Nexen oilsands expansion approved

Source: Nexen Inc.

Nexen Inc. (NYSE:NXY) (TSE:NXY), today announced that we have reached two significant milestones in our plan to fill the Long Lake upgrader to capacity. We recently began steaming pad 12 on the Long Lake lease. Additionally, we have received the necessary regulatory approvals to proceed with the development of pads 14 and 15 at Long Lake and the Kinosis 1A area. The wells on these pads are located in high-quality resource areas. 

"Achieving first steam at pad 12 and securing approvals for the remainder of our wells are key steps in our strategy to increase bitumen production and fill the upgrader," said Kevin Reinhart, Nexen's interim President & CEO. "Obtaining regulatory approval allows us to commence drilling the wells this summer." 

Our plan to fill the upgrader starts with increasing production from the existing 11 pads. The average bitumen production rate for the first quarter of 2012 was approximately 34,500 bbls/d, a 10% increase from the prior quarter. Pad 11, our newest producing pad, continues to ramp-up; recent rates of 5,700 bbls/d are trending toward the upper end of our expected range of 4,000 to 8,000 bbls/d.

Steaming on pad 12 started in March as planned and production is expected to begin there this summer. Completion work is underway on pad 13 and steam injection is expected to commence mid-year; bitumen production is expected to begin before the end of the year. Production from these pads is expected to ramp-up to full rates over an 18-24 month period.

With regulatory approvals now received, drilling is expected to commence on pads 14, 15 and Kinosis 1A later this year. Steam injection is expected on pads 14 and 15 in the second half of 2013, with Kinosis 1A following by mid-year 2014. Our winter 2011 core hole program has confirmed the high quality of resource in each of these areas. It has also allowed us to finalize the initial number of wells to be drilled in each area and to optimize the well layouts. For pads 14 and 15, the optimum well configuration calls for shorter well lengths, resulting in a lower production range on these pads.

Nexen has a 65% working interest in both Long Lake and Kinosis and is the operator. The remaining 35% interest is held by CNOOC Limited.

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