EXHIBIT 10.1
 
                             SEPARATION AGREEMENT

  It is hereby agreed by and between Michael D. Watford ("Watford") and his 
former employer, Nuevo Energy Company (hereinafter "Nuevo"), that Watford has 
terminated his employment with Nuevo effective August 31, 1997. In connection 
with the termination of Watford's employment, and the payment to Watford of 
severance benefits provided for under his January 1, 1997 Employment Agreement 
with Nuevo, and in consideration of their mutual promises and other 
consideration itemized below, Watford and Nuevo agree to the following:

  1. Watford shall be paid his salary, less standard deductions, through August 
31, 1997.

  2. Nuevo agrees that upon execution of this Agreement, Nuevo will grant 
Watford an extension in the deadline for exercising Nuevo Energy Company Stock 
options which had previously been granted to him, and that all options and bonus
stock previously granted him are fully vested as of the date of this agreement. 
All options must be exercised by August 31, 1999, at which time the options will
terminate.

  3. Watford's rights under his 401K and Deferred Compensation Plan with Nuevo 
shall be fully vested on August 31, 1997.

  4. Watford shall be entitled to continue participation in the Nuevo medical 
plan, dental plan and vision plan for a total of eighteen (18) months from 
August 31, 1997. Watford shall be entitled to no other employee benefits from 
Nuevo, including those described under Paragraph 3(D) of his Employment 
Agreement. It is expressly understood, however, that this Agreement and this 
language in particular has no effect on Watford's rights under the Torchmark 
Corporation retirement/pension plan.

 
   5. Watford shall be paid a 1997 bonus of $225,000.00 which shall be treated
in accordance with the existing deferred compensation plan. He shall also
receive a severance payment in the amount of $1,408,333.30, less applicable
withholding taxes.

   6. Neuvo shall transfer the title to Watford's automobile to him, and shall
pay the title transfer costs and any applicable sales tax or fees. Taxes, if
any, due by reason of such transfer shall be paid by Watford.

   7. Watford shall receive a lump sum payment of $17,200.00 to obtain and pay a
country club membership for two (2) years following his termination.

   8. Watford shall be given possession of and title to his portable personal 
computer.

   9. Watford shall and hereby does resign his seat on Nuevo's Board of 
Directors, and the Boards of any subsidiaries of Nuevo, and the Boards of The 
Los Angeles Oil Company and Sepulveda Oil & Gas Company.

  10. Watford and Nuevo agree that other than the payments and other 
consideration provided for above, there shall be no further compensation due 
Watford by reason of his employment with and termination by Nuevo.

  IN WITNESS HEREOF, the parties to this Agreement have executed this instrument
on the dates set forth below.



Date: ___________________________         ______________________________________
                                          MICHAEL D. WATFORD

 
                             NUEVO ENERGY COMPANY


Date: ________________________     By: _________________________________________

                                   Name: ______________________________________
 
                                   Title: ______________________________________