Nexen Third-Quarter Profit Falls 71% as Downtime Cuts Output

Nexen Inc. (NXY), the oil and natural gas producer that agreed to be acquired by Cnooc Ltd. (883) for $15.1 billion, said third-quarter profit declined 71 percent as maintenance lowered output.

Net income fell to C$59 million ($59.4 million), or 11 cents a share, from C$200 million, or 32 cents, a year earlier, the Calgary-based company said today in a statement on its website. Revenue declined 1 percent to C$1.51 billion, exceeding the C$1.43 billion average of two analysts’ estimates compiled by Bloomberg.

Cnooc, China’s largest offshore oil producer, is awaiting Canada’s decision on its July 23 bid for Nexen. The government this month rejected Malaysia’s Petroliam Nasional Bhd.’s offer for Progress Energy Resources Corp. (PRQ) Nexen expects the transaction to close in the fourth quarter, according to the statement.

The takeover has “over a 50 percent chance” of closing, Phil Skolnick, a New York-based analyst at Canaccord Genuity Corp., said in a note to clients today. The $27.50-a-share offer price may change as Canada will “more than likely” place conditions on any approval of the deal, he said. Skolnick rates the stock a sell.

Cnooc said yesterday it expects the Nexen deal, China’s biggest foreign takeover, to be completed this year. Foreign takeovers valued at more than C$330 million require the government to determine a “net benefit” to Canada.

Output Declines

Average daily output declined 15 percent to 181,000 barrels of oil equivalent a day due to maintenance at the Buzzard field in the North Sea and the Long Lake oil-sands project in Alberta, according to the statement. Nexen lowered its fourth-quarter production forecast to 180,000 to 200,000 barrels a day because of a delay ramping up Buzzard field. Its annual output target remains 185,000 to 220,000 barrels a day.

Maintenance work at the Long Lake project was completed without “significant issues,” Nexen said. Bitumen production is back to about 34,000 barrels a day, it said in the statement.

Nexen rose 0.3 percent to C$23.70 at the close in Toronto. The shares have four buys, six holds and four sell recommendations from analysts.

To contact the reporter on this story: Rebecca Penty in Calgary at rpenty@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.