Nexen Inc., the Canadian oil producer that’s been seeking a new chief executive officer for six months, said profit fell 57 percent because of lower crude prices and its unsuccessful Kakuna well in the Gulf of Mexico.
Second-quarter net income fell to C$109 million ($108 million), or 19 cents a share, from C$252 million, or 45 cents, a year earlier, the Calgary-based company said in a statement today. Per-share profit was less than the 31-cent average of 10 analysts’ estimates compiled by Bloomberg.
Nexen has had setbacks at its Long Lake oil sands and North Sea operations, which held back earnings growth. Bitumen production in Alberta as well as offshore crude output at the Usan project in Nigeria is growing slower than the company expected, interim Chief Executive Officer Kevin Reinhart said.
“Global oil prices were lower than the first quarter but our weighting to Brent continues to benefit us compared to peers who have production linked to either WTI or further discounted Canadian benchmark crudes,” Reinhart said during a conference call with analysts today. The company aims to boost production at Usan as it develops more wells, he said.
Prices for West Texas Intermediate, the U.S. benchmark for crude, averaged $93.35 a barrel in the second quarter, down 8.8 percent from $102.34 in the year-earlier period. Brent, the European benchmark oil, fell 7 percent to $108.76 in the same period.
Cash flow from operations in the quarter rose to C$707 million from C$598 million a year earlier, and net debt increased to C$3.14 billion from C$2.84 billion. Sales increased 10 percent to C$1.66 billion.
Production after royalties averaged 207,000 barrels a day, compared with 180,000 barrels a year earlier. The increase was driven by increasing production at its Usan field off the coast of West Africa and a “good performance” from the Buzzard field in the North Sea.
“Production was slightly ahead of our estimate,” Michael Dunn, an analyst at FirstEnergy Capital Corp., said in a note to investors.
Former CEO Marvin Romanow stepped down in January amid a slumping share price and missed production targets. The board is looking for a permanent replacement.
Nexen expects to get about 70 percent of its production from offshore reserves including the North Sea, West Africa and the Gulf of Mexico this year, according to its website. The company also has a 7.2 percent stake in Syncrude Canada Ltd. and a joint venture with Cnooc Ltd. to produce bitumen in Alberta.
The company boosted output from its Long Lake oil-sands project in the second quarter. It began producing at Usan in the first quarter. The Usan wells can “do better” than they are now, said Reinhart.
Nexen abandoned drilling operations on the Kakuna exploration well in the Gulf of Mexico in May after failing to encounter enough hydrocarbons to make production profitable. The company spent C$120 million to drill the 30,300-foot (9,235-meter) well, it said May 7.
Nexen increased 1 cent to C$17.44 at the close in Toronto. The stock, which has gained 7.6 percent this year, has 15 buy and nine hold ratings from analysts.