Nexen's Gulf find boosts shares

Calgary-based oil and gas producer Nexen Inc. said Friday it has made a "significant" oil discovery in the eastern Gulf of Mexico.

The find at the Appomattox project in a formation called the Mississippi Canyon has "excellent reservoir quality," Nexen said in a release, and the results have "exceeded our pre-drill expectations."

Reservoir quality means the rock has pore spaces rich in oil and the rock yields its oil readily.

Nexen shares closed up 47 cents, or almost two per cent, at $24.41 on the TSX on Friday.

It's the third discovery in the area by Nexen and partner Royal Dutch Shell, after finds at the nearby Shiloh and Vicksburg sites, all named after U.S. Civil War battlefields.

"The Appomattox discovery confirms our confidence in the play and provides a strong basis to evaluate the remainder of our significant acreage position in the eastern Gulf of Mexico," Nexen CEO Marvin Romanow said.

"We are looking forward to additional drilling at Appomattox to confirm the estimate of total resource and move the discoveries towards development."

Nexen said it's too early to say how big the find is. However, the company said the well should have enough sustained production to justify making it a hub for pipelines from other wells to feed into a larger pipe to carry oil onshore.

The latest discovery is close to eight kilometres deep, the companies said.

Nexen and Shell will conduct further testing at Appomattox later in the year. Nexen has a 20 per cent interest in Appomattox and Shiloh and a 25 per cent interest in the Vicksburg site.

Nexen also operates in Alberta's oilsands, in the North Sea, off West Africa and Yemen.