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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, 2006
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
DECEMBER 31, 2006 AND 2005
C O N T E N T S
Page
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)............11
* 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, 2006 and
2005, 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, 2006 and 2005, 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 15, 2007
NEXEN SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2006 AND 2005
2006 2005
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ASSETS
Cash $ 2,116,979 $ 352
Investments, at fair value 52,300,199 45,552,975
Participant contributions receivable - 1,439
Accrued dividends receivable - 13,558
Participant loans 788,945 969,883
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TOTAL ASSETS 55,206,123 46,538,207
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LIABILITIES
Due to broker 1,781 -
Other payables - 5
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TOTAL LIABILITIES AVAILABLE 1,781 5
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NET ASSETS FOR BENEFITS $ 55,204,342 $ 46,538,202
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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
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
2006 2005
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ADDITIONS
Investment income:
Net appreciation in fair value
of investments $ 4,878,615 $ 9,946,256
Interest 332,758 271,859
Dividends 2,013,672 1,369,008
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7,225,045 11,587,123
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Contributions:
Participants 2,305,947 1,980,100
Employer 1,355,299 1,193,594
Rollover 120,823 47,204
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3,782,069 3,220,898
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TOTAL ADDITIONS 11,007,114 14,808,021
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DEDUCTIONS
Benefits paid to participants 2,336,249 1,912,767
Administrative expenses 4,725 4,763
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TOTAL DEDUCTIONS 2,340,974 1,917,530
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NET INCREASE IN NET ASSETS AVAILABLE 8,666,140 12,890,491
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 46,538,202 33,647,711
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NET ASSETS AVAILABLE FOR BENEFITS
End of year $ 55,204,342 $ 46,538,202
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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. As more fully discussed in Note 5, on
December 29, 2006, an amendment to the plan was executed and adopted to
remove Nexen Chemicals U.S.A., Inc., Nexen Oil and Gas U.S.A., Inc. and
Canexus U.S., Inc. as participating employers.
For the years ended December 31, 2006 and 2005, 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; a combination of pretax and after-tax dollars; or from
an existing Roth 401(k) account. 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) American Century Real Estate Investment Fund, (4)
Managers Special Equity Fund, (5) DWS 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.
4
NEXEN SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF THE PLAN - CONTINUED
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.
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.
5
NEXEN SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENTS - CONTINUED
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 many 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 investment options 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, American Century Investments, First Eagle
Funds, and DWS 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.
AMERICAN CENTURY REAL ESTATE INVESTMENT FUND - seeks long-term
capital appreciation; current income is a secondary consideration.
The fund invests at least 80% of assets in equities issued by
companies in the real estate industry.
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.
DWS 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.
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.
6
NEXEN SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENTS - CONTINUED
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.
7
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, 2006 ranged from 6.16% to
9.13%.
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.
8
NEXEN SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 4. INVESTMENTS
Investments that represent 5% or more of the net assets available for Plan
benefits at December 31, 2006 and 2005 are as follows:
December 31, December 31,
2006 2005
Fair Value Fair Value
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Bond Fund of America A $ 3,257,643 $ 3,150,948
EuroPacific Growth Fund A 3,440,498 2,755,028
Nexen Inc. Stock Fund 17,044,005 15,072,085
Stable Value Fund 5,995,388 5,501,169
Third Avenue Value Fund 2,772,459 2,518,717
Washington Mutual Investors Fund A 5,015,076 4,399,742
Growth Fund of America A 3,197,142 2,608,119
American Century Real Estate 2,914,279 -
During 2006 and 2005, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year) increased
in value by $7,225,045 and $11,587,123, respectively, as follows:
2006 2005
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Realized and Realized and
Interest and Unrealized Interest and Unrealized
Dividends Gains Dividends Gains
------------ ------------ ------------ ------------
Mutual funds $ 2,225,242 $ 2,169,687 $ 1,519,930 $ 1,015,736
Stock funds 55,371 2,708,928 53,924 8,930,520
Loans to Participants 65,817 67,013
9
NEXEN SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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.
On June 30, 2006, the Seventh Amendment to the Nexen Savings Plan was
executed and adopted effective July 1, 2006. The purpose of this amendment
was to change the Plan's cash-out distribution dollar limit from $1,000 to
$5,000.
On December 27, 2006, the Eighth Amendment to the Nexen Savings Plan was
executed and adopted effective December 1, 2006. The amendment
incorporates the provisions of the Roth 401(k), the final regulations
under sections 401(k) and 401(m) of the Internal Revenue Code, and a
provision expanding the definition of a financial hardship to include
certain funeral expenses and expenses for the repair of damage to an
employee's principal residence.
On December 29, 2006, the Ninth Amendment to the Nexen Savings Plan was
executed and adopted. Effective December 29, 2006, Section XIII of the
Adoption Agreement was amended to remove Canexus U.S. Inc., Nexen
Chemicals U.S.A. Inc, and Nexen Oil and Gas U.S.A. Inc as participating
employers under the plan.
NOTE 6. SUBSEQUENT EVENT
In early January 2007 the Plan transferred assets totaling $1,928,109 to
the newly established Canexus U.S. Inc., Retirement Plan.
10
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, 2006
(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
- -- ------------------------------ ------------------------------------ ------- -----------
PARTICIPANT-DIRECTED INVESTMENTS:
The American Funds Group Bond Fund of America A,
Net Asset Value $13.32 $ 3,257,643
The American Funds Group Washington Mutual Investors Fund A,
Net Asset Value $34.86 5,015,076
The American Funds Group EuroPacific Growth Fund A,
Net Asset Value $46.56 3,440,498
American Beacon American Beacon Small Cap Value Plan
Net Asset Value $21.20 1,168,980
DWS Scudder Funds DWS Equity 500 Index Fund,
Net Asset Value $158.94 2,450,476
First Eagle Funds First Eagle Overseas Fund A,
Net Asset Value $25.08 1,567,623
Managers Funds Managers Special Equity Fund
Net Asset Value $82.96 1,604,712
The American Funds Group Growth Fund of America A,
Net Asset Value $32.87 3,197,142
Third Avenue Funds Third Avenue Value Fund,
Net Asset Value $59.46 2,772,459
American Century Investments American Century Real Estate Investment Fund,
Net Asset Value $30.36 2,914,279
Oppenheimer Funds Oppenheimer Developing Markets Fund A,
Net Asset Value $41.21 1,644,611
The American Funds Group Cash Management Trust Of America,
Par Value $1.00 227,255
Federated Capital Reserves Federated Capital Reserves
Par Value $1.00 52
AMVESCAP National Trust Company Stable Value Trust Fund,
Par Value $1.00 5,995,388
Chase Bank, NA Cash 2,116,979
* Nexen Inc. Nexen Inc. Stock Fund 17,044,005
(Nexen Inc. Stock, no par,
Net Asset Value $55.00)
* Loans to Participants Interest Rates From 6.16% to 9.13% 788,945
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$55,206,123
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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, 2006, as required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure.
11
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, 2007
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.