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\ue000
\ue000
UNITED\ue000 STATES
SECURITIES\ue000 AND\ue000 EXCHANGE\ue000 COMMISSION
Washington,\ue000 D.C.\ue000 20549
\ue000
FORM\ue000 10-K
\ue000
ANNUAL\ue000 REPORT\ue000 PURSUANT\ue000 TO\ue000 SECTION\ue000 13\ue000 or\ue000 15(d)\ue000 of
THE\ue000 SECURITIES\ue000 EXCHANGE\ue000 ACT\ue000 OF\ue000 1934
\ue000
For\ue000 the\ue000 year\ue000 ended\ue000 December\ue000 31,\ue000 2008
\ue000
Commission\ue000 File\ue000 Number\ue000 1-6702
\ue000
NEXEN\ue000 INC.
Incorporated\ue000 under\ue000 the\ue000 Laws\ue000 of\ue000 Canada
\ue000
\ue000
98-6000202
(I.R.S.\ue000 Employer\ue000 Identification\ue000 No.)
\ue000
801\ue000 \u2013\ue000 7th\ue000 Avenue\ue000 S.W.
Calgary,\ue000 Alberta,\ue000 Canada\ue000 T2P\ue000 3P7
Telephone:\ue000 (403)\ue000 699-4000
Web\ue000 site:\ue000 www.nexeninc.com
\ue000
Securities\ue000 registered\ue000 pursuant\ue000 to\ue000 Section\ue000 12(b)\ue000 of\ue000 the\ue000 Act:
\ue000
Title
\ue000
Exchange\ue000 Registered\ue000 On
Common\ue000 shares,\ue000 no\ue000 par\ue000 value
\ue000
The\ue000 New\ue000 York\ue000 Stock\ue000 Exchange
\ue000
\ue000
The\ue000 Toronto\ue000 Stock\ue000 Exchange
\ue000
\ue000
\ue000
Subordinated\ue000 Securities,\ue000 due
2043
\ue000
The\ue000 New\ue000 York\ue000 Stock\ue000 Exchange
\ue000
\ue000
The\ue000 Toronto\ue000 Stock\ue000 Exchange
\ue000
Securities\ue000 registered\ue000 pursuant\ue000 to\ue000 Section\ue000 12(g)\ue000 of\ue000 the\ue000 Act:\ue000 None.
\ue000
Indicate\ue000 by\ue000 check\ue000 mark\ue000 if\ue000 the\ue000 registrant\ue000 is\ue000 a\ue000 well-known\ue000 seasoned\ue000 issuer,\ue000 as\ue000 defined\ue000 in\ue000 Rule\ue000 405\ue000 of\ue000 the\ue000 Securities\ue000 Act.
\ue000
Yes\ue000 \ue000x
\ue000
No\ue000 \ue000o
\ue000
Indicate\ue000 by\ue000 check\ue000 mark\ue000 if\ue000 the\ue000 registrant\ue000 is\ue000 not\ue000 required\ue000 to\ue000 file\ue000 reports\ue000 pursuant\ue000 to\ue000 Section\ue000 13\ue000 or\ue000 Section\ue000 15(d)\ue000 of\ue000 the\ue000 Exchange\ue000 Act.
\ue000
Yes\ue000 \ue000o
\ue000
No\ue000 \ue000x
\ue000

Indicate\ue000 by\ue000 check\ue000 mark\ue000 whether\ue000 the\ue000 registrant\ue000 (1)\ue000 has\ue000 filed\ue000 all\ue000 reports\ue000 required\ue000 to\ue000 be\ue000 filed\ue000 by\ue000 Section\ue000 13\ue000 or\ue000 15(d)\ue000 of\ue000 the\ue000 Securities\ue000 Exchange\ue000 Act
of\ue000 1934\ue000 during\ue000 the\ue000 preceding\ue000 12\ue000 months\ue000 (or\ue000 for\ue000 such\ue000 shorter\ue000 period\ue000 that\ue000 the\ue000 registrant\ue000 was\ue000 required\ue000 to\ue000 file\ue000 such\ue000 reports),\ue000 and\ue000 (2)\ue000 has\ue000 been
subject\ue000 to\ue000 such\ue000 filing\ue000 requirements\ue000 for\ue000 the\ue000 past\ue000 90\ue000 days.

\ue000
Yes\ue000 \ue000x
\ue000
No\ue000 \ue000o
\ue000

Indicate\ue000 by\ue000 check\ue000 mark\ue000 if\ue000 disclosure\ue000 of\ue000 delinquent\ue000 filers\ue000 pursuant\ue000 to\ue000 Item\ue000 405\ue000 of\ue000 Regulation\ue000 S-K\ue000 is\ue000 not\ue000 contained\ue000 herein,\ue000 and\ue000 will\ue000 not\ue000 be contained,\ue000 to\ue000 the\ue000 best\ue000 of\ue000 registrant\u2019s\ue000 knowledge,\ue000 in\ue000 definitive\ue000 proxy\ue000 or\ue000 information\ue000 statements\ue000 incorporated\ue000 by\ue000 reference\ue000 in\ue000 Part\ue000 III\ue000 of\ue000 this Form\ue000 10-K\ue000 or\ue000 any\ue000 amendment\ue000 to\ue000 this\ue000 Form\ue000 10-K.\ue000 \ue000x

\ue000

Indicate\ue000 by\ue000 check\ue000 mark\ue000 whether\ue000 the\ue000 registrant\ue000 is\ue000 a\ue000 large\ue000 accelerated\ue000 filer,\ue000 an\ue000 accelerated\ue000 filer,\ue000 a\ue000 non-accelerated\ue000 filer,\ue000 or\ue000 a\ue000 smaller\ue000 reporting company.\ue000 See\ue000 the\ue000 definitions\ue000 of\ue000 \u201clarge\ue000 accelerated\ue000 filer\u201d,\ue000 \u201caccelerated\ue000 filer\u201d\ue000 and\ue000 \u201csmaller\ue000 reporting\ue000 company\u201d\ue000 in\ue000 Rule\ue000 12b-2\ue000 of\ue000 the\ue000 Exchange Act.

\ue000
Large\ue000 accelerated\ue000 filer\ue000 \ue000 \ue000x
Accelerated\ue000 filer\ue000 \ue000 \ue000o
Non-accelerated\ue000 filer\ue000 \ue000 \ue000o
Smaller\ue000 reporting\ue000 company\ue000 \ue000 \ue000o
Processed and formatted by SEC Watch - Visit SECWatch.com
\ue000
Indicate\ue000 by\ue000 check\ue000 mark\ue000 whether\ue000 the\ue000 registrant\ue000 is\ue000 a\ue000 shell\ue000 company\ue000 (as\ue000 defined\ue000 in\ue000 Rule\ue000 12b-2\ue000 of\ue000 the\ue000 Exchange\ue000 Act).
\ue000
Yes\ue000 \ue000o
\ue000
No\ue000 \ue000x
\ue000
On\ue000 June\ue000 30,\ue000 2008,\ue000 the\ue000 aggregate\ue000 market\ue000 value\ue000 of\ue000 the\ue000 voting\ue000 shares\ue000 held\ue000 by\ue000 non-affiliates\ue000 of\ue000 the\ue000 registrant\ue000 was\ue000 approximately
Cdn\ue000 $22\ue000 billion\ue000 based\ue000 on\ue000 the\ue000 Toronto\ue000 Stock\ue000 Exchange\ue000 closing\ue000 price\ue000 on\ue000 that\ue000 date.\ue000 On\ue000 January\ue000 30,\ue000 2009,\ue000 there\ue000 were\ue000 519,820,961\ue000 common\ue000 shares
issued\ue000 and\ue000 outstanding.
\ue000\ue000
\ue000
Processed and formatted by SEC Watch - Visit SECWatch.com
\ue000
TABLE\ue000 OF\ue000 CONTENTS
\ue000
P
ART\ue000 I
ITEMS\ue000 1\ue000 AND\ue000 2.
Business\ue000 and\ue000 Properties
1
\ue000
ITEM\ue000 1A.
Risk\ue000 Factors
28
\ue000
ITEM\ue000 1B.
Unresolved\ue000 Staff\ue000 Comments
36
\ue000
ITEM\ue000 3.
Legal\ue000 Proceedings
36
\ue000
ITEM\ue000 4.
Submission\ue000 of\ue000 Matters\ue000 to\ue000 a\ue000 Vote\ue000 of\ue000 Security\ue000 Holders
36
P
ART\ue000 II
ITEM\ue000 5.
Market\ue000 for\ue000 the\ue000 Registrant\u2019s\ue000 Common\ue000 Equity,\ue000 Related\ue000 Stockholder\ue000 Matters\ue000 and\ue000 Issuer\ue000 Purchases\ue000 of
Equity\ue000 Securities
36
\ue000
ITEM\ue000 6.
Selected\ue000 Financial\ue000 Data
38
\ue000
ITEM\ue000 7.
Management\u2019s\ue000 Discussion\ue000 and\ue000 Analysis\ue000 of\ue000 Financial\ue000 Condition\ue000 and\ue000 Results\ue000 of\ue000 Operations
39
\ue000
ITEM\ue000 7A.
Quantitative\ue000 and\ue000 Qualitative\ue000 Disclosures\ue000 about\ue000 Market\ue000 Risk
75
\ue000
ITEM\ue000 8.
Financial\ue000 Statements\ue000 and\ue000 Supplementary\ue000 Data
81
\ue000
ITEM\ue000 9.
Changes\ue000 in\ue000 and\ue000 Disagreements\ue000 with\ue000 Accountants\ue000 on\ue000 Accounting\ue000 and\ue000 Financial\ue000 Disclosure
131
\ue000
ITEM\ue000 9A.
Controls\ue000 and\ue000 Procedures
131
P
ART\ue000III
ITEMS\ue000 10\ue000 AND\ue000 11. Directors,\ue000 Executive\ue000 Officers\ue000 and\ue000 Corporate\ue000 Governance,\ue000 and\ue000 Executive\ue000 Compensation
133
\ue000
ITEM\ue000 12.
Security\ue000 Ownership\ue000 of\ue000 Certain\ue000 Beneficial\ue000 Owners\ue000 and\ue000 Management\ue000 and\ue000 Related\ue000 Stockholder\ue000 Matters
160
\ue000
ITEM\ue000 13.
Certain\ue000 Relationships\ue000 and\ue000 Related\ue000 Transactions,\ue000 and\ue000 Director\ue000 Independence
161
\ue000
ITEM\ue000 14.
Principal\ue000 Accounting\ue000 Fees\ue000 and\ue000 Services
161
P
ART\ue000 IVITEM\ue000 15.
Exhibits,\ue000 Financial\ue000 Statement\ue000 Schedules
163
\ue000
Special\ue000 Note\ue000 to\ue000 Canadian\ue000 Investors\u2014see\ue000 page\ue000 79
\ue000

Unless\ue000 we\ue000 indicate\ue000 otherwise,\ue000 all\ue000 dollar\ue000 amounts\ue000 ($)\ue000 are\ue000 in\ue000 Canadian\ue000 dollars,\ue000 and\ue000 oil\ue000 and\ue000 gas\ue000 volumes,\ue000 reserves\ue000 and\ue000 related\ue000 performance
measures\ue000 are\ue000 presented\ue000 on\ue000 a\ue000 working\ue000 interest\ue000 before-royalties\ue000 basis.\ue000 Where\ue000 appropriate,\ue000 information\ue000 on\ue000 an\ue000 after-royalties\ue000 basis\ue000 is\ue000 provided
in\ue000 tabular\ue000 format.\ue000 Volumes\ue000 and\ue000 reserves\ue000 include\ue000 Syncrude\ue000 operations\ue000 unless\ue000 otherwise\ue000 stated.

\ue000
Below\ue000 is\ue000 a\ue000 list\ue000 of\ue000 terms\ue000 specific\ue000 to\ue000 the\ue000 oil\ue000 and\ue000 gas\ue000 industry.\ue000 They\ue000 are\ue000 used\ue000 throughout\ue000 the\ue000 Form\ue000 10-K.
\ue000
/
d
= per\ue000day
b
bl
= barrel
m
bbls
= thousand\ue000barrels
m
mbbls
= million\ue000barrels
m
mbtu
= million\ue000 British\ue000 thermal\ue000 units
k
m
= kilometre
MW
= megawatt
PSCTM
= Premium\ue000Synthetic\ue000Crude
m
boe
= thousand\ue000 barrels\ue000 of\ue000 oil\ue000 equivalent
m
mboe
= million\ue000 barrels\ue000 of\ue000 oil\ue000 equivalent
m
cf
= thousand\ue000 cubic\ue000 feet
m
mcf
= million\ue000 cubic\ue000 feet
b
cf
= billion\ue000 cubic\ue000 feet
W
TI
= West\ue000 Texas\ue000 Intermediate
NGL
= natural\ue000 gas\ue000 liquid
NYMEX
= New\ue000 York\ue000 Mercantile\ue000 Exchange
\ue000

In\ue000 this\ue000 10-K,\ue000 we\ue000 refer\ue000 to\ue000 oil\ue000 and\ue000 gas\ue000 in\ue000 common\ue000 units\ue000 called\ue000 barrel\ue000 of\ue000 oil\ue000 equivalent\ue000 (boe).\ue000 A\ue000 boe\ue000 is\ue000 derived\ue000 by\ue000 converting\ue000 six\ue000 thousand\ue000 cubic feet\ue000 of\ue000 gas\ue000 to\ue000 one\ue000 barrel\ue000 of\ue000 oil\ue000 (6mcf/1bbl).\ue000 This\ue000 conversion\ue000 may\ue000 be\ue000 misleading,\ue000 particularly\ue000 if\ue000 used\ue000 in\ue000 isolation,\ue000 as\ue000 the\ue000 6mcf/1bbl\ue000 ratio\ue000 is\ue000 based on\ue000 an\ue000 energy\ue000 equivalency\ue000 at\ue000 the\ue000 burner\ue000 tip\ue000 and\ue000 does\ue000 not\ue000 represent\ue000 the\ue000 value\ue000 equivalency\ue000 at\ue000 the\ue000 well\ue000 head.

\ue000
The\ue000 noon-day\ue000 Canadian\ue000 to\ue000 US\ue000 dollar\ue000 exchange\ue000 rates\ue000 for\ue000 Cdn\ue000 $1.00,\ue000 as\ue000 reported\ue000 by\ue000 the\ue000 Bank\ue000 of\ue000 Canada,\ue000 were:
\ue000
(
US$)
\ue000
December\ue000 31
\ue000
Average
\ue000
High
\ue000
Low
\ue000
2004
\ue000
0.8308\ue000
0.7683\ue000
0.8493\ue000
0.7159\ue000
2005
\ue000
0.8577\ue000
0.8253\ue000
0.8690\ue000
0.7872\ue000
2006
\ue000
0.8581\ue000
0.8818\ue000
0.9099\ue000
0.8528\ue000
2007
\ue000
1.0120\ue000
0.9304\ue000
1.0905\ue000
0.8437\ue000
2008
\ue000
0.8166\ue000
0.9381\ue000
1.0289\ue000
0.7711\ue000
\ue000
On\ue000 January\ue000 30,\ue000 2009,\ue000 the\ue000 noon-day\ue000 exchange\ue000 rate\ue000 was\ue000 US\ue000 $0.8088\ue000 for\ue000 Cdn\ue000 $1.00.
\ue000

Electronic\ue000 copies\ue000 of\ue000 our\ue000 filings\ue000 with\ue000 the\ue000 Securities\ue000 Exchange\ue000 Commission\ue000 (SEC)\ue000 and\ue000 the\ue000 Ontario\ue000 Securities\ue000 Commission\ue000 (OSC)\ue000 (from
November\ue000 8,\ue000 2002\ue000 onward)\ue000 are\ue000 available,\ue000 free\ue000 of\ue000 charge,\ue000 on\ue000 our\ue000 website\ue000 (www.nexeninc.com).\ue000 Filings\ue000 prior\ue000 to\ue000 November\ue000 8,\ue000 2002\ue000 are\ue000 available
free\ue000 of\ue000 charge,\ue000 on\ue000 request,\ue000 by\ue000 contacting\ue000 our\ue000 investor\ue000 relations\ue000 department\ue000 at\ue000 403.699.5931.\ue000 As\ue000 soon\ue000 as\ue000 reasonably\ue000 practicable,\ue000 our\ue000 filings\ue000 are
made\ue000 available\ue000 on\ue000 our\ue000 website\ue000 once\ue000 they\ue000 are\ue000 electronically\ue000 filed\ue000 with\ue000 the\ue000 SEC\ue000 and/or\ue000 the\ue000 OSC.\ue000 Alternatively,\ue000 the\ue000 SEC\ue000 and\ue000 the\ue000 OSC\ue000 each
maintain\ue000 a\ue000 website\ue000 (www.sec.gov\ue000 and\ue000 www.sedar.com)\ue000 that\ue000 contains\ue000 our\ue000 reports,\ue000 proxy\ue000 and\ue000 information\ue000 statements\ue000 and\ue000 other\ue000 published
information\ue000 that\ue000 have\ue000 been\ue000 filed\ue000 or\ue000 furnished\ue000 with\ue000 the\ue000 SEC\ue000 and\ue000 the\ue000 OSC.\ue000 The\ue000 information\ue000 on\ue000 our\ue000 website,\ue000 is\ue000 not,\ue000 and\ue000 shall\ue000 not\ue000 be\ue000 deemed\ue000 to\ue000 be,
a\ue000 part\ue000 of\ue000 this\ue000 Annual\ue000 Report\ue000 on\ue000 Form\ue000 10-K.

\ue000
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