Challenges in the Deepwater Gulf of Mexico
Brian Reinsborough
Nexen Inc.
President
Nexen Petroleum U.S.A., Inc.
Friday, December 5, 2008
Agenda
 Why Deepwater Gulf of Mexico?
 Challenges Our Industry Faces
Nexen Inc.
 The Path Forward
Why Deepwater GoM?
 Long-Term Demand for Oil Remains Strong
 Deepwater has Large Yet-to-Find Resources
 Fiscal Regime is Stable and Attractive
 Proximity to a Consuming Market
Nexen Inc.
 Deepwater Drilling will Account for 25% of
Offshore Production
 Technology Breakthroughs will Drive Activity
Challenges Our Industry Faces: External Environment
Competitive
Landscape
Development
External
Environment
Nexen Inc.
Infrastructure
Technology
Access
Competitive Landscape
Competitive
Landscape
Access
Technology
 Players / New Entrants
 Access
Nexen Inc.
 Costs
Competitive
Landscape
Infrastructure
Development
Access
Competitive
Landscape
Access
Technology
 Lease Sales
 M&A
Nexen Inc.
Access
Infrastructure
Development
Technology
Competitive
Landscape
Access
Technology
 Seismic
 New Plays
Nexen Inc.
 Complex Geology
Technology
Infrastructure
Development
Infrastructure
Competitive
Landscape
Access
Technology
 Infrastructure
Development
 Tie-backs
Nexen Inc.
Infrastructure
Infrastructure
Development
Development
Competitive
Landscape
Access
Technology
 Resource
Constraints
 Execution
Nexen Inc.
 Knowledge
Development
Infrastructure
Development
Impact of Lower Prices & Recession
Type of Company
Nexen Inc.
Majors
Large Caps
E&P
NOC – Resource
Holder
Service
Companies
Lower
Oil Price
Seek to reduce
costs
Exploration
review
Reduce
discretionary
expenditure
Cut exploration
activity
Domestic budget
pressures
Margins at risk
as activity falls
Credit
Tightness
Maintain low
debt levels
(reduce buybacks?)
Conserve cash
Struggle to raise
finance
Lack of project
finance
Slow investment
in new
equipment
Response
Exploit
“opportunistic”
M&A
Delay /phase
major projects
Asset
rationalisation
for some
Sell assets to
fund
developments
Seek financially
strong partners
Become more
competitive
seeking service
contracts with
NOCs
The Path Forward
 Longer-Term Oil Price Forecast Remains Strong
 recession believed to be short term
 worldwide supply/demand equation will balance
 Projects may Slow Short Term
 industry consolidation expected to occur
 some companies will conserve capital
 Deepwater Projects are Long-Term Focused
 Deepwater Rigs will keep Drilling
Nexen Inc.
 assumes capital is available for contract owners
 deepwater rigs still in short supply
 Technology Advancements will Improve Economics
of New Plays