Nexen Inc. (NXY), a major Canadian oil and gas company, has provided its Long Lake projects update. Following the turnaround, which was completed late last year, steam production ramped up at an all time high of more than 105,000 barrels per day (bpd). As a result, the company is injecting more steam into more wells than ever before. The increased steam injection has resulted in a bitumen production rate of around 18,000 bpd.
The company said that it is now in a position to provide consistent steam to the reservoir, resulting in an improved individual well performance. Additionally, Nexen has converted about 40% of its wells from gas lift to electric submersible pumping and expects to have about 80% converted by year end. This offers more flexibility to optimize steam injection and grow bitumen production.
Apart from the Long Lake project in Canada, the company’s future production growth prospect moves forward with the development of several other identified projects including Usan in offshore Nigeria, Golden Eagle in the UK North Sea and Horn River shale gas in British Columbia. Nexen is now expecting a growth of approximately 4% to 6% in 2010.
Though Nexen shares have been facing some softness in recent days, the company’s above peer-group crude oil leverage, improving balance sheet and stronger operational reliability at Long Lake will provide long-term value for shareholders, in our view. We are currently Neutral on Nexen shares.
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