CALGARY — Global oil and gas producer Nexen Inc. lowered its 2011 production outlook on Thursday, as maintenance downtime in the North Sea crimps output and the Long Lake oilsands development continues to underperform.
The Calgary-based company (TSX:NXY) now expects annual production before royalties to average 210,000 to 230,000 barrels of oil equivalent output per day for 2011. The low end of its previous estimate was 230,000 barrels.
During the second-quarter, Nexen produced about 204,000 barrels of oil equivalent per day before royalties.
The company’s offshore Buzzard oil field in the U.K. North Sea contributed 49,000 barrels of oil equivalent net to Nexen during the quarter — down from the 85,000 to 95,000 barrels per day Nexen normally churns out from the asset.
Buzzard was taken down earlier this year to repair a cooling system, while issues on an export pipeline added further constraints. Production is expected to be up to full rates in August.
“The third quarter will not be back to normal production levels as we are completing the Buzzard work,” said Nexen chief financial officer Kevin Reinhart on a conference call with analyst.
He added the nearby Forties pipeline will be taken down for a week so its operator can remove a Second World War explosive found in the area.
“The fourth quarter should be strong, and production will depend on how quickly the new platform at Buzzard allows us to produce from our existing well set. This will allow us to nearly double our available well capacity,” Reinhart said.
For the rest of the year, there will also be maintenance downtime at the Syncrude oilsands project, in which Nexen holds a seven per cent stake, other platforms in the North Sea, and its Long Lake oilsands project.
Opti Canada inc. (TSX:OPC), which owns 35 per cent of Long Lake compared with Nexen’s 65 per cent stake, announced separately Thursday that it doesn’t expect the oilsands project to achieve a 2011 production target of between 38,000 and 45,000 barrels per day.
Nexen, which is far larger and more diversified than Opti, wasn’t as bleak in its Long Lake outlook but didn’t contradict Opti’s report. Both reported the operation produced 27,900 barrels of bitumen per day on average during the quarter. Its upgrader processed 45,000 barrels per day including 16,100 barrels per day from third-party sources — achieving 65 per cent of the upgrader’s capacity.
The project has a design capacity of 72,000 barrels of bitumen per day, but hasn’t been able to reach that level due to numerous technical problems.
Nexen said Long Lake had reached 30,000 barrels per day of proprietary bitumen output by the end of June. It added that bitumen production is expected to be in the “mid-30,000” barrels per day range by the end of 2011.
Also Thursday, Nexen Inc. reported profits of $252 million, or 45 cents per diluted share, narrowly besting the average analyst estimate of 44 cents per share, according to Thomson Reuters.
The results compare to profits of $245 million a year ago, or 42 cents per diluted share.
Total revenues were $1.6 billion, below analyst predictions of nearly $1.7 billion, but above revenues of $1.4 billion in the same period last year.
On Wednesday afternoon, Opti filed for court protection from creditors, who will take on ownership of the company and provide $375 million in new funds.
“We welcome this recapitalization, the new injection of equity, the restoration of balance sheet strength to them,” said Nexen chief executive officer Marvin Romanow.
“We spent some time with the bondholders during this process and we believe they understand the project and what it takes to advance our strategy there.”
Nexen has traced the hiccups at Long Lake back to the project’s inception around a decade ago, and is currently working on fixing those mistakes.
It initially planned to develop land closest to the upgrader first in order to save money on pipelines and other infrastructure to bring the bitumen there. Those areas, however, are not in the highest quality part of the reservoir.
“At Long Lake we’re making good progress. We’re defining our plan to fill the upgrader,” Romanow said.
Nexen is a major landholder in northeastern B.C.’s natural gas-rich Horn River Basin. It has been actively seeking a partner to help develop those assets, potentially exporting the gas to Asia via the West Coast.
In addition, Nexen has offshore operations in the North Sea, Gulf of Mexico and West Africa and oil production in Yemen.
Nexen shares gained 23 cents to $21.41 in afternoon trading on the Toronto Stock Exchange.