EXHIBIT 99.1
NUEVO ENERGY REPORTS SECOND QUARTER EARNINGS; REDEEMED $160
MILLION OF 9 1/2% LONG-TERM DEBT
Nuevo Energy Company (NYSE: NEV) today reported net income of $7.4 million, or
$0.38 per diluted share in the second quarter 2003, compared to $16.6 million,
or $0.96 per diluted share in the second quarter 2002. Income from continuing
operations for the second quarter 2003 was $6.6 million, or $0.34 per diluted
share versus $14.6 million, or $0.84 per diluted share in the year ago period.
The second quarter 2003 results include a $2.7 million after-tax ($0.14 per
diluted share) gain on disposition of properties and a $6.7 million after-tax
($0.34 per diluted share) loss on early extinguishment of debt. The comparable
item in the second quarter 2002 was a $9.1 million after-tax ($0.53 per diluted
share) gain on disposition of properties.
Net cash provided by operating activities was $37.9 million in the second
quarter 2003 compared to $16.7 million in the same period in 2002. Discretionary
cash flow, a non-GAAP financial measure, was $37.2 million in the second quarter
2003 compared to $33.2 million in the second quarter 2002.
"On top of strong financial results for the quarter we significantly improved
our capitalization by redeeming approximately $160 million of high cost debt,"
commented Jim Payne, Chairman, President and CEO. "We have made great strides in
improving our balance sheet, and in a relatively short time period we reduced
our debt to capital to 48% at June 30, 2003 versus 62% at December 31, 2001. We
will continue to pursue our disciplined financial and operating strategy."
PRODUCTION AND PRICES
Total production from continuing operations was 48.2 thousand barrels of oil
equivalent (MBOE) per day in the second quarter 2003 compared to 46.0 MBOE per
day in the comparable period in 2002. Production from our discontinued
operations and assets held for sale was 1.2 MBOE per day in the second quarter
2003 and 5.0 MBOE per day in the second quarter 2002. Crude oil production of
42.1 thousand barrels (MBbls) per day was slightly higher than 41.3 MBbls per
day in the comparable period in 2002 due to increased production from the Point
Pedernales Field offshore California and production from our September 2002 West
Texas acquisition. The realized crude oil price increased 14% to $21.09 per
barrel in the second quarter 2003 versus $18.47 per barrel in the year ago
period. Included in the realized crude oil prices are hedging losses of $1.59
per barrel for the second quarter 2003 and $0.58 per barrel in the comparable
period a year ago.
Nuevo's second quarter 2003 natural gas production increased 30% to 36.4 million
cubic feet (MMcf) per day from 28.1 MMcf per day in the second quarter 2002 due
to production from our West Texas acquisition which more than offset lower
production in California. Nuevo's realized natural gas price increased 31% to
$4.06 per thousand cubic feet (Mcf) in the second quarter 2003 compared to $3.10
per Mcf in the year ago period. Included in the realized gas price is a hedging
loss of $0.20 per Mcf in the second quarter 2003. No gas was hedged in the 2002
period.
DRILLING UPDATE
The Diatomite drilling program at the Cymric and Midway-Sunset Fields onshore
California has been completed and the steaming of these new wells and
surrounding wells has commenced. As a result of this activity, production at
these fields should average 1,500 barrels per day higher in the second half of
2003 compared to the second quarter. The Cymric and Midway-Sunset Fields
represent about 49% of Nuevo's California production.
Year-to-date, five wells have been drilled and completed at the Pakenham Field
in West Texas and production has increased 26% to 24 MMcfe (million cubic feet
of gas equivalent) per day from 19 MMcfe per day at the time of acquisition. For
the balance of 2003, Nuevo will drill an additional five wells at the Pakenham
Field including a deep Ellenberger test which was spudded in July.
COSTS AND EXPENSES
Total costs and expenses in the second quarter 2003 were $61.6 million versus
$42.0 million in the year ago period. Excluding the gain on disposition of
properties and steam costs, total costs and expenses were $53.4 million in the
second quarter 2003 compared to $49.2 in the second quarter 2002. Lease
operating expenses represented a significant portion of the quarter-over-quarter
increase in total costs due to natural gas costs which increased 61% to $5.03
per Mcf versus the second quarter 2002. Natural gas is used to generate steam
which in turn facilitates production of heavy oil in California. Excluding the
natural gas cost, lease operating expense was $29.5 million in the second
quarter 2003 versus $24.3 million in the comparable period in 2002. The main
increase quarter-over-quarter is attributable to increased major maintenance and
workover activity. Nuevo continues to maintain cost discipline over other
controllable lease operating expenses. General and administrative costs also
declined significantly to $6.3 million in the second quarter 2003 versus $7.2
million in the same period in 2002 mainly due to lower outsourcing costs. DD&A
of $17.7 million was up $0.2 million from the second quarter of 2002, but
included $2.4 million of accretion expense required by SFAS No. 143. DD&A
expense averaged $4.04 per barrel oil equivalent (BOE) in the second quarter
2003 compared to $4.17 per BOE in the year ago period. Interest expense was $9.0
million in the second quarter 2003, a $0.2 million decline versus the year ago
period. Due to the redemption of the 9 1/2% Notes with cash on hand supplemented
by low cost bank debt, subsequent quarters will reflect a substantial interest
expense reduction. During the second quarter 2003, Nuevo terminated two
remaining interest rate swaps and received $4.1 million of cash which will be
amortized into income over the life of the Notes.
CAPITAL EXPENDITURES
Capital expenditures in the second quarter 2003 were $15.7 million,
primarily spent on our Cymric, Belridge and Pakenham fields. Capital
expenditures for the first half 2003 were $32.6 million compared to $30.6
million in the comparable period in 2002. Our 2003 capital program will be in
the range of $65 - $70 million.
BALANCE SHEET
In the second quarter 2003, Nuevo redeemed $157.2 million of 9 1/2% Senior
Subordinated Notes due 2008 and $2.4 million of 9 1/2% Senior Subordinated Notes
due 2006. At June 30, 2003, total debt outstanding was $316.2 million versus
$438.3 million at year-end 2002. At the end of the second quarter 2003, Nuevo's
debt to capital ratio as defined in our credit agreement declined to 48%
compared to 57% at year-end 2002. The fixed charge coverage ratio improved to
5.0 times for the four quarters ending June 30, 2003 versus 2.6 times in the
comparable period a year ago.
As of June 30, 2003, Nuevo had assets held for sale with a book value of
approximately $48.2 million related to certain California real estate and a
non-core oil field.
SECOND QUARTER CONFERENCE CALL
Nuevo will host a conference call to review second quarter 2003 financial
results today at 3:00 p.m. EDT (2:00 p.m. CDT). There will also be a
simultaneous web cast of the conference call which can be accessed from Nuevo's
web site at www.nuevoenergy.com. A copy of this press release will also be
posted on our web site.
FINANCIAL GUIDANCE
The third quarter 2003 and year 2003 financial and operating guidance is
provided in a separate press release and will be posted on our web site.
Nuevo Energy Company is a Houston, Texas-based company primarily engaged in the
acquisition, exploitation, development, exploration and production of crude oil
and natural gas. Nuevo's domestic producing properties are located onshore and
offshore California and in West Texas. Nuevo is the largest independent producer
of oil and gas in California. The Company's international producing property is
located offshore the Republic of Congo in West Africa. To learn more about
Nuevo, please refer to the Company's internet site at
http://www.nuevoenergy.com.
This press release includes "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, Section 21E of the
Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act
of 1995. All statements other than statements of historical facts included in
this press release, including without limitation, estimated quantities and net
present value of reserves, estimated production volumes, business strategies,
plans and objectives of management of the Company for future operations and
covenant compliance and capital expenditures are forward-looking statements.
Although the Company believes that the assumptions upon which such
forward-looking statements are based are reasonable, it can give no assurances
that such assumptions will prove to have been correct. Important factors that
could cause actual results to differ materially from the Company's expectations
("Cautionary Statements") and projections include volatility in oil and gas
prices, operating risks, the risks associated with reserve replacement,
competition from other companies and other factors set forth in the Company's
Annual Report on Form 10-K and other filings made with the SEC and incorporated
herein. All subsequent written and oral forward-looking statements and
projections attributable to the Company or to persons acting on its behalf are
expressly qualified by the Cautionary Statements.
NUEVO ENERGY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------
PRODUCTION
Crude oil and liquids (MBbls) 3,832 3,763 7,625 7,604
Per Day 42.1 41.3 42.1 42.0
Natural Gas (MMcf) 3,310 2,561 6,853 5,119
Per Day 36.4 28.1 37.9 28.3
MBOE 4,384 4,190 8,767 8,457
Per Day 48.2 46.0 48.4 46.7
PRICES
Crude oil and liquids ($/Bbl)
Unhedged $ 22.68 $ 19.05 $ 24.09 $ 17.39
Hedged $ 21.09 $ 18.47 $ 21.46 $ 17.72
Natural gas ($/Mcf)
Unhedged $ 4.26 $ 3.10 $ 4.54 $ 2.67
Hedged $ 4.06 $ 3.10 $ 4.19 $ 2.67
REVENUES
Crude oil and liquids $ 80,818 $ 69,506 $ 163,620 $ 134,757
Natural gas 13,428 7,943 28,738 13,654
Other 275 42 413 48
------------ ------------ ------------ ------------
94,521 77,491 192,771 148,459
------------ ------------ ------------ ------------
COSTS AND EXPENSES
Lease operating expenses 42,106 32,414 81,436 67,040
Exploration costs 317 424 1,389 1,482
Depletion, depreciation, amortization and accretion 17,709 17,458 35,098 34,706
General and administrative 6,346 7,232 13,063 13,315
Other (466) (222) 329 (198)
Loss (gain) on disposition of properties (4,457) (15,326) (4,457) (15,326)
------------ ------------ ------------ ------------
61,555 41,980 126,858 101,019
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 32,966 35,511 65,913 47,440
Derivative gain (loss) (784) (177) (1,727) (933)
Interest income 224 66 303 174
Interest expense (9,034) (9,212) (18,356) (18,216)
Loss on early extinguishment of debt (10,892) -- (10,892) --
Dividends on TECONS (1,653) (1,653) (3,306) (3,306)
------------ ------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX 10,827 24,535 31,935 25,159
Income tax expense
Current 576 -- 2,080 --
Deferred 3,639 9,948 10,580 10,199
------------ ------------ ------------ ------------
4,215 9,948 12,660 10,199
------------ ------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS 6,612 14,587 19,275 14,960
Income from discontinued operations,
including gain(loss) on disposition,
net of income taxes 770 1,979 5,324 3,068
Cummulative effect of a change in accounting
principle, net of income taxes -- -- 8,496
------------ ------------ ------------ ------------
NET INCOME $ 7,382 $ 16,566 $ 33,095 $ 18,028
============ ============ ============ ============
EARNINGS PER SHARE
Basic
Income from continuing operations $ 0.34 $ 0.85 $ 1.00 $ 0.88
Income from discontinued operations 0.04 0.12 $ 0.28 0.18
Cummulative effect of change in accounting principle -- -- $ 0.44 --
------------ ------------ ------------ ------------
Net income $ 0.38 $ 0.97 $ 1.72 $ 1.06
============ ============ ============ ============
Diluted
Income from continuing operations $ 0.34 $ 0.84 $ 0.99 $ 0.87
Income from discontinued operations 0.04 0.12 $ 0.27 0.18
Cummulative effect of change in accounting principle -- -- $ 0.44 --
------------ ------------ ------------ ------------
Net income $ 0.38 $ 0.96 $ 1.70 $ 1.05
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 19,260 17,079 19,230 17,040
============ ============ ============ ============
Diluted 19,507 17,291 19,446 17,237
============ ============ ============ ============
</Table>
NUEVO ENERGY
SUMMARY BALANCE SHEET
(IN THOUSANDS)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
CONDENSED BALANCE SHEET
ASSETS
Current assets(2) $ 70,637 $ 64,863
Assets held for sale 48,154 92,738
Property, plant and equipment, 699,907 613,713
Deferred tax assets, net 25,681 43,258
Goodwill 17,121 19,664
Other assets 14,285 20,935
------------ ------------
$ 875,785 $ 855,171
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities(3) $ 115,731 $ 100,744
Long-term debt 316,150 438,277
Interest rate swap adjustment 15,180 13,834
------------ ------------
Total debt and interest rate swap adjustment 331,330 452,111
------------ ------------
Asset retirement obligation 99,229 --
Other long-term 9,913 13,040
TECON 115,000 115,000
Stockholders' equity (4) 204,582 174,276
------------ ------------
$ 875,785 $ 855,171
============ ============
Common Stock Outstanding at Period 19,303 19,181
============ ============
</Table>
(2) Current assets excluding SFAS 133 were $60.5 million at June 30, and $57.2
million at December 31,
(3) Current liabilities excluding SFAS 133 were $85.4 million at June 30, and
$79.9 million at December 31,
(4) Includes ($16.5) million and ($11.5) million of other (loss) income in 2003
and 2002, respectively.
NUEVO ENERGY COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
<Table>
<Caption>
Three Months Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
----------- ------------ ----------- ----------
</Table>
Discretionary cash flow represents net cash provided by operating activities
before changes in assets and liabilities and exploration expense, less interest
capitalized. Discretionary cash flow is presented because management believes it
is a useful adjunct to net cash provided by operating activities under
accounting principles generally accepted in the United States (GAAP). Management
believes that discretionary cash flow is widely accepted as a financial
indicator of an oil and gas company's ability to generate cash which is used to
internally fund exploration and development activities, service debt and pay
dividends. This measure is widely used by investors and professional research
analysts in the valuation, comparison, rating and investment recommendations of
companies within the oil and gas exploration and production industry.
Discretionary cash flow is not a measure of financial performance under GAAP and
should not be considered as an alternative to cash flow from operating,
investing, or financing activities as an indicator of cash flow, or as a measure
of liquidity, or as an alternative to net income.
<Table>
DISCRETIONARY CASH FLOW
Net cash provided by operating activities $ 37,949 $ 16,686 $ 85,073 $ 29,006
Working capital changes, net of non-cash (787) 16,546 (3,567) 27,313
Exploration costs excluding dry hole costs 602 453 1,103 1,421
Interest capitalized (551) (439) (1,060) (888)
-------- -------- -------- --------
DISCRETIONARY CASH FLOW $ 37,213 $ 33,246 $ 81,549 $ 56,852
======== ======== ======== ========
</Table>
Total costs and expenses excluding the gain on the disposition of properties and
steam costs is a non-GAAP financial measure. The Company believes that this
measure more fully reflects inherent costs and expenses of our business and is
useful in evaluating our operational trends and performance relative to other
exploration and production companies.
<Table>
TOTAL COSTS AND EXPENSES EXCLUDING GAIN ON
DISPOSITION OF PROPERTIES AND STEAM COSTS $ 53,427 $ 49,192 $ 106,944 $ 101,503
Loss (gain) on disposition of properties (4,457) (15,326) (4,457) (15,326)
Steam costs 12,585 8,114 24,371 14,842
-------- -------- --------- ---------
TOTAL COSTS AND EXPENSES $ 61,555 $ 41,980 $ 126,858 $ 101,019
======== ======== ========= =========
</Table>
Lease operating expenses excluding steam costs is a non-GAAP financial measure.
Nuevo's heavy oil production in California is produced using thermal techniques
in which natural gas is used to generate steam which facilitates the production
of heavy oil. Over time, natural gas prices exhibit a high degree of price
volatility. Due to commodity price volatility and specialized thermal techniques
used to produce heavy California oil, the Company believes that lease operating
expenses excluding steam costs are more comparable to lease operating expenses
incurred by the majority of exploration and production companies.
<Table>
LEASE OPERATING EXPENSES EXCLUDING STEAM COSTS $29,521 $24,300 $57,065 $52,198
Steam costs 12,585 8,114 24,371 14,842
------- ------- ------- -------
LEASE OPERATING EXPENSE $42,106 $32,414 $81,436 $67,040
======= ======= ======= =======
</Table>