Nexen Profit More Than Doubles; Fischer to Retire

By Jordan Burke

Oct. 29 (Bloomberg) -- Nexen Inc., the Canadian oil and natural-gas producer with some Gulf of Mexico fields still shut from Hurricane Ike, said third-quarter profit more than doubled on higher crude prices. Chief Executive Officer Charlie Fischer will retire, the company also said.

Net income rose to C$886 million ($703.5 million), or C$1.66 per share, up from C$403 million, or 75 cents, a year earlier, the Calgary-based company said today in a statement. Nexen was expected to earn $1.29 per share, the average of four analysts estimates compiled by Bloomberg. Revenue increased 40 percent to C$2.34 billion.

Fischer, who will retire at the end of the year, will be replaced by Marvin Romanow, who has been finance chief since 1998.

``I'm not sure with the change in CEO right now if there are going to be any major changes that can address problems in the past given that it's not an outsider,'' said Philip Skolnick, an analyst at Genuity Capital Markets in Toronto, who has a ``hold'' rating on the shares.

The company benefited from a ``one-time reorganization related tax deduction in the U.K., but my expectations is it's not indicative of the potential going forward,'' he said.

Nexen jumped about 14 percent, or C$2.35, to C$18.60 on the Toronto Stock Exchange. The stock has declined 42 percent this year.

Oil, Gas Production

Oil futures traded in New York soared to a record above $147 a barrel in the third quarter, up 57 percent from the previous year. Natural-gas futures averaged $9 per million British thermal units, up 44 percent.

Oil production before royalties in the quarter fell 4.6 percent to 212,400 barrels a day following damage from Hurricane Ike. The company's oil sold for C$115.56 a barrel, up 52 percent.

Gas output before royalties dropped 3.1 percent to 220 million cubic feet a day. The home-heating fuel sold for C$8.65 per thousand cubic feet, a gain of 49 percent.

Cash flow from operations during the quarter rose 94 percent to C$1.69 billion.

``In this marketplace, cash is king and we have substantial liquidity,'' Fischer said in the statement. ``We are slowing capital expenditures to build cash during this period of global financial uncertainty and to ensure that the projects we undertake continue to generate attractive full-cycle returns.''

Company Not For Sale

The company hasn't been approached by buyers and isn't for sale, Fischer said on the call. Nexen may use cash to buy assets, he said.

``They are building up, like any other company that has the opportunity to generate cash flow, for opportunities and for the uncertainty,'' Skolnick said. ``That could possibly give them an opportunity at the end of the day, but there are other competitors that are large who have some cash build up that may also be in there to take advantage.''

Nexen, which got 79 percent of its net from oil and gas production last year, has said damage from hurricanes Ike and Gustav in September left production ``minimal'' at some of its Gulf of Mexico fields. The company normally produces the equivalent of about 30,000 barrels a day in the Gulf.

Three deepwater fields were also closed after a third-party processing platform toppled. The Vermillion 321/340 venture suffered damage to some platforms and won't restart until next year, the company has said. The fields usually produce the equivalent of 5,600 barrels of oil a day.

Oil Sands

Fischer, 58, had boosted production to capitalize on soaring oil prices. Nexen and partner Opti Canada Inc. are increasing output of bitumen, an extra-heavy oil, from their C$6.1 billion Long Lake oil-sands project in northern Alberta.

Bitumen production at Long Lake is ramping up and upgrader units are starting, the company said. Nexen previously said it planned to start producing premium synthetic crude oil at Long Lake this month, about 30 days behind schedule following a transformer failure in June.

In 2007, oil accounted for about 85 percent of Nexen's daily output before royalties. The company owns oil and gas wells in North America, the U.K., the Middle East and Africa.

To contact the reporter on this story: Jordan Burke in New York at jburke29@bloomberg.net.