CALGARY, Aug. 2 /PRNewswire-FirstCall/ - Nexen Inc. (NYSE and TSE: NXY)
announced today that Elf Petroleum Nigeria Ltd., a subsidiary of Total, and
operator of deepwater Oil Prospecting License (OPL) 222, has successfully
drilled two appraisal wells in the Usan field discovery, offshore south-
eastern Nigeria and has received approval of the Usan Field Development Plan
from the Nigeria National Petroleum Corporation (NNPC).
    The Usan field is located 110 kilometres offshore in water depths of
approximately 800 metres. The field was discovered and successfully appraised
in 2002. In 2004, a western extension was confirmed by the drilling of Usan 5
and 6. This year, the Usan 7 and 8 wells were successfully drilled confirming
an eastern extension of the field. A final investment decision is expected in
2006.
    The Field Development Plan has been approved by the Nigerian National
Petroleum Corporation (NNPC), the concessionaire of the licence. Additional
approval will be sought from the Department of Petroleum Resources in the near
future. The plan features development of the Usan field through 35 subsea
wells connected to a 2 million barrel storage FPSO by subsea lines and risers.
The processing capacity will be around 150,000 barrels of oil per day. First
oil is planned by 2010.
    NNPC is concessionaire for OPL 222 under a Production Sharing Contract
operated by Elf Petroleum Nigeria Ltd., (20%) in partnership with Chevron
Petroleum Nigeria Ltd. (30%), Esso Exploration and Production Nigeria
(Offshore East) Ltd. (30%) and Nexen Petroleum Nigeria Ltd. (20%).

    Nexen Inc. is an independent, Canadian-based global energy company,
listed on the Toronto and New York stock exchanges under the symbol NXY. We
are uniquely positioned for growth in the North Sea, deep-water Gulf of
Mexico, the Athabasca oil sands of Alberta, the Middle East and West Africa.
We add value for shareholders through successful full-cycle oil and gas
exploration and development, and leadership in ethics, integrity and
environmental protection.

    Forward Looking Statements

    Certain statements in this report constitute "forward-looking statements"
within the meaning of the United States Private Securities Litigation Reform
Act of 1995, Section 21E of the United States Securities Exchange Act of 1934,
as amended, and Section 27A of the United States Securities Act of 1933, as
amended. Such statements are generally identifiable by the terminology used
such as "intend", "plan", "expect", "estimate", "budget", "outlook" or other
similar words, and include statements relating to future production associated
with our Long Lake, North Sea and West Africa projects.
    The forward-looking statements are subject to known and unknown risks and
uncertainties and other factors which may cause actual results, levels of
activity and achievements to differ materially from those expressed or implied
by such statements. Such factors include, among others: market prices for oil
and gas and chemicals products; the ability to explore, develop, produce and
transport crude oil and natural gas to markets; the results of exploration and
development drilling and related activities; foreign-currency exchange rates;
economic conditions in the countries and regions where Nexen carries on
business; actions by governmental authorities including increases in taxes,
changes in environmental and other laws and regulations; renegotiations of
contracts; and political uncertainty, including actions by insurgent or other
armed groups or other conflict. The impact of any one factor on a particular
forward-looking statement is not determinable with certainty as such factors
are interdependent upon other factors, and management's course of action would
depend on its assessment of the future considering all information then
available. Any statements as to possible commerciality, development plans,
capacity expansions, drilling of new wells, ultimate recoverability of
reserves, future production rates, cash flows or ability to execute on the
disposition of assets or businesses, and changes in any of the foregoing are
forward-looking statements.
    Although we believe that the expectations conveyed by the forward-looking
statements are reasonable based on information available to us on the date
such forward-looking statements were made, no assurances can be given as to
future results, levels of activity and achievements. Readers should also refer
to Items 7 and 7A in our 2004 Annual Report on Form 10-K for further
discussion of the risk factors.
    Cautionary Note to U.S. Investors - The United States Securities and
Exchange Commission (SEC) permits oil and gas companies, in their filings with
the SEC, to discuss only proved reserves that are supported by actual
production or conclusive formation tests to be economically and legally
producible under existing economic and operating conditions. In this press
release, we may refer to "recoverable reserves", "probable reserves" and
"recoverable resources" which are inherently more uncertain than proved
reserves. These terms are not used in our filings with the SEC. Our reserves
and related performance measures represent our working interest before
royalties, unless otherwise indicated. Please refer to our Annual Report on
Form 10-K available from us or the SEC for further reserve disclosure.
    In addition, under SEC regulations, the Syncrude oil sands operations are
considered mining activities rather than oil and gas activities. Production,
reserves and related measures in this release include results from the
Company's share of Syncrude.
    Cautionary Note to Canadian Investors - Nexen is required to disclose oil
and gas activities under National Instrument 51-101- Standards of Disclosure
for Oil and Gas Activities (NI 51-101). However, the Canadian securities
regulatory authorities (CSA) have granted us exemptions from certain
provisions of NI 51-101 to permit US style disclosure. These exemptions were
sought because we are a US Securities and Exchange Commission (SEC) Registrant
and our securities regulatory disclosures, including Form 10-K and other
related forms, must comply with SEC requirements. Our disclosures may differ
from those Canadian companies who have not received similar exemptions under
NI 51-101.
    Please read the "Special Note to Canadian Investors" in Item 7A in our
2004 Annual Report on Form 10-K, for a summary of the exemption granted by the
CSA and the major differences between SEC requirements and NI 51-101. The
summary is not intended to be all-inclusive or to convey specific advice.
Reserve estimation is highly technical and requires professional collaboration
and judgment. The differences between SEC requirements and NI 51-101 may be
material.
    Our probable reserves disclosure applies the Society of Petroleum
Engineers/World Petroleum Council (SPE/WPC) definition for probable reserves.
The Canadian Oil and Gas Evaluation Handbook states there should not be a
significant difference in estimated probable reserve quantities using the
SPE/WPC definition versus NI 51-101.
    In this press release, we refer to oil and gas in common units called
barrel of oil equivalent (boe). A boe is derived by converting six thousand
cubic feet of gas to one barrel of oil (6mcf:1bbl). This conversion may be
misleading, particularly if used in isolation, since the 6mcf:1bbl ratio is
based on an energy equivalency at the burner tip and does not represent the
value equivalency at the well head.

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