Nexen has signed an agreement to acquire an additional 15% interest in the Long Lake project and the joint venture lands from OPTI Canada Ltd., effective December 31, 2008. We will also become operator of the upgrader. Upon closing, we will have a 65% interest in the Long Lake project and the joint venture lands, and will be the sole operator of the resource and upgrader. We now expect our 2009 production guidance to increase by approximately 5,000 boe/d to average between 255,000 and 270,000 boe/d before royalties (225,000 to 240,000 boe/d net of royalties).
The total purchase price of the transaction is $735,000,000 and is expected to close in late January 2009, subject to normal approvals.
"We are excited by this opportunity to increase our ownership interest in this world-class resource," said Charlie Fischer, Nexen's President and CEO. "These are assets we know and understand and this is an excellent strategic fit that strengthens our position as one of the premier players in the oil sands."
As an existing co-venturer, we are confident that the transition in operatorship will be a smooth one. Our objective is to facilitate a seamless transition with continued focus on the ramp up of production and preserve the knowledge base that has been developed. The acquisition will also create operational efficiencies and reduce the cost of managing Long Lake.
"Long Lake has a skilled and committed operating and project team that will continue to provide a solid foundation for the safe and successful operation of Long Lake," said Marvin Romanow, Nexen's Executive Vice President and CFO, and incoming President and CEO.
We expect to generate significant free cash flow this year, some of which has been used for share buybacks and have approximately $4 billion of cash and undrawn committed credit facilities. We are well positioned to fund this acquisition and will continue to have substantial liquidity that provides us with the financial strength and flexibility to invest in high quality projects that generate value over the long term.
"This acquisition has attractive metrics and increases our total proved reserves by approximately 8%," said Romanow. "We expect these assets will generate considerable shareholder value for many years to come."
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