EXHIBIT 99.1
NUEVO ENERGY COMPANY
2001 Forecast
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
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3 months ended 9 months ended
March 31, 2001 Dec. 31, 2001 2001
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REVENUES:
Oil revenues........................................ $ 64,460 $249,247 $313,708
Gas revenues........................................ 47,249 84,230 131,480
Liquids revenues.................................... 973 2,683 3,657
Interest and other income (1)....................... 151 225 376
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Total revenues................................. $112,834 $336,386 $449,220
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COSTS & EXPENSES:
Lease operating expenses............................ $ 60,886 $168,676 $229,562
Depreciation, depletion and amortization............ 16,303 55,815 72,118
Exploration costs................................... 5,304 16,897 22,201
General and administrative expenses................. 8,372 23,376 31,748
Interest expense.................................... 10,452 32,851 43,303
TECONS - Dividends expense.......................... 1,653 4,959 6,613
Other expense (1)................................... 455 855 1,311
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Total expenses................................. $103,425 $303,431 $406,855
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Net earnings before taxes........................... $ 9,409 $ 32,956 $ 42,365
Income Taxes (2):
Current........................................ 188 659 847
Deferred....................................... 3,575 12,523 16,099
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Net income (loss)................................... $ 5,645 $ 19,773 $ 25,419
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Earnings per share (diluted)........................ $ 0.33 $ 1.16 $ 1.49
Discretionary Cash Flow (3).................... $ 31,517 $107,077 $138,594
Discretionary Cash Flow per share (diluted).... $ 1.84 $ 6.27 $ 8.11
EBITDAX (4)......................................... $ 43,120 $143,479 $186,599
Weighted average common and dilutive potential
common shares outstanding...................... 17,090 17,087 17,088
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Prices:
Oil ($/BBL) - Including hedges................. $ 15.75 $ 17.36 $ 17.00
Oil ($/BBL) - reference price (NYMEX).......... $ 30.02 $ 28.19 $ 28.65
Gas ($/MCF).................................... $ 11.93 $ 7.28 $ 8.47
Gas ($/MCF) - reference price (NYMEX).......... $ 7.81 $ 5.61 $ 6.16
Production:
Oil (MBBL)..................................... 4,092 14,361 18,453
BBLS/D......................................... 45,464 52,223 50,557
Gas (MMCF)..................................... 3,960 11,569 15,528
MMCF/D......................................... 44 42 43
Liquids (MBBL)................................. 43 127 170
MBOE - including liquids............................ 4,795 16,416 21,211
Lease Operating Expense per BOE..................... $ 12.70 $ 10.27 $ 10.82
General & Administrative Expense per BOE............ $ 1.75 $ 1.42 $ 1.50
Fixed Charge Coverage Ratio......................... 3.6 3.8 3.7
Long-term Debt...................................... $409,727 $459,472 $459,472
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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
Dividends on TECONS, plus Interest Expense, 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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First Quarter 2001 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 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 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 will be updated in April 2001 to include the impact of SFAS No.
133. Upon adoption of SFAS No. 133, the provisions of this statement must be
applied prospectively. The Company has completed an inventory of all known
derivatives and is in the process of documenting the relevant hedge
relationships. 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.
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 first quarter 2001 production will be between 3.8 and 4.2
million barrels (42,222 - 46,667 barrels per day) which incorporates a reduction
in crude oil volume due to a decrease in cyclic steaming, downtime for potential
electrical interruptions and pump repairs as well as planned downtime for
scheduled field maintenance. Of this first quarter 2001 volume, approximately
92% will be derived from California, 7% 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.
Crude Oil Prices
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Realized crude oil prices for the first quarter 2001 are expected to be between
$15.50 and $16.00 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 degrees 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 degrees 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.
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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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.
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 first quarter 2001 production will be between 3.8 and 4.1
Bcf (42.2 MMcfd - 45.6 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.
Natural Gas Prices
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Realized gas prices for the first quarter 2001 are expected to be between $10.80
and $13.00 Mcf based on our assumption regarding the California price
differential versus the current NYMEX strip price. Recently, natural gas prices
in California have greatly exceeded NYMEX prices, and that wide basis
differential is expected to persist through much of 2001.
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 it will produce more
natural gas than it will consume in 2001. 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 related to cyclic steaming operations for higher steam:oil ratio
(SOR) wells in order to capture robust California spot gas prices. This forecast
assumes a reduction in steam usage through April 2001. For the remainder of
2001, Nuevo will continue to look for opportunities to take advantage of its net
long natural gas position in California. Finally, Nuevo expects to continue to
add to gas reserves and production in California through both exploration and
exploitation efforts in 2001.
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 first quarter 2001 production will be between 42,000 and
44,000 barrels (467 and 489 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.
First Quarter 2001 Total Production
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We anticipate that our first quarter 2001 production will be between 4.7 and 4.9
million BOE with 85% 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
recent natural gas prices have increased significantly, 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 averaged
$2.30 BOE. Due to high gas costs, we expect the first quarter 2001 LOE to be
between $12.15 and $13.25 BOE. 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. In
California, Nuevo produced 38 MMcfd and consumed 28 MMcfd in thermal operations
in the fourth quarter 2000.
Depreciation, Depletion and Amortization
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We anticipate that the DD&A rate for the first quarter 2001 will be between
$3.25 and $3.55 BOE. 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, completed
and the success rate in any given quarter and any potential changes to the
capital budget. Exploration expenses for the first quarter 2001 should be
between $4.9 million and $5.7 million. During the first quarter 2001 the Cougar
prospect (Ghana) and the Wedge prospect (California) will be drilling. Depending
on the timing of well results, these wells may be expensed in the first quarter
2001 if these wells are non-commercial.
General and Administrative Expense
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We anticipate that the G&A rate for the first quarter 2001 will be between $1.70
and $1.80 BOE. The factor that could have the greatest impact on G&A 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.
Interest Expense
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We anticipate that our interest expense for the first quarter 2001 will be
between $10 million and $11 million.
Term Convertible Securities (TECONS) - Dividend Expense
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We expect our first quarter 2001 TECONS dividend expense to be $1.65 million.
Income Taxes
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We expect our effective income tax rate for the first quarter 2001 to be 40%
(inclusive of applicable federal and state taxes) 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 December 31, 2000, approximately 135,500 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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We expect base capital expenditures for 2001 to be approximately $187 million.
Depending on the level of drilling success, capital expenditures could be
increased by approximately $18 million to $205 million. Some of the factors
impacting the level of capital expenditures include crude oil and natural gas
prices as well as the volatility in these prices, the cost and availability of
oilfield services, exploratory drilling success, acquisitions and divestitures
and the level and availability of external financing. Should high gas prices
persist in California throughout 2001, Nuevo may defer a portion of capital
expenditures associated with thermal projects into 2002.