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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NO. 001-06702
A. Full title of the plan and address of the plan, if different
from that of the issuer named below:
NEXEN SAVINGS PLAN
12790 Merit Drive, Suite 800
Dallas, Texas 75251-1270
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office:
NEXEN INC.
801 - 7th Avenue SW
Calgary, Alberta, Canada T2P 3P7
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NEXEN SAVINGS PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
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DECEMBER 31, 2005
TABLE OF CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4
SUPPLEMENTAL SCHEDULE *
Schedule H, line 4i - Schedule of Assets (Held at End of Year) 9
* Other schedules required by 29 CFR 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under
Employee Retirement Income Security Act of 1974 have been omitted
because they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Administrative Committee
NEXEN SAVINGS PLAN
Dallas, Texas
We have audited the accompanying statements of net assets available for
benefits of the Nexen Savings Plan (the "Plan") as of December 31, 2005 and
2004, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements and the
supplemental schedule referred to below are the responsibility of the Plan's
Administrative Committee. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Nexen
Savings Plan as of December 31, 2005 and 2004, and the changes in its net
assets available for benefits for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets
(held at end of year) is presented for purposes of additional analysis and is
not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
WEAVER AND TIDWELL, L.L.P.
Dallas, Texas
June 8, 2006
NEXEN SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005 AND 2004
2005 2004
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ASSETS
Cash $ 352 $ 2,927
Investments, at fair value 45,552,975 32,693,915
Receivables for securities sold 181,533
Participant contributions receivable 1,439
Accrued dividends receivable 13,558 12,210
Participant loans 969,883 941,365
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TOTAL ASSETS 46,538,207 33,831,950
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LIABILITIES
Payables for securities purchased 184,015
Other payables 5 224
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TOTAL LIABILITIES 5 184,239
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NET ASSETS AVAILABLE FOR BENEFITS $46,538,202 $33,647,711
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The Notes to Financial Statements are
an integral part of these statements
2
NEXEN SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004
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ADDITIONS
Investment income:
Net appreciation in fair value of investments $ 9,946,256 $ 2,982,992
Interest 271,859 231,387
Dividends 1,369,008 572,298
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11,587,123 3,786,677
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Contributions:
Participants 1,980,100 1,752,603
Employer 1,193,594 1,108,541
Rollover 47,204 296,621
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3,220,898 3,157,765
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TOTAL ADDITIONS 14,808,021 6,944,442
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DEDUCTIONS
Benefits paid to participants 1,912,767 971,453
Administrative expenses 4,763 5,337
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TOTAL DEDUCTIONS 1,917,530 976,790
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NET INCREASE IN NET ASSETS AVAILABLE 12,890,491 5,967,652
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 33,647,711 27,680,059
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NET ASSETS AVAILABLE FOR BENEFITS
End of year $46,538,202 $33,647,711
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The Notes to Financial Statements are
an integral part of these statements
3
NEXEN SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Note 1. Description of the Plan
The following description of the Nexen Savings Plan (the "Plan") is
provided for general information purposes only. More complete information
regarding the Plan's provisions may be found in the Plan Document.
The Plan is a defined contribution plan that was adopted September 1,
1988, and amended and restated effective January 1, 2002, to provide
eligible employees of Nexen Petroleum U.S.A. Inc. (the "Company") and
participating employers, Nexen Chemicals U.S.A. Inc., Nexen Marketing
U.S.A. Inc., Nexen Oil and Gas U.S.A. Inc., and Nexen Petroleum
International (U.S.A.) Inc. (the "Participating Employers"), wholly owned
subsidiaries of Nexen Inc., and Canexus U.S. Inc., a method to meet their
long-range financial objectives under the requirements of Section 401(k)
of the Internal Revenue Code.
For the years ended December 31, 2005 and 2004, Nationwide Trust Company,
FSB (the "Trustee") was the Plan Trustee with the recordkeeping function
performed by The 401(k) Company (the "Recordkeeper").
All regular employees of the Company and Participating Employers who are
18 years of age and over are eligible to participate in the Plan on the
entry date coinciding with or next following the date the employee attains
age 18. Participant contributions are made on a voluntary basis and
directly withheld from the participant's eligible compensation, as defined
in the Plan Document. Contributions may be made with pretax dollars,
after-tax dollars, or a combination of pretax and after-tax dollars.
Eligible compensation excludes overtime and bonuses. Participants are
immediately vested in their employee contribution account and actual
earnings thereon.
The Company and Participating Employers will match 100 percent of
Participant contributions up to 6% of the Participant's eligible
compensation. In addition, a Participant who completes one hour of service
after January 1, 2000, shall be vested 100% in his or her employer
matching account.
The Plan's investment options are: (1) Stable Value Trust Fund, (2) Bond
Fund of America A, (3) Delaware Group: REIT Fund A, (4) Managers Special
Equity Fund, (5) Scudder Equity 500 Index Fund, (6) Growth Fund of America
A, (7) First Eagle Overseas Fund A, (8) EuroPacific Growth Fund A, (9)
Washington Mutual Investors Fund A, (10) Oppenheimer Developing Markets
Fund A, (11) Third Avenue Value Fund, (12) American Beacon Small Cap Value
Plan, and (13) Nexen Inc. Stock Fund. All Company and Participating
Employers contributions are invested in accordance with the investment
choices selected by each respective Participant.
Distribution of a Participant's entire account becomes due in three ways:
(1) upon termination of employment, (2) death, or (3) disability, as
defined in the Plan Document. At the option of the Participant or
beneficiary, such account balances may be distributed in a lump-sum
payment or via periodic installment payments as described in the Plan
Document. Withdrawals from the Plan by active Participants are permitted
for specific instances of financial hardship and age 59 1/2 withdrawals,
which can be made once every six months. Once per Plan year, a Participant
may withdraw a portion or all of his or her after-tax and rollover
account, subject to a $250 minimum.
In December 2005, the Financial Accounting Standards Board issued
Statement of Position (SOP) 94-4-1, "REPORTING OF FULLY BENEFIT-RESPONSIVE
INVESTMENT CONTRACTS HELD BY CERTAIN INVESTMENT COMPANIES SUBJECT TO THE
AICPA INVESTMENT COMPANY GUIDE AND DEFINED-CONTRIBUTION HEALTH AND WELFARE
AND PENSION PLANS," which affects defined contribution pension plans and
health and welfare plans that hold fully benefit-responsive investment
contracts. Presently, the Plan has no investment contracts that are
considered fully benefit-responsive for purposes of SOP 94-4-1
4
NEXEN SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of net
assets available for benefits and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of additions to and deductions from net assets available for
benefits during the reporting period. Actual results could differ from
those estimates.
Basis of Accounting
The financial statements of the Plan are presented on the accrual basis of
accounting in accordance with accounting principles generally accepted in
the United States of America. Current year contributions, expenses, and
investment income, including both interest and dividends, which are not
received or paid until the subsequent year, are accrued in the current
year. Benefits are recorded when paid.
Investments
Investments are stated at fair value as determined by the Trust based on
quoted market prices at the Plan's year end. Purchases and sales of
investments are recorded on a trade date basis. Participants may direct
their contributions and any related earnings into thirteen distinct
investment options, including the Nexen Inc. Stock Fund. Interest is
allocated to Participant accounts on a pro-rata basis depending on the
Participants' account balance. Dividends are allocated based on the number
of shares in a Participant's account.
A brief description of each investment option is as follows:
STABLE VALUE TRUST FUND - The Stable Value Trust Fund's core investment
vehicle is the AMVESCAP National Trust Company Stable Value Trust Fund.
The remaining portion of the money is invested in money market funds
offered through the following mutual fund families: The American Funds
Group, Oppenheimer Funds, Managers Funds, Third Avenue Funds, Delaware
Funds, First Eagle Funds, and Scudder Funds.
AMERICAN BEACON SMALL CAP VALUE PLAN - is a small value fund that seeks
long-term capital appreciation and current income by investing over 80% of
its assets in equity securities of companies within the United States.
BOND FUND OF AMERICA A - invests primarily in high quality
intermediate-term corporate bonds and U.S. government securities.
DELAWARE GROUP: REIT FUND A - is a non-diversified fund that seeks
long-term total return by investing primarily in equities of real-estate
investment trusts (REITs).
MANAGERS SPECIAL EQUITY FUND - is a small growth fund that seeks long-term
capital appreciation by investing at least 80% of assets in equity
securities.
SCUDDER EQUITY 500 INDEX FUND - is a large company growth and income fund
that invests primarily in equity securities of companies included in the S
& P 500.
5
NEXEN SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Policies - continued
Investments - continued
GROWTH FUND OF AMERICA A - is a large growth fund that seeks capital
growth by investing primarily in common stocks. The fund may invest up to
15% of assets in securities of issuers domiciled outside of the United
States and Canada.
FIRST EAGLE OVERSEAS FUND A - is a foreign stock fund that seeks long-term
capital growth by investing primarily in equities of small- and mid-sized
foreign companies in developed and emerging markets.
EUROPACIFIC GROWTH FUND A - is a large company foreign stock fund that
seeks long-term capital appreciation by investing in companies domiciled
in developed countries outside the United States.
WASHINGTON MUTUAL INVESTORS FUND A - is a large company value-oriented
growth and income fund.
OPPENHEIMER DEVELOPING MARKETS FUND A - is an emerging markets stock fund
that seeks long-term growth by investing in stock of issues in countries
with developing markets.
THIRD AVENUE VALUE FUND - is a small value fund that seeks long-term
capital appreciation by investing in equity securities issued by companies
that are believed to be undervalued and to have strong financial positions
and responsible management.
NEXEN INC. STOCK FUND - provides ownership interest in Nexen Inc. Common
Stock with short-term cash sufficient to maintain a liquidity balance to
facilitate daily transactions and compliance with securities law.
Market and Credit Risks
The Plan invests in a variety of investments. Investments are exposed to
various risks, such as interest rate, market and credit risks. Due to the
level of risk associated with certain investments, it is at least
reasonably possible that the changes in the values of the investments will
occur in the near term and that such changes could materially affect the
amount reported in the Plan's statement of net assets available for
benefits.
Administration
The Plan is administered by the Administrative Committee, which is
composed of members who are either officers or employees of the Company.
Investment options for the Plan are selected by the Benefit Plan Design
Committee from funds available through the Recordkeeper. Some of the fund
providers charge 12b-1 fees at the fund level before earnings are paid to
investors. The Recordkeeper receives fees from these fund providers from
12b-1 fees charged to the funds. 12b-1 fees received by the Recordkeeper
are based on Plan assets invested in each fund. Similarly, all Trustee
fees for the Plan are received from 12b-1 fees charged to the funds. 12b-1
fees received by the Trustee are also based on Plan assets invested in
each fund.
6
NEXEN SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Policies - continued
Loans to Participants
Participant loans receivable are stated at cost, which approximates fair
value. A Participant may borrow up to the lesser of 50% of his or her
vested account balance or $50,000 with a minimum loan amount of $1,000.
Loans are repayable through payroll deductions over periods ranging up to
60 months. Participants are charged a $50 loan set-up fee with a $2
monthly maintenance fee per loan. The loans are secured by a lien on the
borrower's vested account balance in the Plan and bear interest at rates
based on prevailing market conditions. Interest rates on outstanding loans
at December 31, 2005 ranged from 5.76% to 9.25%.
Plan Termination
Although it has not expressed any intention to do so, the Company has the
right to terminate the Plan pursuant to provisions set forth by the Plan
Document and subject to the provisions of ERISA. In the event of Plan
termination, each Participant's account shall become fully vested and
Participants will be entitled to distributions of their entire accounts.
Note 3. Tax Status
The Plan received a favorable determination letter from the Internal
Revenue Service dated April 5, 2002, stating that the Plan and its
amendments are qualified under Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the Trust is exempt from taxation
under Section 501(a) of the Code. The Trust established under the Plan to
hold the Plan's assets is intended to qualify pursuant to the appropriate
section of the Internal Revenue Code as a tax-exempt organization. The
plan has been amended since receiving the determination letter. However,
the Company and the Plan's tax counsel believe that the Trust continues to
qualify and to operate as designed.
Note 4. Investments
Investments that represent 5% or more of the net assets available for Plan
benefits at December 31, 2005 and 2004 are as follows:
December 31, December 31,
2005 2004
Fair Value Fair Value
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Bond Fund of America A $ 3,150,948 $ 2,459,382
EuroPacrfic Growth Fund A 2,755,028 2,213,910
Nexen Inc. Stock Fund 15,072,085 6,934,421
Stable Value Fund 5,501,169 5,097,765
Third Avenue Value Fund 2,518,717 1,993,099
Washington Mutual Investors Fund A 4,399,742 4,092,367
Growth Fund of America A 2,608,119
Delaware Group REIT Fund A 1,722,598
MFS Massachusetss Investors Growth Fund A 2,097,425
7
NEXEN SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Note 4. Investments - continued
During 2005 and 2004, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year) increased
in value by $11,587,123 and $3,786,677, respectively, as follows:
2005 2004
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Realized and Realized and
Interest and Unrealized Interest and Unrealized
Dividends Gains Dividends Gains
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Mutual funds $ 1,519,930 $ 1,015,736 $ 688,502 $ 2,002,637
Stock funds 53,924 8,930,520 55,876 980,355
Loans to Participants 67,013 59,307
Note 5. Plan Amendments
On March 8, 2005, the Fifth Amendment to the Nexen Savings Plan was
executed and adopted effective March 28, 2005. The purpose of this
amendment was to change the Plan's cash-out distribution dollar limit from
$5,000 to $1,000.
On August 17, 2005, the Sixth Amendment to the Nexen Savings Plan was
executed and adopted. Effective August 18, 2005, Section XIII of the
Adoption Agreement was amended to add Canexus U.S. Inc. as a Participating
Employer covered under the Plan.
8
SUPPLEMENTAL SCHEDULE
NEXEN SAVINGS PLAN
Schedule H, Line 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
EIN: 06-0944810
PLAN NUMBER 001
December 31, 2005
(a) (b) (c) (d) (e)
Description of Investment including
Identity of Issuer, borrower maturity date, rate of investment, Current
lessor, or similar party collateral, par, or maturity value Cost # value
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PARTICIPANT-DIRECTED INVESTMENTS:
The American Funds Group Bond Fund of America A,
Net Asset Value $13.22 $ 3,150,948
The American Funds Group Washington Mutual Investors Fund A,
Net Asset Value $30.84 4,399,742
The American Funds Group EuroPacific Growth Fund A,
Net Asset Value $41.10 2,755,028
American Beacon American Beacon Small Cap Value Plan
Net Asset Value $20.03 845,029
Scudder Funds Scudder Equity 500 Index Fund,
Net Asset Value $139.85 1,884,097
First Eagle Funds First Eagle Overseas Fund A,
Net Asset Value $23.04 1,323,872
Managers Funds Managers Special Equity Fund
Net Asset Value $86.77 1,597,513
The American Funds Group Growth Fund of America A,
Net Asset Value $30.86 2,608,119
Third Avenue Funds Third Avenue Value Fund,
Net Asset Value $54.78 2,518,717
Delaware Funds Delaware Group: REIT Fund A,
Net Asset Value $19.18 2,121,991
Oppenheimer Funds Oppenheimer Developing Markets Fund A,
Net Asset Value $36.33 1,364,984
The American Funds Group Cash Management Trust Of America,
Par Value $1.00 409,681
AMVESCAP National Trust Company Stable Value Trust Fund,
Par Value $1.00 5,501,169
AllianceBernstein Capital Reserve Money Market Fund
Par Value $1.00 115
Chase Bank, NA Cash 237
* Nexen Inc. Nexen Inc. Stock Fund
(Nexen Inc. Stock, no par,
Net Asset Value $47.63) 15,072,085
* Loans to Participants Interest Rates From 5.76% to 9.25% 969,883
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$ 46,523,210
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* Indicates each identified person/entity known to be party-in-interest.
# Historical cost information omitted as it is not required for
participant-directed investments.
This supplemental schedule lists assets held for investment purposes at
December 31, 2005, as required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure.
9
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of
1934, Nexen Petroleum U.S.A. Inc. has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
DATED: June 28, 2006
NEXEN SAVINGS PLAN
By: Nexen Petroleum U.S.A. Inc.
By: /s/ Douglas B. Otten
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Douglas B. Otten, President
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
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1 Consent of Weaver & Tidwell, L.L.P.