to boe in these estimates were made on the basis of
1 boe to 6 mcf of natural gas. A boe conversion ratio of 6 mcf:1 bbl is based
on an energy equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead. Using the
forecast prices applied to our reserves estimates, the boe conversion ratio
based on wellhead value is approximately 30 mcf:1 bbl. Disclosure provided
herein in respect of boes may be misleading, particularly if used in
isolation.

Nexen Inc. Financial Highlights

                                                                           Nine Months
                                               Three Months Ended             Ended
                                            Sept.      June     Sept.   Sept.       Sept.
                                               30        30        30      30          30
    (Cdn$ millions,
     except per-share amounts)               2012      2012      2011    2012        2011
    Net Sales [1]                           1,495     1,659     1,399   4,850       4,546
    Cash Flow from Operations [1]             560       707       516   1,937       1,783
    Per Common Share, Basic ($/share)        1.06      1.34      0.98    3.66        3.38
    Per Common Share, Diluted ($/share)      1.03      1.28      0.95    3.55        3.29
    Net Income [1]                             59       109       200     339         654
    Per Common Share, Basic ($/share)        0.11      0.20      0.38    0.63        1.24
    Capital Investment [2]                    831       743       729   2,331       1,758
    Net Debt [3]                            2,367     3,136     3,454   2,367       3,454
    Common Shares Outstanding
         (millions of shares)               530.0     529.3     527.4   530.0       527.4

^[ ^1 ^]   Includes results of discontinued operations. See Note 23 of our
2011 Annual Consolidated Financial Statements. ^[ ^2 ^]   Includes oil and gas
development, exploration, and expenditures for other property, plant and
equipment. ^[ ^3 ^]   Net debt is defined as long-term debt and short-term
borrowings less cash and cash equivalents.

Cash Flow from Operations   ^[ ^1 ^]

                                    Three Months Ended              Nine Months Ended
                               Sept. 30     June 30     Sept. 30   Sept. 30     Sept. 30
    (Cdn$ millions)                2012        2012         2011       2012         2011
    Conventional Oil & Gas
    United Kingdom                  737         919          645      2,721        2,231
    North America                    13          15           50         66          206
    Other Countries [2]             182         165          132        366          443
    Oil Sands
    In Situ                        (64)           4          (4)       (42)         (17)
    Syncrude                        106          70          106        267          316
                                    974       1,173          929      3,378        3,179
    Interest, Marketing and
     Other Corporate Items        (129)        (70)         (62)      (280)        (237)[3]
    Current Income Taxes          (285)       (396)        (351)    (1,161)      (1,159)
    Cash Flow from Operations       560         707          516      1,937        1,783

^[ ^1 ^]     Defined as cash flow from operating activities before changes in
non-cash working capital and other. We evaluate our performance and that of
our business segments based on earnings and cash flow from operations. Cash
flow from operations is a non-GAAP term that represents cash generated from
operating activities before changes in non-cash working capital and other. We
consider it a key measure as it demonstrates our ability to generate the cash
flow necessary to fund future growth through capital investment. Cash flow
from operations may not be comparable with the calculation of similar measures
for other companies.

                                        Three Months Ended              Nine Months Ended
                                Sept. 30     June 30     Sept. 30   Sept. 30       Sept. 30
    (Cdn$ millions)                 2012        2012         2011       2012           2011
    Cash Flow from
      Operating Activities           515       1,159          288      2,182          2,038
    Changes in Non-Cash
      Working Capital                  4       (446)          198      (296)          (287)
    Other                             53           6           38         87             56
    Impact of Annual Crude
      Oil Put Options               (12)        (12)          (8)       (36)           (24)
    Cash Flow from Operations        560         707          516      1,937          1,783

    Weighted Average Number
      of Common
    Shares Outstanding,
      Basic (millions of shares)     530         529          527        529            527
    Cash Flow from Operations
      Per Common
    Share, Basic ($/share)          1.06        1.34         0.98       3.66           3.38

    Cash Flow from Operations,
      Diluted                        566         713          522      1,956          1,802
    Weighted Average Number
      of Common Shares Outstanding,
      Diluted (millions of shares)   550         556          550        551            547
    Cash Flow from Operations
      Per Common
    Share, Diluted ($/share)        1.03        1.28         0.95       3.55           3.29

^[ ^2 ^]  Includes Nigeria, Yemen and Colombia. ^[ ^3 ^]  Includes results of
discontinued operations. See Note 23 of our 2011 Annual Consolidated Financial
Statements.

Nexen Inc. Production Volumes (before royalties) ^[ ^1 ^]

                                  Three Months Ended               Nine Months Ended
                             Sept. 30       June 30     Sept. 30   Sept. 30        Sept. 30
    (mboe/d)                     2012          2012         2011       2012            2011
    Conventional Oil and Gas
    United Kingdom               85.8         114.2         71.1      103.6            85.7
    North America [2]            32.3          34.4         39.7       34.9            44.8
    Other Countries [3]          25.8          25.5         33.9       20.3            36.8
                                143.9         174.1        144.7      158.8           167.3
    Oil Sands
    Long Lake Bitumen [4]        13.9          21.9         19.2       19.4            18.0
    Syncrude                     22.7          17.2         21.6       20.4            21.7
                                 36.6          39.1         40.8       39.8            39.7

    Total Production            180.5         213.2        185.5      198.6           207.0

    Total Crude Oil and
     Liquids (mbbls/d)          150.6         178.7        149.2      165.6           165.5
    Total Natural Gas
     (mmcf/d)                     180[5]        207          218        198[6]          249


Production Volumes (after royalties)

                                       Three Months Ended              Nine Months Ended
                                Sept. 30     June 30     Sept. 30   Sept. 30       Sept. 30
    (mboe/d)                        2012        2012         2011       2012           2011
    Conventional Oil and Gas
    United Kingdom                  85.2       113.7         70.7      103.1           85.5
    North America [2]               30.0        33.1         36.0       32.8           40.7
    Other Countries [3]             21.3        22.9         18.9       16.9           20.5
                                   136.5       169.7        125.6      152.8          146.7
    Oil Sands
    Long Lake Bitumen [4]           13.2        20.4         17.3       18.2           16.6
    Syncrude                        22.0        16.9         20.6       19.2           20.2
                                    35.2        37.3         37.9       37.4           36.8

    Total Production               171.7       207.0        163.5      190.2          183.5

    Total Crude Oil and
     Liquids (mbbls/d)             143.4       173.2        130.0      158.5          145.2
    Total Natural Gas (mmcf/d)       170         203          201        190            230

^[ ^1 ^]    We have presented production volumes before royalties as we
measure our performance on this basis consistent with other Canadian oil and
gas companies. ^[ ^2 ^]    Includes shale gas production in Canada. ^[ ^3 ^]
   Includes Nigeria, Yemen and Colombia. ^[ ^4 ^]    We report Long Lake
bitumen as production. ^[ ^5 ^]    Includes 107 mmcf/d of natural gas
production in Canada, 43 in the US and 30 in the UK (2011-111, 81 and 26,
respectively). ^[ ^6 ^]    Includes 120 mmcf/d of natural gas production in
Canada, 44 in the US and 34 in the UK (2011-123, 94 and 32, respectively).

Nexen Inc. Oil and Gas Prices and Cash Netbacks   ^[ ^1 ^]

                                                                                    Total
                                       Quarters - 2012        Quarters - 2011        Year
    (all dollar amounts
     in Cdn$ unless noted)           1st    2nd    3rd    1st    2nd    3rd    4th   2011
    PRICES:
    Brent Crude Oil (US$/bbl)      119.13 108.66 110.13 104.97 117.36 113.47 109.31 111.28
    WTI Crude Oil (US$/bbl)        102.93  93.49  92.22  94.10 102.56  89.76  94.06  95.12
    Nexen Average - Oil (Cdn$/bbl) 111.62 102.21 103.43  98.37 110.28 103.98 108.44 105.21
    NYMEX Natural Gas (US$/mmbtu)    2.51   2.35   2.90   4.20   4.37   4.06   3.48   4.03
    AECO Natural Gas (Cdn$/mcf)      2.39   1.74   2.08   3.58   3.54   3.53   3.29   3.48
    Nexen Average - Gas (Cdn$/mcf)   3.13   2.58   3.19   4.51   4.75   4.36   3.63   4.31
    NETBACKS [1]:
    United Kingdom
    Crude Oil:
    Sales (mbbls/d)                 106.9  105.3   82.1  104.2   73.3   75.2   92.7   86.3
    Price Received ($/bbl)         118.12 105.82 108.39  99.97 110.67 107.58 110.46 106.76
    Natural Gas:
    Sales (mmcf/d)                     33     31     31     36     37     26     22     30
    Price Received ($/mcf)           7.83   6.64   7.43   7.29   8.20   7.28   6.52   7.42
    Total Sales Volume (mboe/d)     112.3  110.4   87.3  110.2   79.5   79.5   96.4   91.3

    Price Received ($/boe)         114.65 102.74 104.57  96.91 105.87 104.13 107.70 103.32
    Royalties & Other                0.51   0.55   0.71      -   0.11   0.82   0.54   0.36
    Operating Costs                 10.14  10.90  13.78   9.85   8.48  14.46   9.99  10.60
    In-country Taxes                45.41  38.84  32.04  42.46  42.76  41.00  43.24  42.41
    Netback                         58.59  52.45  58.04  44.60  54.52  47.85  53.93  49.95
    Oil Sands - In Situ [2]
    Sales (mbbls/d)                  17.8   16.5   11.2   12.9   14.3   11.8   16.7   13.9

    Price Received ($/bbl)          94.45  86.58  80.13  89.82 108.78  94.15  97.28  98.33
    Royalties & Other                4.79   6.10   3.22   3.58   6.05   5.07   5.29   5.05
    Operating Costs                 68.89  69.95 77.36[3] 89.43 95.34  85.42  67.41  83.44
    Netback [2]                     20.77  10.53 (0.45)  (3.19)  7.39   3.66  24.58   9.84
    Oil Sands - Syncrude
    Sales (mbbls/d)                  21.3   17.2  22.7    23.2   20.4   21.6   18.2    20.8

    Price Received ($/bbl)          92.54  89.85 91.48   94.60 111.79  97.65 104.32  101.73
    Royalties & Other               11.25  (3.03) 1.84    4.30  13.82   4.65  10.59    8.10
    Operating Costs                 31.36  44.96 35.93   36.11  39.98  37.10  38.24   37.78
    Netback                         49.93  47.92 53.71   54.19  57.99  55.90  55.49   55.85
    United States
    Crude Oil:
    Sales (mbbls/d)                   8.0    7.3   7.4     9.2    8.9    7.7    7.2     8.2
    Price Received ($/bbl)         108.40 102.19 99.04   91.39 101.89  96.00 110.89   99.65
    Natural Gas:
    Sales (mmcf/d)                     50     41    43     103     96     81     66      86
    Price Received ($/mcf)           2.67   2.19  2.89    4.36   4.42   4.27   3.59    4.21
    Total Sales Volume (mboe/d)      16.3   14.1  14.5    26.3   24.9   21.2   18.2    22.6
    Price Received ($/boe)          61.33  58.84 58.91   48.91  53.56  50.72  57.27   52.31
    Royalties & Other                6.02   6.12  6.50    5.65   6.11   5.63   3.31    5.30
    Operating Costs                 17.29  17.87 19.37   10.43  10.72  11.18  16.73   11.96
    Netback                         38.02  34.85 33.04   32.83  36.73  33.91  37.23   35.05

^[ ^1 ^]    Netbacks are defined as average sales price less royalties, other
operating costs and in-country taxes. ^[ ^2 ^]    Excludes activities related
to third-party bitumen purchased, processed and sold. ^[ ^3 ^]    Excludes
costs related to turnaround activities.

Nexen Inc. Oil and Gas Cash Netback   ^[ ^1 ^] (continued)

                                                                                      Total
                                     Quarters - 2012          Quarters - 2011          Year
    (all dollar amounts
     in Cdn$ unless noted)         1st    2nd    3rd      1st    2nd     3rd     4th   2011
    Canada - Natural Gas [2]
    Sales (mmcf/d)                 131    120    105       97     85      79     112     93

    Price Received ($/mcf)        2.12   1.67   2.05     3.65   3.62    3.51    3.08   3.44
    Royalties & Other             0.08  (0.05)  0.06     0.28   0.24    0.27    0.17   0.23
    Operating Costs               1.58   1.62   1.72     1.70   1.54    1.65    1.70   1.65
    Netback                       0.46   0.10   0.27     1.67   1.84    1.59    1.21   1.56
    Other Countries [3]
    Sales (mbbls/d)                5.4   27.0   27.4     36.7   41.0    33.5    29.4   35.1

    Price Received ($/bbl)      119.61 105.59 109.24   101.17 111.56  107.64  111.10 107.85
    Royalties & Other            48.76  17.27  18.44    44.95  50.38   47.54   43.83  46.92
    Operating Costs              13.02  17.70  14.42    10.62   9.23   12.97   19.89  12.73
    In-country Taxes              9.31   2.50   1.94    12.81  15.58   14.71   13.27  14.17
    Netback                      48.52  68.12  74.44    32.79  36.37   32.42   34.11  34.03
    Company-Wide
    Oil and Gas Sales (mboe/d)   195.0  205.2  180.6    225.5  194.3   180.7   197.6  199.2

    Price Received ($/boe)       94.67  88.65  89.52    85.98  95.31   91.06   94.11  91.46
    Royalties & Other             3.87   3.19   4.12     8.74  13.47   10.83    8.62  10.34
    Operating Costs              18.56  19.74  20.71[4] 17.32  18.68   20.80   19.56  19.00
    In-country Taxes             26.43  21.21  15.79    22.84  20.78   20.76   23.08  21.92
    Netback                      45.81  44.51  48.90    37.08  42.38   38.67   42.85  40.20

^[ ^1 ^]    Netbacks are defined as average sales price less royalties and
other, operating costs and in-country taxes. ^[ ^2 ^]    Includes Canadian
conventional, CBM and shale gas activities. Shale gas was included beginning
in the fourth quarter of 2011 when it became commercial. ^[ ^3 ^]    Includes
Yemen, Colombia and West Africa. ^[ ^4 ^]    Excludes costs related to
turnaround activities.

Nexen Inc. Unaudited Condensed Consolidated Statement of Income For the Three
and Nine Months Ended September 30

                                                      Three Months         Nine Months
                                                   Ended September 30   Ended September 30
    (Cdn$ millions, except per-share amounts)       2012         2011    2012         2011
    Revenues and Other Income
    Net Sales                                      1,495        1,399   4,850        4,504
    Marketing and Other Income (Note 8)               14          125     165          254
                                                   1,509        1,524   5,015        4,758
    Expenses
    Operating                                        401          356   1,116        1,060
    Depreciation, Depletion, Amortization and
    Impairment                                       427          409   1,312        1,114
    Transportation and Other                         128          110     353          289
    General and Administrative                       223           23     464          204
    Exploration                                       49           59     264          278
    Finance (Note 5)                                  80           59     225          193
    Loss on Debt Redemption and Repurchase             -            -       -           91
    Gain from Dispositions (Note 10)                (145)           -    (197)         (12)
                                                   1,163        1,016   3,537        3,217

    Income from Continuing Operations before Provision
    for Income Taxes                                 346          508   1,478        1,541

    Provision for (Recovery of) Income Taxes
    Current                                          285          351   1,161        1,159
    Deferred                                           2          (43)    (22)          30
                                                     287          308   1,139        1,189

    Net Income from Continuing Operations             59          200     339          352
    Net Income from Discontinued Operations, Net of
    Tax                                                -            -       -          302
    Net Income Attributable to
    Nexen Inc. Shareholders                           59          200     339          654

    Earnings Per Common Share from Continuing
    Operations ($/share) (Note 6)
    Basic                                           0.11         0.38    0.63         0.67

    Diluted                                         0.11         0.32    0.63         0.61

    Earnings Per Common Share ($/share) (Note 6)
    Basic                                           0.11         0.38    0.63         1.24

    Diluted                                         0.11         0.32    0.63         1.16

See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.

Nexen Inc. Unaudited Condensed Consolidated Balance Sheet

                                                     September 30    December 31
    (Cdn$ millions)                                          2012           2011
    Assets
    Current Assets
    Cash and Cash Equivalents                               1,870            845
    Restricted Cash                                            18             45
    Accounts Receivable                                     1,582          2,247
    Derivative Contracts                                       62            119
    Inventories and Supplies                                  351            320
    Other                                                     140            115
    Total Current Assets                                    4,023          3,691
    Non-Current Assets
    Property, Plant and Equipment (Note 3)                 15,462         15,571
    Goodwill                                                  282            291
    Deferred Income Tax Assets                                482            338
    Derivative Contracts                                        4             25
    Other Long-Term Assets                                     98            152
    Total Assets                                           20,351         20,068

    Liabilities
    Current Liabilities
    Accounts Payable and Accrued Liabilities                2,591          2,867
    Income Taxes Payable                                      609            458
    Derivative Contracts                                       63            103
    Total Current Liabilities                               3,263          3,428
    Non-Current Liabilities
    Long-Term Debt                                          4,237          4,383
    Deferred Income Tax Liabilities                         1,574          1,488
    Asset Retirement Obligations                            1,973          2,010
    Derivative Contracts                                        4             24
    Other Long-Term Liabilities                               452            362
    Equity (Note 6)
    Share Capital
    Common Shares                                           1,194          1,157
    Preferred Shares                                          195              -
    Retained Earnings                                       7,465          7,211
    Cumulative Translation Adjustment                         (6)              5
    Total Equity                                            8,848          8,373
    Total Liabilities and Equity                           20,351         20,068

See accompanying notes to Unaudited Condensed Consolidated Financial
Statements.

Nexen Inc. Unaudited Condensed Consolidated Statement of Cash Flows For the
Three and Nine Months Ended September 30

                                                      Three Months          Nine Months
                                                   Ended September 30    Ended September 30
    (Cdn$ millions)                               2012            2011    2012         2011
    Operating Activities
    Net Income from Continuing Operations           59             200     339          352
    Net Income from Discontinued Operations          -               -       -          302
    Charges and Credits to Income
     not Involving Cash (Note 9)                   464             265   1,370          875
    Exploration Expense                             49              59     264          278
    Changes in Non-Cash Working Capital (Note 9)    (4)           (198)    296          287
    Other                                          (53)            (38)    (87)        (56)
                                                   515             288   2,182        2,038

    Financing Activities
    Repayment of Long-Term Debt                      -               -       -        (871)
    Issue of Common Shares                          11               8      37           39
    Issue of Preferred Shares                        -               -     195            -
    Dividends Paid on Common and Preferred Shares  (29)            (26)    (82)        (78)
    Other                                            -               1      (6)           2
                                                   (18)            (17)    144        (908)

    Investing Activities
    Capital Expenditures
    Exploration, Evaluation and Development       (807)           (716) (2,261)     (1,708)
    Corporate and Other                            (24)            (13)    (70)        (50)
    Proceeds from Dispositions (Note 10)           828               1     881          475
    Changes in Restricted Cash                      83               1      27         (10)
    Changes in Non-Cash Working Capital (Note 9)    75              69     140          184
    Other                                           (2)              -       3         (75)
                                                   153            (658) (1,280)     (1,184)

    Effect of Exchange Rate Changes on
     Cash and Cash Equivalents                     (35)            100     (21)         74

    Increase (Decrease) in Cash
     and Cash Equivalents                          615            (287)  1,025          20

    Cash and Cash Equivalents -
      Beginning of Period                        1,255           1,312     845       1,005

    Cash and Cash Equivalents -
      End of Period [1]                          1,870           1,025   1,870       1,025

^[ ^1 ^    ^] Cash and cash equivalents at September 30, 2012 consists of cash
of $620 million and short-term investments of $1,250 million (September 30,
2011 cash of $277 million and short-term investments of $748 million).

See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.

Nexen Inc. Unaudited Condensed Consolidated Statement of Changes in Equity For
the Three and Nine Months Ended September 30

                                              Three Months                Nine Months
                                            Ended September 30         Ended September 30
    (Cdn$ millions)                       2012              2011     2012             2011

    Share Capital
    Common Shares, Beginning of Period   1,183             1,142    1,157            1,111
    Issue of Common Shares                  11                 8       37               39
    Common Shares, Balance at End of
    Period                               1,194             1,150    1,194            1,150

    Preferred Shares, Beginning of Period  195                 -        -                -
    Issue of Preferred Shares                -                 -      195                -
    Preferred Shares, Balance at End of
    Period                                 195                 -      195                -

    Retained Earnings, Beginning of
    Period                               7,435             7,094    7,211            6,692
    Net Income Attributable to Nexen
    Inc.
    Shareholders                            59               200      339              654
    Dividends on Common and Preferred
    Shares (Note 6)                        (29)              (26)     (85)             (78)
    Balance at End of Period             7,465             7,268    7,465            7,268

    Cumulative Translation Adjustment,
    Beginning of Period                     26               (55)       5              (37)
    Currency Translation Adjustment        (35)                63     (30)              45
    Realized Translation Adjustments [1]     3                 -       19                -
    Balance at End of Period                (6)                 8      (6)               8

^[ ^1 ^  ^] Net of income tax recovery for the three months ended September
30, 2012 of $2 million (2011 - net of income tax expense of $4 million) and
net of income tax recovery for the nine months ended September 30, 2012 of $9
million (2011 - net of income tax expense of $24 million).

See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.

Nexen Inc. Unaudited Condensed Consolidated Statement of Comprehensive Income
For the Three and Nine Months Ended September 30

                                       Three Months                Nine Months
                                       Ended September 30         Ended September 30
    (Cdn$ millions)                 2012              2011     2012              2011
    Net Income Attributable to
    Nexen Inc. Shareholders           59               200      339               654
    Other Comprehensive Income (Loss):
    Currency Translation Adjustment
    Net Translation Gains (Losses)
    of Foreign Operations           (163)              339     (149)              200
    Net Translation Gains
    (Losses) on US$-Denominated
    Debt Hedging of Foreign
    Operations [1]                   128             (276)      119             (155)
    Total Currency Translation
    Adjustment                       (35)               63      (30)               45
    Total Comprehensive Income        24               263      309               699

^[ ^1 ^  ^] Net of income tax expense for the three months ended September 30,
2012 of $18 million (2011 - net of income tax recovery of $39 million) and net
of income tax expense for the nine months ended September 30, 2012 of $17
million (2011 - net of income tax recovery of $22 million).

See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.

Nexen Inc. Notes to Unaudited Condensed Consolidated Financial Statements Cdn$
millions, except as noted

1. BASIS OF PRESENTATION

Nexen Inc. (Nexen, we or our) is an independent, global energy company with
operations in the UK North Sea, US Gulf of Mexico, offshore Nigeria, Canada,
Yemen, Colombia and Poland. Nexen is incorporated and domiciled in Canada and
our head office is located at 801-7 ^th Avenue SW, Calgary, Alberta, Canada.
Nexen's shares are publicly traded on both the Toronto Stock Exchange and the
New York Stock Exchange.

These Unaudited Condensed Consolidated Financial Statements for the three and
nine months ended September 30, 2012 have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB). Specifically, they have been
prepared in accordance with International Accounting Standard (IAS) 34 Interim
Financial Reporting . The Unaudited Condensed Consolidated Financial
Statements do not include all of the information required for annual financial
statements and should be read in conjunction with the Audited Consolidated
Financial Statements for the year ended December 31, 2011, which have been
prepared in accordance with IFRS.

CNOOC Acquisition of Nexen

On July 23, 2012, Nexen and CNOOC Limited (CNOOC) entered into an Arrangement
Agreement in which CNOOC proposed to acquire all of the outstanding shares of
Nexen Inc. for US$27.50 per common share and Cdn$26.00 per preferred share.
The transaction is proposed to be completed by way of a plan of arrangement
(the "Arrangement") under the Canada Business Corporations Act .  On September
20, 2012, Nexen's common and preferred shareholders approved the Arrangement,
and the Court of Queen's Bench of Alberta granted a final order approving the
Arrangement. The closing of the Arrangement remains subject to the receipt of
required regulatory approvals and the satisfaction or waiver of the other
customary closing conditions.

The Unaudited Condensed Consolidated Financial Statements were authorized for
issue by Nexen's Board of Directors on October 24, 2012.

2. ACCOUNTING POLICIES

The accounting policies we follow are described in Note 2 of the Audited
Consolidated Financial Statements for the year ended December 31, 2011. There
have been no changes to our accounting policies since December 31, 2011.

3. PROPERTY, PLANT AND EQUIPMENT (PP&E)

(a)    Carrying amount of PP&E

                                Exploration         Assets    Producing
                                        and          Under    Oil & Gas   Corporate
                                 Evaluation   Construction   Properties   and Other   Total
    Cost
    As at December 31, 2011       2,206          2,347       19,832         837     25,222
    Additions                       546            581        1,134          70      2,331
    Disposals/Derecognitions      (187)              -        (925)        (15)     (1,127)
    Transfers [1]                    -        (1,862)        1,862           -           -
    Exploration Expense           (264)              -            -           -       (264)
    Other                           (6)              -           90          18        102
    Effect of Changes in Exchange
    Rate                           (39)           (32)        (375)         (7)       (453)
    As at September 30, 2012     2,256          1,034       21,618         903      25,811

    Accumulated Depreciation, Depletion &
    Amortization (DD&A)
    As at December 31, 2011        368              -        8,860         423       9,651
    DD&A                            44              -        1,203          65       1,312
    Disposals/Derecognitions       (16)             -        (307)        (12)       (335)
    Other                            -              -         (27)          17        (10)
    Effect of Changes in Exchange
    Rate                           (11)             -        (253)         (5)       (269)
    As at September 30, 2012       385              -        9,476         488      10,349

    Net Book Value
    As at December 31, 2011      1,838          2,347       10,972         414      15,571
    As at September 30, 2012     1,871          1,034       12,142         415      15,462

^[ ^1 ^  ^  ^] Includes PP&E costs related to our Usan development, offshore
Nigeria which came on-stream February 2012.

Exploration and evaluation assets mainly comprise of unproved properties and
capitalized exploration drilling costs. Assets under construction at September
30, 2012 primarily include our developments in the UK North Sea.

(b)    Impairment

DD&A expense for the third quarter of 2011 includes non-cash impairment
charges of $141 million for our Canadian coalbed methane and conventional gas
assets. Sustained lower natural gas prices in the quarter reduced our
estimates of fair value and resulted in impairment of the properties' carrying
value.

4. LONG-TERM DEBT

During the three and nine months ended September 30, 2012, we borrowed and
repaid nil and $254 million on our term credit facilities, respectively. We
recorded $146 million and $136 million, respectively, of unrealized foreign
exchange gains on long-term debt in other comprehensive income.

We have undrawn, committed, unsecured term credit facilities of $3.7 billion,
of which $700 million is available until 2014 and $3.0 billion is available
until 2017. As at September 30, 2012, $232 million of our term credit
facilities were utilized to support letters of credit (December 31, 2011-$367
million).

Nexen has undrawn, uncommitted, unsecured credit facilities of approximately
$180 million. We utilized $5 million of these facilities to support
outstanding letters of credit at September 30, 2012 (December 31, 2011-$17
million).

Nexen has undrawn, uncommitted, unsecured credit facilities of approximately
$207 million exclusively to support letters of credit. We utilized $16 million
of these facilities to support outstanding letters of credit at September 30,
2012 (December 31, 2011-$4 million).

5. FINANCE EXPENSE

                                                 Three Months               Nine Months
                                              Ended September 30        Ended September 30
                                            2012            2011     2012             2011
    Interest on Long-Term Debt                75              73      223              231
    Accretion Expense Related to
     Asset Retirement Obligations             13              12       39               35
    Other Interest and Fees                    6               7       18               17
    Total                                     94              92      280              283
    Less: Capitalized at 6.7% (2011 - 6.7%)  (14)            (33)     (55)             (90)
    Total                                     80              59      225              193


Capitalized interest relates to and is included as part of the cost of our oil
and gas properties. The capitalization rates are based on our weighted-average
cost of borrowings.

6. EQUITY

(a)    Common Shares

Authorized share capital consists of an unlimited number of common shares of
no par value. At September 30, 2012, there were 530,005,285 common shares
outstanding (December 31, 2011-527,892,635 common shares).

(b)    Preferred Shares

Authorized share capital consists of an unlimited number of Class A preferred
shares of no par value, issuable in series. At September 30, 2012, there were
8,000,000 Cumulative Redeemable Class A Rate Reset Preferred Shares, Series 2
outstanding (December 31, 2011-nil).

(c)    Earnings Per Common Share (EPS)

We calculate basic EPS using net income attributable to Nexen Inc. common
shareholders, adjusted for preferred share dividends and divided by the
weighted-average number of common shares outstanding. We calculate diluted EPS
in the same manner as basic, except we adjust basic earnings for the potential
conversion of the subordinated debentures and potential exercise of
outstanding tandem options for shares, if dilutive. We use the
weighted-average number of diluted common shares outstanding in the
denominator of our diluted EPS calculation.

                                                      Three Months           Nine Months
                                                  Ended September 30     Ended September 30
    (Cdn$ millions)                             2012            2011   2012            2011
    Net Income Attributable to Nexen
     Inc. Common Shareholders                     59             200    339             654
    Preferred Share Dividends Payable            (3)               -    (6)               -
    Net Income Attributable to Nexen
     Inc. Common
    Shareholders, Basic                           56             200    333             654
    Potential Tandem Options Exercises             -            (29)      -            (39)
    Potential Conversion of Subordinated
     Debentures                                    -               6      -              19
    Net Income Attributable to Nexen Inc. Common
    Shareholders, Diluted                         56             177    333             634

    (millions of shares)
    Weighted Average Number of Common Shares
    Outstanding, Basic                           530             527    529             527
    Common Shares Issuable Pursuant to
     Tandem Options                                -               2      -               2
    Common Shares Notionally Purchased
     from Proceeds of Tandem Options               -             (2)      -             (2)
    Common Shares Issuable Pursuant
     to Potential Conversion
    of Subordinated Debentures                     -              23      -              20
    Weighted Average Number of Common Shares
    Outstanding, Diluted                         530             550    529             547


In calculating the weighted-average number of diluted common shares
outstanding and related earnings adjustments for the three and nine months
ended September 30, 2012, we excluded 8,118,453 and 11,390,032 tandem options,
respectively (2011-15,162,013 and 15,081,166, respectively) because their
exercise price was greater than the average common share market price during
those periods. During the three and nine months ended September 30, 2012,
there were no dilutive instruments. During the three and nine months ended
September 30, 2011, the potential conversion of tandem options and
subordinated debentures were the only dilutive instruments.

(d)    Dividends

We paid dividends of $0.05 and $0.15 per common share, for the three and nine
months ended September 30, 2012 ($0.05 and $0.15 per common share for the
respective periods ended September 30, 2011).

We paid dividends of $0.3928 per preferred share, for the three and nine
months ended September 30, 2012 (nil paid per preferred share for the
respective periods ended September 30, 2011).

Dividends paid to holders of common and preferred shares have been designated
as "eligible dividends" for Canadian tax purposes.

On October 24, 2012, the Board of Directors declared a quarterly dividend of
$0.05 per common share, payable January 1, 2013 to the shareholders of record
on December 10, 2012.

(e)    Stock-Based Compensation

                                                Three Months Ended September 30, 2012
    (thousands of shares)               Options          STARs         RSUs           PSUs
    Outstanding, Beginning of
    Period                               14,966         13,584        3,793            599
    Granted                                   -              -           23              -
    Exercised for Stock                   (107)              -            -              -
    Exercised or Redeemed for Cash        (510)          (822)          (1)              -
    Cancelled                             (169)          (252)        (119)           (14)
    Expired                                   -           (13)            -              -
    Outstanding, End of Period           14,180         12,497        3,696            585

                                                Nine Months Ended September 30, 2012
    (thousands of shares)               Options          STARs         RSUs           PSUs
    Outstanding, Beginning of
    Period                               14,854         14,407        2,025            390
    Granted                               1,368            339        1,936            312
    Exercised for Stock                   (107)              -            -              -
    Exercised or Redeemed for Cash        (552)          (962)          (4)              -
    Cancelled                           (1,333)        (1,173)        (261)          (117)
    Expired                                (50)          (114)            -              -
    Outstanding, End of Period           14,180         12,497        3,696            585

    Exercisable, End of Period            7,710          8,729


Options and STARs granted in the nine months ended September 30, 2012 have a
weighted average exercise price of $19.26/unit. No options or STARs were
granted during the three months ended September 30, 2012. We recognized
compensation expense related to share-based payments in the amount of $116 and
$140 million (2011-compensation recovery $65 and $62 million) for the three
and nine months ended September 30, 2012, respectively.

7. COMMITMENTS, CONTINGENCIES AND GUARANTEES

As described in Note 19 to the 2011 Audited Consolidated Financial Statements,
there are a number of lawsuits and claims pending, the ultimate results of
which cannot be ascertained at this time. We record costs as they are incurred
or become determinable. We believe that payments, if any, related to existing
indemnities would not have a material adverse effect on our liquidity,
financial condition or results of operations.

We assume various contractual obligations and commitments in the normal course
of our operations. During the quarter, we entered into drilling rig
commitments comprised of the following:

                                     2012     2013     2014     2015     2016   Thereafter
    Drilling Rig Commitments           17       60       23        9        -            -

The commitments above are in addition to those included in Note 19 to the 2011
Audited Consolidated Financial Statements and Note 7 to the Unaudited
Condensed Consolidated Financial Statements for the three months ended March
31, 2012 and June 30, 2012.

8. MARKETING AND OTHER INCOME

                                                   Three Months                Nine Months
                                             Ended September 30         Ended September 30
                                          2012             2011     2012              2011
    Marketing Revenue, Net                  35               72      210               174
    Interest Income                         15                -       16                 3
    Foreign Exchange Gains (Losses)       (55)               30     (59)                14
    Change in Fair Value of Crude
     Oil Put Options                       (4)               13     (38)                 6
    Insurance Proceeds                       -                -        -                26
    Other                                   23               10       36                31
    Total                                   14              125      165               254

9. CASH FLOWS

(a)    Charges and credits to income not involving cash

                                        Three Months                Nine Months
                                      Ended September 30         Ended September 30
                                   2012              2011     2012              2011
    Depreciation, Depletion,
     Amortization and Impairment    427               409    1,312             1,114
    Gain from Dispositions        (145)                 -    (197)              (12)
    Change in Fair Value of Crude
     Oil Put Options                  4              (13)       38               (6)
    Non-cash Stock-Based Compensation
     (Recovery)                     108              (65)      132              (67)
    Foreign Exchange                 51              (31)       59              (14)
    Provision for (Recovery of)
     Deferred Income Taxes            2              (43)     (22)                30
    Loss on Debt Redemption
     and Repurchase                   -                 -        -                91
    Non-Cash Items Included in
     Discontinued Operations          -                 -        -             (290)
    Other                            17                 8       48                29
    Total                           464               265    1,370               875


(b)    Changes in non-cash working capital

                                            Three Months                Nine Months
                                          Ended September 30         Ended September 30
                                     2012              2011     2012              2011
    Accounts Receivable               294                61      807              (73)
    Inventories and Supplies        (105)               (3)     (65)               181
    Other Current Assets              (6)               (4)     (23)              (13)
    Accounts Payable and
     Accrued Liabilities              143               114    (403)               283
    Current Income Taxes Payable    (255)             (297)      120                93
    Total                              71             (129)      436               471

    Relating to:
    Operating Activities              (4)             (198)      296               287
    Investing Activities               75                69      140               184
    Total                              71             (129)      436               471


(c)    Other cash flow information

                                           Three Months                Nine Months
                                     Ended September 30         Ended September 30
                                 2012              2011     2012              2011
    Interest Paid                  89                88      237               218
    Income Taxes Paid             527               646    1,024             1,106

10. DISPOSITIONS

Asset Dispositions

Canadian Shale Gas Joint Venture

During the quarter, we closed the sale of a 40% working interest in our
northeast British Columbia shale gas operations to INPEX Gas British Columbia
Ltd. (IGBC). Upon closing we received $821 million in cash, comprised of the
initial cash payment, the carry associated with Nexen's capital and IGBC's
share of costs since the July 1, 2011 effective date of the transaction. We
recorded a pre-tax gain on sale of $142 million on closing.

11. OPERATING SEGMENTS AND RELATED INFORMATION

Nexen has the following operating segments:

Conventional Oil and Gas: We explore for, develop and produce crude oil and
natural gas from conventional sources around the world. Our operations are
focused in the UK North Sea, North America (Canada and US) and other countries
(offshore Nigeria, Colombia, Yemen and Poland).

Oil Sands : We develop and produce synthetic crude oil from the Athabasca oil
sands in northern Alberta. We produce bitumen using in situ and mining
technologies and upgrade it into synthetic crude oil before ultimate sale. Our
in situ activities are comprised of our operations at Long Lake and future
development phases. Our mining activities are conducted through our 7.23%
ownership of the Syncrude Joint Venture.

Shale Gas: We explore for and produce unconventional gas from shale formations
in northeast British Columbia. Production and results of operations are
included within Conventional Oil and Gas until they become significant.

Corporate and Other includes energy marketing and unallocated items. The
results of Canexus have been presented as discontinued operations.

The accounting policies of our operating segments are the same as those
described in Note 2 of our Audited Consolidated Financial Statements for the
year ended December 31, 2011. Net income (loss) of our operating segments
excludes interest income, interest expense, income tax expense, unallocated
corporate expenses and foreign exchange gains and losses. Identifiable assets
are those used in the operations of the segments.

Segmented net income for the three months ended September 30, 2012

                                                                         Corporate
                                      Conventional            Oil Sands     and   Total
                                United    North     Other
                               Kingdom  America Countries In Situ Syncrude Other

    Net Sales                    834       90       228     143     188    12     1,495
    Marketing and Other
    Income                        20        3         -       -       -   (9)        14
                                 854       93       228     143     188     3     1,509

    Less: Expenses
    Operating                    111       42        37     131[2]   75     5       401
    Depreciation,
    Depletion and
    Amortization                 157       65       133      40      17    15       427
    Transportation and
    Other                        (1)       14         -      66       6    43       128
    General and
    Administrative                17       46        26      21       1   112[3]    223
    Exploration                   11       28         9[4]    1       -     -        49
    Finance                        6        3         -       1       2    68        80
    Gain from
    Dispositions                 (2)    (143)         -       -       -     -     (145)
    Income (Loss) before
    Income Taxes                 555       38        23   (117)      87 (240)       346
    Less: Provision for
    Income Taxes                                                                    287[5]
    Net Income                                                                       59

    Capital Expenditures         270      178        89[6]  217      67    10       831

^[ ^1 ^] Includes results of operations in Nigeria, Yemen and Colombia. ^[ ^2
^] Includes Long Lake turnaround costs of $49 million. ^[ ^3 ^] Includes
non-cash stock-based compensation expense of $108 million. ^[ ^4 ^]  Includes
exploration activities primarily in Colombia and Poland. ^[ ^5 ^]  Includes UK
current tax expense of $278 million. ^[ ^6 ^]  Includes capital expenditures
in Nigeria of $63 million.

Segmented net income for the three months ended September 30, 2011

                                                                         Corporate
                                      Conventional            Oil Sands     and   Total
                                United    North     Other
                               Kingdom  America Countries In Situ Syncrude Other
                                                       [1,2]
    Net Sales                      756     112      185      146      185    15   1,399
    Marketing and Other Income       -       4        5        -        2   114     125
                                   756     116      190      146      187   129   1,524

    Less: Expenses
    Operating                      106      34       39       97       73     7     356
    Depreciation, Depletion,
    Amortization and Impairment    124     210       18       30       16    11     409
    Transportation and Other         5      10        7       49        6    33     110
    General and Administrative     (7)       3        2      (1)        1    25      23
    Exploration                     15      17       27[3]     -        -     -      59
    Finance                          6       5        -        1        1    46      59
    Income (Loss) before
    Income Taxes                   507   (163)       97     (30)       90     7     508
    Less: Provision for Income
    Taxes                                                                           308[4]
    Net Income                                                                      200

    Capital Expenditures           190     243      161[5]    90       34    11     729

^[ ^1 ^] Includes results of operations in Yemen and Colombia. ^[ ^2 ^]
Includes Yemen Masila net sales of $138 million and net income before taxes of
$52 million. ^[ ^3 ^] Includes exploration activities primarily in Norway,
Colombia and Poland. ^[ ^4 ^] Includes UK current tax expense of $299 million.
^[ ^5 ^] Includes capital expenditures in Nigeria of $135 million.

Segmented net income for the nine months ended September 30, 2012

                                                                         Corporate
                                      Conventional            Oil Sands     and   Total
                                United    North     Other
                               Kingdom  America Countries In Situ Syncrude Other
                                                       [1]
    Net Sales                     3,028     284       479     534     491     34  4,850
    Marketing and Other Income       29       6         -       -       1    129    165
                                  3,057     290       479     534     492    163  5,015

    Less: Expenses
    Operating                       324     127        89     352[2]  206     18  1,116
    Depreciation, Depletion and
    Amortization                    627     203       251     140      49     42  1,312
    Transportation and Other          4      30         -     194      18    107    353
    General and Administrative       25      92        44      43       1    259[3] 464
    Exploration                      41     205        17[4]    1       -      -    264
    Finance                          18      11         1       2       6    187    225
    Gain from Dispositions          (2)   (156)       (7)    (32)       -      -  (197)
    Income (Loss) before
    Income Taxes                  2,020   (222)        84   (166)     212  (450)  1,478
    Less: Provision for Income Taxes                                              1,139[5]
    Net Income                                                                      339

    Capital Expenditures            708     610       341[6]  493    149      30  2,331

^[ ^1 ^] Includes results of operations in Nigeria, Yemen and Colombia. ^[ ^2
^] Includes Long Lake turnaround costs of $49 million. ^[ ^3 ^] Includes
non-cash stock-based compensation expense of $132 million. ^[ ^4 ^]  Includes
exploration activities primarily in Colombia and Poland, and recovery of
previously expensed exploration costs in Norway. ^[ ^5 ^]  Includes UK current
tax expense of $1,134 million. ^[ ^6 ^]  Includes capital expenditures in
Nigeria of $250 million.

Segmented net income for the nine months ended September 30, 2011

                                                                         Corporate
                                      Conventional            Oil Sands     and   Total
                                United    North     Other
                               Kingdom  America Countries In Situ Syncrude Other
                                                       [1,2]

    Net Sales                    2,482      379      599      449      555    40  4,504
    Marketing and
    Other Income                     9       36       12        -        3   194    254
                                 2,491      415      611      449      558   234  4,758

    Less: Expenses
    Operating                      265      110      109      331      223    22  1,060
    Depreciation,
    Depletion,
    Amortization
    and Impairment                 439      431       66       95       46    37  1,114
    Transportation
    and Other                        5       25       23      118       18   100    289
    General and
    Administrative                (17)       55       25       12        1   128    204
    Exploration                     32      117      127[3]     2        -     -    278
    Finance                         16       13        1        2        4   157    193
    Loss on Debt
    Redemption                       -        -        -        -        -    91     91
    Gain from
    Dispositions                   (8)        -        -        -        -   (4)   (12)
    Income (Loss)
    before
    Income Taxes                 1,759    (336)      260    (111)      266 (297)  1,541
    Less:
    Provision for
    Income Taxes                                                                  1,189[4]
    Income from
    Continuing
    Operations                                                                      352
    Add: Net
    Income from
    Discontinued
    Operations                                                                      302
    Net Income                                                                      654

    Capital
    Expenditures                   368      485      478[5]   310       80    37  1,758

^[ ^1 ^] Includes results of operations in Yemen and Colombia. ^[ ^2 ^]
Includes Yemen Masila net sales of $453 million and net income before taxes of
$192 million. ^[ ^3 ^] Includes exploration activities primarily in Norway,
Colombia and Poland. ^[ ^4 ^] Includes UK current tax expense of $1,047
million. ^[ ^5 ^] Includes capital expenditures in Nigeria of $349 million.

Segmented assets as at September 30, 2012

                                                                             Corporate
                                      Conventional            Oil Sands     and   Total
                                United    North     Other
                               Kingdom  America Countries In Situ Syncrude Other

    Total Assets                 5,039    2,913     2,250    6,243    1,518 2,388[1] 20,351

    Property, Plant and Equipment
    Cost                         7,534    6,514     2,799    6,407    1,878   679    25,811
    Less: Accumulated DD&A       4,127    4,131       878      330      456   427    10,349
    Net Book Value               3,407    2,383[2]  1,921[3] 6,077[4] 1,422   252    15,462

^[ ^1 ^] Includes cash of $1,039 million, and Energy Marketing accounts
receivable, current derivative assets and inventory of $835 million. ^[ ^2 ^]
Includes net book value of $827 million associated with our Canadian shale gas
operations. ^[ ^3 ^] Includes net book value of $1,774 million related to our
Usan development, offshore Nigeria. ^[ ^4 ^] Includes net book value of $5,228
million for Long Lake Phase 1 and $849 million for future phases of our in
situ oil sands projects.

Segmented assets as at December 31, 2011

                                                                         Corporate
                                     Conventional            Oil Sands      and      Total
                               United    North     Other
                              Kingdom  America Countries In Situ Syncrude  Other

    Total Assets                4,817    3,403     2,138    5,881    1,423 2,406[1] 20,068

    Property, Plant and Equipment
    Cost                        7,103    7,256     2,566    5,915    1,733   649    25,222
    Less: Accumulated DD&A      3,707    4,299       648      205      411   381     9,651
    Net Book Value              3,396    2,957[2]  1,918[3] 5,710[4] 1,322   268    15,571

^[ ^1 ^] Includes cash of $453 million, and Energy Marketing accounts
receivable, current derivative assets and inventory of $1,449 million. ^[ ^2
^] Includes net book value of $1,293 million associated with our Canadian
shale gas operations. ^[ ^3 ^] Includes net book value of $1,821 million
related to our Usan development, offshore Nigeria. ^[ ^4 ^] Includes net book
value of $5,050 million for Long Lake Phase 1 and $660 million for future
phases of our in situ oil sands projects.

For further information: For investor relations inquiries, please contact:
Janet Craig Vice President, Investor Relations +1-(403)-699-4230 For media and
general inquiries, please contact: Pierre Alvarez   Vice President, Corporate
Relations +1-(403)-699-5202 801 - 7 ^th Ave SWCalgary, Alberta, Canada T2P 3P7
http://www.nexeninc.com
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