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The company, Canada's No. 4 independent oil producer, said it plans to spend C$2.6 billion next year, about 13 percent less than in 2008.
However Nexen still expects to boost output in 2009 by 10 percent, to 220,000-235,000 barrels of oil equivalent a day, as it focuses spending on areas like the North Sea, where it has promising new discoveries.
"We have scaled back investment on our mature conventional assets in both Canada and on the (continental) shelf in the Gulf of Mexico," Charlie Fischer, the company's chief executive, said on a conference call.
Canada's big oil companies are slashing spending to cope with a huge drop in the price of oil, which has fallen by more than $100 a barrel since peaking above $147 in July.
Most, including Nexen, are cutting back or deferring spending plans in Alberta's oil sands.
While the region holds the biggest reserves outside the Middle East, they are technically difficult and expensive to extract, and every project in the region has faced higher than expected costs on the multibillion-dollar projects.
Nexen said in October it has deferred a decision to expand its Long Lake oil sands project. The first C$6.1 billion, 60,000 barrel per day, phase is just starting up but Nexen said will spend about C$100 million on early development work for the project's second stage.
To be sure, not every oil sands firm is cutting back. Canadian Oil Sands Trust, the biggest shareholder in the Syncrude Canada project, said on Tuesday it would boost its capital spending next year by more than half to C$440 million as it boosts maintenance on the project and add expensive environmental equipment.
NORTH SEA SPENDING
Nexen predicted its cash flow would be between C$2.3 billion and C$2.9 billion in 2009, assuming a U.S. oil price of $50-$65 a barrel.
The company has earmarked C$400 million for North Sea development, including C$160 million for its Ettrick field.
Nexen said it will spend C$690 million on exploration, as it moves development of its Horn River, British Columbia, shale gas assets forward and drills up to 14 exploration and appraisal wells in the Gulf of Mexico, North Sea and offshore West Africa.
Last week, reports surfaced in the British press that French oil major Total SA was eyeing Nexen for a takeover, but the speculation has since died down.
Nexen shares were up 67 Canadian cents, or 3.2 percent, at C$21.55 on Wednesday afternoon on the Toronto Stock Exchange.
($1=$1.26 Canadian)
(Reporting by Scott Haggett and Jeffrey Jones; editing by Rob Wilson) Keywords: NEXEN/BUDGET (scott.haggett@thomsonreuters.com; Reuters Messaging: scott.haggett.reuters.com @reuters.net; +1 403 531-1622)
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