By Edward Welsch
Of DOW JONES NEWSWIRES
CALGARY (Dow Jones)--Nexen Inc. (NXY) said oil production in Yemen has been shut down due to a worker strike, and that equipment problems at its offshore oil operations in the North Sea will reduce production rates.
Problems in Yemen and the North Sea add to Calgary-based Nexen's troubles, which have included production problems at a Canadian oil-sands operation and a negative outlook for its investment-grade credit rating by rating agency Moody's.
The strike at Nexen's Masila operations in Yemen began Sunday. With about 1,000 local workers represented by the Masila Labour Union making up more than 90% of Nexen's workforce, the company had to shut-in oil production there. The shut down is expected to affect between 28,000 and 35,000 barrels of oil a day, or as much as 15% of total production.
The strike is related to an ongoing dispute between workers and management, not the political unrest in Yemen's capital or the wave of protests against governments across the Arab world, Nexen spokesman Pierre Alvarez said.
The company also said production at its Buzzard offshore oil platform in the North Sea would be reduced due to problems with cooling equipment. A solution has been found, but production is expected to be reduced until the repairs are completed this summer.
Raymond James analyst Kristopher Zack said the strike in Yemen is likely factored into Nexen's stock price due to the unrest in the region, but that Buzzard's problems are more meaningful. Buzzard production was 80,500 barrels a day net to Nexen last year, or about a third of its total production. Zack estimated production at about 35,000 barrels a day during the second quarter, which could cut into cash flow per share by about 8%.
"This could be an overhang on the stock until the company demonstrates that the proper repairs are in place," he said.
Nexen shares declined 3.2% to $23.75 in recent trading on the New York Stock Exchange.