Nexen Inc. (NXY)

[mlkrborn]

Nexen provides update on operations in Yemen; application to extend the PSA on Block 14 has not been accepted (NXY) 14.70 : Co reports it has been informed by the Government of Yemen that its application to extend the Production Sharing Agreement on Block 14 has not been accepted. As a result, the PSA will expire on December 17, 2011. The block will then be operated by a newly created Yemen national operating co. The decrease in our overall production volumes resulting from the contract expiry will be mitigated by the start-up of the Usan project, offshore West Africa, which is expected to begin production in the first half of 2012. This change in production mix is expected to contribute to higher cash flow from operations in 2012 as Usan's anticipated netback is about double the Yemen netback at current prices. The PSA expiry will not have any effect on co's reserves, as we did not book any barrels beyond the PSA term. Similarly, all capital costs have been amortized over the contract period.