EXHIBIT 99.1
NUEVO ENERGY COMPANY
2000 Forecast
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
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Actual Forecast
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1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 2000
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REVENUES:
Oil revenues................................................ $ 59,937 $ 58,565 $ 67,149 $ 67,411 $ 253,062
Gas revenues................................................ $ 9,660 $ 13,082 $ 19,051 $ 31,088 $ 72,882
Liquids revenues............................................ $ 1,132 $ 952 $ 1,128 $ 1,259 $ 4,471
Gain on sales of assets (1)................................. $ 140 $ 366 -- -- $ 506
Interest and other income (1)............................... $ 626 $ 195 $ 2,264 $ 1,025 $ 4,110
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Total revenues......................................... $ 71,495 $ 73,160 $ 89,592 $ 100,783 $ 335,030
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COSTS & EXPENSES:
Lease operating expenses.................................... $ 31,111 $ 34,273 $ 38,226 $ 50,576 $ 154,186
Depreciation, depletion and amortization.................... $ 16,241 $ 15,582 $ 18,062 $ 17,640 $ 67,525
Exploration costs........................................... $ 3,254 $ 1,488 $ 791 $ 2,254 $ 7,787
Loss on sale of assets (1).................................. -- -- $ 520 -- $ 520
General and administrative expenses......................... $ 8,705 $ 7,531 $ 7,354 $ 8,241 $ 31,831
Interest expense............................................ $ 8,290 $ 8,517 $ 9,789 $ 10,696 $ 37,292
TECONS - Dividends expense.................................. $ 1,653 $ 1,653 $ 1,653 $ 1,653 $ 6,612
Other expense (1)........................................... $ 1,160 $ 2,687 $ 572 -- $ 4,419
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Total expenses......................................... $ 70,414 $ 71,731 $ 76,967 $ 91,061 $ 310,173
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Net earnings before taxes................................... $ 1,081 $ 1,429 $ 12,625 $ 9,722 $ 24,857
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Income Taxes (2):
Current................................................ ($ 360) ($ 11) $ 0 $ 194 ($ 177)
Deferred............................................... $ 796 $ 586 $ 5,089 $ 3,694 $ 10,165
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Net income (loss)........................................... $ 645 $ 854 $ 7,536 $ 5,833 $ 14,868
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Earnings per share (diluted)................................ $ 0.04 $ 0.05 $ 0.42 $ 0.33 $ 0.83
Discretionary Cash Flow (3)................................. $ 22,486 $ 17,818 $ 32,085 $ 29,422 $ 101,811
Discretionary Cash Flow per share (diluted)................. $ 1.23 $ 0.99 $ 1.79 $ 1.66 $ 5.68
EBITDAX (4)................................................. $ 30,379 $ 28,303 $ 43,440 $ 41,771 $ 143,893
Weighted average common and dilutive potential
common shares outstanding.............................. 18,209 17,939 17,886 17,716 17,938
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Prices:
Oil ($/BBL) - Consolidated............................. $ 14.22 $ 14.23 $ 15.00 $ 15.20 $ 14.67
Oil ($/BBL) - Unhedged realized price.................. $ 20.51 $ 20.26 $ 22.27 $ 22.81 $ 21.50
Oil ($/BBL) - reference price (NYMEX).................. $ 28.73 $ 28.63 $ 31.57 $ 31.85 $ 30.20
Gas ($/MCF)............................................ $ 2.42 $ 3.43 $ 5.24 $ 7.95 $ 4.75
Gas ($/MCF) - reference price (NYMEX).................. $ 2.48 $ 3.40 $ 4.30 $ 5.39 $ 3.89
Production:
Oil (MBBL)............................................. 4,215 4,117 4,478 4,436 17,245
BBLS/D................................................. 46,831 45,238 48,668 48,218 47,247
Gas (MMCF)............................................. 3,995 3,816 3,636 3,911 15,359
MMCF/D................................................. 44 42 39 43 42
Liquids (MBBL)......................................... 41 44 48 46 179
MBOE - including liquids.................................... 4,921 4,797 5,131 5,134 19,983
Lease Operating Expense per BOE............................. $ 6.32 $ 7.14 $ 7.45 $ 9.85 $ 7.72
General & Administrative Expense per BOE.................... $ 1.77 $ 1.57 $ 1.43 $ 1.61 $ 1.59
Long-term Debt.............................................. $ 338,752 $ 363,227 $ 409,727 $ 409,727 $ 409,727
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Notes:
(1) As a matter of policy, we will not provide guidance on other income, other
expense, or gain or loss on sales of assets, except as specifically noted.
(2) Assumes an effective tax rate of 40%; 5% current, 95% deferred.
(3) Calculated as Net Income, plus Deferred Taxes, plus Exploration Costs,
plus DD&A, less Gain on Sale of Assets plus Loss on Sale of Assets. Actual
amounts may include additional cash flow adjustments not specified above,
resulting in immaterial differences.
(4) Calculated as Net Earnings before Taxes, plus Exploration Costs, plus
DD&A, less Gain on Sale of Assets plus Loss on Sale of Assets. Actual
amounts may include additional cash flow adjustments not specified above,
resulting in immaterial differences.
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Fourth Quarter 2000 Financial Guidance
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The estimates listed below contain assumptions which we believe are reasonable.
We caution that these estimates are based on currently available information as
of the date hereof. We are not undertaking any obligation to update these
estimates as conditions change or as additional information becomes available.
All of the estimates and assumptions set forth in this document constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private
Securities Litigation Reform Act of 1995. Although we believe that these
forward-looking statements are based on reasonable assumptions, we can give no
assurance that our expectations will in fact occur and caution that actual
results may differ materially from those in the forward-looking statements. A
number of factors could affect our future results or the energy industry
generally and could cause our expected results to differ materially from those
expressed in this release. These factors include, among other things:
- Increases or decreases in oil and gas prices;
- Compliance with environmental regulations and other governmental laws
and regulations applicable to the oil and gas industry;
- Unanticipated problems or successes encountered during the exploration
for and exploitation and production of oil and gas;
- Political and economic events and conditions in the foreign
jurisdictions in which we operate;
- Our hedging activities;
- Decisions we make regarding our debt and equity structure, including the
decision to issue additional capital stock or debt securities;
- Our ability to deliver oil and gas to commercial markets;
- Changes in consumer demand;
- The impact of competition;
- The uncertainty of estimates of oil and gas reserves and production
rates;
- The impact of the adoption of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Company must adopt SFAS No. 133
by January 1, 2001. On adoption, the provisions of this statement must
be applied prospectively. The Company expects that the adoption of SFAS
No. 133 will primarily increase the volatility of other comprehensive
income and results of operations. In general, the amount of volatility
will vary with the level of derivative activities during any period.
- The risk factors and other conditions described in the report on
Form 10-K for the period ended December 31, 1999 and in the reports on
Form 10-Q for the periods ended March 31, 2000, June 30, 2000 and
September 30, 2000.
These estimates also assume that we will not engage in any material transactions
such as acquisitions or divestitures of assets, formation of joint ventures or
sale of debt or equity securities. We continually review these types of
transactions as part of our corporate strategy, and may engage in any of them
without prior notice.
Crude Oil Production
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We anticipate that our fourth quarter 2000 production will be between 4.4 and
4.5 million barrels (47,800 - 48,900 barrels per day) which incorporates
downtime for pump repairs as well as planned downtime for scheduled field
maintenance. Of this fourth quarter 2000 volume, approximately 90% will be
derived from California, 9% from the Republic of Congo and 1% from other U.S.
However, weather, unexpected subsurface conditions, power supply disruptions and
other unforeseen operating hazards may have an adverse impact on Nuevo's
production volumes and better than expected development drilling results or
exploration success could have a positive effect. For the previous four
quarters, oil production ranged from 4.1 million barrels to 4.5 million barrels.
Crude Oil Prices
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Realized crude oil prices for the fourth quarter 2000 are expected to be between
$15.10 and $15.30 Bbl. Realized prices are based on the current NYMEX WTI
futures price and are adjusted for the California crude oil sales contract, the
impact of hedges, and the price sharing agreements for our Point Pedernales and
Congo production.
. Nuevo realizes approximately 70% of the NYMEX WTI price for California
crude oil production, before hedges. About half of Nuevo's California crude
oil production is considered heavy oil (15 degree API quality crude oil
or heavier produced by thermal operations). The market price for California
heavy crude oil differs from the established market indices for oil
elsewhere in the U.S., due principally to the higher transportation and
refining costs associated with heavy oil.
. Nuevo realizes approximately 95% of the NYMEX WTI price for East Texas
crude oil production, before hedges.
. Nuevo realizes approximately 80% of the NYMEX WTI price for Congo crude oil
production, before hedges. Nuevo's Congo production is a relatively heavy
crude oil (16 - 20 degree API gravity) which is processed into low-sulfur,
No. 6 fuel oil for sale to worldwide markets. The market for residual fuel
oil differs from the markets for WTI and other benchmark crudes due to its
primary use as an industrial or utility fuel versus the higher value
transportation fuel component, which is produced from refining most grades
of crude oil.
The price of crude oil is subject to large fluctuations in response to
relatively minor changes in the supply of and demand for crude oil, market
uncertainty and a variety of additional factors beyond Nuevo's control. Any
substantial or extended decline in the price of crude oil would have an adverse
effect on Nuevo. For the previous four quarters, Nuevo's realized crude oil
price ranged from $14.22 to $15.00 Bbl.
Price Risk Management Policy
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Nuevo's price risk management policy was designed to accomplish the following
objectives: 1) to ensure sufficient capital for reserve replacement and 2) to
ensure fixed charge coverage ratios are maintained. Subsequent to the initial
website posting on November 14, 2000, the only change to the Crude Oil Hedge
schedule listed below is 1,200 B/D of new hedges added in the 2Q01.
Crude Oil Hedges
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Swaps Volume WTI Price
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4Q00 16,500 B/D $18.03 Bbl.
1Q01 26,000 B/D $19.52 Bbl.
2Q01 26,200 B/D $19.84 Bbl.
3Q01 20,000 B/D $21.22 Bbl.
4Q01 15,500 B/D $22.95 Bbl.
1Q02 12,500 B/D $25.91 Bbl.
Collar Volume WTI Price
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4Q00 16,500 B/D $16.00 Bbl. (Floor)
4Q00 13,700 B/D $21.21 Bbl. (Cap)
Floors Volume WTI Price
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2Q02 19,000 B/D $22.00 Bbl.
3Q02 14,000 B/D $22.00 Bbl.
4Q02 14,000 B/D $22.00 Bbl.
For a swap transaction, we receive a fixed price for our production and pay the
counter party a floating price based on a market index. For a floor (purchased
put), we receive the floor price if the floating price falls below the floor
price. Swaps fix the price we receive for production, while floors establish a
minimum price.
Natural Gas Production
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We anticipate that our fourth quarter 2000 production will be between 3.8 and
4.0 Bcf (41.3 MMcfd - 43.5 MMcfd). Of this volume, approximately 90% will be
derived from California and 10% from other U.S. However, weather, unexpected
subsurface conditions, and other unforeseen operating hazards may have an
adverse impact on our production volumes and better than expected development
drilling results or exploration success could have a positive effect. For the
previous four quarters, Nuevo's gas production ranged from 3.6 to 4.5 Bcf.
Natural Gas Prices
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Realized gas prices for the fourth quarter 2000 are expected to be between $7.90
and $8.10 Mcf based on the current NYMEX strip price. Realized gas prices
generally average within +/- $0.10 Mcf of the NYMEX strip price; however, the
price differential can vary by a significantly greater amount at different
points in time. For the previous four quarters, Nuevo's realized gas price
ranged from $2.42 to $5.24 Mcf.
The price of natural gas is subject to large fluctuations in response to
relatively minor changes in the supply of and demand for natural gas, market
uncertainty and a variety of additional factors beyond Nuevo's control. Natural
gas prices have been high recently, especially in the California market. No
assurances can be made that they will remain at current levels.
California Natural Gas Market Volatility
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Nuevo continues to work to optimize the use of its gas reserves in a very
volatile California gas market. The Company projects that for the balance of
2000 and all of 2001 it will produce more natural gas than it will consume.
Given that fact, the Company believes that any decisions to reduce gas
consumption for steam usage which would reduce near-term crude oil production,
will have a net positive impact on overall earnings, cash flow and EVA.
Beginning in mid-December 2000, Nuevo reduced its gas consumption relating to
cyclic steaming operations for higher steam oil ratios (SOR) wells.
Natural Gas Hedges
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Nuevo does not have any of its natural gas production hedged.
Liquids
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We anticipate that our fourth quarter 2000 production will be between 45,000 and
47,000 barrels (489 and 510 barrels per day). Historically, the estimated
realized price for liquids is approximately 80% of the NYMEX WTI price. The
same factors that affect our oil and gas production and pricing can also have an
effect on the production and pricing of liquids.
2000 Production
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We anticipate production of approximately 20 million BOE for the year with 87%
crude oil. However, our production volumes are subject to curtailments, delays,
and cancellations as a result of a lack of capital or other problems such as,
weather, compliance with governmental regulations or price controls, electrical
shortages, mechanical difficulties or shortages or delays in the delivery of
equipment. Changes to the capital budget (i.e. dollar amount and projects) and
exploratory drilling success will also have an impact on production volumes.
Lease Operating Expense (includes production and ad valorem taxes)
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Nuevo uses natural gas to generate steam for its thermal production. Since
natural gas prices have increased significantly during 2000, gas costs have
become a major component of LOE. With more normalized natural gas prices in
1999, steam costs contributed less than $1.00 BOE to LOE. During 2000, steam
costs have averaged over $1.80 BOE through September 30, 2000. Due to higher
gas costs, we expect fourth quarter 2000 LOE to be between $9.70 and $10.10 BOE.
For the previous four quarters, Nuevo's LOE rate per BOE has ranged from $6.32
to $7.95. Note that company-wide Nuevo produces more natural gas in total than
we consume in our thermal operations, so the net effect of higher natural gas
prices on our income statement is positive. Year-to-date through September 30,
2000, in California Nuevo produced 36 MMcfd and consumed 27 MMcfd in thermal
operations.
Depreciation, Depletion and Amortization
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We anticipate that the DD&A rate for the fourth quarter 2000 will be between
$3.35 and $3.50 BOE which is in-line with previous quarters in 2000. Our DD&A
rate is based on an estimate of our proved reserves for the most recent period.
Exploration Expenses
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We caution that this is an inherently difficult expense category to estimate and
that this estimate can be volatile due to the number of wells drilled and
completed and the success rate in any given quarter and any potential changes to
the capital budget. Exploration expenses for the fourth quarter 2000 should be
between $2.0 million and $2.4 million and includes a $2.3 million dry hole cost
for the Rainbow well in California. For the previous four quarters, Nuevo's
exploration expenses ranged from $0.8 million to $3.4 million.
General and Administrative Expense
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We anticipate that G&A for the fourth quarter 2000 will be between $1.55 and
$1.65 BOE. The factor that could have the greatest impact on G&A in the quarter
is the mark to market accounting for Nuevo's deferred compensation plan which is
based on the price of Nuevo common stock. As a matter of policy, Nuevo accrues
target EVA bonuses on a quarterly basis which may not represent actual results
at year-end. For the previous four quarters, Nuevo's G&A rate per BOE ranged
from $1.43 to $1.92.
Interest Expense
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We anticipate that our interest expense for the fourth quarter 2000 will be
between $10.4 million and $10.8 million. The fourth quarter will include
interest payments for a full quarter for the recently issued $150 million of 9
3/8% Senior Subordinated Notes due 2010. For the previous four quarters,
Nuevo's interest expense ranged from $8.2 million to $9.8 million.
Term Convertible Securities (TECONS) - Dividend Expense
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We expect our TECONS dividend expense to be $1.65 million which is in-line with
the previous four quarters.
Income Taxes
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We expect our effective income tax rate to be 40% (inclusive of applicable
federal and state taxes) in the fourth quarter 2000 and our deferred tax ratio
to be 95%.
Weighted Average Common and Dilutive Potential Common Shares Outstanding
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Nuevo repurchases its common shares under a Board authorized share repurchase
program. As of September 30, 2000, approximately 956,000 shares remained
authorized for repurchase at management's discretion under the most recent
authorization. While the company's policy is not to comment on the status of
the share repurchase program until the authorization is exhausted or when
quarterly financial statements are published, the weighted average shares shown
for these forecast periods are updated for material changes in share balances
through the forecast date. No future anticipated share repurchases are included
in the forecast.
Capital Expenditures
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Through September 30, 2000, Nuevo's capital expenditures were $83 million. We
expect capital expenditures for 2000 to be approximately $120 million. Some of
the factors impacting the level of capital expenditures include absolute crude
oil and natural gas prices as well as the volatility in these prices, the cost
and availability of oilfield services, acquisitions and divestitures and the
level and availability of external financing.