Nexen Inc. Delivers Record Fourth Quarter and Annual Financial Results in 2005.CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. -- 2005 Highlights: - Record annual earnings increased 45% over 2004 to $4.43/share; fourth quarter $1.15/share - Record annual cash flow increased 24% over 2004 to $9.23/share; fourth quarter $2.96/share - 2005 production targets achieved, even after dispositions and hurricane hurricane, tropical cyclone in which winds attain speeds greater than 74 mi (119 km) per hr. Wind speeds reach over 190 mi (289 km) per hr in some hurricanes. disruptions - Proved reserve additions of 82 million boe replace 93% of production - Significant exploration success in the deep-water deep-wa·ter adj. Of, relating to, or carried on in waters of a relatively great depth: a deep-water port; deep-water drilling for oil. Adj. 1. Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east with a potential world-class world-class adj. 1. Ranking among the foremost in the world; of an international standard of excellence; of the highest order: a world-class figure skater. 2. discovery at Knotty Head Knotty Head is the deepest oil well drilled in the Gulf of Mexico. It is drilled in 3,500 feet of water and 30,589 feet below the sea floor. It is owned jointly by Chevron, Anadarko Petroleum Corporation, BHP Billiton and Nexen Inc. with each having 25% of the share. - Raised approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.4 billion from the disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. conventional assets and the partial disposition of chemicals business - Major projects continue on schedule-production before royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. expected to grow to between 300,000 and 350,000 boe/d in 2007
Three Months Ended Twelve Months Ended
December 31 December 31
------------------- --------------------
(Cdn$ millions) 2005 2004 2005 2004
---------------------------------------------------------------------
Production (mboe/d)(1)
Before Royalties 225 256 242 250
After Royalties 165 183 173 174
Net Sales 1,073 892 4,086 3,251
Cash Flow from Operations(2) 772 592 2,403 1,942
Per Common Share ($/share)(2) 2.96 2.29 9.23 7.55
Net Income 300 246 1,152 793
Per Common Share ($/share) 1.15 0.95 4.43 3.08
Capital Expenditures 731 668 2,691 1,754
---------------------------------------------------------------------
(1) Production and reserves in this release also include our share of
Syncrude oil sands. US investors should read the Cautionary Note
to US Investors at the end of this release.
(2) For reconciliation of this non-GAAP measure, see Cash Flow from
Operations on pg. 11.
Strong commodity prices, together with attractive cash operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: and outstanding marketing contributions boosted our financial results to record levels for the fourth quarter and the year. Higher crude oil and natural gas prices combined with strong operating performance resulted in a record year for cash flow and net income in 2005. The benchmark A performance test of hardware and/or software. There are various programs that very accurately test the raw power of a single machine, the interaction in a single client/server system (one server/multiple clients) and the transactions per second in a transaction processing system. WTI WTI West Texas Intermediate WTI Western Transportation Institute (Montana State University) WTI World Tribunal on Iraq WTI With The Idea (used in chess to point to the idea behind a specific move) crude oil price increased 37% in 2005. Wider crude oil differentials world wide and a stronger Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents limited our year over year increase in product realizations to 28%. Fourth quarter cash flow was a record $772 million, while net income was $300 million. Strong commodity prices and pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta income of $182 million from our marketing division led to this exceptional performance. In the third quarter, we recorded a pre-tax loss of $162 million in marketing, largely because we could not recognize $195 million of income related to certain physical assets. In the fourth quarter, we recognized approximately $150 million of this income, and expect to recognize the balance in 2006. Stock-based compensation expense in the fourth quarter was $40 million, reducing cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses by $19 million. During the year, our stock price increased 128%, adding over $8 billion in shareholder value. As a result, $490 million ($322 million after tax) of stock-based compensation was recognized. The $322 million expense represents approximately 4% of the increase in shareholder value. Approximately 16% of this expense was in cash, while the balance represents the change in value of our accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. stock-based compensation. During the fourth quarter, we recorded exploration expense of $86 million which included seismic expense and costs for the Polecat polecat, carnivorous mammal of the weasel family. The name refers especially to the common Old World polecat, Mustela putorius, found in wooded areas of N Eurasia and N Africa. , Black Horse and Bennachie Bennachie is the most northeasterly mountain in Aberdeenshire. It has several summits, the highest of which, Oxen Craig, has a height of 528 m (1733 feet). wells in the North Sea, the Castleton well in the Gulf of Mexico, and three wells in Yemen Yemen (yĕm`ən), officially Republic of Yemen, republic (2005 est. pop. 20,727,000), 207,300 sq mi (535,800 sq km), SW Asia, at the southern edge of the Arabian peninsula. . "I am very pleased with our performance in 2005," commented Charlie Fischer Fi·scher , Hans 1881-1945. German chemist known for his research on the components of blood. He won a 1930 Nobel Prize for his work on the synthesis of hemin. , Nexen's President and Chief Executive Officer. "We met our production and cash flow targets, progressed our major projects at Buzzard buzzard, common name for hawks of the genus Buteo and the genus Pernis, or honey buzzard, of the Old World family Accipitridae. Honey buzzards feed on insects, wasp and bumblebee larvae, and small reptiles. and Long Lake, disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of assets at attractive prices, and realized exploration success in the Gulf of Mexico. Our success last year positions us well for an exciting 2006 as we complete Syncrude's Stage 3 expansion and our North Sea Buzzard development, make strong progress at Long Lake and evaluate our recent discoveries."
Oil and Gas Production
Production before Production after
Royalties Royalties
Fourth Third Fourth Third
Crude Oil, NGLs and Quarter Quarter Quarter Quarter
Natural Gas (mboe/d) 2005 2005 2005 2005
----------------------------------------------- --------------------
Yemen 108 114 60 61
North Sea 22 12 22 12
Canada 39 45(1) 31 36(1)
United States 35 39 31 33
Other Countries 5 5 5 5
Syncrude 16 17 16 17
-------------------------- --------------------
Total 225 232 165 164
-------------------------- --------------------
(1) Third quarter volumes include approximately 6,500 boe/d before
royalties and 4,800 boe/d after royalties of production related
to asset dispositions completed in the third quarter of 2005.
Fourth-quarter production before royalties was lower than in the third quarter as a result of declining production from our Masila fields in Yemen, asset sales in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and lost production from hurricanes in the Gulf of Mexico. In the Gulf, hurricane disruptions are expected to cost us approximately $200 million in shut-in shut-in n. A person confined indoors by illness or disability. adj. 1. Confined to a home or hospital, as by illness. 2. Disposed to avoid social contact; excessively withdrawn or introverted. production, insurance-related costs, damages and drilling delays. The majority of these costs will be recovered through insurance claims and future production of shut-in volumes. The storms and damage to third-party infrastructure reduced our fourth-quarter volumes by approximately 11,000 boe/d with an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. loss of 6,000 boe/d in 2005. This was offset by stronger North Sea production following a major turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. earlier in the year at the Scott platform, and start-up Start-up The earliest stage of a new business venture. of the Farragon field. Production after royalties increased between the third and fourth quarter as we added royalty-free Royalty-free describes material (typically graphics such as stock photography and icons, but also sound such as music loop samples) that may be used for profit, without paying royalties. production from the North Sea.
Production before Production after
Royalties Royalties
Crude Oil, NGLs and Annual Annual Annual Annual
Natural Gas (mboe/d) 2005 2004 2005 2004
----------------------------------------------- --------------------
Yemen 113 107 61 54
North Sea 16 2 16 2
Canada 50(1) 61(1) 40(1) 47(1)
United States 42 55 36 47
Other Countries 5 8 5 7
Syncrude 16 17 15 17
-------------------------- --------------------
Total 242 250 173 174
-------------------------- --------------------
(1) Annual volumes include approximately 10,700 boe/d before
royalties and 8,100 boe/d after royalties of production related
to asset dispositions for 2005 and 19,500 boe/d before royalties
and 14,500 boe/d after royalties for 2004.
Our annual production averaged 242,000 boe/d (173,000 boe/d after royalties). Production from Block 51 in Yemen and the North Sea largely offset declines at Masila, in the Gulf of Mexico, and in Canada where we sold assets earlier in the year. "Our production was above the mid-point of our initial guidance, even after asset sales in Canada and hurricane induced induced /in·duced/ (in-dldbomacst´) 1. produced artificially. 2. produced by induction. induced, adj artificially caused to occur. induced induction. production interruptions in the Gulf of Mexico," commented Fischer. "With most of our Gulf of Mexico production restored and strong performance from Syncrude This article is about Syncrude Canada Ltd.. For synthetic crude oil, see synthetic crude. Syncrude Canada Ltd. is the world's largest producer of synthetic crude oil from oil sands and the largest single source producer in Canada. and the North Sea, we averaged 238,000 boe/d in December December: see month. . This has enabled us to get off to a great start in 2006 and keeps us on track to meet our production target of between 220,000 and 240,000 boe/d before royalties for the year. Incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. volumes from Syncrude by mid-year and first production from Buzzard toward the end of the year will contribute strongly to our performance this year." Dispositions Generate Attractive Returns In the third quarter, we sold Canadian conventional oil and gas properties, which were producing approximately 18,300 boe/d, at attractive prices of approximately $51,000 per daily barrel barrel: see English units of measurement. and $18.50 per boe of proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. . Proceeds of $946 million (before closing adjustments) were realized from these sales. We also converted our chemicals business to Canexus Income Fund and raised $500 million from the sale of approximately 39% of this income trust to the public. Capital Strategy - Investing in Long-Term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. , High-Value Production Growth "We are building sustainable businesses A business is sustainable if it has adapted its practices for the use of renewable resources and holds itself accountable for the environmental and human rights impacts of its activities. in the deep-water Gulf of Mexico, Athabasca oil sands The Athabasca Oil Sands are a large deposit of oil-rich bitumen located in northern Alberta, Canada. These oil sands consist of a mixture of crude bitumen (a semi-solid form of crude oil), silica sand, clay minerals, and water. , North Sea, Middle East and offshore West Africa West Africa A region of western Africa between the Sahara Desert and the Gulf of Guinea. It was largely controlled by colonial powers until the 20th century. West African adj. & n. ," said Fischer. "While our projects tend to have longer cycle-times and require significant upfront capital investment, they provide significant opportunity for long-term growth and generate attractive full-cycle returns." At the end of 2005, we had over $4 billion of capital invested in multi-year development projects not yet producing oil or cash flow. This amount is expected to peak in late-2006 at approximately $5 billion, as we bring Buzzard on stream and approach completion of the Long Lake project. To date, we have recognized 231 mmboe of proved reserves for our long cycle-time projects at Buzzard, the Syncrude Stage 3 expansion and coal bed methane methane (mĕth`ān), CH4, colorless, odorless, gaseous saturated hydrocarbon; the simplest alkane. It is less dense than air, melts at −184°C;, and boils at −161.4°C;. (CBM CBM Commodore Business Machines CBM Coalbed Methane CBM Christoffel Blindenmission CBM Condition Based Maintenance CBM Confidence-Building Measures CBM Curriculum Based Measurement (education) CBM Cubic Meter ). No proved reserves have been recognized for our insitu oilsands project at Long Lake where we have invested over $1.2 billion to date. We have recognized 645 mmboe of probable PROBABLE. That which has the appearance of truth; that which appears to be founded in reason. reserves for Long Lake, Buzzard, Syncrude Stage 3, CBM and the Usan discovery offshore West Africa. We expect additional reserves to be recognized from these projects in the future, as we invest additional capital and establish strong production performance from the projects. The incremental production and cash flow from this investment will be impressive. Overall, we expect our 2007 production, after royalties, to grow by more than 50% compared to current volumes. We have assumed exploration success contributes very little volume to these estimates, given the longer cycle-times associated with our exploration projects. Most of our new production is subject to little or no royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. payments as we recover our investment, and generates significantly higher cash margins than our current production. As a result, we expect our production after royalties to increase from 173,000 boe/d in 2005 to between 260,000 and 280,000 boe/d in 2007. All of our major projects return their cost of capital at oil prices in the US$20s per barrel. 2005 Reserves and Capital Results In 2005, we invested $2.6 billion in oil and gas activities adding 82 mmboe of proved reserves, and replacing 93% of our production. During 2005, we also disposed of 49 mmboe of proved reserves.
2005 Oil and Gas Investment(1) ($mm)
---------------------------------------------------------------------
Core Asset Major Early Stage
Development Development Development
---------------------------------------------------------------------
Canada 130 33 10
United States 144 4 -
International 173 630 13
Synthetic - 743 31
---------------------------------------------
Total Oil and Gas 447 1,410 54
Mining (Syncrude) 57 140 -
---------------------------------------------
Total Including Mining 504 1,550 54
---------------------------------------------
% of Total 19% 59% 2%
---------------------------------------------------------------------
2005 Oil and Gas Investment(1) ($mm)
---------------------------------------------------------------------
Proved Property
Exploration Acquisitions Total(2)
---------------------------------------------------------------------
Canada 81 17 271
United States 235 3 386
International 177 - 993
Synthetic 16 - 790
---------------------------------------------
Total Oil and Gas 509 20 2,440
Mining (Syncrude) - - 197
---------------------------------------------
Total Including Mining 509 20 2,637
---------------------------------------------
% of Total 19% 1% 100%
---------------------------------------------------------------------
(1) Geological and geophysical expenditures of $53 million are
included.
(2) Non-oil and gas investments totaled $54 million. Total 2005
capital investment was $2,691 million.
--------------------------------------------------------------------
2005 Reserve Continuity
--------------------------------------------------------------------
Oil and Gas Activities
--------------------------------------------------------------------
International US
---------------------------------------------------------------------
Other
Yemen North Sea Intl
mmboe Oil Oil Gas Oil Oil Gas
---------------------------------------------------------------------
PROVED RESERVES (1)
Dec. 31, 2004 133 128 2 12 60 43
Extensions and
Discoveries 11 5 1 1 1 12
Acquisitions - - - - - -
Dispositions - - - - - -
Revisions 3 15 - - (6) (4)
Production (42)(4) (5) (1) (2) (8) (8)
----------------------------------------------------
Dec. 31, 2005 105 143 2 11 47 43
----------------------------------------------------
PROBABLE RESERVES (1),(2)
Dec. 31, 2004 49 117 6 89 6 8
Extensions,
Discoveries
& Conversions - 33 1 15 4 2
Acquisitions - - - - - -
Dispositions - - - - - -
Revisions (23) 21 1 (20) (1) -
----------------------------------------------------
Dec. 31, 2005 26 171 8 84 9 10
----------------------------------------------------
PROVED + PROBABLE
RESERVES (1),(2)
Dec. 31, 2004 182 245 8 101 66 51
Extensions,
Discoveries
& Conversions 11 38 2 16 5 14
Acquisitions - - - - - -
Dispositions - - - - - -
Revisions (20) 36 1 (20) (7) (4)
Production (42)(4) (5) (1) (2) (8) (8)
----------------------------------------------------
Dec. 31, 2005 131 314 10 95 56 53
----------------------------------------------------
--------------------------------------------------------------------
2005 Reserve Continuity
---------------------------------------------------------------------
Oil and Gas Activities Mining Total
-------------------------------------------- Total --------- Oil,
Canada Oil Gas
-------------------------------------------- and Syncrude(3) and
mmboe Oil Gas Bitumen Gas Mining
---------------------------------------------------------------------
PROVED RESERVES (1)
Dec. 31, 2004 92 72 - 542 301 843
Extensions and
Discoveries 4 8 - 43 23 66
Acquisitions 2 - - 2 - 2
Dispositions (32) (17) - (49) - (49)
Revisions 4 2 - 14 - 14
Production (11) (7) - (84) (6) (90)
----------------------------------------------------
Dec. 31, 2005 59 58 - 468 318 786
----------------------------------------------------
PROBABLE RESERVES (1),(2)
Dec. 31, 2004 39 24 400 738 69 807
Extensions,
Discoveries &
Conversions (1) 35 - 89 (18) 71
Acquisitions - - - - - -
Dispositions (10) (3) - (13) - (13)
Revisions (5) (3) - (30) - (30)
----------------------------------------------------
Dec. 31, 2005 23 53 400 784 51 835
----------------------------------------------------
PROVED + PROBABLE
RESERVES (1),(2)
Dec. 31, 2004 131 96 400 1,280 370 1,650
Extensions,
Discoveries &
Conversions 3 43 - 132 5 137
Acquisitions 2 - - 2 - 2
Dispositions (42) (20) - (62) - (62)
Revisions (1) (1) - (16) - (16)
Production (11) (7) - (84) (6) (90)
----------------------------------------------------
Dec. 31, 2005 82 111 400 1,252 369 1,621
----------------------------------------------------
(1) We internally evaluate all of our reserves and have at least 80%
of our proved reserves assessed by independent qualified
consultants each year. Our reserves are also reviewed and
approved by our Reserves Committee and our Board of
Directors. Reserves represent our working interest before
royalties at year-end constant pricing using SEC rules.
Gas is converted to equivalent oil at a 6:1 ratio.
(2) Probable reserves are determined according to SPE/WPC
definitions. US investors should read the Cautionary Note to US
Investors at the end of this release.
(3) US investors should read the Cautionary Note to US Investors at
the end of this release.
(4) Production includes volumes used for fuel in Yemen.
Major and Early Stage Development Projects Approximately 60% of our 2005 invested capital was directed towards early stage and major development projects including Buzzard, Long Lake, Syncrude Stage 3, Yemen Block 51 and CBM. These projects added approximately 45 mmboe and are characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by multi-year investments which result in timing differences between reserve additions and capital expenditures. Synthetic Synthetic A financial instrument that is created artificially by simulating another instrument with the combined features of a collection of other assets. Notes: Crude Oil We invested approximately $774 million to develop our insitu oil sands resource in 2005. This included $743 million invested at Long Lake. We have not recognized any proved bitumen bitumen (bĭty  `mən) a generic term referring to flammable, brown or black mixtures of tarlike hydrocarbons, derived naturally or by distillation from petroleum. reserves. Although the
integrated process we are using at Long Lake will produce high-quality
synthetic crude oil, the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Securities and Exchange
Commission (SEC) regulations require us to recognize bitumen reserves
for this project. Over the last few years, a combination of wide heavy
oil differentials and high natural gas and diluent diluent /dil·u·ent/ (dil´oo-int)1. causing dilution. 2. an agent that dilutes or renders less potent or irritant. dil·u·ent adj. Serving to dilute. n. costs have resulted in negligible  This article or section is written like a personal reflection or and may require .Please [ improve this article] by rewriting this article or section in an . cash margins from insitu bitumen production. Our oil sands strategy addresses the issues of wide differentials and high natural gas and diluent costs which erode Erode (ĕrōd`), city (1991 urban agglomeration pop. 361,755), Tamil Nadu state, S India, on the Kaveri River. The city is located in a cotton-growing region, and its industries include cotton ginning and the manufacture of transport equipment. the value of insitu bitumen. Our project integrates field upgrading with bitumen production to produce a high quality premium synthetic crude oil and it virtually eliminates our dependence on natural gas. Canadian reserve standards would allow us to recognize synthetic crude oil reserves Oil reserves refer to portions of oil in place that are claimed to be recoverable under economic constraints. Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally rather than bitumen reserves, as a result of this integrated process. At year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2005, we could have recognized 200 mmboe of synthetic crude under Canadian reserve standards. "Our oil sands business is based on the sale of synthetic crude oil, not bitumen," said Fischer. "Long Lake is a terrific project which will earn its cost of capital at WTI oil prices below US$30 per barrel and will generate outstanding returns at current prices." The base Long Lake project remains on schedule and on budget. Detailed project engineering is substantially complete and approximately 69% of the project's total costs have been committed. Steam injection is expected to commence in late-2006, followed by a ramp-up in bitumen production. The upgrader is scheduled to start operations in the second half of 2007. To enhance reliability, ensuring bitumen feedstock feed·stock n. Raw material required for an industrial process. Noun 1. feedstock - the raw material that is required for some industrial process raw material, staple - material suitable for manufacture or use or finishing supply and building capacity for future growth, we are expanding our steam generating facilities to enable us to operate at a steam oil ratio of up to 3.3 compared to the existing design of 2.5. This expansion is expected to cost up to $250 million ($125 million, net to us). In optimizing the value from the project, we will also construct a facility to concentrate soot soot, black or dull brown deposit of fine powder resulting from incomplete combustion of fuel of high carbon content, e.g., coal, wood, and oil. It consists chiefly of amorphous carbon and tarry substances that cause it to adhere to surfaces. produced by the gasifier and thereby reduce disposal costs. This facility is expected to cost approximately $110 million ($55 million, net to us). These two projects will increase our total capital investment to construct Long Lake by 10% to $1.9 billion. At peak rates of premium synthetic crude, the first phase of Long Lake should provide us with cash flow of between $400 and $500 million per year, assuming oil prices of US$50/bbl WTI. "The major remaining uncertainties for this project relate to our ability to access the right labour when we need it, and to achieve labour performance in line with our projections," said Fischer. "To date, labour availability and productivity have been reasonable and we continue to operate within the levels of our contingency contingency n. an event that might not occur. for the project. Given the advanced state of the project, we believe the risk of major cost overruns Noun 1. cost overrun - excess of cost over budget; "the cost overrun necessitated an additional allocation of funds in the budget" cost - the total spent for goods or services including money and time and labor is significantly reduced." We are planning to increase synthetic crude oil production to 240,000 bbls/d over the next 10 years (120,000 bbls/d, net to us) in phases of 60,000 bbls/d (30,000 bbls/d, net to us) using the same technology as Long Lake. In 2005, we invested $31 million to further evaluate our existing resource base and acquire additional resource. Phase 2 bitumen production is expected to commence in late-2010, with upgrader commissioning in 2011. Buzzard At Buzzard, we invested $439 million and added proved reserves of 17 mmboe. The additions resulted from remapping the reservoir reservoir (rĕz`əvôr, -vwär), storage tank or wholly or partly artificial lake for storing water. Building an embankment or dam to preserve a supply of water for irrigation is an ancient practice; India and Egypt have many old and size using new seismic data. To date, we have recognized 248 mmboe of proved plus probable reserves for the Buzzard field. We expect to convert probable reserves to proved as we drill development wells and obtain production history. We believe there is potential for additional reserves based on improved recovery factors from this high-quality reservoir. Buzzard is progressing on schedule and on budget. Development of the facilities is approximately 88% complete. We are currently drilling the production wells and expect to install the utilities and production decks during the second quarter. First oil is expected in late-2006. At its peak, Buzzard is expected to add approximately 85,000 boe/d of net production and generate between $1.6 and $1.7 billion of annual pre-tax cash flow, assuming US$50/bbl WTI. Syncrude Stage 3 Expansion At Syncrude, we invested $140 million in 2005 for the Stage 3 expansion and added 17 mmboe of proved reserves. All of these additions were converted from probable reserves. The Stage 3 expansion was approximately 98% complete at the end of 2005, with 65% of the new units completed and operating reliably throughout 2005. Commissioning of all remaining Stage 3 units is underway. The expansion is expected to be completed and on stream by mid-year, adding approximately 8,000 bbls/d of production capacity, net to us. Coal Bed Methane In Canada, we are developing the first commercial CBM project in Mannville coals. In 2005, we invested a total of $102 million in exploration and development, of which $33 million was associated with CBM development which added 5 mmboe of proved reserves. Mannville CBM is a new play type in Western Canada
Western Canada, commonly referred to as the West with no direct analogies. Without analogies, our ability to recognize proved CBM reserves is limited. To date we have recognized 35 mmboe of CBM probable reserves. We expect our CBM reserves to grow significantly over the coming years as additional wells are drilled, development work progresses and more production history is obtained. Our CBM production is expected to be modest in 2006, but grow substantially in 2007 and beyond as we dewater de·wa·ter tr.v. de·wa·tered, de·wa·ter·ing, de·wa·ters To remove water from (a waste product or streambed, for example). the reservoirs and expand our developments. We currently have more than 600 net sections of CBM lands containing an estimated 3 tcf of gas-in-place. "We are excited about our Mannville CBM opportunities," said Fischer. "Results from our horizontal drilling a drilling machine having a horizontal drill spindle. See also: Horizontal program have exceeded our expectations and we have initiated an aggressive development program to accelerate production. We are targeting to add approximately 150 million cubic feet of daily production by 2011 from these projects, which generate attractive full-cycle rates of return." Other Projects We commenced production on Block 51 in Yemen in late-2004 through an early production system. In 2005, we invested $161 million on this block to construct permanent production facilities and further develop the fields. Approximately 17 mmbbl of proved undeveloped reserves were converted to proved producing reserves and 4 mmbbl of additional proved reserves were added through drilling and completion of the permanent production facilities. In 2005, we recognized approximately 40 mmboe of probable reserves for the Ettrick Places named Ettrick include:
Investment in Exploration We invested $509 million in exploration in 2005. This resulted in a number of exploration successes, including the potentially significant Knotty Head discovery in the Gulf of Mexico where we have a 25% interest. Approximately $140 million of this capital was invested in land, seismic and other early stage exploration activities. The balance was invested to drill 20 high-impact exploration wells. In addition to Knotty Head, we also had smaller discoveries in the Gulf of Mexico at Big Bend Big Bend A region of southwest Texas on the Mexican border in a triangle formed by a bend in the Rio Grande. The area includes deep river canyons, desert wilderness, mountains rising to 2,386. , Anduin In J. R. R. Tolkien's fictional Middle-earth, Anduin is the Sindarin name for the Great River of Wilderland, the longest river in the Third Age (the original Sindarin name means Long River). The ancestors of the Rohirrim called it Langflood. and Wrigley Wrig·ley , William, Jr. 1861-1932. American manufacturer who founded (1891) William Wrigley, Jr., Company, one of the world's largest chewing gum manufacturers. . In total, we participated in approximately one-third of deep-water discoveries in the Gulf of Mexico in 2005. Offshore West Africa, we drilled two successful appraisal wells in the Usan field on Nigeria's OPL-222. We added 4 mmboe from exploration in 2005 from our discovery at Wrigley. We anticipate significant additional reserve additions as we delineate the other discoveries and sanction sanction, in law and ethics, any inducement to individuals or groups to follow or refrain from following a particular course of conduct. All societies impose sanctions on their members in order to encourage approved behavior. commercial development projects. In the fourth quarter, we announced that Knotty Head, a potential world-class discovery on Green Canyon canyon Very narrow, deep valley cut by a river through resistant rock and having steep, almost vertical sides. Canyons occur most often in arid or semiarid regions. Some canyons (e.g., the Grand Canyon) are spectacular natural features. See also submarine canyon. Block 512, encountered approximately 600 feet of net oil pay in good quality reservoirs. The sidetrack appraisal well, which commenced drilling in late-2005, is nearing completion on the drilling operations. Additional appraisal drilling is planned within the next year to determine the extent of the discovery. "We believe Knotty Head has the potential to be a significant development in the Green Canyon area," said Fischer. "With continued drilling success, our plan would be to sanction a development project within the next 24 months." We are proceeding with the development of Wrigley on Mississippi Mississippi, state, United States Mississippi (mĭs'əsĭp`ē), one of the Deep South states of the United States. It is bordered by Alabama (E), the Gulf of Mexico (S), Arkansas and Louisiana, with most of the border formed by Canyon Block 506. We plan to sub-sea tieback tie·back n. 1. A decorative loop of fabric, cord, or metal for parting and draping a curtain to the side. 2. tiebacks A pair of curtains intended to be tied back. Noun 1. the well to nearby existing infrastructure with first production expected in the second half of 2006. We have a 50%, non-operated interest in Wrigley. Our Big Bend discovery contains an estimated 15 to 25 bcf of net recoverable resource, with additional potential to be evaluated through subsequent drilling. We plan to complete the well in 2007. We have a 50%, non-operated interest in Big Bend. At our Anduin discovery, we plan to drill an appraisal well in 2006 to determine the resource size and development options. We have a 50% operated interest in Anduin. Internationally we drilled three small discoveries in the North Sea at Polecat, Yeoman yeoman (yō`mən), class in English society. The term has always been ill-defined, but generally it means a freeholder of a lower status than gentleman who cultivates his own land. and Black Horse. Their ultimate development is being evaluated and may be dependent on additional exploration success in the area. We have a 40% interest in Polecat, a 50% interest in Yeoman and a 60% interest in Black Horse and operate all three of these wells. On Nigeria Nigeria (nījĭr`ēə), officially Federal Republic of Nigeria, republic (2006 provisional pop. 140,003,542), 356,667 sq mi (923,768 sq km), W Africa. OPL-222, offshore West Africa, the Usan-7 and Usan-8 appraisal wells were successfully drilled during 2005. Appraisal of the Usan field is now complete and a preliminary field development plan has been submitted to Nigerian governmental agencies for approval. Preparation for basic engineering and tendering of contracts is proceeding on a multi-well development plan. The current design calls for development that will consist of a purpose-built purpose-built Adjective made to serve a specific purpose Adj. 1. purpose-built - designed and constructed to serve a particular purpose purpose-made FPSO FPSO Floating Production Storage and Off-loading (shipping & oil industry) FPSO Foster Parent Society of Ontario FPSO Fleet Publication Supply Office capable of handling peak production rates of 160,000 bbl/d of oil with a storage capacity of 2 million barrels. Following government approvals of the final field development plan, the partners expect to formally sanction the project in late-2006. During 2006, the exploration and appraisal program outside of the Usan field will continue on the block. The first well is expected to spud shortly. We have a 20% non-operated interest in this block. Company-wide, we expect to drill 20 high-impact exploration wells in 2006. We currently have drilling rigs secured for the majority of our 2006 program. We have an extensive inventory of exploration prospects in the Gulf of Mexico. To ensure the continuity of our deep-water drilling program, we have contracted a new-build fifth generation dynamically positioned semi-submersible A semi-submersible or semisubmersible is a watercraft that can put much of its bulk underwater. With a relatively small area above the water's surface, the semi-submersible is less affected by the waves than a normal ship, but must be trimmed continuously. drilling rig, which is scheduled to be completed in 2009. The contract provides us access to the rig for two years. Investment in Core Asset Development Our investment in our maturing assets is directed at maximizing max·i·mize tr.v. max·i·mized, max·i·miz·ing, max·i·miz·es 1. To increase or make as great as possible: the value we extract To decompress. WinZip and other decompression utilities use the term to mean "pulling out" the original files from the compressed archive. See WinZip and data compression. . In 2005, we invested $504 million in our core assets. Approximately $190 million of this investment converted 17 mmboe of proved undeveloped and proved non-producing reserves to proved developed reserves. The remaining $314 million added approximately 31 mmboe of new proved reserves in Canada, Syncrude and our International operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. . Quarterly Dividend The Board of Directors has declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. the regular quarterly dividend of $0.05 per common share payable April 1, 2006, to shareholders of record on March 10, 2006. Nexen
Nexen is an energy company based in Calgary, Alberta. Inc. is an independent, Canadian-based global energy company, listed on the Toronto Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing and New York stock exchanges New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol NXY NXY Nexen, Inc. (stock symbol) . We are uniquely positioned for growth in the North Sea, deep-water Gulf of Mexico, the Athabasca oil sands of Alberta, the Middle East and offshore West Africa. We add value for shareholders through successful full-cycle oil and gas exploration and development and leadership in ethics ethics, in philosophy, the study and evaluation of human conduct in the light of moral principles. Moral principles may be viewed either as the standard of conduct that individuals have constructed for themselves or as the body of obligations and duties that a , integrity and environmental protection. Conference Call Charlie Fischer, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , and Marvin Romanow, Executive Vice-President vice president or vice-pres·i·dent n. Abbr. VP 1. An officer ranking next below a president, usually empowered to assume the president's duties under conditions such as absence, illness, or death. 2. and CFO See Chief Financial Officer. , will host a conference call to discuss our financial and operating results and expectations for the future. Date: February 17, 2006 Time: 7 a.m. Mountain Time (9 a.m. Eastern Time) To listen to the conference call, please call one of the following: 416-641-6111 (Toronto) 866-696-5911 (North American toll-free) 800-9559-6854 (Global toll-free) A replay of the call will be available for two weeks starting at 11 a.m. Eastern Time, February February: see month. 17 by calling 416-695-5800 (Toronto) or 800-408-3053 (toll-free) passcode 3175900 followed by the pound sign. A live and on demand webcast of the conference call will be available at www.nexeninc.com. Forward Looking Statements Certain statements in this report constitute "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the United States Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology The terminology used in the computer and telecommunications field adds tremendous confusion not only for the lay person, but for the technicians themselves. What many do not realize is that terms are made up by anybody and everybody in a nonchalant, casual manner without any regard or used such as "intend", "plan", "expect", "estimate", "budget", "outlook" or other similar words, and include statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future production associated with our Coal Bed Methane, Long Lake, Syncrude, North Sea and West Africa projects. 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such statements. Such factors include, among others: market prices for oil and gas and chemicals products; the ability to explore, develop, produce and transport crude oil and natural gas to markets; the results of exploration and development drilling and related activities; foreign-currency exchange rates; economic conditions in the countries and regions where Nexen carries on business; actions by governmental authorities including increases in taxes, changes in environmental and other laws and regulations; renegotiations of contracts; and political uncertainty, including actions by insurgent INSURGENT. One who is concerned in an insurrection. He differs from a rebel in this, that rebel is always understood in a bad sense, or one who unjustly opposes the constituted authorities; insurgent may be one who justly opposes the tyranny of constituted authorities. or other armed groups or other conflict. The impact of any one factor on a particular forward-looking statement is not determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. with certainty CERTAINTY, UNCERTAINTY, contracts. In matters of obligation, a thing is certain, when its essence, quality, and quantity, are described, distinctly set forth, Dig. 12, 1, 6. It is uncertain, when the description is not that of one individual object, but designates only the kind. Louis. as such factors are interdependent in·ter·de·pen·dent adj. Mutually dependent: "Today, the mission of one institution can be accomplished only by recognizing that it lives in an interdependent world with conflicts and overlapping interests" upon other factors, and management's course of action would depend on its assessment of the future considering all information then available. Any statements as to possible commerciality, development plans, capacity expansions, drilling of new wells, ultimate recoverability of reserves, future production rates, cash flows or ability to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution on the disposition of assets or businesses, and changes in any of the foregoing are forward-looking statements. 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. Readers should also refer to Items 7 and 7A in our 2004 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for further discussion of the risk factors. Cautionary Note to US Investors - The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to discuss only proved reserves that are supported by actual production or conclusive Determinative; beyond dispute or question. That which is conclusive is manifest, clear, or obvious. It is a legal inference made so peremptorily that it cannot be overthrown or contradicted. formation tests to be economically ec·o·nom·i·cal adj. 1. Prudent and thrifty in management; not wasteful or extravagant. See Synonyms at sparing. 2. Intended to save money, as by efficient operation or elimination of unnecessary features; economic: and legally producible under existing economic and operating conditions. In this press release, we may refer to "recoverable reserves", "probable reserves" and "recoverable resources" which are inherently more uncertain than proved 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 Report on Form 10-K available from us or the SEC for further reserve disclosure. In addition, under SEC regulations, the Syncrude oil sands operations are considered mining activities rather than oil and gas activities. Production, reserves and related measures in this release include results from the Company's share of Syncrude. Cautionary Note to Canadian Investors - Nexen is required to disclose oil and gas activities under National Instrument 51-101-Standards of Disclosure for Oil and Gas Activities (NI 51-101). However, the Canadian securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities (CSA (1) (Canadian Standards Association, Toronto, Ontario, www.csa.ca) A standards-defining organization founded in 1919. It is involved in many industries, including electronics, communications and information technology. ) have granted us exemptions from certain provisions of NI 51-101 to permit US style disclosure. These exemptions were sought because we are a US Securities and Exchange Commission (SEC) Registrant An individual or organization that signs up (registers) for a training class or service. See domain name registrar. and our securities regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. disclosures, including Form 10-K and other related forms, must comply with SEC requirements. Our disclosures may differ from those Canadian companies This is a list of companies from Canada.
Directory: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Current Companies who have not received similar exemptions under NI 51-101. Please read the "Special Note to Canadian Investors" in Item 7A in our 2004 Annual Report on Form 10-K, for a summary of the exemption exemption n. 1) in income taxation, a credit given for each dependent, blindness or other disability, and age over 65, which result in a downward calculation in tax levels. granted by the CSA and the major differences between SEC requirements and NI 51-101. The summary is not intended to be all-inclusive or to convey convey v. to transfer title (official ownership) to real property (or an interest in real property) from one (grantor) to another (grantee) by a written deed (or an equivalent document such as a judgment of distribution which conveys real property from an estate). specific advice. Reserve estimation estimation In mathematics, use of a function or formula to derive a solution or make a prediction. Unlike approximation, it has precise connotations. In statistics, for example, it connotes the careful selection and testing of a function called an estimator. is highly technical and requires professional collaboration Working together on a project. See collaborative software. and judgment. The differences between SEC requirements and NI 51-101 may be material. Our probable reserves disclosure applies the Society of Petroleum Engineers/World Petroleum Council (SPE/WPC) definition for probable reserves. The Canadian Oil and Gas Evaluation Handbook
This article is about reference works. For the subnotebook computer, see .
In this press release, we refer to oil and gas in common units called barrel of oil equivalent The barrel of oil equivalent (bboe, sometimes BOE) is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU [1]. 5. (boe). A boe is derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. by converting six thousand cubic feet of gas to one barrel of oil (6mcf:1bbl). This conversion may be misleading, particularly if used in isolation, since the 6mcf:1bbl ratio is based on an energy equivalency equivalency the combining power of an electrolyte. See also equivalent. at the burner A drive that writes write-once optical discs such as CD-Rs and DVD-Rs. A "burner" implies a one-time recording, but the term is erroneously used to refer to drives that "write" to re-recordable CD-RW and DVD-RW/+RW media as well. See burn, CD-R and DVD-R. tip and does not represent the value equivalency at the well head.
Nexen Inc.
Financial Highlights
Three Months Twelve Months
Ended December 31 Ended December 31
(Cdn$ millions) 2005 2004 2005 2004
---------------------------------------------------------------------
Net Sales (1) 1,073 892 4,086 3,251
Cash Flow from Operations (1) 772 592 2,403 1,942
Per Common Share ($/share) 2.96 2.29 9.23 7.55
Net Income (1) 300 246 1,152 793
Per Common Share ($/share) 1.15 0.95 4.43 3.08
Capital Expenditures 731 668 2,691 1,754
Business Acquisitions Net
of Cash Acquired - 2,583 - 2,583
Net Debt (2) 3,641 4,219 3,641 4,219
Common Shares Outstanding
(millions of shares) 261.1 258.4 261.1 258.4
--------------------------------------
(1) Includes discontinued operations as discussed in Note 15 to our
Unaudited Consolidated Financial Statements.
(2) Net Debt is defined as long-term debt less working capital.
Cash Flow from Operations (1)
Three Months Twelve Months
Ended December 31 Ended December 31
(Cdn$ millions) 2005 2004 2005 2004
---------------------------------------------------------------------
Cash Flow from Operations
Oil & Gas and Syncrude
Yemen (2) 236 151 929 581
Canada (3) 88 115 397 426
United States 164 201 667 700
United Kingdom 117 30 284 30
Other Countries (3) 10 12 48 57
Marketing 186 71 138 100
Syncrude 54 38 223 183
--------------------------------------
855 618 2,686 2,077
Chemicals 25 21 95 82
--------------------------------------
880 639 2,781 2,159
Interest and Other Corporate
Items (98) (47) (335) (196)
Income Taxes (4) (10) - (43) (21)
--------------------------------------
Cash Flow from Operations (1) 772 592 2,403 1,942
--------------------------------------
--------------------------------------
(1) Defined as cash generated from operating activities before
changes in non-cash working capital and other. We evaluate our
performance and that of our business segments based on earnings
and cash flow from operations. Cash flow from operations is a
non-GAAP term that represents cash generated from operating
activities before changes in non-cash working capital and other.
We consider it a key measure as it demonstrates our ability and
the ability of our business segments to generate the cash flow
necessary to fund future growth through capital investment and
repay debt. Cash flow from operations may not be comparable with
the calculation of similar measures for other companies.
Three Months Twelve Months
Ended December 31 Ended December 31
(Cdn$ millions) 2005 2004 2005 2004
---------------------------------------------------------------------
Cash Flow from Operating
Activities 468 390 2,143 1,606
Changes in Non-Cash Working
Capital 315 23 195 122
Other 6 179 133 214
Amortization of Premium for
Crude Oil Put Options (17) - (68) -
--------------------------------------
Cash Flow from Operations 772 592 2,403 1,942
--------------------------------------
--------------------------------------
Weighted-average Number of
Common Shares Outstanding
(millions of shares) 261.0 258.3 260.4 257.3
--------------------------------------
Cash Flow from Operations Per
Common Share ($/share) 2.96 2.29 9.23 7.55
--------------------------------------
--------------------------------------
(2) After in-country cash taxes of $74 million for the three months
ended December 31, 2005 (2004 - $59 million) and $296 million for
the year ended December 31, 2005 (2004 - $227 million).
(3) Includes discontinued operations as discussed in Note 15 to our
Unaudited Consolidated Financial Statements.
(4) Excludes in-country cash taxes in Yemen.
Nexen Inc.
Production Volumes (before royalties) (1)
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Crude Oil and NGLs (mbbls/d)
Yemen 107.7 105.8 112.7 107.3
Canada (2) 21.7 35.5 29.2 36.2
United States 18.9 34.4 22.2 30.0
United Kingdom 16.2 6.0 12.6 1.5
Australia (3) - 1.8 - 2.7
Other Countries 5.4 5.8 5.6 5.3
Syncrude (4) (mbbls/d) 16.3 16.4 15.5 17.2
--------------------------------------
186.2 205.7 197.8 200.2
--------------------------------------
Natural Gas (mmcf/d)
Canada (2) 102 147 124 146
United States 98 147 116 148
United Kingdom 33 11 23 3
--------------------------------------
233 305 263 297
--------------------------------------
Total Production (mboe/d) 225 256 242 250
--------------------------------------
--------------------------------------
Production Volumes (after royalties)
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Crude Oil and NGLs (mbbls/d)
Yemen 59.9 55.1 60.6 53.5
Canada (2) 16.8 28.3 22.6 28.2
United States 16.7 30.6 19.6 26.5
United Kingdom 16.2 6.0 12.6 1.5
Australia (3) - 1.4 - 2.5
Other Countries 5.0 5.2 5.1 4.7
Syncrude 4 (mbbls/d) 16.2 14.6 15.3 16.6
--------------------------------------
130.8 141.2 135.8 133.5
--------------------------------------
Natural Gas (mmcf/d)
Canada (2) 87 117 101 115
United States 83 125 99 126
United Kingdom 33 11 23 3
--------------------------------------
203 253 223 244
--------------------------------------
Total Production (mboe/d) 165 183 173 174
--------------------------------------
--------------------------------------
Notes:
(1) We have presented production volumes before royalties as we
measure our performance on this basis consistent with other
Canadian oil and gas companies.
(2) Includes the following production from discontinued operations as
discussed in Note 15 to our Unaudited Consolidated Financial
Statements.
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Before Royalties
Oil and Liquids (mbbls/d) - 12.9 6.7 11.7
Natural Gas (mmcf/d) - 45 24 47
After Royalties
Oil and Liquids (mbbls/d) - 10.2 5.3 9.0
Natural Gas (mmcf/d) - 31 17 33
--------------------------------------
(3) Comprises production from discontinued operations. See Note 15 to
our Unaudited Consolidated Financial Statements.
(4) Considered a mining operation for US reporting purposes.
Nexen Inc.
Oil and Gas Prices and Cash Netback (1)
Quarters - 2005 Total Year
---------------------------------------------------------------------
(all dollar amounts
in Cdn$ unless noted) 1st 2nd 3rd 4th 2005
---------------------------------------------------------------------
PRICES:
WTI Crude Oil (US$/bbl) 49.85 53.17 63.52 59.78 56.58
Nexen Average - Oil
(Cdn$/bbl) 51.33 55.45 68.99 60.89 58.98
NYMEX Natural Gas
(US$/mmbtu) 6.48 6.95 9.69 12.86 8.99
Nexen Average - Gas
(Cdn$/mcf) 6.98 7.39 9.68 12.18 8.89
---------------------------------------------------------------------
NETBACKS:
Canada - Light Oil and NGLs
Sales (mbbls/d) 11.5 12.0 4.7 - 7.1
Price Received ($/bbl) 55.37 58.06 67.04 - 58.55
Royalties & Other 12.08 10.98 14.75 - 12.69
Operating Costs 9.77 6.29 6.45 - 7.97
---------------------------------------------------------------------
Netback 33.52 40.79 45.84 - 37.89
---------------------------------------------------------------------
Canada - Heavy Oil
Sales (mbbls/d) 22.7 22.1 21.2 21.1 21.8
Price Received ($/bbl) 26.15 30.87 47.53 34.41 34.62
Royalties & Other 6.05 8.47 11.80 7.96 8.17
Operating Costs 10.55 10.86 11.42 12.55 10.40
---------------------------------------------------------------------
Netback 9.55 11.54 24.31 13.90 16.05
---------------------------------------------------------------------
Canada - Total Oil
Sales (mbbls/d) 34.2 34.1 25.9 21.1 28.9
Price Received ($/bbl) 35.99 40.47 51.05 34.41 40.51
Royalties & Other 8.12 9.39 12.39 7.96 9.28
Operating Costs 10.29 9.25 10.53 12.55 9.80
---------------------------------------------------------------------
Netback 17.58 21.83 28.13 13.90 21.43
---------------------------------------------------------------------
Canada - Natural Gas
Sales (mmcf/d) 143 141 111 102 124
Price Received ($/mcf) 5.80 6.30 8.19 10.75 7.51
Royalties & Other 1.17 1.21 1.26 1.63 1.33
Operating Costs 0.71 0.74 0.80 1.21 1.00
---------------------------------------------------------------------
Netback 3.92 4.35 6.13 7.91 5.18
---------------------------------------------------------------------
Yemen
Sales (mbbls/d) 115.0 112.6 116.8 108.3 113.2
Price Received ($/bbl) 54.38 58.08 72.04 63.39 62.07
Royalties & Other 27.08 26.30 33.20 28.06 28.71
Operating Costs 3.33 3.72 3.46 4.03 3.63
In-country Taxes 5.67 6.91 8.61 7.47 7.17
---------------------------------------------------------------------
Netback 18.30 21.15 26.77 23.83 22.56
---------------------------------------------------------------------
Syncrude
Sales (mbbls/d) 11.4 16.9 17.2 16.3 15.5
Price Received ($/bbl) 65.15 66.93 78.93 70.79 71.00
Royalties & Other 0.65 0.65 0.78 0.72 0.71
Operating Costs 39.91 20.76 23.22 28.36 26.95
---------------------------------------------------------------------
Netback 24.59 45.52 54.93 41.71 43.34
---------------------------------------------------------------------
United States
Crude Oil:
Sales (mbbls/d) 28.5 23.0 18.4 18.9 22.2
Price Received ($/bbl) 50.90 54.96 68.30 60.32 57.63
Natural Gas:
Sales (mmcf/d) 127 120 122 98 116
Price Received ($/mcf) 8.32 9.01 11.57 13.95 10.56
Total Sales Volume (mboe/d) 49.6 43.0 38.7 35.2 41.6
Price Received ($/boe) 50.48 54.54 68.91 71.14 60.26
Royalties & Other 6.48 7.31 9.60 9.47 8.06
Operating Costs 4.91 5.70 6.95 8.47 6.35
---------------------------------------------------------------------
Netback 39.09 41.53 52.36 53.20 45.85
---------------------------------------------------------------------
Australia
Sales (mbbls/d) - - - - -
Price Received ($/bbl) - - - - -
Royalties & Other - - - - -
Operating Costs - - - - -
---------------------------------------------------------------------
Netback - - - - -
---------------------------------------------------------------------
United Kingdom
Crude Oil:
Sales (mbbls/d) 17.5 11.7 10.4 15.6 13.8
Price Received ($/bbl) 54.53 59.02 65.87 64.75 60.55
Natural Gas:
Sales (mmcf/d) 26 15 13 30 21
Price Received ($/mcf) 6.92 5.45 4.84 11.26 7.86
Total Sales Volume (mboe/d) 21.9 14.3 12.6 20.6 17.3
Price Received ($/boe) 51.92 54.31 59.39 65.42 57.83
Royalties & Other - - - - -
Operating Costs 12.59 21.69 19.30 9.95 14.90
---------------------------------------------------------------------
Netback 39.33 32.62 40.09 55.47 42.93
---------------------------------------------------------------------
Other Countries
Sales (mbbls/d) 5.6 6.2 5.3 6.3 5.9
Price Received ($/bbl) 46.63 53.70 65.82 72.75 59.96
Royalties & Other 3.68 6.01 5.07 5.96 5.23
Operating Costs 2.32 9.27 3.20 7.03 5.55
---------------------------------------------------------------------
Netback 40.63 38.42 57.55 59.76 49.18
---------------------------------------------------------------------
Company-Wide
Oil and Gas Sales (mboe/d) 261.6 250.4 235.2 225.2 243.0
Price Received ($/boe) 49.55 53.45 67.09 62.97 57.97
Royalties & Other 14.94 15.22 20.21 16.66 16.70
Operating Costs 6.94 7.18 7.21 8.18 7.36
In-country Taxes 2.49 3.10 4.28 3.59 3.34
---------------------------------------------------------------------
Netback 25.18 27.95 35.39 34.54 30.57
---------------------------------------------------------------------
Quarters - 2004 Total Year
---------------------------------------------------------------------
(all dollar amounts
in Cdn$ unless noted) 1st 2nd 3rd 4th 2004
---------------------------------------------------------------------
PRICES:
WTI Crude Oil (US$/bbl) 35.15 38.32 43.88 48.28 41.40
Nexen Average - Oil
(Cdn$/bbl) 40.22 44.75 50.98 47.98 45.90
NYMEX Natural Gas
(US$/mmbtu) 5.73 6.16 5.56 7.30 6.19
Nexen Average - Gas
(Cdn$/mcf) 6.63 7.17 6.55 7.02 6.85
---------------------------------------------------------------------
NETBACKS:
Canada - Light Oil and NGLs
Sales (mbbls/d) 12.4 13.6 12.0 11.5 12.4
Price Received ($/bbl) 41.31 46.37 51.82 51.47 47.64
Royalties & Other 9.41 10.60 12.30 10.10 10.60
Operating Costs 9.09 6.52 6.22 6.27 7.03
---------------------------------------------------------------------
Netback 22.81 29.25 33.30 35.10 30.01
---------------------------------------------------------------------
Canada - Heavy Oil
Sales (mbbls/d) 23.7 22.9 23.0 23.4 23.2
Price Received ($/bbl) 27.92 30.12 36.75 28.15 30.71
Royalties & Other 6.00 6.73 8.77 5.65 6.78
Operating Costs 9.98 10.44 10.05 10.70 10.29
---------------------------------------------------------------------
Netback 11.94 12.95 17.93 11.80 13.64
---------------------------------------------------------------------
Canada - Total Oil
Sales (mbbls/d) 36.1 36.5 35.0 34.9 35.6
Price Received ($/bbl) 32.51 36.18 41.94 35.83 36.60
Royalties & Other 7.21 8.19 10.03 7.02 8.11
Operating Costs 9.68 8.98 8.73 9.24 9.16
---------------------------------------------------------------------
Netback 15.62 19.01 23.18 19.57 19.33
---------------------------------------------------------------------
Canada - Natural Gas
Sales (mmcf/d) 149 145 141 147 146
Price Received ($/mcf) 5.59 5.97 5.43 6.02 5.76
Royalties & Other 1.10 1.11 1.04 0.95 1.06
Operating Costs 0.59 0.69 0.83 0.65 0.69
---------------------------------------------------------------------
Netback 3.90 4.17 3.56 4.42 4.01
---------------------------------------------------------------------
Yemen
Sales (mbbls/d) 115.3 105.6 101.5 104.0 106.6
Price Received ($/bbl) 41.88 45.88 53.80 49.52 47.59
Royalties & Other 22.10 22.53 27.40 24.15 23.98
Operating Costs 2.72 2.55 2.91 3.04 2.80
In-country Taxes 4.41 5.88 6.97 6.17 5.82
---------------------------------------------------------------------
Netback 12.65 14.92 16.52 16.16 14.99
---------------------------------------------------------------------
Syncrude
Sales (mbbls/d) 18.3 16.6 17.6 16.4 17.2
Price Received ($/bbl) 45.54 52.46 55.58 58.16 52.80
Royalties & Other 0.45 0.52 0.55 6.08 1.84
Operating Costs 17.41 20.01 18.87 23.58 19.89
---------------------------------------------------------------------
Netback 27.68 31.93 36.16 28.50 31.07
---------------------------------------------------------------------
United States
Crude Oil:
Sales (mbbls/d) 26.5 25.7 32.9 34.4 30.0
Price Received ($/bbl) 38.99 46.31 49.90 49.44 46.60
Natural Gas:
Sales (mmcf/d) 167 134 144 147 148
Price Received ($/mcf) 7.63 8.47 7.64 7.93 7.89
Total Sales Volume (mboe/d) 54.4 48.0 56.9 58.8 54.5
Price Received ($/boe) 42.47 48.38 48.19 48.67 46.94
Royalties & Other 5.90 6.98 6.22 6.16 6.29
Operating Costs 4.13 4.84 7.60 4.52 5.30
---------------------------------------------------------------------
Netback 32.44 36.56 34.37 37.99 35.35
---------------------------------------------------------------------
Australia
Sales (mbbls/d) 7.5 4.8 - 5.1 4.3
Price Received ($/bbl) 42.60 49.84 - 63.78 51.22
Royalties & Other 2.11 2.28 - 7.42 4.00
Operating Costs 22.88 34.28 - 46.38 32.94
---------------------------------------------------------------------
Netback 17.61 13.28 - 9.98 14.28
---------------------------------------------------------------------
United Kingdom
Crude Oil:
Sales (mbbls/d) - - - 6.3 1.6
Price Received ($/bbl) - - - 46.81 46.81
Natural Gas:
Sales (mmcf/d) - - - 11 3
Price Received ($/mcf) - - - 8.28 8.28
Total Sales Volume (mboe/d) - - - 8.1 2.1
Price Received ($/boe) - - - 47.45 47.45
Royalties & Other - - - - -
Operating Costs - - - 8.26 8.26
---------------------------------------------------------------------
Netback - - - 39.19 39.19
---------------------------------------------------------------------
Other Countries
Sales (mbbls/d) 4.1 5.8 5.0 5.4 5.1
Price Received ($/bbl) 37.07 44.75 46.22 42.95 43.07
Royalties & Other 1.73 4.94 3.46 3.33 3.49
Operating Costs 2.70 6.28 2.93 2.65 3.76
---------------------------------------------------------------------
Netback 32.64 33.53 39.83 36.97 35.82
---------------------------------------------------------------------
Company-Wide
Oil and Gas Sales (mboe/d) 260.5 241.5 239.5 257.2 249.7
Price Received ($/boe) 40.11 44.41 48.66 46.82 44.94
Royalties & Other 12.76 13.34 15.30 13.29 13.65
Operating Costs 5.67 6.06 6.25 6.63 6.15
In-country Taxes 1.95 2.57 2.96 2.49 2.48
---------------------------------------------------------------------
Netback 19.73 22.44 24.15 24.41 22.66
---------------------------------------------------------------------
(1) Defined as average sales price less royalties and other,
operating costs, and in-country taxes in Yemen.
Nexen Inc.
Unaudited Consolidated Statement of Income
For the Three and Twelve Months Ended December 31
Cdn$ millions, except per share amounts
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Revenues
Net Sales 1,073 805 3,932 2,944
Marketing and Other (Note 14) 372 286 702 713
Gain on Dilution of
Interest in Chemicals
Business (Note 2) - - 193 -
------------------------------------
1,445 1,091 4,827 3,657
------------------------------------
Expenses
Operating 243 188 893 722
Depreciation, Depletion,
Amortization and Impairment 304 194 1,052 674
Transportation and Other 226 161 796 549
General and Administrative 145 52 792 299
Exploration 86 136 250 243
Interest (Note 7) 13 25 97 143
------------------------------------
1,017 756 3,880 2,630
------------------------------------
Income from Continuing
Operations before Income
Taxes 428 335 947 1,027
------------------------------------
Provision for Income Taxes
Current 84 59 339 248
Future 41 50 (100) 69
------------------------------------
125 109 239 317
------------------------------------
Net Income from Continuing
Operations before
Non-Controlling Interests 303 226 708 710
Net Income Attributable to
Non-Controlling Interests 3 - 8 -
------------------------------------
Net Income from Continuing
Operations 300 226 700 710
Net Income from Discontinued
Operations (Note 15) - 20 452 83
------------------------------------
Net Income 300 246 1,152 793
------------------------------------
------------------------------------
Earnings Per Common Share
from Continuing Operations
($/share)
Basic (Note 12) 1.15 0.87 2.69 2.76
------------------------------------
------------------------------------
Diluted (Note 12) 1.12 0.86 2.63 2.72
------------------------------------
------------------------------------
Earnings Per Common Share
($/share)
Basic (Note 12) 1.15 0.95 4.43 3.08
------------------------------------
------------------------------------
Diluted (Note 12) 1.12 0.94 4.33 3.04
------------------------------------
------------------------------------
See accompanying notes to the Unaudited Consolidated Financial
Statements.
Nexen Inc.
Unaudited Consolidated Balance Sheet
Cdn$ millions, except share amounts
December 31 December 31
2005 2004
---------------------------------------------------------------------
Assets
Current Assets
Cash and Cash Equivalents 48 73
Restricted Cash 70 -
Accounts Receivable (Note 3) 3,151 2,100
Inventories and Supplies (Note 4) 504 351
Assets of Discontinued Operations
(Note 15) - 38
Other 51 41
-------------------------------
Total Current Assets 3,824 2,603
-------------------------------
Property, Plant and Equipment (Note 6)
Net of Accumulated Depreciation,
Depletion, Amortization and Impairment
of $5,468 (December 31, 2004 - $4,924) 9,594 8,203
Goodwill 364 375
Future Income Tax Assets 410 333
Deferred Charges and Other Assets
(Note 5) 398 429
Assets of Discontinued Operations
(Note 15) - 440
-------------------------------
14,590 12,383
-------------------------------
-------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Short-Term Borrowings (Note 7) - 100
Accounts Payable and Accrued
Liabilities 3,710 2,377
Accrued Interest Payable 55 34
Dividends Payable 13 13
Liabilities of Discontinued
Operations (Note 15) - 39
-------------------------------
Total Current Liabilities 3,778 2,563
-------------------------------
Long-Term Debt (Note 7) 3,687 4,259
Future Income Tax Liabilities 1,960 2,023
Asset Retirement Obligations (Note 8) 590 399
Deferred Credits and Other
Liabilities (Note 9) 479 142
Liabilities of Discontinued
Operations (Note 15) - 130
Non-Controlling Interests (Note 2) 88 -
Shareholders' Equity (Note 11)
Common Shares, no par value
Authorized: Unlimited
Outstanding: 2005 - 261,140,571 shares
2004 - 258,399,166 shares 732 637
Contributed Surplus 2 -
Retained Earnings 3,435 2,335
Cumulative Foreign Currency
Translation Adjustment (161) (105)
-------------------------------
Total Shareholders' Equity 4,008 2,867
-------------------------------
Commitments, Contingencies and
Guarantees (Note 16)
14,590 12,383
-------------------------------
-------------------------------
See accompanying notes to the Unaudited Consolidated Financial
Statements.
Nexen Inc.
Unaudited Consolidated Statement of Cash Flows
For the Three and Twelve Months Ended December 31
Cdn$ millions
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Operating Activities
Net Income from
Continuing Operations 300 226 700 710
Net Income from Discontinued
Operations - 20 452 83
Charges and Credits to Income
not Involving Cash (Note 13) 403 210 1,069 906
Exploration Expense 86 136 250 243
Changes in Non-Cash Working
Capital (Note 13) (315) (23) (195) (122)
Other (6) (179) (133) (214)
------------------------------------
468 390 2,143 1,606
Financing Activities
Proceeds from (Repayment of)
Term Credit Facilities, Net 1 83 (66) 83
Proceeds from Long-Term
Debt (Note 7) - 1,779 1,253 1,779
Repayment of Long-Term
Debt (Note 7) - - (1,818) (300)
Proceeds from (Repayment of)
Short-Term Borrowings, Net - 101 (99) 101
Redemption of Preferred
Securities - - - (289)
Dividends on Common Shares (13) (13) (52) (52)
Issue of Common Shares 7 8 58 124
Net Proceeds from Canexus
Initial Public Offering
(Note 2) - - 301 -
Proceeds from Term Credit
Facilities of Canexus,
Net (Notes 2 and 7) 3 - 176 -
Other 8 (20) (27) (20)
------------------------------------
6 1,938 (274) 1,426
Investing Activities
Business Acquisition,
Net of Cash Acquired - (2,583) - (2,583)
Capital Expenditures
Exploration and Development (694) (619) (2,564) (1,582)
Proved Property Acquisitions - (4) (20) (4)
Chemicals, Corporate and Other (21) (26) (54) (95)
Proceeds on Disposition of Assets - 24 911 34
Changes in Non-Cash Working
Capital (Note 13) - 137 (54) 244
Changes in Restricted Cash 140 - (70) -
Other (20) (7) (13) (27)
------------------------------------
(595) (3,078) (1,864) (4,013)
Effect of Exchange Rate Changes
on Cash and Cash Equivalents (31) (43) (30) (33)
------------------------------------
Decrease in Cash and Cash
Equivalents (152) (793) (25) (1,014)
Cash and Cash Equivalents -
Beginning of Period 200 866 73 1,087
------------------------------------
Cash and Cash Equivalents -
End of Period 48 73 48 73
------------------------------------
------------------------------------
See accompanying notes to the Unaudited Consolidated Financial
Statements.
Nexen Inc.
Unaudited Consolidated Statement of Shareholders' Equity
For the Twelve Months Ended December 31, 2005 and December 31, 2004
Cdn$ millions
2005 2004
---------------------------------------------------------------------
Common Shares
Balance at Beginning of Year 637 513
Exercise of Stock Options 29 93
Issue of Common Shares 29 31
Previously Recognized Liability
Relating to Stock Options Exercised 37 -
-------------------------------
Balance at End of Year 732 637
-------------------------------
-------------------------------
Contributed Surplus
Balance at Beginning of Year - 1
Stock Based Compensation Expense 2 2
Modification of Stock Option
Plan to Tandem Option Plan - (3)
-------------------------------
Balance at End of Year 2 -
-------------------------------
-------------------------------
Retained Earnings
Balance at Beginning of Year 2,335 1,594
Net Income 1,152 793
Dividends on Common Shares (52) (52)
-------------------------------
Balance at End of Year 3,435 2,335
-------------------------------
-------------------------------
Cumulative Foreign Currency
Translation Adjustment
Balance at Beginning of Year (105) (33)
Translation Adjustment,
Net of Income Taxes (56) (72)
-------------------------------
Balance at End of Year (161) (105)
-------------------------------
-------------------------------
See accompanying notes to the Unaudited Consolidated Financial
Statements.
Nexen Inc.
Notes to Unaudited Consolidated Financial Statements
Cdn$ millions except as noted
1. ACCOUNTING POLICIES The Unaudited Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge are prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). The consolidated financial statements include the assets and liabilities of Canexus (see Note 2) with an adjustment made for non-controlling interests. In the opinion of management, the Unaudited Consolidated Financial Statements contain all adjustments of a normal and recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. nature necessary to present fairly Nexen Inc.'s (Nexen, we or our) financial position at December 31, 2005 and the results of our operations and our cash flows for the three and twelve months ended December 31, 2005 and 2004. Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets Contingent Asset An asset in which the possibility of ownership depends solely upon future events uncontrollable by the company. Notes: An example might be a settlement from a lawsuit. See also: Asset, Balance Sheet, Contingent Liability, Liability and liabilities at the date of the Unaudited Consolidated Financial Statements, and revenues and expenses during the reporting period. Our management reviews these estimates, including those related to accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. , litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , asset retirement obligations Asset Retirement Obligations provide for future disposal of assets as required by SFAS 143 [1]. Firms must recognize the ARO liability in the period it was acquired, generally acquisition. , income taxes and determination of proved reserves, on an ongoing basis. Changes in facts and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or may result in revised estimates Revised estimate The third estimate of GDP released about three months after the measurement period. and actual results may differ from these estimates. These Unaudited Consolidated Financial Statements do not conform in all respects with the requirements for annual financial statements and therefore should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with our Audited Consolidated Financial Statements included in our 2004 Annual Report on Form 10-K. The accounting policies we follow are described in Note 1 of the Audited Consolidated Financial Statements included in our 2004 Annual Report on Form 10-K. Changes in Accounting Principles Financial Instruments In the fourth quarter of 2004, we retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adopted the changes to Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. (CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) ) standard S.3860, Financial Instruments. These changes require that fixed-amount contractual obligations that can be settled by issuing a variable number of equity instruments be classified as a liability. Our US-dollar denominated preferred and subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. securities have these characteristics and accordingly have been reclassified as long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . Dividends and interest on these securities have been included in interest expense and issue costs previously charged to retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. have been amortized over the life of the securities. Unamortized issue costs have been expensed on the redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. of the preferred securities in 2004. Foreign exchange gains or losses from translation of the US-dollar denominated preferred and subordinated securities have been included as cumulative foreign currency translation adjustments. The change was adopted retroactively and all prior periods presented have been restated. This change in accounting principle has no effect on our Unaudited Consolidated Financial Statements for the three and twelve months ended December 31, 2005. Generally Accepted Accounting Principles In 2004, we adopted CICA standard S.1100, Generally Accepted Accounting Principles which eliminated general industry practice in Canada as a component of GAAP. Our accounting policy is to include geological ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. and geophysical ge·o·phys·ics n. (used with a sing. verb) The physics of the earth and its environment, including the physics of fields such as meteorology, oceanography, and seismology. costs as operating cash outflows in our Unaudited Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statement of Cash Flows. For previous years, we included geological and geophysical costs as investing cash outflows consistent with industry practice in Canada. In our Unaudited Consolidated Statement of Cash Flows for the three months ended December 31, 2005, we included $16 million (2004 - $19 million) and for the twelve months ended December 31, 2005, we included $53 million (2004 - $73 million) of geological and geophysical costs as other operating cash outflows. This change in accounting policy was adopted prospectively. Reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. Certain comparative figures have been reclassified to ensure consistency Consistency can refer to:
2. CANEXUS INCOME FUND In June June: see month. 2005, our board of directors approved a plan to monetize Monetize 1. To convert into money. 2. To convert from securities into currency that can be used to purchase goods and services. Notes: For example, you'll often hear Internet marketers talk about "monetizing website visitors. our chemicals operations through the creation of an income trust and the issuance of trust units in an initial public offering. This initial public offering closed on August 18, 2005 with Canexus Income Fund (Canexus) issuing 30 million units at a price of $10 per unit for gross proceeds of $300 million ($284 million, net of underwriters' commissions). Concurrent At the same time. It implies that multiple processes are taking place simultaneously. See concurrent operation. with the closing of the offering, Canexus acquired a 36.5% interest in Canexus Limited Partnership (Canexus LP) using the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the initial public offering. Canexus LP acquired Nexen's chemicals business for approximately $1 billion, comprised of the net proceeds from Canexus' initial public offering and $200 million (US$167 million) of bank debt, plus the issuance of 52.3 million exchangeable limited partnership units (Exchangeable LP Units) of Canexus LP. At that time, the Exchangeable LP Units held by Nexen represented a 63.5% interest in Canexus LP. The Exchangeable LP Units held by Nexen are exchangeable on a one for one basis for trust units of Canexus. As a result, the Exchangeable LP Units owned by Nexen were exchangeable into 52.3 million trust units which represented 63.5% of the outstanding trust units of Canexus assuming exchange of the Exchangeable LP Units. On September September: see month. 16, 2005, the underwriters of the initial public offering exercised a portion of their over-allotment option to purchase 1.75 million trust units at $10 per unit for gross proceeds of $18 million ($17 million, net of underwriters' commissions). As a result, Nexen exchanged 1.75 million of its Exchangeable LP Units for $17 million in net proceeds. After this exchange, Nexen has a 61.4% interest in Canexus LP represented by 50.5 million Exchangeable LP Units. The initial public offering, together with the exercise of the over-allotment, resulted in total net proceeds to Nexen of $301 million. These transactions diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. our interest in our chemicals operations. As a result of this dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. , we recorded a gain of $193 million during the third quarter. We have the right to nominate nom·i·nate tr.v. nom·i·nat·ed, nom·i·nat·ing, nom·i·nates 1. To propose by name as a candidate, especially for election. 2. To designate or appoint to an office, responsibility, or honor. a majority of the members of the board of Canexus Limited, the corporation with responsibility for the strategic management and operational decisions of Canexus and Canexus LP. Nexen has currently nominated nom·i·nate tr.v. nom·i·nat·ed, nom·i·nat·ing, nom·i·nates 1. To propose by name as a candidate, especially for election. 2. To designate or appoint to an office, responsibility, or honor. two representatives to the ten-member board of Canexus Limited. Since we have retained effective control of our chemicals business, the results, assets and liabilities of this business have been included in these financial statements. The non-Nexen ownership interests in our chemicals business are shown as non-controlling interests.
3. ACCOUNTS RECEIVABLE
December 31 December 31
2005 2004
---------------------------------------------------------------------
Trade
Marketing 2,400 1,452
Oil and Gas 614 557
Chemicals and Other 48 57
-----------------------------
3,062 2,066
Non-Trade 96 49
-----------------------------
3,158 2,115
Allowance for Doubtful Accounts (7) (15)
-----------------------------
Total 3,151 2,100
-----------------------------
-----------------------------
4. INVENTORIES AND SUPPLIES
December 31 December 31
2005 2004
---------------------------------------------------------------------
Finished Products
Marketing 320 199
Oil and Gas 11 6
Chemicals and Other 15 13
-----------------------------
346 218
Work in Process 6 4
Field Supplies 152 129
-----------------------------
Total 504 351
-----------------------------
-----------------------------
5. DEFERRED CHARGES AND OTHER ASSETS
December 31 December 31
2005 2004
---------------------------------------------------------------------
Long-Term Marketing Derivative
Contracts (Note 10) 232 91
Deferred Financing Costs 63 67
Asset Retirement Remediation Fund (Note 8) 14 -
Crude Oil Put Options 4 200
Defined Benefit Pension Plan Asset - 13
Other 85 58
-----------------------------
Total 398 429
-----------------------------
-----------------------------
6. SUSPENDED sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. WELL COSTS In the third quarter of 2005, we adopted staff position 19-1 (FSP FSP - File Service Protocol 19-1) issued by the Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). (FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). ) on accounting for suspended well costs. FSP 19-1 amends AMENDS. A satisfaction, given by a wrong doer to the party injured for a wrong committed. 1 Lilly's Reg. 81. 2. By statute 24 Geo. II. c. 44, in England, and by similar statutes in some of the United States, justices of the peace, upon being notified of an FASB Statement FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting No. 19, Financial Accounting and Reporting by Oil and Gas Producing Companies, for companies using the successful efforts method of accounting which required that capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. exploratory well costs be expensed if related reserves could not be classified as proved within one year. FSP 19-1 provides that exploratory well costs should continue to be capitalized when a well has found a sufficient quantity of reserves to justify its completion as a producing well and sufficient progress is being made to assess the reserves and the economic and operating viability of the well. FSP 19-1 also requires certain disclosures with respect to capitalized exploratory well costs. The following table sets out the changes in capitalized exploratory well costs during the twelve months ended December 31, 2005 and 2004, and does not include amounts that were initially capitalized and subsequently expensed in the same period.
Twelve Months
Ended December 31
2005 2004
---------------------------------------------------------------------
Balance at Beginning of Year 116 89
Additions to Capitalized Exploratory Well Costs
Pending the Determination of Proved Reserves 174 51
Capitalized Exploratory Well Costs Charged to Expense (27) (19)
Reclasses to Wells, Facilities and Equipment Based
on Determination of Proved Reserves (3) -
Effects of Foreign Exchange (8) (5)
-----------------------------
Balance at End of Year 252 116
-----------------------------
-----------------------------
The following table provides an aging of capitalized exploratory well costs based on the date drilling was completed and shows the number of projects for which exploratory well costs have been capitalized for a period greater than one year since the completion of drilling.
December 31 December 31
2005 2004
---------------------------------------------------------------------
Capitalized for a Period of
One Year or Less 165 53
Capitalized for a Period of Greater
than One Year 87 63
-----------------------------
Balance at End of Year 252 116
-----------------------------
-----------------------------
Number of Projects that have Exploratory
Well Costs Capitalized for a Period
Greater than One Year 3 2
-----------------------------
As at December 31, 2005, we have exploratory costs that have been capitalized for more than one year relating to our interest in an exploratory block, offshore Nigeria ($74 million), our interest in exploratory blocks in the Gulf of Mexico ($4 million) and coal bed methane exploratory activities in Canada ($9 million). Exploratory costs offshore Nigeria were first capitalized in 1998 and we have subsequently drilled a further seven successful wells on the block. The joint venture partners have finalized See finalization. pre-development design studies and have submitted a field development plan for government approval. Drilling activity has resumed and an appraisal and exploration program is currently in progress. Once final regulatory approvals have been received and the project has been sanctioned, we will book proved reserves. We have capitalized costs related to successful wells drilled in 2004 and 2005 in the Gulf of Mexico, and in Canada we have capitalized exploratory costs relating to our coal bed methane projects. We are currently assessing all of these wells and projects and we are working with our partners to prepare development plans.
7. LONG-TERM DEBT AND SHORT-TERM BORROWINGS
December 31 December 31
2005 2004
---------------------------------------------------------------------
Acquisition Credit Facilities (a) - 1,806
Canexus LP Term Credit Facilities
(US$147 million drawn) (b) 171 -
Term Credit Facilities (c) - 87
Debentures, due 2006 (1) 93 93
Medium-Term Notes, due 2007 150 150
Medium-Term Notes, due 2008 125 125
Notes, due 2013 (US$500 million) 583 602
Notes, due 2015 (US$250 million) (d) 292 -
Notes, due 2028 (US$200 million) 233 241
Notes, due 2032 (US$500 million) 583 602
Notes, due 2035 (US$790 million) (e) 921 -
Subordinated Debentures, due 2043
(US$460 million) 536 553
-----------------------------
3,687 4,259
-----------------------------
-----------------------------
Note:
(1) Includes $50 million of principal that was effectively converted
through a currency exchange contract to US$37 million. Amounts
due November 2006 have not been included in current liabilities
as we expect to refinance this amount with our term credit
facilities.
(a) Acquisition credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities During the third quarter, we repaid all amounts outstanding under our Acquisition Credit Facilities which were used to fund a portion of the purchase price for the acquisition of EnCana UK Limited in 2004. We replaced the US$500 million development facility associated with the Acquisition Credit Facilities with the renewal of our term credit facilities. During 2005, the weighted average interest rate on the Acquisition Credit Facilities was 3.9% (2004 - 3.2%). (b) Canexus LP term credit facilities Canexus LP has $350 million of committed, secured, revolving term credit facilities which are available until 2009. At December 31, 2005, US$147 million ($171 million) was drawn on these facilities. Borrowings are available as Canadian bankers' acceptances A bankers' acceptance, or BA, is a time draft drawn on and accepted by a bank. Before acceptance, the draft is not an obligation of the bank; it is merely an order by the drawer to the bank to pay a specified sum of money on a specified date to a named person or to the , LIBOR-based loans, Canadian prime rate loans or US-dollar base rate loans. Interest is payable monthly at a floating rate. The term credit facilities are secured by a floating charge debenture debenture (dəbĕn`chər), document acknowledging indebtedness. In Great Britain a debenture is practically the same as a bond, and debenture stock is similar to preferred stock. over all of Canexus LP's assets and by certain guarantees, security interests and subordination agreements subordination agreement n. a written contract in which a lender who has secured a loan by a mortgage or deed of trust agrees with the property owner to subordinate the first loan to a new loan (thus giving the new loan priority in any foreclosure or payoff). provided by certain affiliates of Canexus LP (which do not include Nexen). During 2005, the weighted average interest rate on the Canexus LP term credit facilities was 4.8%. (c) Term credit facilities We have committed, unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. , term credit facilities of $2.4 billion which are available until 2010. The lenders have the option to extend the terms annually. Borrowings are available as Canadian bankers' acceptances, LIBOR-based loans, Canadian prime loans, US-dollar base rate loans or British pound call rate loans. Interest is payable monthly at a floating rate. During 2005, the weighted average interest rate was 4.4% (2004 - 3.2%). At December 31, 2005, $250 million of these facilities were utilized to support letters of credit. (d) Notes, due 2015 In March 2005, we issued US$250 million of notes. Interest is payable semi-annually at a rate of 5.20% and the principal is to be repaid in March 2015. We may redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. part or all of the notes at any time. The redemption price Redemption price See: Call price redemption price 1. The price at which an open-end investment company will buy back its shares from the owners. In most cases, the redemption price is the net asset value per share. 2. will be the greater of par and an amount that provides the same yield as a US Treasury security having a term to maturity equal to the remaining term of the notes plus 0.15%. (e) Notes, due 2035 In March 2005, we issued US$790 million of notes. Interest is payable semi-annually at a rate of 5.875% and the principal is to be repaid in March 2035. We may redeem part or all of the notes at any time. The redemption price will be the greater of par and an amount that provides the same yield as a US Treasury security having a term to maturity equal to the remaining term of the notes plus 0.2%.
(f) Interest expense
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Long-Term Debt 63 46 260 182
Other 3 3 15 12
----------------------------------------
66 49 275 194
Less: Capitalized (53) (24) (178) (51)
----------------------------------------
Total 13 25 97 143
----------------------------------------
----------------------------------------
Capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. relates to and is included as part of the cost of our oil, gas and Syncrude properties, plant and equipment. The capitalization rates Capitalization Rate According to the Appraisal Institute, it is a method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, by dividing the income estimate by an appropriate rate. are based on our weighted-average cost of borrowings. (g) Short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. borrowings Nexen has uncommitted, unsecured credit facilities of approximately $732 million. No amounts were drawn under these facilities at December 31, 2005 (2004 - $100 million). We have utilized $468 million of these facilities to support letters of credit at December 31, 2005. Interest is payable at floating rates. During 2005, the weighted average interest rate on our short-term borrowings was 3.6% (2004 - 2.9%). 8. ASSET RETIREMENT OBLIGATIONS Changes in carrying amounts of the asset retirement obligations associated with our property, plant and equipment are as follows:
December 31 December 31
2005 2004
---------------------------------------------------------------------
Balance at Beginning of Year 468 323
Obligations Assumed with
Development Activities 72 12
Obligations Assumed with
Business Acquisition - 134
Obligations Discharged with
Disposed Properties (37) (4)
Expenditures Made on Asset Retirements (34) (31)
Accretion 26 17
Revisions to Estimates 138 24
Effects of Foreign Exchange (22) (7)
-----------------------------
Balance at End of Year 1, 2 611 468
-----------------------------
-----------------------------
Notes:
(1) Obligations due within 12 months of $21 million
(2004 - $47 million) have been included in accounts payable and
accrued liabilities. Obligations related to discontinued
operations of $22 million have been included with liabilities of
discontinued operations at December 31, 2004.
(2) Obligations relating to our oil and gas activities amount to $564
million (2004 - $422 million) and obligations relating to our
chemicals business amount to $47 million (2004 - $46 million).
Our total estimated undiscounted asset retirement obligations amount to $1,471 million. We have discounted the total estimated asset retirement obligations using a weighted-average, credit-adjusted risk-free rate Risk-free rate The rate earned on a riskless asset. of 5.7%. Approximately $88 million included in our asset retirement obligations will be settled over the next five years. The remaining obligations settle beyond five years and will be funded by future cash flows from our operations. In connection with the sale of our chemicals business to Canexus LP, we have contributed $14 million to a remediation fund to be used for asset retirement obligations associated with the assets sold. This is included on our balance sheet as part of deferred charges and other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. . We own interests in assets for which the fair value of the asset retirement obligations cannot be reasonably determined because the assets currently have an indeterminate That which is uncertain or not particularly designated. INDETERMINATE. That which is uncertain or not particularly designated; as, if I sell you one hundred bushels of wheat, without stating what wheat. 1 Bouv. Inst. n. 950. life and we cannot determine when remediation activities would take place. These assets include our interest in Syncrude's upgrader and sulphur Sulphur, city, United States Sulphur, city (1990 pop. 20,125), Calcasieu parish, SW La.; inc. 1914. It is a trade center for an area producing natural gas, oil, and timber as well as sorghum, soybeans, cattle, and crawfish. pile pile, post of timber, steel, or concrete used to support a structure. Vertical piles, or bearing piles, the most common form, are generally needed for the foundations of bridges, docks, piers, and buildings. Slender tree trunks, roughly trimmed and about 10 in. (25. . The estimated future recoverable reserves at Syncrude are significant and given the long life of this asset, we are unable to determine when asset retirement activities would take place. Furthermore, the Syncrude plant can continue to run indefinitely in·def·i·nite adj. Not definite, especially: a. Unclear; vague. b. Lacking precise limits: an indefinite leave of absence. c. with ongoing maintenance activities. The retirement obligations for these assets will be recorded in the first year in which the lives of the assets are determinable.
9. DEFERRED CREDITS AND OTHER LIABILITIES
December 31 December 31
2005 2004
---------------------------------------------------------------------
Fixed Price Natural Gas Contracts
(Note 10) 128 -
Long-Term Marketing Derivative Contracts
(Note 10) 124 46
Deferred Transportation 87 33
Stock Based Compensation Liability 53 -
Defined Benefit Pension Obligation 39 32
Other 48 31
-----------------------------
Total 479 142
-----------------------------
-----------------------------
10. DERIVATIVE INSTRUMENTS Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. AND FINANCIAL RISK MANAGEMENT (a) Carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. and estimated fair value of derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. and financial instruments The carrying value, fair value, and unrecognized gains or losses on our outstanding derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. and long-term financial assets Financial assets Claims on real assets. and liabilities are:
Cdn$ millions December 31, 2005
---------------------------------------------------------------------
Carrying Fair Unrecognized
Value Value Gain/(Loss)
-----------------------------------
Commodity Price Risk
Non-Trading Activities
Crude Oil Put Options 4 4 -
Fixed Price Natural Gas Contracts (175) (175) -
Natural Gas Swaps 29 29 -
Trading Activities
Crude Oil and Natural Gas 161 161 -
Future Sale of Gas Inventory - (35) (35)
Foreign Currency Risk
Non-Trading Activities 14 14 -
Trading Activities 8 8 -
-----------------------------------
Total Derivatives 41 6 (35)
-----------------------------------
-----------------------------------
Financial Assets and Liabilities
Long-Term Debt (3,687) (3,863) (176)
-----------------------------------
-----------------------------------
Cdn$ millions December 31, 2004
---------------------------------------------------------------------
Carrying Fair Unrecognized
Value Value Gain/(Loss)
-----------------------------------
Commodity Price Risk
Non-Trading Activities
Crude Oil Put Options 200 200 -
Fixed Price Natural Gas Contracts - (98) (98)
Natural Gas Swaps - - -
Trading Activities
Crude Oil and Natural Gas 83 83 -
Future Sale of Gas Inventory - 6 6
Foreign Currency Risk
Non-Trading Activities 7 7 -
Trading Activities 10 10 -
-----------------------------------
Total Derivatives 300 208 (92)
-----------------------------------
-----------------------------------
Financial Assets and Liabilities
Long-Term Debt (4,259) (4,503) (244)
-----------------------------------
-----------------------------------
The estimated fair value of all derivative instruments is based on quoted market prices and, if not available, on estimates from third-party brokers or dealers. The carrying value of cash and cash equivalents, restricted cash, amounts receivable and short-term obligations approximates their fair value because the instruments are near maturity. (b) Commodity price risk management Non-Trading Activities We generally sell our crude oil and natural gas under short-term market based contracts. Crude oil put options We purchased WTI crude oil put options to manage the commodity price risk exposure of a portion of our oil production in 2005 and 2006. These options established an annual average WTI floor price of US$43/bbl in 2005 and US$38/bbl in 2006 at a cost of $144 million. The WTI crude put options with respect to 2005 production were not used and have expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. . The WTI crude oil put options with respect to 2006 production are stated at fair market value and are included in deferred charges and other assets as they settle beyond 12 months of December 31, 2005. Any change in fair value is included in marketing and other on the Unaudited Consolidated Statement of Income.
Notional Average Fair
Volumes Term Price (WTI) Value
---------------------------------------------------------------------
(bbls/d) (US$/bbl) (Cdn$ millions)
WTI Crude Oil
Put Options 30,000 2006 39 2
20,000 2006 38 1
10,000 2006 36 1
---------------
4
---------------
---------------
Fixed price natural gas contracts and natural gas swaps In July July: see month. and August 2005, we sold certain Canadian oil and gas properties and we retained fixed price natural gas contracts that were previously associated with those properties (see Note 15). Since these contracts are no longer used in the normal course of our oil and gas operations, they have been marked-to-market Marked-to-market An arrangement whereby the profits or losses on a futures contract are settled each day. and are included in the Unaudited Consolidated Balance Sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. . Any change in fair value is included in marketing and other in the Unaudited Consolidated Statement of Income.
Notional Fair
Volumes Term Price Value
---------------------------------------------------------------------
(Gj/d) ($/Gj) (Cdn$ millions)
Fixed Price Natural
Gas Contracts 22,034 2005- 2.28- (47)
2006 3.72
15,514 2007- 2.47- (128)
2010 2.77
---------------
(175)
---------------
---------------
Following the sale of the Canadian oil and gas properties, we entered into natural gas swaps to economically hedge our exposure to the fixed price natural gas contracts. Any change in fair value is included in marketing and other in the Unaudited Consolidated Statement of Income.
Notional Fair
Volumes Term Price Value
---------------------------------------------------------------------
(Gj/d) ($/Gj) (Cdn$ millions)
Natural Gas Swaps 22,034 2005- 9.02-
2006 11.81 1
15,514 2007-
2010 7.45 28
---------------
29
---------------
---------------
Trading Activities Crude oil and natural gas We enter into physical purchase and sales contracts Sales Contract Contract between a seller and buyer for the sale of goods, services, or both. as well as financial commodity contracts to enhance our price realizations and lock-in (standard) lock-in - When an existing standard becomes almost impossible to supersede because of the cost or logistical difficulties involved in convincing all its users to switch something different and, typically, incompatible. our margins. The physical and financial commodity contracts (derivative contracts) are stated at market value. The $161 million fair value of the commodity contracts at December 31, 2005 is included in the Unaudited Consolidated Balance Sheet and any change in fair value is included in marketing and other on the Unaudited Consolidated Statement of Income. Future Sale of Gas Inventory We have certain NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). futures contracts Futures Contract An exchange traded agreement to buy or sell a particular type and grade of commodity for delivery at an agreed upon place and time in the future. Futures contracts are transferable between parties. and swaps in place, which effectively lock-in our margins on the future sale of our natural gas inventory in storage. We have designated, in writing, some of these derivative contracts as cash flow hedges A cash flow hedge is a hedge of the exposure to the variability of cash flow that
Hedged Average Unrecognized
Volumes Month Price Loss
---------------------------------------------------------------------
(mmcf) (US$/mcf) (Cdn$ millions)
NYMEX Natural
Gas Futures 9,100 January 2006 8.89 (27)
400 February 2006 10.96 -
NYMEX Natural
Gas Fixed Price
and Basis Swaps 4,529 January 2006 9.15 (8)
---------------
(35)
---------------
---------------
(c) Foreign currency exchange rate risk management
Non-Trading Activities
Amount Term Rate Fair Value
---------------------------------------------------------------------
(for US$1.00) (Cdn$ millions)
Foreign Currency Pounds
Call Options Sterling
- Buzzard (i) 207 million 2006 2.00 -
US Dollar Call
Options -
Canexus (ii) US$11 million 2006 0.813 6
Foreign Currency
Swap (iii) US$37 million 2006 0.736 8
---------------
14
---------------
---------------
(i) Foreign currency call options - Buzzard Our Buzzard development project in the North Sea creates foreign currency exposure as a portion of the capital costs are denominated in British pounds and Euros. In order to reduce our exposure to fluctuations in these currencies relative to the US dollar, we purchased foreign currency call options in early 2005 which effectively set a ceiling on most of our British pound and Euro spending exposure from March 2005 through to the end of 2006. Any change in fair value is included in marketing and other on the Unaudited Consolidated Statement of Income. (ii) US dollar call options - Canexus The operations of Canexus are exposed to changes in the US dollar exchange rate as a portion of their sales are denominated in US dollars. In connection with the initial public offering of Canexus, we purchased US-dollar call options to reduce this exposure to fluctuations in the Canadian - US-dollar exchange rate. Canexus has the right to sell US$11 million monthly and purchase Canadian dollars at an exchange rate of US$0.813 until August 2006. Any change in fair value is included in marketing and other on the Unaudited Consolidated Statement of Income. (iii) Foreign currency swap Currency Swap A swap that involves the exchange of principal and interest in one currency for the same in another currency. Notes: Currency swaps were originally done to get around the problem of exchange controls. We occasionally use derivative instruments to effectively convert cash flows from Canadian to US dollars and vice versa VICE VERSA. On the contrary; on opposite sides. . At December 31, 2005, we held a foreign currency derivative instrument Noun 1. derivative instrument - a financial instrument whose value is based on another security derivative legal document, legal instrument, official document, instrument - (law) a document that states some contractual relationship or grants some right that obligates us and the counterparty Counterparty The other participant, including intermediaries, in a swap or contract. to exchange principal and interest amounts. In November November: see month. 2006, we will pay US$37 million and receive Cdn$50 million. Any change in fair value is included in marketing and other on the Unaudited Consolidated Statement of Income. Trading Activities Our sales and purchases of crude oil and natural gas are generally transacted in or referenced to the US dollar, as are most of the financial commodity contracts used by our marketing group. We enter into forward contracts to sell US dollars. When combined with certain commodity sales contracts, either physical or financial, these forward contracts allow us to lock-in our margins on the future sale of crude oil and natural gas. The $8 million fair value of the US-dollar forward contracts and swaps at December 31, 2005 is included in the Unaudited Consolidated Balance Sheet and any change in fair value is included in marketing and other on the Unaudited Consolidated Statement of Income. (d) Total carrying value of derivative contracts related to trading activities Amounts related to derivative contracts held by our marketing group are equal to fair value as we use mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. accounting. The amounts are as follows:
December 31 December 31
Cdn$ millions 2005 2004
---------------------------------------------------------------------
Accounts Receivable 382 177
Deferred Charges and Other Assets (1) 232 91
-----------------------------
Total Derivative Contract Assets 614 268
-----------------------------
-----------------------------
Accounts Payable and Accrued Liabilities 321 129
Deferred Credits and Other Liabilities (1) 124 46
-----------------------------
Total Derivative Contract Liabilities 445 175
-----------------------------
-----------------------------
Total Derivative Contract Net Assets (2) 169 93
-----------------------------
-----------------------------
Notes:
(1) These derivative contracts settle beyond 12 months and are
considered non-current.
(2) Comprised of $161 million (2004 - $83 million) related to
commodity contracts and $8 million (2004 - $10 million) related
to US dollar forward contracts and swaps.
Our exchange-traded derivatives are subject to margin deposit requirements. We are required to advance cash to counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. in order to satisfy these requirements. We did not have any margin deposit requirements at December 31, 2005 and 2004. 11. SHAREHOLDERS' EQUITY Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. Dividends Dividends per common share for the three months ended December 31, 2005 were $0.05 (2004 - $0.05). Dividends per common share for the twelve months ended December 31, 2005 were $0.20 (2004 - $0.20). 12. EARNINGS PER COMMON SHARE Our shareholders approved a split of our issued and outstanding common shares on a two-for-one basis at our annual and special meeting on April 27, 2005. All common share and per common share amounts have been restated to retroactively reflect this share split. We calculate basic earnings per common share from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the using net income from continuing operations divided by the weighted-average number of common shares outstanding. We calculate basic earnings per common share using net income and the weighted-average number of common shares outstanding. We calculate diluted earnings per common share from continuing operations and diluted earnings per common share in the same manner as basic, except we use the weighted-average number of diluted common shares outstanding in the denominator denominator the bottom line of a fraction; the base population on which population rates such as birth and death rates are calculated. denominator .
Three Months Twelve Months
Ended December 31 Ended December 31
(millions of shares) 2005 2004 2005 2004
---------------------------------------------------------------------
Weighted-average number of
common shares outstanding 261.0 258.3 260.4 257.3
Shares issuable pursuant to
stock options 12.3 12.4 13.4 13.1
Shares to be purchased from
proceeds of stock options (6.0) (9.0) (7.4) (9.8)
-----------------------------------------
Weighted-average number of
diluted common shares
outstanding 267.3 261.7 266.4 260.6
-----------------------------------------
-----------------------------------------
In calculating the weighted-average number of diluted common shares outstanding we excluded 1,105,333 options (2004 - 1,388,800) for the three months ended December 31, 2005 and 280,708 options (2004 - 348,200) for the twelve months ended December 31, 2005 because their exercise price was greater than the average common share market price in the period. During the periods presented, outstanding stock options were the only potential dilutive instruments.
13. CASH FLOWS
(a) Charges and credits to income not involving cash
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Depreciation, Depletion,
Amortization and Impairment 304 194 1,052 674
Stock Based Compensation 21 (26) 411 74
Future Income Taxes 41 50 (100) 69
Change in Fair Value of Crude
Oil Put Options 12 (56) 196 (56)
Non-Cash Items included in
Discontinued Operations - 37 (325) 132
Unamortized Issue Costs on
Redemption of Preferred Securities - - - 11
Gain on Disposition of Assets - (20) (4) (24)
Gain on Dilution of Interest in
Chemicals Business - - (193) -
Net Income Attributable to
Non-Controlling Interests 3 - 8 -
Other 22 31 24 26
--------------------------------------
Total 403 210 1,069 906
--------------------------------------
--------------------------------------
(b) Changes in non-cash working capital
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Accounts Receivable (261) (320) (1,078) (454)
Inventories and Supplies 11 40 (163) (106)
Other Current Assets 5 7 (10) 44
Accounts Payable and Accrued
Liabilities (85) 390 982 650
Accrued Interest Payable 15 (3) 20 (12)
--------------------------------------
Total (315) 114 (249) 122
--------------------------------------
--------------------------------------
Relating to:
Operating Activities (315) (23) (195) (122)
Investing Activities - 137 (54) 244
--------------------------------------
Total (315) 114 (249) 122
--------------------------------------
--------------------------------------
(c) Other cash flow information
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Interest Paid 47 47 237 190
Income Taxes Paid 77 67 325 249
--------------------------------------
14. MARKETING AND OTHER
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Marketing Revenue, Net 379 217 847 608
Change in Fair Value of Crude
Oil Put Options (12) 56 (196) 56
Interest 7 4 29 12
Foreign Exchange Losses (20) (19) (19) (13)
Other 18 28 41 50
--------------------------------------
Total 372 286 702 713
--------------------------------------
--------------------------------------
15. DISCONTINUED OPERATIONS Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. In the third quarter of 2005, we sold certain Canadian conventional oil and gas properties in southeast Southeast or south east is the ordinal direction halfway between south and east. It the opposite of northwest. Southeast or South East can refer to: Saskatchewan (səskăch`əwən, –wän', săs'–), province (2001 pop. 978,933), 251,700 sq mi (651,903 sq km), W Canada. , northwest For names and places containing the slightly longer word 'northwestern' (or variants), see . Northwest or north west is the ordinal direction halfway between north and west on a compass. It is the opposite of southeast. Saskatchewan, northeast “Northeastern” redirects here. For the Boston college, see Northeastern University, Boston. Northeast or north east is the ordinal direction halfway between north and east. It is the opposite of southwest. See boxing the compass. British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography and the Alberta foothills. The results of operations of these properties have been presented as discontinued operations. The sales closed in the third quarter with net proceeds of $900 million after closing adjustments and we realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. of $225 million. These gains are net of losses attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to pipeline contracts and fixed price gas sales contracts associated with these properties that we have retained but no longer use in connection with our oil and gas business. During the fourth quarter of 2004, we concluded production from our Buffalo field, offshore Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. . The results of our operations in Australia have been presented as discontinued operations, as we have no plans to continue operations in the country. Remediation and abandonment abandonment, in law, voluntary, intentional, and absolute relinquishment of rights or property without conveying them to any other person. Abandonment also means willfully leaving one's spouse or children, intending not to return (see desertion). activities have been completed and no gain or loss was recognized. The results of operations from these properties in Australia and Canada are detailed below and shown as discontinued operations in our Unaudited Consolidated Statement of Income.
Three months ended December 31
2005 2004
Canada Canada Australia Total
----------------------------------------- --------------------------
Revenues
Net Sales - 61 26 87
Marketing and Other - 1 - 1
-------- --------------------------
- 62 26 88
Expenses
Operating - 9 22 31
Depreciation, Depletion,
Amortization and Impairment - 18 - 18
Exploration - 2 - 2
-------- --------------------------
Income before Income Taxes - 33 4 37
Future Income Taxes - 17 - 17
-------- --------------------------
Net Income from Discontinued
Operations - 16 4 20
-------- --------------------------
-------- --------------------------
Earnings per Common Share
Basic - 0.06 0.02 0.08
-------- --------------------------
-------- --------------------------
Diluted - 0.06 0.02 0.08
-------- --------------------------
-------- --------------------------
Twelve months ended December 31
2005 2004
Canada Canada Australia Total
----------------------------------------- --------------------------
Revenues
Net Sales 154 232 75 307
Marketing and Other - 1 - 1
Gain on Disposition of Assets 225 - - -
-------- --------------------------
379 233 75 308
Expenses
Operating 27 40 53 93
Depreciation, Depletion,
Amortization and Impairment 28 70 9 79
Exploration Expense 1 3 - 3
-------- --------------------------
Income before Income Taxes 323 120 13 133
Future Income Taxes (129) 50 - 50
-------- --------------------------
Net Income from Discontinued
Operations 452 70 13 83
-------- --------------------------
-------- --------------------------
Earnings per Common Share
Basic 1.74 0.27 0.05 0.32
-------- --------------------------
-------- --------------------------
Diluted 1.70 0.27 0.05 0.32
-------- --------------------------
-------- --------------------------
Assets and liabilities on the Unaudited Consolidated Balance Sheet include the following amounts for discontinued operations. There were no assets and liabilities related to discontinued operations at December 31, 2005.
As at December 31, 2004
Canada Australia Total
---------------------------------------------------------------------
Cash and Cash Equivalents - 1 1
Accounts Receivable 28 8 36
Other Current Assets - 1 1
Property, Plant and Equipment, Net 440 - 440
Accounts Payable and Accrued Liabilities 14 25 39
Asset Retirement Obligations 22 - 22
Future Income Tax Liabilities 108 - 108
------------------- ------
16. COMMITMENTS, CONTINGENCIES Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. AND GUARANTEES As described in Note 12 to the Audited Consolidated Financial Statements included in our 2004 Annual Report on Form 10-K, there are a number of lawsuits and claims pending, the ultimate results of which cannot be ascertained as·cer·tain tr.v. as·cer·tained, as·cer·tain·ing, as·cer·tains 1. To discover with certainty, as through examination or experimentation. See Synonyms at discover. 2. at this time. We record costs as they are incurred or become determinable. We believe the resolution of these matters would not have a material adverse effect on our liquidity, consolidated financial position or results of operations.
17. PENSION AND OTHER POST RETIREMENT BENEFITS
Net pension expense recognized under our defined benefit pension
plans
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Nexen(1)
Cost of Benefits Earned
by Employees 6 2 16 8
Interest Cost on Benefits Earned 3 3 13 12
Expected Return on Plan Assets (3) (2) (11) (11)
Net Amortization and Deferral - 1 1 1
--------------------------------------
Net 6 4 19 10
--------------------------------------
Syncrude
Cost of Benefits Earned
by Employees 1 - 4 3
Interest Cost on Benefits Earned 1 2 5 5
Expected Return on Plan Assets (1) (1) (4) (4)
Net Amortization and Deferral 3 1 3 1
--------------------------------------
Net 4 2 8 5
--------------------------------------
Total 10 6 27 15
--------------------------------------
--------------------------------------
Note:
(1) Includes pension expense related to Canexus defined benefit
pension plan.
18. OPERATING SEGMENTS AND RELATED INFORMATION Nexen is involved in activities relating to Oil and Gas, Syncrude and Chemicals in various geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. locations as described in Note 18 to the Audited Consolidated Financial Statements included in our 2004 Annual Report on Form 10-K.
Three months ended December 31, 2005
(Cdn$ millions) Oil and Gas
---------------------------------------------------------------------
United United Other
Yemen Canada States Kingdom Countries(2) Marketing
---------------------------------------------------------------------
Net Sales 352 139 199 124 41 12
Marketing
and Other 2 1 2 15 - 379
Gain on
Dilution
of Interest
In Chemicals
Business - - - - - -
---------------------------------------------------------------------
Total
Revenues 354 140 201 139 41 391
Less:
Expenses
Operating 41 36 27 19 5 10
Depreciation,
Depletion,
Amortization
and Impairment
(DD&A) 98 35 52 95 2 3
Transportation
and Other 2 6 1 - 2 179
General and
Administrative
(4) 3 12 13 3 21 17
Exploration 7 8 17 33 21(5) -
Interest - - - - - -
---------------------------------------------------------------------
Income (Loss)
from Continuing
Operations
before Income
Taxes 203 43 91 (11) (10) 182
---------------------------------------------------------------------
---------------------------------------------------------------------
Less: Provision
for Income
Taxes (6)
Less: Non
Controlling
Interests
Add: Net
Income from
Discontinued
Operations
Net Income
Identifiable
Assets 635 2,449 1,433 4,775 183 3,165(7)
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital
Expenditures
Development
and Other 52 296 53 142 4 2
Exploration 14 37 33 8 7 -
Proved
Property
Acquisitions - - - - - -
---------------------------------------------------------------------
66 333 86 150 11 2
---------------------------------------------------------------------
---------------------------------------------------------------------
Property, Plant
and Equipment
Cost 2,243 3,631 2,437 4,013 249 177
Less:
Accumulated
DD&A 1,841 1,311 1,159 216 119 72
---------------------------------------------------------------------
Net Book
Value 402 2,320 1,278 3,797 130 105
---------------------------------------------------------------------
---------------------------------------------------------------------
Corporate
and
(Cdn$ millions) Syncrude(1) Chemicals Other Total
---------------------------------------------------------------------
Net Sales 105 101 - 1,073
Marketing and Other - (1) (26)(3) 372
Gain on Dilution of Interest
In Chemicals Business - - - -
---------------------------------------------------------------------
Total Revenues 105 100 (26) 1,445
Less: Expenses
Operating 42 63 - 243
Depreciation, Depletion,
Amortization and
Impairment (DD&A) 4 9 6 304
Transportation and Other 8 10 18 226
General and Administrative(4) 1 6 69 145
Exploration - - - 86
Interest - 2 11 13
---------------------------------------------------------------------
Income (Loss) from
Continuing Operations
before Income Taxes 50 10 (130) 428
-----------------------------------------------------------
-----------------------------------------------------------
Less: Provision for
Income Taxes (6) 125
Less: Non Controlling
Interests 3
Add: Net Income from
Discontinued Operations -
--------
Net Income 300
--------
--------
Identifiable Assets 1,135 482 333 14,590
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital Expenditures
Development and Other 48 5 14 616
Exploration - - - 99
Proved Property
Acquisitions - - - -
---------------------------------------------------------------------
48 5 14 715
---------------------------------------------------------------------
---------------------------------------------------------------------
Property, Plant and Equipment
Cost 1,240 827 245 15,062
Less: Accumulated DD&A 171 456 123 5,468
---------------------------------------------------------------------
Net Book Value 1,069 371 122 9,594
---------------------------------------------------------------------
---------------------------------------------------------------------
Notes:
(1) Syncrude is considered a mining operation for US reporting
purposes. Property, plant and equipment at December 31, 2005
include mineral rights of $6 million.
(2) Includes results of operations from producing activities in
Nigeria and Colombia.
(3) Includes interest income of $7 million, foreign exchange losses
of $20 million, decrease in the fair value of crude oil put
options of $12 million, and decrease in the fair value of foreign
currency call options of $1 million.
(4) Includes stock based compensation expense of $40 million.
(5) Includes exploration activities primarily in Nigeria, Colombia
and Equatorial Guinea.
(6) Includes Yemen cash taxes of $74 million.
(7) Approximately 86% of marketing's identifiable assets are accounts
receivable and inventories.
Twelve months ended December 31, 2005
(Cdn$ millions) Oil and Gas
---------------------------------------------------------------------
United United Other
Yemen Canada States Kingdom Countries(2) Marketing
---------------------------------------------------------------------
Net Sales 1,377 455 792 366 119 28
Marketing
and Other 8 3 2 16 4 847
Gain on
Dilution of
Interest
in Chemicals
Business - - - - - -
---------------------------------------------------------------------
Total
Revenues 1,385 458 794 382 123 875
Less: Expenses
Operating 150 121 96 95 12 30
Depreciation,
Depletion,
Amortization
and Impairment
(DD&A) 354 140 234 210 13 11
Transportation
and Other 6 23 1 - 2 641
General and
Administrative
(5) 42 105 84 8 97 89
Exploration 12 23 100 51 64(6) -
Interest - - - - - -
---------------------------------------------------------------------
Income (Loss)
from Continuing
Operations
before Income
Taxes 821 46 279 18 (65) 104
---------------------------------------------------------------------
---------------------------------------------------------------------
Less: Provision
for Income
Taxes(7)
Less: Non
Controlling
Interest
Add: Net
Income from
Discontinued
Operations (8)
Net Income
Identifiable
Assets 635 2,449 1,433 4,775 183 3,165(9)
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital
Expenditures
Development
and Other 236 947 148 566 14 16
Exploration 41 90 211 59 55 -
Proved
Property
Acquisitions - 17 3 - - -
---------------------------------------------------------------------
277 1,054 362 625 69 16
---------------------------------------------------------------------
---------------------------------------------------------------------
Property, Plant
and Equipment
Cost 2,243 3,631 2,437 4,013 249 177
Less:
Accumulated
DD&A 1,841 1,311 1,159 216 119 72
---------------------------------------------------------------------
Net Book
Value 402 2,320 1,278 3,797 130 105
---------------------------------------------------------------------
---------------------------------------------------------------------
Corporate
and
(Cdn$ millions) Syncrude(1) Chemicals Other Total
---------------------------------------------------------------------
Net Sales 397 398 - 3,932
Marketing and Other - 15 (193)(3) 702
Gain on Dilution of
Interest in Chemicals
Business - 193 - 193
---------------------------------------------------------------------
Total Revenues 397 606 (193) 4,827
Less: Expenses
Operating 152 237 - 893
Depreciation, Depletion,
Amortization and
Impairment (DD&A) 17 51(4) 22 1,052
Transportation and Other 21 40 62 796
General and Administrative(5) 1 45 321 792
Exploration - - - 250
Interest - 3 94 97
---------------------------------------------------------------------
Income (Loss) from
Continuing Operations
before Income Taxes 206 230 (692) 947
-----------------------------------------------------------
-----------------------------------------------------------
Less: Provision for
Income Taxes(7) 239
Less: Non Controlling
Interest 8
Add: Net Income from
Discontinued Operations(8) 452
--------
Net Income 1,152
--------
--------
Identifiable Assets 1,135 482 333 14,590
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital Expenditures
Development and Other 197 14 24 2,162
Exploration - - - 456
Proved Property Acquisitions - - - 20
---------------------------------------------------------------------
197 14 24 2,638
---------------------------------------------------------------------
---------------------------------------------------------------------
Property, Plant and Equipment
Cost 1,240 827 245 15,062
Less: Accumulated DD&A 171 456 123 5,468
---------------------------------------------------------------------
Net Book Value 1,069 371 122 9,594
---------------------------------------------------------------------
---------------------------------------------------------------------
Notes:
(1) Syncrude is considered a mining operation for US reporting
purposes. Property, plant and equipment at December 31, 2005
includes mineral rights of $6 million.
(2) Includes results of operations from producing activities in
Nigeria and Colombia.
(3) Includes interest income of $29 million, foreign exchange losses
of $19 million, decrease in the fair value of crude oil put
options of $196 million and decrease in the fair value of foreign
currency call options of $7 million.
(4) Includes impairment charge of $12 million related to the closure
of our sodium chlorate plant in Amherstburg, Ontario.
(5) Includes stock based compensation expense of $490 million.
(6) Includes exploration activities primarily in Nigeria, Colombia
and Equatorial Guinea.
(7) Includes Yemen cash taxes of $296 million.
(8) During the third quarter of 2005, we concluded the sale of
certain Canadian conventional oil and gas properties. The results
of these properties are shown as discontinued operations (see
Note 15).
(9) Approximately 86% of marketing's identifiable assets are accounts
receivable and inventories.
Three months ended December 31, 2004
(Cdn$ millions)
Oil and Gas
---------------------------------------------------------------------
Other
Yemen Canada US UK(2)Countries(3) Marketing
---------------------------------------------------------------------
Net Sales 242 100 230 36 20 4
Marketing and
Other 2 21(4) 1 - 2 217
---------------------------------------------------------------------
Total Revenues 244 121 231 36 22 221
Less: Expenses
Operating 29 29 25 6 1 4
Depreciation,
Depletion,
Amortization
and Impairment 46 32 73 18 4 2
Transportation
and Other 3 5 - - - 125
General and
Administrative
(6) 2 1 2 - 8 20
Exploration - 6 85 3 42(7) -
Interest - - - - - -
---------------------------------------------------------------------
Income (Loss)
from Continuing
Operations
before Income
Taxes 164 48 46 9 (33) 70
---------------------------------------------------------------------
---------------------------------------------------------------------
Less: Provision
for Income
Taxes(8)
Add: Net Income
from
Discontinued
Operations(9)
Net Income
Identifiable
Assets 564 1,979 1,359 4,446 218 2,030(10)
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital
Expenditures
Development
and Other 91 184 68 53 16 1
Exploration 8 33 78 4 25 -
Proved Property
Acquisitions - 4 - - - -
---------------------------------------------------------------------
99 221 146 57 41 1
---------------------------------------------------------------------
---------------------------------------------------------------------
Property, Plant
and Equipment
Cost 2,038 2,603 2,249 3,499 535 157
Less:
Accumulated
DD&A 1,550 1,195 1,037 16 408 64
---------------------------------------------------------------------
Net Book
Value 488 1,408(11) 1,212 3,483 127 93
---------------------------------------------------------------------
---------------------------------------------------------------------
(Cdn$ millions) Corporate
and
Syncrude(1) Chemicals Other Total
---------------------------------------------------------------------
Net Sales 78 95 - 805
Marketing and Other - 2 41(5) 286
---------------------------------------------------------------------
Total Revenues 78 97 41 1,091
Less: Expenses
Operating 35 59 - 188
Depreciation, Depletion,
Amortization and Impairment 5 9 5 194
Transportation and Other 4 13 11 161
General and Administrative(6) 1 3 15 52
Exploration - - - 136
Interest - - 25 25
---------------------------------------------------------------------
Income (Loss) from
Continuing Operations
before Income Taxes 33 13 (15) 335
-----------------------------------------------------------
-----------------------------------------------------------
Less: Provision for
Income Taxes(8) 109
Add: Net Income from
Discontinued Operations(9) 20
-------
Net Income 246
-------
-------
Identifiable Assets 912 497 378 12,383
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital Expenditures
Development and Other 59 11 14 497
Exploration - - - 148
Proved Property Acquisitions - - - 4
---------------------------------------------------------------------
59 11 14 649
---------------------------------------------------------------------
---------------------------------------------------------------------
Property, Plant and
Equipment
Cost 1,030 815 201 13,127
Less: Accumulated DD&A 155 409 90 4,924
---------------------------------------------------------------------
Net Book Value 875 406 111 8,203
---------------------------------------------------------------------
---------------------------------------------------------------------
Notes:
1 Syncrude is considered a mining operation for US reporting
purposes. Property, plant and equipment at December 31, 2004
includes mineral rights of $6 million.
2 On December 1, 2004 we acquired EnCana (U.K.) Limited.
3 Includes results of operations from producing activities in
Nigeria and Colombia.
4 Includes gains on dispositions from the sale of minor oil and gas
assets.
5 Includes interest income of $4 million and foreign exchange losses
of $19 million and fair value gains on crude oil put options of
$56 million.
6 Includes a $24 million decrease in our stock based compensation
obligations revalued each reporting period based on the change in
the market value of our common shares.
7 Includes exploration activities primarily in Nigeria.
8 Includes Yemen cash taxes of $59 million.
9 In the fourth quarter of 2004 we concluded production activities
in Australia. During the third quarter of 2005, we concluded the
sale of certain Canadian conventional oil and gas properties. The
combined results of these dispositions are shown as discontinued
operations (Note 15).
10 Approximately 81% of Marketing's identifiable assets are accounts
receivable and inventories.
11 Excludes PP&E costs of $860 million and accumulated depreciation
depletion and amortization of $420 million relating to the
Canadian properties disposed of during 2005 (Note 15).
Twelve months ended December 31, 2004
(Cdn$ millions)
Oil and Gas
---------------------------------------------------------------------
Other
Yemen Canada US UK(2)Countries(3) Marketing
---------------------------------------------------------------------
Net Sales 921 390 811 36 73 14
Marketing and
Other 5 27(4) 11 - 2 608
---------------------------------------------------------------------
Total Revenues 926 417 822 36 75 622
Less: Expenses
Operating 109 116 106 6 7 16
Depreciation,
Depletion,
Amortization
and
Impairment 169 128 258 18 18 10
Transportation
and Other 5 15 - - - 451
General and
Administrative(6) 4 42 30 - 47 58
Exploration 2 18 138 3 82(7) -
Interest - - - - - -
---------------------------------------------------------------------
Income (Loss)
from
Continuing
Operations
before Income
Taxes 637 98 290 9 (79) 87
---------------------------------------------------------------------
---------------------------------------------------------------------
Less: Provision
for Income
Taxes(8)
Add: Net Income
from
Discontinued
Operations(9)
Net Income
Identifiable
Assets 564 1,979 1,359 4,446 218 2,030(10)
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital
Expenditures
Development
and Other 267 491 267 53 24 4
Exploration 19 46 133 4 64 -
Proved Property
Acquisitions - 4 - - - -
---------------------------------------------------------------------
286 541 400 57 88 4
---------------------------------------------------------------------
---------------------------------------------------------------------
Property, Plant
and Equipment
Cost 2,038 2,603 2,249 3,499 535 157
Less:
Accumulated
DD&A 1,550 1,195 1,037 16 408 64
---------------------------------------------------------------------
Net Book
Value 488 1,408(11) 1,212 3,483 127 93
---------------------------------------------------------------------
---------------------------------------------------------------------
(Cdn$ millions) Corporate
and
Syncrude(1) Chemicals Other Total
---------------------------------------------------------------------
Net Sales 321 378 - 2,944
Marketing and Other - 5 55(5) 713
---------------------------------------------------------------------
Total Revenues 321 383 55 3,657
Less: Expenses
Operating 125 237 - 722
Depreciation, Depletion,
Amortization and Impairment 18 37 18 674
Transportation and Other 12 41 25 549
General and
Administrative(6) 1 28 89 299
Exploration - - - 243
Interest - - 143 143
---------------------------------------------------------------------
Income (Loss) from
Continuing Operations
before Income Taxes 165 40 (220) 1,027
-----------------------------------------------------------
-----------------------------------------------------------
Less: Provision for
Income Taxes(8) 317
Add: Net Income from
Discontinued Operations(9) 83
--------
Net Income 793
--------
--------
Identifiable Assets 912 497 378 12,383
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital Expenditures
Development and Other 214 58 33 1,411
Exploration - - - 266
Proved Property Acquisitions - - - 4
---------------------------------------------------------------------
214 58 33 1,681
---------------------------------------------------------------------
---------------------------------------------------------------------
Property, Plant and Equipment
Cost 1,030 815 201 13,127
Less: Accumulated DD&A 155 409 90 4,924
---------------------------------------------------------------------
Net Book Value 875 406 111 8,203
---------------------------------------------------------------------
---------------------------------------------------------------------
Notes:
1 Syncrude is considered a mining operation for US reporting
purposes. Property, plant and equipment at December 31, 2004
includes mineral rights of $6 million.
2 On December 1, 2004 we acquired EnCana (U.K.) Limited.
3 Includes results of operations from producing activities in
Nigeria and Colombia
4 Includes gains on dispositions from the sale of minor oil and gas
assets.
5 Includes interest income of $12 million, foreign exchange losses
of $13 million and fair value gains on crude oil put options of
$56 million.
6 Includes a one-time charge of $82 million related to the
modification of our stock option plan and a $15 million decrease
in our stock based compensation obligations revalued each
reporting period based on the change in the market value of our
common shares.
7 Includes exploration activities primarily in Nigeria and Colombia.
8 Includes Yemen cash taxes of $227 million.
9 In the fourth quarter of 2004, we concluded production activities
in Australia. During the third quarter of 2005, we concluded the
sale of certain Canadian conventional oil and gas properties. The
combined results of these dispositions are shown as discontinued
operations (Note 15).
10 Approximately 81% of Marketing's identifiable assets are accounts
receivable and inventories.
11 Excludes PP&E costs of $860 million and accumulated depreciation
depletion and amortization of $420 million relating to the
Canadian properties disposed of during 2005 (Note 15).
Nexen Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :NXY) (NYSE NYSE See: New York Stock Exchange :NXY) |
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