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Nexen in 2001 formed a joint venture with OPTI Canada to develop the Long Lake, Alta., oil sands property.

Out of sight from investors and the media, Nexen Inc. set up a special committee to conduct a strategic review earlier this year, the company announced at an investor summit in New York.

The news was reported by analyst Greg Pardy at RBC Dominion Securities, who deemed it the most interesting aspect of chief executive officer Martin Romanow's presentation. (Mr. Pardy gave the CEO a lot of credit for his "refreshing" candour.)

The strategic review was far-reaching, and the committee debated a number of options, including a corporate sale, asset disvestitures, such as selling its 7.23 per cent stake in Syncrude, and share buybacks. Ultimately, the company decided to focus on the main driver of its valuation gap: Long Lake.

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That's going to take some cash. Last week Nexen announced that the project will require another $900-million of capital over the next three years, some of which will go toward its upgrader. And it's also going to take time to work through the problems.

That's why Mr. Pardy believes that "in the absence of wild exploration success, we are hard pressed to identify any near term catalysts that will bridge [Nexen's]valuation gap."

For those who forget, the company got a new partner at Long Lake this year, after China National Offshore Oil Co. purchased Opti Canada, which holds the other 35 per cent stake in Long Lake, earlier this year.

Elsewhere, Nexen made two big moves last week. After selling its interest in Horn River shale-gas holdings for $700-million to a group led by Japan's Inpex Corp., Nexen also struck a deal with CNOOC to develop some of its Gulf of Mexico exploration wells.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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