Nexen output to rise, spending to fall in '09

Oil and gas producer Nexen Inc., the subject of a recent round of takeover speculation, expects to spend about 15 per cent less on capital projects in 2009 than this year while boosting production about 10 per cent.

In unveiling its budget for 2009, the Calgary company said it is planning $2.56-billion in oil and gas capital investment for next year, down from $3-billion in 2008.

At the same time, it said its production would increase to the equivalent of between 250,000 and 265,000 barrels of oil a day, before royalties, compared with between 220,000 and 235,000, after royalties, this year.

Like many other oil patch players throughout the fall, Nexen warned in October that it expected to cut spending in 2009 because of plunging energy prices and the global economic and financial crisis but said at the time it would not provide specific numbers until releasing its budget.

Oil sands projects have been hit especially hard by the industry cutbacks, including a decision by Nexen to delay or postpone construction on a new upgrader, saying the costs are prohibitive in the current environment.

"Our 2009 capital investment program will allow us to meet our commitments, pursue our strategic opportunities and preserve our liquidity," Marvin Romanow, Nexen's incoming president and chief executive officer, said in a news release.

"We are well positioned to pursue the opportunities in our attractive portfolio without compromising our financial position and we have choices to adjust our capital investment as the economic environment unfolds."

Nexen's shares soared between mid-November and early last week - climbing as high as $26.01 from as little as $14.65- amid takeover speculation.

This was fanned in its late stages by a detailed European news report that French oil and gas giant Total SA was poised to launch a $17.7-billion bid for the Canadian company, although the next day Total was said to have put the plan on the back-burner, having failed to line up financing.

Nexen stock rose 4.1 per cent on the Toronto Stock Exchange yesterday, although it is still down about 32 per cent for the year to date - giving the company a stock market capitalization of $10.8-billion.

Royal Dutch Shell and BP PLC have also been cited as potential acquirers over the years.

As well as reducing capital spending, Nexen has signalled it will take other steps to try to boost its stock price and make itself less vulnerable to takeover, including reducing its marketing division.

NEXEN (NXY)

Close: $21.73, up 85¢