Nexen Inc. net income fell to $109-million in the second quarter, a bigger decline than analysts had been estimating, but the Calgary-based oil, gas and oilsands company said it has made solid progress on strategic initiatives.
Nexen reported Thursday that it earned 20 cents per common share in the three months ended June 30. The profit was down compared with both the year-earlier period and the first quarter of 2012.
Nexen said the latest quarter's results were hurt by the unsuccessful Kakuna exploration well in the Gulf of Mexico.
The company announced in May that the well hadn't found commercial levels of hydrocarbons. It said at the time the well had cost Nexen $120-million, or $80-million after taxes.
A year ago, Nexen's profit in the second quarter of 2011 was more than twice as big as the comparable period this year at $252-million or 48 cents per common share. In the first quarter of 2012, net income was $171-million or 32 cents per share.
Analysts estimates for the quarter had declined in recent days, falling to 27 cents per share on an adjusted basis from 29 cents per share earlier in the week and 41 cents per share last week.
On other financial measures, Nexen did better.
Cash flow from operations improved to $707-million or $1.34 per share in the three months ended June 30, up from $670-million or $1.27 per share in the first quarter of 2012 and from $598-million or $1.13 in the second quarter of 2011.
Analysts had been looking for $1.22 per share in cash flow.
Net debt was $3.1-billion, up from $2.8-billion a year ago but down from $3.4-billion at the end of March.
Nexen also said it's on track to meet its production guidance in both the third and fourth quarters.
"I'm pleased that we continue to make significant progress against our milestones and that we've generated solid financial results over the past few quarters," said Kevin Reinhart, Nexen's interim President and CEO.
In January, Nexen announced a major management shakeup, with Marvin Romanow leaving his post as CEO and Gary Nieuwenburg stepping down as the executive vice-president of the company's Canadian operations.
Mr. Reinhart, who had been chief financial officer, was appointed as interim president and CEO while the company searches for a permanent replacement for Romanow.
Nexen did not give a reason for the abrupt departures, but investors have been losing patience with the company's Long Lake oilsands project in northern Alberta.
At Long Lake, steam is pumped deep underground to soften the thick, tarry bitumen so it can flow to the surface. The project is unique in that uses the dregs of each barrel of crude as a fuel source.
But the project has yet to come close to its design capacity of 72,000 barrels of bitumen per day due to a number of operational glitches.
Performance has been improving recently. Bitumen production from Long Lake's existing well pads averaged 34,500 barrels per day during the first quarter, a 10 per cent improvement from the last three months of 2011.
Last month, Nexen said production from new wells it had drilled had been exceeding expectations.
Nexen has a 65 per cent working interest in Long Lake is the operator. The remaining 35 per cent interest is held by state-owned China National Offshore Oil Corp.
In addition to the oilsands, Nexen has shale gas land in northeastern B.C. and offshore operations in the North Sea, Gulf of Mexico and West Africa.