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Nexen Management Discusses Q2 2012 Results - Earnings Call Transcript

I'd like to remind everyone, if you have detailed modeling questions, my IR team would be pleased to respond to those questions after the conclusion of the call. With that, I'll turn the call over to Kevin.

Kevin J. Reinhart

Thank you, Janet, and good morning, everyone. As always, we appreciate your time and interest this morning. I'm going to keep my comments quite brief as I'm assuming everyone has had a chance to read our news release.

Last quarter, I spoke about 4 topics that are very important to our business for 2012 and beyond. This quarter, let me again make a few comments on each of those 4 items.

First, we had a strong cash flow despite lower global oil prices. Cash flow was up 6% to over $700 million, primarily reflecting the inclusion of the Usan in our financial results for the first time. Netbacks at Usan are very strong. This quarter, they were almost double our corporate average net back from last year. Global oil prices were lower than the first quarter, but our waiting to Brent continues to benefit us compared to peers who have production link to either WTI or further discounted Canadian benchmark crudes.

Second, we met our production guidance again. We came at the midpoint at our guidance range which was slightly higher than what we had expected last conference call. This was due to a strong reliability run at Buzzard and good production late in the quarter from the Telford field in the UK.

We ramped up production at Usan during the quarter and we averaged about 100,000 barrels per day gross in line with our guidance. The Gulf of Mexico was at the low end of our guidance, as we previously indicated we had expected.

And lastly, we saw higher production in Canada, because of the delay in closing the shale gas joint venture. We have started the process for closing and expected to be concluded before the end of July. This will generate over $800 million of cash, including the reimbursement of capital we've incurred on our partner's behalf since the effective date of last July.

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