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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
May 6, 1998
NUEVO ENERGY COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 0-10537 76-0304436
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
1331 LAMAR, SUITE 1650
HOUSTON, TEXAS 77010
(Address of principal executive offices)
(713) 652-0706
(Registrant's telephone number, including area code)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not applicable
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Not applicable
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
Not applicable
ITEM 5. OTHER EVENTS
Nuevo Energy Company made the Press Release attached hereto as Exhibits
99A and 99B.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
Not applicable
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99A. Copy of the Company's Press Release dated May 6, 1998
99B. Copy of the Company's Press Release dated May 6, 1998
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
Not applicable
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NUEVO ENERGY COMPANY
May 6, 1998 By: /s/ Robert M. King
--------------------------
Robert M. King
Senior Vice President & Chief
Financial Officer
3
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EXHIBIT 99A
Nuevo Energy Company
1331 Lamar, Suite 1650
Houston, Texas 77010
phone (713) 652-0706
NEWS RELEASE
FOR IMMEDIATE RELEASE
May 6, 1998
Contact: Barbara B. Forbes
Director of Investor Relations
(713) 756-1652
NUEVO ENERGY CHANGES TO SUCCESSFUL EFFORTS ACCOUNTING
AND REPORTS FIRST QUARTER 1998 RESULTS
HOUSTON: Nuevo Energy Company (NYSE: NEV) today announced that it changed its
accounting method for oil and gas properties from full cost to successful
efforts effective as of January 1, 1998. Nuevo's management said it made the
change to the more conservative method in order to improve earnings quality and
to present a balance sheet which more closely approximates the underlying
economic value of the Company. The cumulative effect of the change to
successful efforts is an after-tax reduction of Stockholders' Equity by $64.1
million. In accordance with accounting rules and as a result of the accounting
change, financial statements for all previous years will be retroactively
restated as if Nuevo had always used the successful efforts accounting method.
For the first quarter 1998, Nuevo reported a net loss of $6.6 million on
revenues of $67.7 million, compared to restated net income and revenues of $14.6
million and $102.4 million, respectively, for the first quarter 1997. The first
quarter 1998 loss per share on a diluted basis was $0.33 compared to restated
diluted earnings per share of $0.70 for the year earlier period. Operating cash
flow for the first quarter 1998 was $11.3 million, or $0.56 per diluted share,
compared to a restated $44.6 million, or $2.14 per diluted share for the first
quarter 1997. If Nuevo had not converted to successful efforts accounting, the
Company would have reported cash flow per diluted share for the first quarter
1998 of $0.66, as approximately $2 million of geological and geophysical costs
would not have had to be expensed. Irrespective of the accounting change, year-
to-year results were negatively impacted by substantially lower oil and gas
prices which more than offset higher production volume.
"A host of negative factors impacted our financial results for the first
quarter, not the least of which was a dramatic decline in our realized crude oil
prices," stated Doug Foshee, Nuevo's Chairman and CEO. "Furthermore, unusual
weather patterns in California caused landslides and power outages which in turn
depressed our production by 185,000 barrels of oil equivalent and resulted in
$2.3 million of incremental non-recurring costs. While we can't control oil
prices or the weather, we are actively managing the Company within
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this environment to enhance the balance sheet and provide the flexibility
required to take advantage of acquisition opportunities as they arise. Our solid
base of exploitation projects should generate a double digit production increase
in 1998 despite a reduction in capital expenditures, and our prospects in
California and the Republic of Ghana will expose our investors to significant
upside through the exploratory drill bit."
Oil production increased 9% to 50,307 barrels of oil per day (Bopd) versus
46,089 Bopd in the first quarter 1997 due to continued exploitation success of
our California assets. Oil prices declined 39% to $10.02 per barrel from $16.46
per barrel in the comparable 1997 period. Gas production declined 4% to 95.8
million cubic feet per day (MMcfd) versus 99.5 MMcfd in the first quarter 1997.
Gas prices declined 10% to $1.97 per thousand cubic feet (Mcf) versus $2.18 per
Mcf in the comparable 1997 period.
Looking into the future, the Company anticipates several changes due to the
adoption of the successful efforts method. Nuevo expects a slight increase in
depletion expense relative to what it would have been under the full cost method
due to more conservative accruals for the abandonment of offshore properties.
In addition, Nuevo's earnings will have an unpredictable exploration expense
component associated with the timing and magnitude of unsuccessful exploratory
wells. Under the successful efforts method, certain exploration expenditures,
including geological and geophysical costs and dry hole costs, are expensed
against current period income rather than capitalized as under the full cost
method.
Nuevo Energy Company is a Houston, Texas-based Company primarily engaged in the
exploration for, and the acquisition, exploitation, development and production
of crude oil and natural gas. Nuevo's principal domestic properties are located
onshore and offshore California, in East Texas and the onshore Gulf Coast
region. Nuevo is the largest independent producer of oil and gas in California.
The Company's international properties are located offshore the Republics of
Congo and Ghana in West Africa.
This press release includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this press release, including without
limitation, business strategies, plans and objectives of management of Nuevo for
future operations, and capital expenditures are forward looking statements.
There can be no assurances that such forward-looking statements will prove to be
correct. Important factors that could cause actual results to differ materially
from the forward looking statements ("Cautionary Statements") 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 filed with the SEC and incorporated herein.
All subsequent written and oral forward-looking statements attributable to the
Company or to persons acting on its behalf are expressly qualified by the
Cautionary Statements.
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EXHIBIT 99B
Nuevo Energy Company
1331 Lamar, Suite 1650
Houston, Texas 77010
phone (713) 652-0706
NEWS RELEASE
FOR IMMEDIATE RELEASE
May 6, 1998
Contact: Barbara B. Forbes
Director of Investor Relations
(713) 756-1652
NUEVO EVALUATING POTENTIAL SALE OF
EAST TEXAS NATURAL GAS ASSETS;
ALSO ANNOUNCES NEW NOTE
OFFERING AND REDUCTION OF 1998 CAPITAL SPENDING
HOUSTON: Nuevo Energy Company (NYSE: NEV) today announced that it has retained
an investment banking firm to evaluate options for maximizing the value of its
East Texas natural gas reserves, including a possible sale of those operations,
in order to take advantage of a strong market for such properties and to
redeploy capital into higher return alternatives.
Concurrently, Nuevo announced that it intends to offer for sale $100 million of
senior subordinated notes that will mature in 2008 through a Rule 144A offering
to qualified institutional buyers. Nuevo intends to use the proceeds to reduce
the outstanding balance under its senior revolving credit facility. The notes
offered will not be registered under the U.S. Securities Act of 1933 and may not
be offered or sold in the United States absent registration or an applicable
exemption from registration requirements.
Additionally, in response to lower price realizations for its oil production,
Nuevo announced a $45 million reduction in capital spending plans for the year
from its original budget of $196 million. These program reductions affect oil
development projects whose projected rates of return fall below acceptable
threshold levels assuming the continuation of current low oil prices. Management
believes that all of these projects will ultimately be undertaken once oil
prices return to historic norms.
"Taken together, these three actions represent an aggressive strategy to respond
to and benefit from the effects of the current low oil price environment, but
more importantly they position us to take advantage of better investment
opportunities which lie ahead of us, including drilling projects in California
and West Africa, potential acquisitions of crude oil properties, and repurchases
of Nuevo common stock," commented Doug Foshee, Nuevo's Chairman and CEO.
Nuevo has retained NationsBanc Montgomery Securities LLC to assist in the
evaluation of the disposition of certain East Texas natural gas properties.
Proved reserves associated
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with these assets totaled approximately 275 bcfe at January 1, 1998. While
management believes that a sale of these assets is likely to occur before the
end of 1998, the final decision to sell any assets will be subject to
management's satisfaction with the valuation received.
"Contemplating a sale of properties in a core area like East Texas is consistent
with our stated objective to aggressively manage our portfolio," said Foshee.
"Gas prices are high, acquisition pricing is strong, and we are confident in our
ability to successfully redeploy this capital elsewhere in our existing
opportunity set, as well as through attractively priced acquisitions of oil-
oriented assets."
MORE
Proceeds from any property sale will be used first to eliminate the company's
remaining senior bank debt, which may be redrawn to fund capital expenditures or
acquisitions. Depending on the proceeds received from the transaction, Nuevo
will also consider repurchasing its common stock pursuant to a one million share
authorization approved by its board in late 1997.
Nuevo disclosed that the proposed note offering will coincide with a consent
solicitation to amend the terms of the company's existing 9.5% senior
subordinated notes due 2006, in order to conform them with the terms of the new
offering.
"By updating the existing agreement, we will ensure ourselves of the flexibility
necessary to implement our contrarian business strategy, which includes
repurchasing shares from time to time," explained Bob King, Nuevo's Chief
Financial Officer. "Additionally, the consent solves the problem of having to
maintain two sets of books for covenant compliance, as would otherwise be
required given the change to the successful efforts accounting method that we
announced this morning."
The reduction in capital spending followed an economic evaluation of Nuevo's
1998 drilling projects given a significantly lower crude oil price environment.
The majority of the reduction in exploitation activity is in California and
pertains to deferral of shallow vertical wells, well workovers, and certain
facility modifications. Major efforts such as the development of the Monument
Junction prospect in California and the Lower Sendji development of the Yombo
Field offshore the Republic of Congo will not be impacted. On the exploration
side, the reduction affects a few small projects, with Nuevo's largest reserve
potential projects, Midway Peak and the Ghana East Cape Three Points prospect,
still on track for drilling in 1998.
"Despite a 23% reduction in our budget, we continue to forecast double digit
production growth in 1998 from exploitation alone," said Foshee. "This, plus
our growing exploration program and a strong balance sheet that will permit us
to aggressively pursue acquisition opportunities, will expose our shareholders
to meaningful reserve and production growth in 1998."
Nuevo Energy Company is a Houston, Texas based company primarily engaged in the
exploration for and the acquisition, exploitation, development and production of
crude oil and natural gas. Nuevo's principal domestic properties are located
onshore and offshore California, in East Texas and the onshore Gulf Coast
region. Nuevo is the largest independent producer of oil and gas in California.
The Company's international properties are located offshore the Republics of
Congo and Ghana in West Africa.
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This press release includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this press release, including without
limitation, statements regarding the quantities of reserves, business
strategies, plans and objectives of management of Nuevo for future operations,
capital expenditures and capital stock repurchases, are forward looking
statements. There can be no assurances that such forward looking statements
will prove to be correct. Important factors that could cause actual results to
differ materially from the forward looking statements ("Cautionary Statements")
include volatility in oil and gas prices, operating risks, risks of foreign
investments, markets for producing gas properties, the Company's substantial
capital requirements, 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 filed with the SEC and incorporated herein. All subsequent written
and oral forward looking statements attributable to the Company or to persons
acting on its behalf are expressly qualified by the Cautionary Statements.
