EX-99.1 2 h15186exv99w1.htm PRESS RELEASE exv99w1
 

EXHIBIT 99.1

     
FOR IMMEDIATE RELEASE
May 6, 2004
  NEWS RELEASE
CONTACT:
Barbara B. Forbes
Director of Investor Relations
713-374-4870

NUEVO ENERGY REPORTS FIRST QUARTER 2004 FINANCIAL RESULTS

HOUSTON — Nuevo Energy Company (NYSE: NEV) today reported income from continuing operations for the first quarter 2004 of $7.2 million, or $0.35 per diluted share versus $12.7 million, or $0.65 per diluted share in the year ago period. The decline in income from continuing operations in the first quarter 2004 versus the year ago period primarily reflects an after-tax derivative loss of $3.4 million ($0.16 per diluted share) and an after-tax loss on early extinguishment of debt of $1.5 million ($0.07 per diluted share). The derivative loss is attributable to losses on three-way crude oil derivative contracts (with price ceilings of $31.00 per barrel) which are marked-to-market through net income for the duration of the crude oil contracts at a currently robust crude oil price strip. The loss on early extinguishment of debt is due to the redemption of the remaining $75.0 million of 9 1/2% Notes.

Net income was $7.1 million, or $0.35 per diluted share in the first quarter 2004, compared to $25.7 million, or $1.33 per diluted share in the first quarter 2003. The decline in net income in the first quarter 2004 versus the year ago period reflects the aforementioned items as well as income from discontinued operations of $4.6 million ($0.24 per diluted share) and the cumulative effect of a change in accounting principle of $8.5 million ($0.44 per diluted share) which were reported in the first quarter 2003.

Net cash provided by operating activities was $15.9 million in the first quarter 2004 compared to $47.1 million in the same period in 2003 due to working capital changes related to the timing of crude oil liftings and payments in our Congo operations, and the annual settlement of certain crude oil derivative contracts made in the first quarter 2004. Discretionary cash flow, a non-GAAP financial measure, was $43.0 million in the first quarter 2004 compared to $44.3 million in the first quarter 2003 which included $4.5 million of discretionary cash flow from discontinued operations.

Production and Prices

Total production from continuing operations decreased 3% to 47.4 thousand barrels of oil equivalent (MBOE) per day in the first quarter 2004 compared to 48.7 MBOE per day in the year ago period. Production from our discontinued operations was 3.3 MBOE per day in the first quarter 2003. Crude oil production of 41.6 thousand barrels (MBbls) per day declined slightly from 42.1 MBbls per day in the comparable period in 2003. The realized crude oil price increased 9% to $23.83 per barrel in the first quarter 2004 versus $21.83 per barrel in the year ago period. Included in the realized crude oil prices are hedging losses of $4.44 per barrel in the first quarter 2004 and $3.68 per barrel in the comparable period a year ago.

Nuevo’s first quarter 2004 natural gas production decreased 11% to 35.2 million cubic feet (MMcf) per day from 39.4 MMcf per day in the first quarter 2003 due to a decline in production at the Pitas Point Field, offshore California and a decline in production from a prolific well in the Pakenham Field, West Texas which was placed on production in the first quarter 2003. Nuevo’s realized natural gas price was relatively flat at $4.26 per thousand cubic feet (Mcf) in the first quarter 2004 compared to $4.32 per Mcf in the year ago period. Included in the realized natural gas price is a hedging loss of $0.09 per Mcf in the first quarter 2004 and $0.48 per Mcf in the comparable period a year ago.

Costs and Expenses

Total costs and expenses in the first quarter 2004 were $72.5 million versus $65.3 million in the year ago period primarily impacted by higher lease operating expense (LOE). LOE was $44.8 million in the first quarter 2004 compared to $39.3 million in the year ago period. Excluding the natural gas cost and the increased natural gas volume, lease operating expense was $31.4 million in the first quarter 2004 versus $27.5 million in the comparable period in 2003 due to the timing of well workovers offshore California. Natural gas is used to generate steam which in turn facilitates production of heavy oil onshore California. General and administrative (G&A) costs increased to $7.8 million in the first quarter 2004 versus $6.7 million in the same period in 2003 due to legal expenses and merger-related costs. DD&A increased to $18.7 million in the first quarter 2004 compared to $17.4 million in the year ago period due to the Unocal contingent payment buyout in April 2004. The DD&A expense averaged $4.33 per barrel oil equivalent (BOE) in the first quarter 2004 compared to $3.97 per BOE in the year ago period. Interest expense declined 55% to $4.2 million in the first quarter 2004 compared to $9.3 million in the first quarter 2003 due to the redemption of $259.6 million of our 9 1/2% Notes.

 

 

Balance Sheet

At March 31, 2004, total debt outstanding was $318.3 million versus $355.0 million at year-end 2003. (Both periods include a long-term liability to unconsolidated affiliate of $115.0 million.) At the end of the first quarter 2004, Nuevo’s debt to capital ratio, as defined in our credit agreement, declined to 34% compared to 38% at year-end 2003. The fixed charge coverage ratio improved to 5.4 times for the four quarters ending March 31, 2004 versus 5.0 times at year-end 2003.

Capital Expenditures

Capital expenditures in the first quarter 2004 were $11.4 million compared to $16.9 million in the first quarter 2003.

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 producing properties are located onshore and offshore California and in West Texas. Nuevo is the largest independent producer of crude oil and natural gas in California. 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)

                 
    Three Months Ended March 31,
    2004
   2003
Production
                
Crude oil and liquids (MBbls)
     3,783       3,793  
Per Day
     41.6       42.1  
Natural Gas (MMcf)
     3,201       3,542  
Per Day
     35.2       39.4  
MBOE
     4,317       4,383  
Per Day
     47.4       48.7  
Prices
                
Crude oil and liquids ($/Bbl)
                
Unhedged
   $ 28.27     $ 25.51  
Hedged
     23.83       21.83  
Natural gas ($/Mcf)
                
Unhedged
   $ 4.35     $ 4.80  
Hedged
     4.26       4.32  
Revenues
                
Crude oil and liquids
   $ 90,145     $ 82,802  
Natural gas
     13,647       15,310  
Other
     (944 )     138  
 
    
 		      
 		  
 
     102,848       98,250  
 
    
 		      
 		  
Costs and Expenses
                
Lease operating expenses
     44,793       39,330  
Exploration costs
     366       1,072  
Depletion, depreciation, amortization and accretion
     18,678       17,389  
General and administrative
     7,768       6,717  
Other
     910       795  
 
    
 		      
 		  
 
     72,515       65,303  
 
    
 		      
 		  
Income From Operations
     30,333       32,947  
Derivative gain (loss)
     (7,014 )     (943 )
Interest income
     437       79  
Interest expense
     (4,219 )     (9,322 )
Loss on early extinguishment of debt
     (3,004 )     —  
Interest expense on long-term liability to unconsolidated affiliate
     (1,704 )     —  
Dividends on TECONS
     —       (1,653 )
 
    
 		      
 		  
Income From Continuing Operations Before Income Tax
     14,829       21,108  
Income tax expense
                
Current
     1,571       1,504  
Deferred
     6,080       6,941  
 
    
 		      
 		  
 
     7,651       8,445  
 
    
 		      
 		  
Income From Continuing Operations
     7,178       12,663  
Income from discontinued operations, including gain(loss) on disposition, net of income taxes
     (37 )     4,554  
Cumulative effect of a change in accounting principle, net of income taxes
     —       8,496  
 
    
 		      
 		  
Net Income
   $ 7,141     $ 25,713  
 
    
 		      
 		  
Earnings Per Share
                
Basic
                
Income from continuing operations
   $ 0.35     $ 0.66  
Income from discontinued operations
     —       0.24  
Cumulative effect of change in accounting principle
     —       0.44  
 
    
 		      
 		  
Net income
   $ 0.35     $ 1.34  
 
    
 		      
 		  
Diluted
                
Income from continuing operations
   $ 0.35     $ 0.65  
Income from discontinued operations
     —       0.24  
Cumulative effect of change in accounting principle
     —       0.44  
 
    
 		      
 		  
Net income
   $ 0.35     $ 1.33  
 
    
 		      
 		  
Weighted Average Shares Outstanding
                
Basic
     20,246       19,199  
 
    
 		      
 		  
Diluted
     20,662       19,305  
 
    
 		      
 		  

 

NUEVO ENERGY COMPANY
SUMMARY BALANCE SHEET
(In thousands)

                 
    March 31,   December 31,
    2004
   2003
Condensed Balance Sheet
                
Assets
                
Current assets(1)
   $ 85,367     $ 68,141  
Assets held for sale
     39,747       38,290  
Property, plant and equipment, net
     728,836       696,241  
Deferred tax assets, net
     17,643       17,404  
Goodwill
     17,121       17,121  
Other assets
     9,834       7,779  
 
    
 		      
 		  
 
   $ 898,548     $ 844,976  
 
    
 		      
 		  
Liabilities and Stockholders’ Equity
                
Current liabilities(2)
     217,281       138,948  
Long-term debt
                
Senior Subordinated Notes
     150,000       225,000  
Bank Credit Facility
     53,300       15,000  
Long-term liability to unconsolidated affiliate
     115,000       115,000  
 
    
 		      
 		  
Total debt
   $ 318,300     $ 355,000  
Interest rate swap adjustment
     14,308       14,211  
 
    
 		      
 		  
Long-term debt
     332,608       369,211  
 
    
 		      
 		  
Asset retirement obligation
     105,111       102,921  
Other long-term liabilities
     19,399       12,067  
Stockholders’ equity (3)
     224,149       221,829  
 
    
 		      
 		  
 
   $ 898,548     $ 844,976  
 
    
 		      
 		  
Common Stock Outstanding at Period End
     20,385       19,682  
 
    
 		      
 		  

(1)   Current assets excluding SFAS 133 were $64.5 million at March 31, 2004 and $56.2 million at December 31, 2003.
 
(2)    Current liabilities excluding SFAS 133 were $155.7 million at March 31, 2004 and $103.9 million at December 31, 2003.
 
(3)   Includes ($43.9) million and ($24.6) million of other comprehensive (loss) income in 2004 and 2003, respectively.

 

NUEVO ENERGY COMPANY
Reconciliation of Non-GAAP Financial Measures
(In thousands)

Discretionary cash flow represents net cash provided by operating activities before changes in assets and liabilities and exploration expense, less interest capitalized. (This definition may differ from definitions used by other companies.) Discretionary cash flow is presented because the Company believes it is a useful alternative to net cash provided by operating activities under generally accepted accounting principles (GAAP). The Company believes that discretionary cash flow is widely accepted as a financial indicator of an exploration and production (E&P) company’s ability to generate cash which is used to internally fund exploration and development activities, service debt, pay dividends or fund acquisitions. This measure is widely used by investors and security analysts in the valuation, comparison, and investment recommendations of companies within the E&P sector. 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, as a measure of liquidity, or as an alternative to net income.

                 
    Three Months Ended March 31,
    2004
   2003
Discretionary Cash Flow
   $ 43,048     $ 44,336  
Adjustments:
                
Working capital changes, net of non-cash
     (26,886 )     2,790  
Exploration costs excluding dry hole costs
     (359 )     (501 )
Interest capitalized
     125       509  
 
    
 		      
 		  
Net cash provided by operating activities
   $ 15,928     $ 47,134  
 
    
 		      
 		  

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 natural gas 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.

                 
    Three Months Ended March 31,
    2004
   2003
Lease Operating Expenses Excluding Steam Costs
   $ 31,391     $ 27,544  
Adjustment:
                
Steam costs
     13,402       11,786  
 
    
 		      
 		  
Lease Operating Expenses
   $ 44,793     $ 39,330  
 
    
 		      
 		  

Total debt represents bank debt and long-term fixed rate debt. Total debt is presented because the Company believes it is a useful alternative to long-term debt under GAAP. The Company believes that total debt is a more accurate representation of Nuevo’s debt obligations than long-term debt which includes SFAS No. 133 adjustments associated with the Company’s interest rate swaps. Total debt is widely used by investors and security analysts in the valuation, comparison, and investment recommendations of companies within the E&P sector.

                 
    03/31/04
   12/31/03
Total Debt
   $ 318,300       355,000  
Adjustments:
                
Interest rate swaps — fair value adjustment
     2,276       (153 )
Interest rate swaps — termination gain
     12,032       14,364  
 
    
 		      
 		  
Long-Term Debt
   $ 332,608     $ 369,211