Nexen's drilling operations at Knotty Head in the Gulf of Mexico.
Nexen Inc. says a steep drop in oil prices dragged its profits down 95 per cent and its cut its operating cash flow by half during the second-quarter.
The Calgary-based energy firm also warned production will be squeezed over the next few months due to maintenance work at a number of its operations.
Nexen shares fell about 6.7 per cent in late morning trading on the Toronto Stock Exchange to $21.61.
The company said net income for the three months ended June 30 was $20-million, or 4 cents a share, a drastic drop from its profits of $380-million, or 72 cents per share in the same 2008 quarter.
Cash flow from operations fell by more than 50 per cent, plummeting to $443-million from $946-million the year before.
Revenues were about $1.3-billion, down from $2.1-billion in the year-ago quarter.
Analysts surveyed by Thomson Reuters expected Nexen to post a profit of 31 cents per share.
Nexen said oil prices - which fell from an average of $124 (U.S.) a barrel in the second quarter of 2008 to a meagre $60 in 2009 - were the main factor in the lower results.
But with oil prices about 40 per cent higher in the second quarter than in the first three months of the year, oil patch watchers had been anticipating an improvement quarter-over-quarter.
That wasn't the case with Nexen, which reported net earnings of $135-million (Canadian) during the first quarter of 2009 and cash flow from operations of $557-million.
Nexen's operations in the North sea, Gulf of Mexico and the oil sands are set to undergo maintenance work in the third quarter.
"As a result, we expect production to be temporarily lower than second-quarter volumes," said chief financial officer Kevin Reinhart on a conference call with analysts.
On top of a previously announced four-week shutdown of the Buzzard offshore platform in the United Kingdom, Nexen's Scott/Telford platform will be taken offline for five weeks.
Volumes from Wrigley in the Gulf of Mexico will be cut for three weeks for corrosion mitigation.
And Nexen's Long Lake project - which was completed late last year with minority partner Opti Canada Inc. - will have lower bitumen output as the company spruces up its water treatment plant.
"When we're doing startup, you have a multiplicity of things that you encounter," said chief executive officer Marvin Romanow on the conference call.
"You do find modest improvements that you could make and should make."
The improvements will cost Nexen a relatively small amount, between $3-million and $5-million.
"The encouraging part to me is that, when we make these changes, we're seeing the results of them delivering better reliability and better operability," Mr. Romanow said.
Volumes are expected to pick up again in the fourth quarter, and exit 2009 at the low end of its guidance range - somewhere between 280,000 and 300,000 barrels of oil equivalent per day.
Nexen reported a decline in quarterly production, which was affected by a rig move at its Buzzard project and a coker turnaround at Syncrude.
Quarterly production after royalties was 208,000 barrels of oil equivalent per day, down from 211,000 the year before.