Nexen Oil Field Comes Online

Nexen Inc. (NXY - Analyst Report) has commenced its first oil production from the Ettrick field in Blocks 20/2a and 20/3a in the U.K. North Sea. In July 2006, U.K. authorities approved the Ettrick field development. Subsequently, six wells were drilled in this field.

The field is being produced via Bluewater floating production, storage and offloading vessel (FPSO) Aoka Mizu, which is designed to handle 30,000 barrels per day (Bbl/d) oil and 35 million cubic feet per day of gas. The field is expected to produce at rates of up to 20,000 Bbl/d over the next few months.

Nexen operates Ettrick field (with a 79.73% interest) with Dana Petroleum (12%) and Atlantic Petroleum (8.27%).

In 2008, Nexen announced a discovery at Blackbird, in the vicinity of the Ettrick project. The FPSO is equipped to provide services for both the fields.

The company also has a number of satellite discoveries – including Bugle, Selkirk and Kildare – in its North Sea position. These discoveries have a sizable potential and Nexen is assessing development options for them.

Nexen has several other identified projects such as Longhorn and Knotty Head (both in the Gulf of Mexico), Usan (in offshore Nigeria) and a number of discoveries in the U.K. North Sea. These projects along with the recent production from Ettrick will generate future production growth.

However, Nexen’s relatively debt-heavy balance sheet and substantial capital needs in a capital-constrained and tentative commodity-price environment remain major headwinds, in our view.

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