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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, 2008
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
5601 Granite Parkway, Suite 1400
Plano, Texas 75024-6654
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
NEXEN SAVINGS PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2008 AND 2007
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).........16
* 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.
[LETTERHEAD OF WEAVER AND TIDWELL, L.L.P.]
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Administrative Committee
NEXEN SAVINGS PLAN
Plano, Texas
We have audited the accompanying statements of net assets available for
benefits of the Nexen Savings Plan (the Plan) as of December 31, 2008 and 2007,
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, 2008 and 2007, 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.
/s/ Weaver and Tidwell, L.L.P.
WEAVER AND TIDWELL, L.L.P.
Dallas, Texas
June 16, 2009
NEXEN SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2008 AND 2007
2007
2008 (As restated)
--------------- ---------------
ASSETS
Cash $ 197,139 $ 340
Investments, at fair value 37,692,731 57,978,018
Accrued dividends receivable 26,221 13,749
Participant loans 808,274 761,928
--------------- ---------------
TOTAL ASSETS 38,724,365 58,754,035
--------------- ---------------
LIABILITIES
Due to broker 172,448 304
Other payables 5 5
--------------- ---------------
TOTAL LIABILITIES 172,453 309
--------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS AT FAIR VALUE 38,551,912 58,753,726
Adjustment from fair value to contract value for
fully benefit-responsive investment contracts 219,680 39,594
--------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS $ 38,771,592 $ 58,793,320
=============== ===============
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, 2008 AND 2007
2007
2008 (AS RESTATED)
----------------------------------
ADDITIONS
Investment income:
Net appreciation (depreciation) in fair value of investments $ (20,741,133) $ 1,694,755
Interest 75,112 315,117
Dividends 1,454,258 3,207,061
--------------- ----------------
(19,211,763) 5,216,933
--------------- ----------------
Contributions:
Participants 2,883,061 2,536,726
Employer 1,862,516 1,561,047
Rollover 109,074 1,244,981
--------------- ----------------
4,854,651 5,342,754
--------------- ----------------
Transfer into plan 64,116 -
--------------- ----------------
NET ADDITIONS (14,292,996) 10,559,687
--------------- ----------------
DEDUCTIONS
Benefits paid to participants 5,724,076 5,037,612
Transfer of Plan assets - 1,928,109
Administrative expenses 4,656 4,988
--------------- ----------------
TOTAL DEDUCTIONS 5,728,732 6,970,709
--------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS AVAILABLE (20,021,728) 3,588,978
NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR 58,793,320 55,204,342
--------------- ----------------
NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $ 38,771,592 $ 58,793,320
=============== ================
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 Marketing U.S.A. Inc. and Nexen Petroleum
International (U.S.A.) Inc. (the Participating Employers), wholly owned
subsidiaries of Nexen Inc., a method to meet their long-range financial
objectives under the requirements of Section 401(k) of the Internal
Revenue Code. In early January 2007 the Plan transferred assets totaling
$1,928,109 to the newly established Canexus U.S. Inc., Retirement Plan.
On March 31, 2007, Quadra Energy Trading, Inc. (QETI) merged with and into
Nexen Marketing U.S.A. Inc., a participating employer. Employees of QETI
transferred employment to the Company and its affiliates on April 1, 2007.
Effective December 31, 2007, the QETI 401(k) Profit Sharing Plan & Trust
(the QETI Plan) was amended to fully vest the accounts of all participants
in the QETI Plan who were employees of Nexen Marketing U.S.A. Inc. as of
December 31, 2007. Effective January 1, 2008, the QETI Plan was amended to
merge with and into the Nexen Savings Plan and Trust.
For the period from January 1, 2007, to April 5, 2007, and for the year
ended December 31, 2006, Nationwide Trust Company, FSB was the trustee of
the Plan. On April 5, 2007, all services as trustee of the Plan were
transferred to the Charles Schwab Trust Company (the Trustee). The
recordkeeping function is performed by Schwab Retirement Services Company
formerly know as "The 401(k) Company" (the Recordkeeper).
Effective February 28, 2008, the Company transferred all the assets of the
Invesco Stable Value Fund to the Charles Schwab Stable Value Fund, which
is a similar type stable value investment.
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 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. The Plan offers participants the option of making Salary
Deferral Contributions and/or Roth 401(k) Contributions. 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. Participants are immediately 100% vested in their employer
matching account.
4
NOTE 1. DESCRIPTION OF THE PLAN - CONTINUED
The Plan's investment options are: (1) Charles Schwab Stable Value Fund,
(2) Bond Fund of America A, (3) American Century Real Estate Investment
Fund, (4) Royce Value Service 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.
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. Currently the Plan holds one investment which is subject to the
new guidance under SOP 94-4-1, the Stable Value Fund, which is a common
collective trust fund. The results of the new statements have been
evaluated and are reflected in the Statement of Net Assets Available for
Benefits and the Statement of Changes in Net Assets Available for
Benefits.
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.
5
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
As described in Financial Accounting Standards Board Staff Position,
FSP AAG INV-1 and 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 (the FSP), investment contracts held by a
defined-contribution plan are required to be reported at fair value.
However, contract value is the relevant measurement attribute for that
portion of the net assets available for benefits of a defined
contribution plan attributable to fully benefit-responsive investment
contracts because contract value is the amount participants would
receive if they were to initiate permitted transactions under the
terms of the plan. As required by the FSP, the Statement of Net Assets
Available for Benefits presents the fair value of the investment
contracts as well as the adjustment of the fully benefit-responsive
investment contracts from fair value to contract value. The Statement
of Changes in Net Assets Available for Benefits is prepared on a
contract value basis.
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 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:
SCHWAB STABLE VALUE CLASS S - The Charles Schwab Stable Value
Fund is a collective investment trust fund that allows
participants to invest in stable value assets. The fund seeks to
provide investors with a stable rate of return while preserving
principal and maintaining liquidity.
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.
6
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENTS - CONTINUED
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.
ROYCE VALUE SERVICE 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.
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.
CASH MANAGEMENT TRUST OF AMERICA - Seeks to provide income on cash
reserves, while preserving capital and maintaining liquidity, through
high-quality money market instruments. This account holds the cash
position of the unitized Nexen Inc. Stock Fund.
7
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
NATURE OF INVESTMENT CONTRACTS AND RESTATEMENT
The Plan's Schwab Stable Value Class S (the Fund) invests primarily in
investment contracts such as traditional guaranteed investment
contracts (GICs) and enters into wrapper contracts (also known as
synthetic GICs). In a traditional GIC, investment contracts are backed
by the general account of the issuer. The Fund deposits a lump sum
with the issuer and receives a guaranteed interest rate for a
specified time. Interest is accrued on either a simple interest or
fully compounded basis and paid either periodically or at the end of
the contract terms. The issuer guarantees that all qualified
participant withdrawals will occur at contract value (principal plus
accrued interest).
In a synthetic GIC structure, the underlying investments are owned by
the Fund and held in trust for plan participants. The Fund enters into
wrapper contracts from high-quality insurance companies or banks that
serve to substantially offset the price fluctuations in the underlying
investments caused by movements in interest rates. Each wrapper
contract obligates the principal amounts invested in the underlying
investments, plus interest accrued at a crediting rate established
under the contract, less any adjustments for withdrawals (as specified
in the wrapper agreement). Under the terms of the wrapper contract,
the realized and unrealized gains and losses on the underlying
investments are, in effect, amortized over the duration of the
underlying investments, through adjustments to the future contract
interest crediting rate (which is the rate earned by participants in
the Fund for the underlying investments). The wrapper contract
provides that the adjustments to the interest crediting will not
result in a future interest crediting rate that is less than zero.
This ensures that participants' principal and accrued interest will be
protected.
In general, if the contract value of the wrapper agreement exceeds the
market value of the underlying investments (including accrued
interest), the wrapper provider becomes obligated to pay that
difference to the Fund in the event that shareholder redemptions
result in a total liquidation. In the event that there are partial
shareholder redemptions that would otherwise cause the contract's
crediting rate to fall below zero percent, the wrapper is obligated to
contribute to the Fund an amount necessary to maintain the contract's
crediting rate at least zero percent. The circumstance under which
payments are made and the timing of payments between the Fund and the
wrapper provider may vary based on the terms of the wrapper contract.
In certain circumstances, the amount withdrawn from the wrapper
contract would be payable at fair value rather than at contract value.
These events include termination of the Plan, a material adverse
change to the provisions of the Plan, the employer elects to withdraw
from a wrapper contract in order to switch to a different investment
provider, or if the terms of a successor Plan (in the event of the
spin-off or sale of a division) do not meet the wrapper contract
issuer's underwriting criteria for issuance of a clone wrapper
contract.
8
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
NATURE OF INVESTMENT CONTRACTS AND RESTATEMENT- CONTINUED
While it is possible that some of the plans participating in the Trust
may experience plan terminations or other events that would trigger
fair value payouts under the Trust's wrapper agreements, based on
prior experience, management of the Trust believes it is not probable
that such events would be of sufficient magnitude to limit the ability
of the Trust to transact at contract value with the participants in
the Trust. Given that such events are beyond the control of the Plan,
however, there can be no guarantee that this will be the case.
Average yields for Charles Schwab and Invesco (2007) Stable Value Funds
Year ended
December 31,
-----------------
2008 2007
-------- -------
Based on actual earnings (at fair value) 5.250% 5.334%
Based on interest rate credited to
participants (at fair value) 3.720% 4.270%
The Company restated Investments, at fair value for year ended
December 31, 2007, to properly reflect the fair value to contract
value adjustment for the Stable Value Fund as required in accordance
with SOP 94-4-1. Accordingly, the Investments, at fair value as
reported was adjusted from $58,017,612 to $57,978,018, and the
adjustment from fair value to contract value for fully
benefit-responsive investment contracts as reported was adjusted from
a negative balance of $39,594 to a positive balance of $39,594 in the
Statement of Net Assets Available for Benefits. Further, Interest as
reported in the Statement of Changes in Net Assets Available for
Benefits for the year ended December 31, 2007, was adjusted from
$275,523 to $315,117 to reflect this restatement in the Stable Value
Fund investment.
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.
9
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
ADMINISTRATION
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.
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, 2008 ranged from 4.96% 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.
NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 157, "Fair
Value Measurements." This statement defines fair value, establishes a
framework for measuring fair value under generally accepted accounting
principles, and expands disclosures about fair value measurements.
SFAS No. 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007. The provisions of SFAS No.
157 are effective for the Plan beginning January 1, 2008, and are
reflected at Note 6.
10
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, 2008 and 2007 are as follows:
December 31, December 31,
2008 2007
Fair Value Fair Value
------------- -------------
Bond Fund of America A $2,886,524 $ 3,556,983
EuroPacific Growth Fund A 2,633,576 4,515,914
Nexen Inc. Stock Fund 11,126,459 17,622,506
Schwab Stable Value Class S 4,528,717 -
Invesco Stable Value Fund - 5,680,702
Third Avenue Value Fund - 3,027,274
Washington Mutual Investors Fund A 3,598,463 5,320,310
Growth Fund of America A 2,410,347 3,957,948
Oppenheimer Developing Markets - 3,164,594
DWS Equity 500 Index S 2,012,263 2,582,138
During 2008 and 2007, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year) increased
(decreased) in value by $(19,211,763) and $5,216,933, respectively, as
follows:
2008 2007
------------------------------ ----------------------------
Realized and Realized and
Interest and Unrealized Interest and Unrealized
Dividends Gains (losses) Dividends Gains (losses)
------------- -------------- ------------ --------------
Mutual funds $1,390,669 $ (13,024,048) $ 3,414,845 $ (1,110,899)
Stock funds 76,163 (7,717,085) 53,617 2,805,654
Loans to Participants 62,538 53,716
11
NOTE 5. PLAN AMENDMENTS
On December 14, 2007, the Tenth Amendment to the Nexen Savings Plan was
executed and adopted to permit cash transfers directly to the Plan from
other qualified plans. Effective December 31, 2007, Section III.G. of the
Adoption Agreement was amended in its entirety to state transfers from
other plans into this Plan shall not be allowed without approval of the
Benefit Plan Design Committee.
On December 27, 2007, the Eleventh Amendment to the Nexen Savings Plan was
executed and adopted. The purpose of the amendment was to allow, effective
January 1, 2007, certain participants, who are part of the Reserve
component of the U.S. Military ordered or called to active duty after
September 11, 2001 and before December 31, 2007 to obtain a Qualified
Distribution for a non-spouse beneficiary to rollover funds to an
inherited individual retirement account; or for a participant to withdraw
amounts from the plan for certain hardships of a primary beneficiary. In
addition, the plan was amended to reflect the appointment of the Charles
Schwab Trust Company as Trustee of the Plan, replacing Nationwide Trust
Company, FSB, effective April 5, 2007.
On November 19, 2008, the Twelfth Amendment to the Nexen Savings Plan was
executed and adopted. The purpose of the amendment was to exclude from
participation in the Plan employees whose base salary is paid on the
payroll of a foreign Affiliate, regardless of whether a portion of the
Employee's compensation or wages is also paid or provided by an Employer.
On December 18, 2008, the Thirteenth Amendment to the Nexen Savings Plan
was executed and adopted. The purpose of the amendment was to 1) update
the employer's address to the location at 5601 Granite Parkway, Suite
1400, in Plano, Texas 75024 and, 2) to bring the Plan into compliance with
the gap period income provisions of the Pension Protection Act of 2006 and
Code section 415 final regulations adopted by the Internal Revenue Service
on April 5, 2007.
NOTE 6. FAIR VALUE MEASUREMENT
In September 2006, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting No. 157, FAIR VALUE MEASUREMENTS
("SFAS No. 157"). SFAS No. 157 introduces a framework for measuring fair
value and expands required disclosure about fair value measurements of
assets and liabilities. SFAS No. 157 for financial assets and liabilities
is effective for fiscal years beginning after November 15, 2007. The Plan
has adopted the standard for those assets and liabilities as of January 1,
2008 and the impact of adoption was not material to the financial
statements. In November 2007, the FASB placed a one year deferral for the
implementation of SFAS No. 157 for nonfinancial assets and liabilities.
Currently, the Plan does not have any nonfinancial assets or liabilities.
12
NOTE 6. FAIR VALUE MEASUREMENT - CONTINUED
SFAS No. 157 defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date.
SFAS No. 157 also establishes a fair value hierarchy which requires an
entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. The standard describes
three levels of inputs what may be used to measure fair value:
LEVEL 1 -- Quoted prices in active markets for identical assets or
liabilities.
LEVEL 2 -- Observable inputs other than Level 1 prices such as quoted
prices for similar assets or liabilities; quoted prices in markets
that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term
of the assets or liabilities.
LEVEL 3 -- Unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the
assets or liabilities.
A financial instrument's level within the fair value hierarchy is based on
the lowest level of any input that is significant to the fair value
measurement. The following is a description of the valuation methodologies
used for instruments measured at fair value, including the general
classification of such instruments pursuant to the valuation hierarchy.
MUTUAL FUNDS
These investments are public investment vehicles valued using the Net
Asset Value (NAV) provided by the administrator of the fund. The NAV
is based on the value of the underlying assets owned by the fund,
minus its liabilities, and then divided by the number of shares
outstanding. The NAV is a quoted price in an active market and
classified within level 1 of the valuation hierarchy.
COLLECTIVE INVESTMENT TRUST
These investments are public investment vehicles valued using the NAV
provided by the administrator of the fund. The NAV is based on the
value of the underlying assets owned by the fund, minus its
liabilities, and then divided by the number of shares outstanding. The
NAV is classified within level 2 of the valuation hierarchy because
the NAV's unit price is quoted on a private market that is not active;
however, the unit price is based on underlying investments which are
traded on an active market.
NEXEN INC. COMMON STOCK
Nexen Inc common stock is valued at the closing price reported on the
New York Stock Exchange Composite Listing and is classified within
Level 1 of the valuation hierarchy.
13
NOTE 6. FAIR VALUE MEASUREMENT - CONTINUED
MONEY MARKET FUNDS
These investments are public investment vehicles valued using $1 for
the NAV. The money market funds are classified within Level 2 of the
valuation hierarchy.
LOANS TO PARTICIPANTS
Loans to Plan participants are valued at cost plus accrued interest,
which approximates fair value and are classified within Level 3 of the
valuation hierarchy.
Below are the Plan's financial instruments carried at fair value on a
recurring basis by the FAS 157 fair value hierarchy levels described in
Note 6:
AS OF DECEMBER 31, 2008
----------------------------------------------------------------
QUOTED PRICES
IN ACTIVE SIGNFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
INDENTICAL ASSETS INPUTS INPUTS TOTAL
(LEVEL 1) (LEVEL 2) (LEVEL 3) FAIR VALUE
----------------- --------------- ------------- -------------
Assets:
Common stock - Nexen $ 11,126,459 $ - $ - $11,126,459
Mutual funds 21,468,877 - - 21,468,877
Collective investment trusts (Stable value fund) - 4,528,717 - 4,528,717
Money market fund - 568,678 - 568,678
Participant loans - - 808,274 808,274
----------------- --------------- ------------- -------------
Total assets $ 32,595,336 $ 5,097,395 $ 808,274 $38,501,005
================= =============== ============= =============
The table below sets forth a summary of changes in the fair value of the
Plan's Level 3 investment assets and liabilities for the year ended
December 31, 2008:
AS OF DECEMBER 31, 2008
SALES, ISSUANCES, TRANSFERS
ITEMS GAINS MATURITIES, IN OR OUT ENDING
BEGINNING FAIR INCLUDED IN (LOSSES) IN SETTLEMENTS, OF LEVEL 3, FAIR
VALUE NET INCOME OCI CALLS, NET NET VALUE
Participant Loans $ 761,928 $ - $ - $ 46,346 $ - $ 808,274
--------------- ------------ ----------- ----------------- ----------- ---------
Total $ 761,928 $ - $ - $ 46,346 $ - $ 808,274
=============== ============ =========== ================= =========== =========
14
NOTE 7. DOL INQUIRY
In 2008 the Department of Labor conducted an audit of the Plan. In a
letter dated May 9, 2009, the Department of Labor noted several possible
violations and requested further information and comment. The Company has
since responded to the Department of Labor with additional information and
an explanation of why it believes no violations occurred. The Company
believes the final resolution will not negatively impact the plan.
NOTE 8. RECONCILIATION OF FINANCIAL STATEMENTS TO SCHEDULE H OF FORM 5500
The following is a reconciliation of net assets available for benefits and
changes in net assets available for benefits per the financial statements
to Schedule H of Form 5500 for the years ending:
2008 2007
--------------- --------------
Net assets available for benefits per financial statements $ 38,771,592 $ 58,793,320
Adjustment from contract value to fair value not reported
on Schedule H of Form 5500 (219,680) (39,594)
--------------- --------------
Net assets available for benefits per Schedule H of
Form 5500 $ 38,551,912 $ 58,753,726
=============== ==============
Increase (Decrease) in net assets available for benefits per financial statements $ (20,021,728) $ 3,588,978
Adjustment from contract value to fair value reported
on Schedule H of Form 5500 (180,086) (39,594)
Transfers of assets into or out of this Plan included in increase in net
assets available for benefits per financial statements but not
included in net income per Schedule H of Form 5500 (64,116) 1,928,109
--------------- --------------
Net gain (loss) per Schedule H of Form 5500 $ (20,265,930) $ 5,477,493
=============== ==============
NOTE 9. SUBSEQUENT EVENTS
Effective March 12, 2009, the Company transferred the assets held in the
Bond Fund of America A to Vanguard Total Bond Index Signal, which is a
similar type investment option.
Effective July 8, 2009, the Company will convert from a unitized
accounting method for the Nexen Inc. Stock Fund to a market share
accounting methodology.
Pending Board approval, effective January 1, 2010, the Company will merge
the Nexen Savings Plan and the Nexen Pension Plan. There will be no
changes to or reduction in benefits for Plan participants.
15
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, 2008
(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 $10.76 $ 2,886,524
The American Funds Group Washington Mutual Investors Fund A,
Net Asset Value $21.41 3,598,463
The American Funds Group EuroPacific Growth Fund A,
Net Asset Value $28.01 2,633,576
American Beacon American Beacon Small Cap Value Plan
Net Asset Value $11.52 992,214
DWS Investments DWS Equity 500 Index Fund,
Net Asset Value $101.24 2,012,263
First Eagle Funds First Eagle Overseas Fund A,
Net Asset Value $16.62 1,479,623
Royce Funds Royce Value Service Fund,
Net Asset Value $7.00 1,261,844
The American Funds Group Growth Fund of America A,
Net Asset Value $20.48 2,410,347
Third Avenue Funds Third Avenue Value Fund,
Net Asset Value $32.86 1,155,493
American Century Investments American Century Real Estate Investment Fund,
Net Asset Value $11.66 1,385,697
Oppenheimer Funds Oppenheimer Developing Markets Fund A,
Net Asset Value $15.89 1,652,833
The American Funds Group Cash Management Trust Of America,
Net Asset Value $1.00 568,678
Schwab Funds Schwab Stable Value Class S,
Net Asset Value $18.30 4,528,717
Chase Bank, NA Cash 197,139
* Nexen Inc. Nexen Inc. Stock Fund,
( Nexen Inc. Stock, no par,
Net Asset Value $17.58 ) 11,126,459
* Loans to Participants Interest Rates From 4.96% to 9.13% 808,274
---------------
$ 38,698,144
===============
* 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, 2008, as required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure.
16
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 25, 2009
NEXEN SAVINGS PLAN
By: Nexen Petroleum U.S.A. Inc.
By: /s/ Brian C. Reinsborough
--------------------------------
Brian C. Reinsborough, President
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
1 Consent of Weaver & Tidwell, L.L.P.