Nexen Petroleum UK Ltd., a subsidiary of Nexen Inc., announced
today it has received approval from the UK Department of Energy and
Climate Change (DECC) to proceed with the Golden Eagle area
development - a GBP 2 billion (C$3.3 billion) investment (GBP 750
million net to Nexen) that is expected to produce an estimated 140
million barrels of oil equivalent (gross) of proved and probable
reserves over an 18-year period.
The Golden Eagle development encompasses both the Golden Eagle
and Peregrine reservoirs located in central North Sea blocks 20/1N,
20/1 and 14/26a, approximately 43 miles from Aberdeen. The
development plan for Golden Eagle incorporates a combined
production, utilities and accommodation platform linked to a
separate wellhead platform. Plans call for 20 development wells (16
platform-based and four subsea) to be drilled. The development will
also include associated in-field and export pipeline
infrastructure.
Detailed design engineering has commenced and fabrication is
scheduled to start in late 2011. Pipeline and subsea installation
is expected to begin in early 2013, to be followed by drilling
later that same year. First oil production is forecast for late
2014 and the development is expected to have an initial gross
production rate of up to 70,000 barrels of oil equivalent per day
(boe/d), about 26,000 boe/d net to Nexen.
"This is a great day for the UK oil and gas industry. Regulatory
approval marks a major milestone in the development of Golden
Eagle, which is one of the largest oil discoveries in the UK North
Sea since our Buzzard discovery," said Phil Oldham, Managing
Director of Nexen Petroleum UK Ltd.
During construction, the Golden Eagle development is expected to
create employment for more than 2,000 workers. Once operational,
the facility is expected to employ more than 400 people and provide
thousands of indirect jobs throughout its 18-year production life.
More than two-thirds of the contracts for products and services for
Golden Eagle are to be sourced in the UK, a total benefit estimated
at more than GBP 1.4 billion.
The project's design, construction and operation will reflect
the results of a comprehensive environmental impact assessment,
which has also been approved by the DECC.
"Continuous improvement in safety and environmental performance
has been built into our project planning. Safe, responsible energy
development is our priority," said Oldham.
Nexen holds significant acreage adjacent to the Golden Eagle
development and continues to explore and appraise the UK North Sea
to identify future opportunities and potential synergies with the
Golden Eagle infrastructure. This includes participating in an
active UK North Sea exploration and appraisal campaign and
investing in other development projects in the region.
Nexen is the second largest oil producer in the UK. In 2010, the
company's UK-based business produced approximately 110,000 boe/d,
primarily from the Buzzard field. The company currently provides
employment for about 1,200 full-time and contract staff at its
offices in Uxbridge and Aberdeen and at its offshore
facilities.
Nexen Petroleum UK Ltd. is the operator of Golden Eagle and
holds a 36.54% working interest in the field. The remaining
interest is held by Maersk Oil North Sea UK Ltd. (31.56%), Suncor
Energy UK Ltd. (26.69%) and Edinburgh Oil and Gas Ltd. (5.21%).
Nexen Petroleum UK Ltd. is a subsidiary of Nexen Inc., a global
energy company listed on the Toronto and New York stock exchanges
under the symbol NXY. Nexen is focused on three growth strategies:
oil sands and shale gas in Western Canada and conventional
exploration and development primarily in the UK North Sea, offshore
West Africa and deepwater Gulf of Mexico.
Forward-Looking Statements
Certain statements in this release constitute "forward-looking
statements" (within the meaning of the United States Private
Securities Litigation Reform Act of 1995, as amended) or
"forward-looking information" (within the meaning of applicable
Canadian securities legislation). Such statements or information
(together "forward-looking statements") are generally identifiable
by the forward-looking terminology used such as "anticipate",
"believe", "intend", "plan", "expect", "estimate", "budget",
"outlook", "forecast" or other similar words and include statements
relating to or associated with individual wells, regions or
projects. Any statements as to possible future crude oil, natural
gas or chemicals prices; future production levels; future royalties
and tax levels; future capital expenditures, their timing and their
allocation to exploration and development activities; future
earnings; future asset acquisitions or dispositions; future sources
of funding for our capital program; future debt levels;
availability of committed credit facilities; possible commerciality
of our projects; development plans or capacity expansions; the
expectation that we have the ability to substantially grow
production at our oil sands facilities through controlled
expansions; the expectation of achieving the production design
rates from our oil sands facilities; the expectation that our oil
sands production facilities continue to develop better and more
sustainable practices; the expectation of cheaper and more
technologically advanced operations; the expected design size of
our operations; the expected timing and associated production
impact of facilities turnarounds and maintenance; the expectation
that we can continue to operate our offshore exploration,
development and production facilities safely and profitably; future
ability to execute dispositions of assets or businesses; future
sources of liquidity, cash flows and their uses; future drilling of
new wells; ultimate recoverability of current and long-term assets;
ultimate recoverability of reserves or resources; expected finding
and development costs;
expected operating costs, future cost recovery oil revenues from
our Yemen operations; the expectation of negotiating of an
extension to certain of our production sharing agreements; the
expectation of our ability to comply with the new safety and
environmental rules enacted in the US at a minimal incremental
cost, and of receiving necessary drilling permits for our US
offshore operations; future demand for chemicals products;
estimates on a per share basis; future foreign currency exchange
rates, future expenditures and future allowances relating to
environmental matters and our ability to comply therewith; dates by
which certain areas will be developed, come on stream or reach
expected operating capacity; and changes in any of the foregoing
are forward-looking statements. Statements relating to "reserves"
or "resources" are forward-looking statements, as they involve the
implied assessment, based on estimates and assumptions that the
reserves and resources described exist in the quantities predicted
or estimated, and can be profitably produced in the future.
All of the forward-looking statements in this release are
qualified by the assumptions that are stated or inherent in such
forward-looking statements. Although we believe that these
assumptions are reasonable, this list is not exhaustive of the
factors that may affect any of the forward-looking statements and
the reader should not place an undue reliance on these assumptions
and such forward-looking statements. The key assumptions that have
been made in connection with the forward-looking statements include
the following: that we will conduct our operations and achieve
results of operations as anticipated; that our development plans
will achieve the expected results; the general continuance of
current or, where applicable, assumed industry conditions; the
continuation of assumed tax, royalty and regulatory regimes; the
accuracy of the estimates of our reserve volumes; commodity price
and cost assumptions; the continued availability of adequate cash
flow and debt and/or equity financing to fund our capital and
operating requirements as needed; and the extent of our
liabilities. We believe the material factors, expectations and
assumptions reflected in the forward-looking statements are
reasonable, but no assurance can be given that these factors,
expectations and assumptions will prove to be correct.
The forward-looking statements are subject to known and unknown
risks and uncertainties and other factors which may cause actual
results, levels of activity and achievements to differ materially
from those expressed or implied by such statements. Such factors
include, among others: market prices for oil and gas; our ability
to explore, develop, produce, upgrade and transport crude oil and
natural gas to markets; ultimate effectiveness of design or design
modifications to facilities; the results of exploration and
development drilling and related activities; the cumulative impact
of oil sands development on the environment; the impact of
technology on operations and processes and how new complex
technology may not perform as expected; the availability of
pipeline and global refining capacity; risks inherent to the
operations of any large, complex refinery units, especially the
integration between production operations and an upgrader facility;
availability of third-party bitumen for use in our oil sands
production facilities; labour and material shortages; risks related
to accidents, blowouts and spills in connection with our offshore
exploration, development and production activities, particularly
our deepwater activities; direct and indirect risks related to the
imposition of moratoriums, suspensions or cancellations of our
offshore exploration, development and production operations,
particularly our deepwater activities; the impact of severe weather
on our offshore exploration, development and production activities,
particularly our deepwater activities; the effectiveness and
reliability of our technology in harsh and unpredictable
environments; risks related to the actions and financial
circumstances of our agents, counterparties, contractors, and joint
venture parties; volatility in energy trading markets; foreign
currency exchange rates; economic conditions in the countries and
regions in which we carry on business; governmental actions
including changes to taxes or royalties, changes in environmental
and other laws and regulations including without limitation, those
related to our offshore exploration, development and production
activities; renegotiations of contracts; results of litigation,
arbitration or regulatory proceedings; political uncertainty,
including actions by terrorists, insurgent or other groups, or
other armed conflict, including conflict between states; and other
factors, many of which are beyond our control.
The impact of any one risk, uncertainty or factor on a
particular forward-looking statement is not determinable with
certainty as these factors are interdependent, and management's
future course of action would depend on our assessment of all
information at that time. Although we believe that the expectations
conveyed by the forward-looking statements are reasonable based on
information available to us on the date such forward-looking
statements were made, no assurances can be given as to future
results, levels of activity and achievements. Undue reliance should
not be placed on the forward-looking statements contained herein,
which are made as of the date hereof and, except as required by
law, Nexen undertakes no obligation to update publicly or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise. The forward-looking
statements contained herein are expressly qualified by this
cautionary statement. Readers should also refer to the Risk Factors
contained in our 2010 Annual Information form, and to the
Quantitative Disclosures about Market Risk and our Forward Looking
Statements contained in our 2010 Management Discussion and
Analysis.
Cautionary Note to US Investors
In this disclosure, we may refer to "recoverable reserves",
"recoverable resources", "recoverable contingent resources" and
"prospective resources" which are inherently more uncertain than
proved reserves or probable reserves. These terms are not used in
our filings with the SEC. Our reserves and related performance
measures represent our working interest before royalties, unless
otherwise indicated. Please refer to our Annual Information Form
available under our profile on SEDAR at www.sedar.com for further
reserves disclosure.
Cautionary Note to Canadian Investors
Nexen has received an exemption from the securities regulatory
authorities in the various provinces of Canada from certain
requirements of National Instrument 51-101 Standards of Disclosure
for Oil and Gas Activities ("NI 51-101") that permits us to
disclose reserves estimates and related disclosures that have been
prepared in accordance with SEC requirements.
As a result of this exemption, Nexen's disclosures may differ
from other Canadian companies and investors should note the
following fundamental differences between reserves estimates and
related disclosures prepared in accordance with SEC requirements
and those prepared in accordance with NI 51-101:
-- SEC reserves estimates are based upon different reserves definitions and
are prepared in accordance with generally recognized industry practices
in the US whereas NI 51-101 reserves are based on definitions and
standards promulgated by the Canadian Oil and Gas Evaluation Handbook
("COGE Handbook") and generally recognized industry practices in Canada;
-- SEC reserves definitions differ from NI 51-101 in areas such as the use
of reliable technology, areal extent around a drilled location,
quantities below the lowest known oil and quantities across an undrilled
fault block;
-- the SEC mandates disclosure of proved reserves and the Standardized
Measure of Discounted Future Net Cash Flows and Changes Therein
calculated using the year's monthly average prices and costs held
constant whereas NI 51-101 requires disclosure of reserves and related
future net revenues using forecast prices and costs;
-- the SEC mandates disclosure of reserves by geographic area whereas NI
51-101 requires disclosure of reserves by additional categories and
product types;
-- the SEC does not require the disclosure of future net revenue of proved
and proved plus probable reserves using forecast pricing at various
discount rates;
-- the SEC requires future development costs to be estimated using existing
conditions held constant, whereas NI 51-101 requires estimation using
forecast conditions;
-- the SEC does not require the validation of reserves estimates by
independent qualified reserves evaluators or auditors, whereas, without
an exemption noted below, NI 51-101 requires issuers to engage such
evaluators or auditors to evaluate, audit or review reserves and related
future net revenue attributable to those reserves; and
-- the SEC does not allow proved and probable reserves to be aggregated
whereas NI 51-101 requires issuers to make such aggregation.
The foregoing is a general description of the principal
differences only. The differences between SEC requirements and NI
51-101 may be material for certain properties. Please also
note:
-- we use oil equivalents (boe) to express quantities of natural gas and
crude oil in a common unit. A conversion ratio of 6 mcf of natural gas
to 1 barrel of oil is used. Boe may be misleading, particularly if used
in isolation. The conversion ratio is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead; and
-- because reserves data are based on judgments regarding future events
actual results will vary and the variations may be material. Variations
as a result of future events are expected to be consistent with the fact
that reserves are categorized according to the probability of their
recovery.
Nexen has also received an exemption from NI 51-101 that permits
us to forego the requirement to have our reserves and related
future net revenue attributable to our reserves evaluated, audited
or reviewed by an independent qualified reserves evaluator or
auditor. Accordingly, our future net revenue and reserves estimates
are based on internal evaluations. Due to the extent and expertise
of our internal reserves evaluation resources, our staff's
familiarity with our properties and the controls applied to the
evaluation process, we believe the reliability of our internally
generated reserves estimates is not materially less than would be
generated by an independent reserves evaluator.
Resources
The resource estimates contained in this news release were
announced on September 27, 2010 and were prepared by qualified
reserves evaluators. The estimated contingent and prospective
resources in this news release reflects all of our low, high and
best case of recoverable resources. A "best estimate" is the best
estimate of the quantity of resources that will actually be
recovered. It is equally likely that the actual quantities
recovered will be greater or less than the best estimate. Those
resources that fall within the best estimate have a 50% confidence
level that the actual quantities recovered will equal or exceed the
estimate. The 'low estimate' and 'high estimate' are considered to
be conservative and optimistic estimates of resources with 90% and
10% confidence respectively. Nexen's estimates of contingent and
prospective resources are based on definitions set out in the
Canadian Oil and Gas Evaluation Handbook. Contingent resources are
quantities of petroleum estimated, as of a given date, to be
potentially recoverable from known accumulations using established
technology or technology under development, but which are not
currently considered to be commercially recoverable due to one or
more contingencies. Prospective resources are quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from undiscovered accumulations by application of
future development projects.
Contingencies on resources may include, but are not limited to,
factors such as economic, legal, environmental, political and
regulatory matters or a lack of markets. Specific oil sands
contingencies precluding these contingent resources being
classified as reserves include but are not limited to: project
sanction, the cost and effectiveness of steam-assisted gravity
drainage application, stakeholder and regulatory approvals, access
to required services and infrastructure, oil prices and a
demonstration of economic viability. There is no certainty that it
will be commercially viable to produce any portion of these
contingent oil sands resources.
Specific shale gas contingencies precluding these contingent
resources being classified as reserves include but are not limited
to: future drilling program and testing results, project sanction,
the cost and effectiveness of fracing optimization, stakeholder and
regulatory approvals, access to required services and field
development infrastructure, gas prices and a demonstration of
economic viability. There is no certainty that it will be
commercially viable to produce any portion of these contingent
shale gas resources. In the case of shale gas prospective resources
there is no certainty that any portion of the resources will be
discovered. If discovered, there is no certainty that it will be
commercially viable to produce any portion of the resources.
Cautionary statement: In the case of discovered resources or a
subcategory of discovered resources other than reserves, there is
no certainty that it will be commercially viable to produce any
portion of the resources. In the case of undiscovered resources or
a subcategory of undiscovered resources, there is no certainty that
any portion of the resources will be discovered. If discovered,
there is no certainty that it will be commercially viable to
produce any portion of the resources.
Contacts: Media Inquiries: Chris Morritt Nexen Petroleum UK Ltd.
01895 555339chris_morritt@nexeninc.com Investor Inquiries: Janet
Craig Vice President, Investor Relations 00 1 403 699 4230
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