Nexen Says CBM Plans Back to Being Economic After Tweaks to Alta Royalty Regime
resourceinvestor.com
By James Stevenson
29 Apr 2008 at 07:32 PM GMT-04:00
CALGARY -- Nexen Inc. [TSX:NXY] says it's now at peace with the Alberta government's new royalty regime and is looking at jump-starting plans to develop coalbed methane holdings in central Alberta.
Chief executive Charlie Fischer said the province's recent adjustments to encourage unconventional gas drilling has salvaged the project after ''destroying the economics'' last fall with its controversial decision to boost its take from the oilpatch.
''Our focus, when we talked to the government, was not to tell them how to solve the problem. Our issue was to tell them the problem that they created,'' Fischer said following the meeting.
''And the economics have been restored and so we would clearly look at increasing our investment.''
Fischer said it was too early to provide details on how much spending would rise on the CBM properties and whether that would affect future development timelines.
Nexen was just one of a long list of oil and gas producers last fall who announced major capital spending cutbacks within Alberta, due primarily to the new royalty structure.
Despite spending about C$170 million last year in exploration and development of its CBM lands, Nexen put the brakes to its plans as part of a C$1.2-billion decrease in total spending.
Alberta announced earlier this month that it was tinkering with its royalty program by spending more than C$1 billion over the next half-decade on programs designed to encourage drilling of new deep gas and CBM wells.
Fischer's announcement of potential new spending in Alberta was made easier by the company's first-quarter earnings, released earlier Tuesday, that showed a 421% jump over last year to C$630 million thanks to both strong production and high commodity prices.
The Calgary-based firm's earnings amounted to C$1.19 per share and compared to a profit of C$121 million, or 23 cents per share, in 2007.
Nexen also announced plans to double its quarterly dividend to five cents per share.
Fischer told shareholders Tuesday at its annual meeting in Calgary that the company will continue focusing on developing such longer-term ''legacy assets'' around the world.
The company's quarterly production was boosted by strong output from its Buzzard field in the North Sea,which more than offset production outages incurred by its seven per cent stake of the massive Syncrude oilsands project in northern Alberta.
Fischer said that production at its North Sea operations was coming back online after a being curtailed for two days by a striking workers at the Grangemouth refinery in Scotland, which provides essential utility services to the operation of the Forties pipeline at BP's Kinneil plant.
Nexen also said everything remained on schedule for the start-up of its the first phase of its new Long Lake oilsands upgrader later this year.
The company also is pumped about its land position in Horn River basin shale gas play in northeastern B.C., with preliminary tests suggesting about three to six trillion cubic feet of recoverable gas.
Fischer said it could be several years before his company could bring its Horn River assets into production, but said there was no danger that other companies in the area could drain neighbouring reserves because the shale was too tight to allow movement.
''So I think that there'll be a lot of collaboration, co-operation as we go forward from this sector - and that's positive.''
Fischer also rejected any notion that he's under any pressure from shareholders to sell off any pieces of his company's varied holdings, whether it be the minority stake in Syncrude or its off-shore position in the waters of the Gulf of Mexico or off the coast of Nigeria.
''The hardest thing that all of us have to do today is access resources.''
On the TSX, Nexen shares dropped C$1.25 to C$35 in a down day for the entire sector. |
