##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


Form 10-K

|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                 
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|           |  | For the fiscal year ended December 31,
    2003                                                 
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|           |  | For the transition period
    from              to                                              

Commission file number 1-10537

Nuevo Energy Company

(Exact Name of Registrant as Specified in Its
Charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 76-0304436                              
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                  
|1021 Main, Suite 2100, Houston,
    Texas                          |  | 77002                                   
|(Address of Principal Executive
    Offices)                       |  | (Zip code)                              

Registrants telephone number, including
area code:

(713) 652-0706


Securities registered pursuant to
Section 12(b) of the Act:

|                                             |  |                                          
|-------------------------------------------- |  | -----------------------------------------
|Title of Each Class                          |  | Name of Each Exchange on Which Registered
|                                             |  |                                          
|Common Stock, par value $.01 per share       |  | New York Stock Exchange                  
|$2.875 Term Convertible Securities, Series A |  | New York Stock Exchange                  
|Preferred Stock Purchase Rights              |  | New York Stock Exchange                  

Securities registered pursuant to
Section 12(g) of the Act:

None


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes o          No þ

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this
Form 10-K.     o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b.2 of the Act).
Yes þ          No o

The aggregate market value of the voting stock
held by non-affiliates of the registrant:

As of June 30, 2003, the aggregate market
value of the voting stock of the registrant held by
non-affiliates of the registrant was approximately
$336.9 million.

The number of shares outstanding of each of
the registrants classes of Common Stock as of the latest
practicable date:

As of February 27, 2004, number of shares of
Common Stock outstanding:     20,318,979

DOCUMENTS INCORPORATED BY REFERENCE:

None



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TABLE OF CONTENTS



|                                                                                                                                           |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|TABLE OF CONTENTS                                                                                                                         
|PART I                                                                                                                                    
|                                                                                                                                           | Item 1. Business                                                                             
|                                                                                                                                           | Item 2. Properties                                                                           
|                                                                                                                                           | Item 3. Legal Proceedings                                                                    
|                                                                                                                                           | Item 4. Submission of matters to a vote of security holders                                  
|PART II                                                                                                                                   
|                                                                                                                                           | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters            
|                                                                                                                                           | Item 6. Selected Financial Data                                                              
|                                                                                                                                           | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|RISK FACTORS AND CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
|                                                                                                                                           | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                          
|                                                                                                                                           | Item 8. Financial Statements and Supplementary Data                                          
|INDEX TO FINANCIAL STATEMENTS AND SCHEDULES                                                                                               
|INDEPENDENT AUDITORS REPORT ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE                                                                 
|SCHEDULE II                                                                                                                               
|                                                                                                                                           | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|                                                                                                                                           | Item 9A. Controls and Procedures                                                             
|PART III                                                                                                                                  
|EQUITY COMPENSATION PLAN INFORMATION                                                                                                      
|                                                                                                                                           | Item 13. Certain Relationships and Related Transactions                                      
|                                                                                                                                           | Item 14. Principal Accountant Fees and Services                                              
|PART IV                                                                                                                                   
|                                                                                                                                           | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|NUEVO ENERGY COMPANY EXHIBIT LIST December 31, 2003                                                                                       
|GLOSSARY OF OIL AND GAS TERMS                                                                                                             
|SIGNATURES                                                                                                                                
|EXHIBIT INDEX                                                                                                                             
|1st Amendment to Shareholder Rights Plan                                                                                                  
|Purchase and Sale Agreement                                                                                                               
|Purchase and Sale Agreement                                                                                                               
|Computation of Earnings to Fixed Charges                                                                                                  
|Subsidiaries of the Registrant                                                                                                            
|Consent of KPMG LLP                                                                                                                       
|Consent of Ryder Scott Company L.P.                                                                                                       
|Certification of CEO Pursuant to Section 302                                                                                              
|Certification of CFO Pursuant to Section 302                                                                                              
|Certification of CEO Pursuant to Section 906                                                                                              
|Certification of CFO Pursuant to Section 906                                                                                              



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##### Table of Contents



NUEVO ENERGY COMPANY






TABLE OF CONTENTS


|         |  |                                                                                                                                                    |  |      |     | 
|-------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|         |  |                                                                                                                                                    |  | Page
|         |  |                                                                                                                                                    |  |     
|PART I  
|Item 1.  |  | Business                                                                                                                                           |  |      | 2   | 
|Item 2.  |  | Properties                                                                                                                                         |  |      | 12  | 
|Item 3.  |  | Legal Proceedings                                                                                                                                  |  |      | 12  | 
|Item 4.  |  | Submission of matters to a vote of security
    holders                                                                                            |  |      | 12  | 
|PART II 
|Item 5.  |  | Market for the Registrants Common Equity
    and Related Stockholder Matters                                                                      |  |      | 13  | 
|Item 6.  |  | Selected Financial Data                                                                                                                            |  |      | 14  | 
|Item 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                                                          |  |      | 16  | 
|         |  | Risk Factors and Cautionary Statement for
    Purposes of the Safe Harbor Provisions of the
    Private Securities Litigation Reform Act of 1995 |  |      | 28  | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                                                     |  |      | 32  | 
|Item 8.  |  | Financial Statements and Supplementary Data                                                                                                        |  |      | 35  | 
|Item 9.  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure                                                           |  |      | 79  | 
|Item 9A. |  | Controls and Procedures                                                                                                                            |  |      | 79  | 
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                                                                                 |  |      | 79  | 
|Item 11. |  | Executive Compensation                                                                                                                             |  |      | 84  | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters                                                 |  |      | 89  | 
|Item 13. |  | Certain Relationships and Related Transactions                                                                                                     |  |      | 92  | 
|Item 14. |  | Principal Accountant Fees and Services                                                                                                             |  |      | 92  | 
|PART IV 
|Item 15. |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                                                                |  |      | 93  | 
|         |  | Signatures                                                                                                                                         |  |      | 101 | 

1



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##### Table of Contents






PART I






|        |         
|------- | --------
|Item 1. | Business

General



| |           
| | ----------
| | Background

Nuevo Energy became a public company in 1990 and
is engaged in the acquisition, exploitation, exploration,
development and production of crude oil and natural gas. Our
core areas in the U.S. are onshore and offshore California
and West Texas. We also have international crude oil production
in the Republic of Congo.

We are the largest independent oil and gas
exploration and production company in California. At year-end
2003, approximately 86% of our proved reserves were in
California (58% onshore and 28% offshore) which have a long
reserve life and shallow production decline curves. Our
California production was approximately 82% of our 2003 oil and
gas production. The high asset concentration combined with a
high proportion of operated properties enables us to control the
timing of exploitation and development expenditures.

In September 2002, we created a new core area in
West Texas principally with natural gas reserves through the
acquisition of Athanor Resources, Inc. (Athanor). In
2003, approximately 41% of our natural gas production was from
West Texas and it accounted for 7% of our proved reserves and
38% of our proved natural gas reserves at year-end 2003. We are
the operator of the Pakenham field, which has significant
exploitation and exploration inventory.

Our only international producing property is
offshore the Republic of Congo, which had approximately 7% of
our proved reserves at year-end 2003. This property is
non-operated and provides a stable production profile with
approximately 10% of our 2003 production.

In 2003 we continued to maintain our strategy of
disciplined allocation of capital and reduced long-term debt
with proceeds from sales of non-core assets and operating cash
flows. We sold $132 million of non-core assets in 2003. We
also redeemed approximately $185 million of our
9 1/2% Senior Subordinated Notes.



| |                    
| | -------------------
| | Recent Developments

On February 12, 2004, we entered into a
definitive agreement with Plains Exploration &
Production Company (Plains) pursuant to which it is
anticipated we will be merged with Plains or alternatively
become a wholly owned subsidiary of Plains. Under the terms of
the transaction, our stockholders will receive 1.765 shares
of Plains common stock in exchange for each share of
Nuevos common stock. Following the merger, our
stockholders are expected to own 47% of the combined company.
The transaction is subject to approval by the stockholders of
both Plains and Nuevo and other customary closing conditions
including regulatory review under the Hart-Scott-Rodino
Antitrust Improvement Act of 1976. The transaction is expected
to close in the second quarter of 2004.

Our annual report on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K
are made available on our website at www.nuevoenergy.com.

As used in this annual report, the words
we, our, us,
Nuevo and the Company refer to Nuevo
Energy Company, except as otherwise specified, and to our
subsidiaries.

2



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##### Table of Contents



Reserves

The following table details our estimated net
proved reserves at December 31, 2003 as set forth in the
report prepared by Ryder Scott Company L.P. (Ryder
Scott), our independent petroleum engineers, in accordance
with criteria prescribed by the Securities and Exchange
Commission:

|                   |                   |                     |                          |             |        |         |         |  |        |         |         |  |        |         | 
|------------------ | ----------------- | ------------------- | ------------------------ | ----------- | ------ | ------- | ------- |  | ------ | ------- | ------- |  | ------ | ------- | 
|                   |                   |                    
|                   |                   | Net Proved Reserves
|                   |                   |                    
|                   |                   | Crude Oil           |                          |            
|                   |                   | And Liquids         |                          | Natural Gas |        |        
|                   |                   | (MBbls)             |                          | (MMcf)      |        | MBOE   
|                   |                   |                     |                          |             |        |        
|U.S. Properties    |                   |                     |                          |             |        |         |         |  |        |         |         | 
|                   | California Fields |                     |                          |             |        |         |         |  |        |         |         |  |       
|                   |                   | Cymric              |                          |             | 71,209 |         |         |  | 5,465  |         |         |  | 72,120 |        
|                   |                   | Point Pedernales    |                          |             | 21,858 |         |         |  | 5,181  |         |         |  | 22,722 |        
|                   |                   | Midway-Sunset       |                          |             | 19,485 |         |         |  |       |         |         |  | 19,485 |        
|                   |                   | Santa Clara         |                          |             | 10,777 |         |         |  | 14,871 |         |         |  | 13,256 |        
|                   |                   | South Belridge      |                          |             | 12,408 |         |         |  | 2,582  |         |         |  | 12,838 |        
|                   |                   | Dos Cuadras         |                          |             | 8,401  |         |         |  | 5,215  |         |         |  | 9,270  |        
|                   |                   | Buena Vista         |                          |             | 2,336  |         |         |  | 27,807 |         |         |  | 6,971  |        
|                   |                   | Huntington Beach    |                          |             | 6,510  |         |         |  | 505    |         |         |  | 6,594  |        
|                   |                   | Other               |                          |             | 8,605  |         |         |  | 41,117 |         |         |  | 15,457 |        
|                   |                   |                     |                          |             |        |         |         |  |        |         |         | 
|                   |                   |                     | Total California         |             |        | 161,589 |         |  |        | 102,743 |         |  |        | 178,713 | 
|                   |                   |                     |                          |             |        |         |         |  |        |         |         | 
|                   | West Texas        |                     |                          |             |        |         |         |  |        |         |         |  |       
|                   |                   | Pakenham            |                          |             | 3,835  |         |         |  | 57,883 |         |         |  | 13,482 |        
|                   |                   | Other               |                          |             | 328    |         |         |  | 5,740  |         |         |  | 1,285  |        
|                   |                   |                     |                          |             |        |         |         |  |        |         |         | 
|                   |                   |                     | Total West Texas         |             |        | 4,163   |         |  |        | 63,623  |         |  |        | 14,767  | 
|                   |                   |                     |                          |             |        |         |         |  |        |         |         | 
|                   |                   |                     | Total U.S. Properties    |             |        | 165,752 |         |  |        | 166,366 |         |  |        | 193,480 | 
|                   |                   |                     |                          |             |        |         |         |  |        |         |         | 
|Foreign Properties |                   |                     |                          |             |        |         |         |  |        |         |         | 
|                   |                   | Yombo, Congo        |                          |             | 14,098 |         |         |  |       |         |         |  | 14,098 |        
|                   |                   | Other               |                          |             | 221    |         |         |  | 805    |         |         |  | 355    |        
|                   |                   |                     |                          |             |        |         |         |  |        |         |         | 
|                   |                   |                     | Total Foreign Properties |             |        | 14,319  |         |  |        | 805     |         |  |        | 14,453  | 
|                   |                   |                     |                          |             |        |         |         |  |        |         |         | 
|Total Properties   |                   |                     | 180,071                  |             |        |         | 167,171 |  |        |         | 207,933 | 
|                   |                   |                     |                          |             |        |         |         |  |        |         |         | 

Oil and Gas Operations



| |                    
| | -------------------
| | Domestic Operations

The following discussion pertains to our domestic
oil and gas assets that are held for continuing use and,
accordingly, does not include the Brea-Olinda, Orcutt and Union
Island fields which were sold in 2003 and are reflected as
discontinued operations.

Our domestic operations are concentrated in three
areas: California onshore, California offshore and West Texas.
At December 31, 2003, our U.S. proved reserves totaled
approximately 193.5 MMBOE or 93% of our total proved
reserve base. During 2003, domestic production averaged
44.0 MBOE/day, or 90% of total production.

We continue to increase the value of our domestic
oil and gas assets through development drilling, workovers,
recompletions, secondary and tertiary recovery operations and
other production enhancement techniques to maximize current
production and the ultimate recovery of reserves. Capital
additions to our domestic oil and gas properties excluding
acquisitions was $59.2 million in 2003 and are currently
budgeted at

3



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approximately $65 to $70 million in 2004.
The main focus of our 2004 exploitation program will be directed
towards our thermal properties onshore California and Pakenham
in West Texas.


California Onshore.Net proved reserves were
120.2 MMBOE at December 31, 2003, and production
averaged 26.1 MBOE/day in 2003. Our main California onshore
properties include interests in the Cymric, Midway-Sunset and
Belridge fields in the San Joaquin Basin in Kern County,
California which utilize thermal operations to maximize current
production and the ultimate recovery of reserves. We own a 100%
working interest (93% net revenue) in our properties in the
Cymric field and the entire working interest and an average net
revenue interest of approximately 97% in our properties in the
Midway-Sunset field. Production is from several zones in the
Cymric field, including the Tulare, Diatomite and Point of Rocks
formations and the Antelope Shale. The Midway-Sunset field
produces from five zones with the Potter Sand and the thermal
Diatomite accounting for the majority of the total production.
We operate the deeper zones of the Belridge field in fee with
100% working and net revenue interests. Production from the
Belridge field is from the Tulare formation.

California Offshore.Net proved reserves were
58.5 MMBOE at December 31, 2003, and production
averaged 14.2 MBOE/day in 2003. Offshore California, we
operate 12 platforms, 10 in federal waters and 2 in state
waters. The Point Pedernales, Dos Cuadras and East Dos Cuadras,
and Santa Clara fields are our largest fields. We purchased
the remaining third-party interest in the Point Pedernales field
in 2003, and now own a 100% working interest (80% net revenue)
in this field which is located 3.5 miles offshore
Santa Barbara County, California, in federal waters.
Production is from the Monterey Shale at depths from
3,500-5,150 feet. The Dos Cuadras and East Dos Cuadras
fields are located offshore five and one-half miles from
Santa Barbara in the Santa Barbara Channel. We operate
three platforms with a 50% working interest (42% net revenue)
and a fourth platform with a 67.5% working interest (56% net
revenue). We have a 100% working interest (83% net revenue) in
the Santa Clara field.

West Texas.We have
properties located in West Texas with a total proved reserve
base of 14.8 MMBOE at December 31, 2003, and
production averaged 22.5 MMcfe/day in 2003. The main asset
is the Pakenham field in Terrell County, Texas. We are the
operator of the Pakenham field and own approximately a 98%
working interest (73% net revenue) in this field.



| |                         
| | ------------------------
| | International Operations

At December 31, 2003, our estimated
international net proved reserves totaled 14.5 MMBOE.
During 2003, our international production averaged
4.8 MBOE/day. See Risk Factors and Cautionary
Statement for Purposes of the Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995
for a discussion of the risks of our international investments.

Congo.Our
international reserves and production consist primarily of a
non-operating 50% working interest (37.5% average net revenue)
in the Yombo oil field located in the Marine 1 Permit offshore
the Republic of Congo in West Africa (Congo).
Estimated net proved reserves of the Yombo oil field as of
December 31, 2003 were 14.1 MMBbl, and production
during 2003 averaged 4.8 MBOE/day. The properties are
located 27 miles offshore in approximately 370 feet of
water. We also own a 50% interest in a converted super tanker
with storage capacity of over one million barrels of oil for use
as a floating production, storage and off loading vessel
(FPSO). Our production is converted on the FPSO to
No. 6 fuel oil with less than 0.3% sulfur content. We also
have a 50% interest in the Masseko field which is currently
under renewed analysis for possible development by a subsidiary
of Perenco, the operator. Should circumstances change in the
future, we may pursue development of the field.

During 2003, Yombo production declined at a rate
less than 7%, which is a significantly lower decline than the
historic 12% annual decline. The field is currently fully
developed, with all well slots being utilized. However, adding
additional slots or utilizing low rate producing wells to side
track for potential future infill development opportunities is
possible.

Tunisia.We have a
42.86% participating interest in the 768,900 acre Fejaj
Permit located onshore central Tunisia. In 2002, Chott
Fejaj #3-A well was deepened from 3,532 meters to a total
depth of 4,637

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meters to evaluate the pre-Jurassic section of
the Chott Fejaj structure. This well was subsequently plugged
and abandoned as a dry hole. We will relinquish our permit in
2004.


Canada.We acquired
a 50% working interest in 22,140 acres in the Marten Hills
heavy oil play in Alberta, Canada for approximately
$0.4 million in 2000. The cyclic steaming potential of the
acreage was evaluated in 2001, determined to be non-commercial,
and we relinquished the acreage in 2002.

Ghana.In 2001, we
relinquished our 1.9 million acre Accra-Keta Permit
offshore the Republic of Ghana and recorded an impairment of
$1.0 million. The Permit was relinquished prior to the
commencement of the second phase of the work program. We were
the operator of this Permit and held a 50% working interest.

Drilling Activities

The following discussion pertains to our oil and
gas assets that are held for continuing use and, accordingly,
does not include the Brea-Olinda, Orcutt Hill and Union Island
fields which were sold in 2003.



| |        
| | -------
| | Acreage

The following table sets forth the acres of
developed and undeveloped oil and gas properties in which we
held an interest as of December 31, 2003. Undeveloped
acreage are leased acres on which wells have not been drilled or
completed to a point that would permit the production of
commercial quantities of oil and gas, regardless of whether or
not such acreage contains proved reserves. A gross acre refers
to the number of acres in which we directly own a working
interest. The number of net acres is the sum of the fractional
ownership of working interests we directly own in the gross
acres expressed as a whole number. A net acre is
deemed to exist when the sum of our fractional ownership of
working interests in gross acres equals one.

|                    |       |       |           |           |  |  |         |         | 
|------------------- | ----- | ----- | --------- | --------- |  |  | ------- | ------- | 
|                    |       | Gross |           | Net      
|                    |       |       |           |          
|Developed Acreage   |       |       | 211,762   |           |  |  | 139,806 |        
|Undeveloped Acreage |       |       | 1,042,000 |           |  |  | 461,948 |        
|                    |       |       |           |           |  |  |         |        
|                    | Total |       |           | 1,253,762 |  |  |         | 601,754 | 
|                    |       |       |           |           |  |  |         |        

The following table sets forth our undeveloped
acreage at December 31, 2003:

|                      |                 |       |         |           |  |  |         |         | 
|--------------------- | --------------- | ----- | ------- | --------- |  |  | ------- | ------- | 
|                      |                 | Gross |         | Net      
|                      |                 |       |         |          
|California            |                 |       | 230,409 |           |  |  | 111,729 |        
|West Texas            |                 |       | 4,691   |           |  |  | 4,691   |        
|Congo, West Africa:   |                 |       |         |           |  |  |         |        
|                      | Marine 1 Permit |       |         | 38,000    |  |  |         | 19,000  | 
|Tunisia, North Africa |                 |       | 768,900 |           |  |  | 326,528 |        
|                      |                 |       |         |           |  |  |         |        
|                      | Total           |       |         | 1,042,000 |  |  |         | 461,948 | 
|                      |                 |       |         |           |  |  |         |        



| |                 
| | ----------------
| | Productive Wells

The following table sets forth our gross and net
interests in productive oil and gas wells at December 31,
2003. Productive wells are producing wells and wells capable of
production.

|          |       |       |       |       |  |  |       |       | 
|--------- | ----- | ----- | ----- | ----- |  |  | ----- | ----- | 
|          |       | Gross |       | Net  
|          |       |       |       |      
|Oil Wells |       |       | 2,271 |       |  |  | 1,729 |      
|Gas Wells |       |       | 281   |       |  |  | 225   |      
|          |       |       |       |       |  |  |       |      
|          | Total |       |       | 2,552 |  |  |       | 1,954 | 
|          |       |       |       |       |  |  |       |      

5



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##### Table of Contents





| |                  
| | -----------------
| | Drilling Activity

Our drilling activities in 2003 were in the
continental United States and offshore California in state and
federal waters.

The following table details the results of our
drilling activity, net to our interest, for the last three
calendar years. Gross wells are the number of wells in which we
own a direct working interest. The number of net wells is the
sum of the fractional ownership of working interests we directly
own in gross wells.

|     |  |                   |   |       |  |       |   |            |  |       |   |       |  |  |      |  |  |  |      |  |  |  |      | 
|---- |  | ----------------- | - | ----- |  | ----- | - | ---------- |  | ----- | - | ----- |  |  | ---- |  |  |  | ---- |  |  |  | ---- | 
|     |  |                  
|     |  | Exploratory Wells
|     |  |                  
|     |  |                   |   |      
|     |  | Gross             |   | Net  
|     |  |                   |   |      
|     |  |                   |   | Dry   |  |       |   |            |  | Dry   |   |      
|     |  | Productive        |   | Holes |  | Total |   | Productive |  | Holes |   | Total
|     |  |                   |   |       |  |       |   |            |  |       |   |      
|2001 |  |                   | 1 |       |  |       | 8 |            |  |       | 9 |       |  |  | 1.00 |  |  |  | 4.95 |  |  |  | 5.95 | 
|2002 |  |                   |  |       |  |       | 1 |            |  |       | 1 |       |  |  |     |  |  |  | 0.43 |  |  |  | 0.43 | 
|2003 |  |                   |  |       |  |       |  |            |  |       |  |       |  |  |     |  |  |  |     |  |  |  |     | 

|     |  |                   |     |       |  |       |   |            |  |       |     |       |  |  |        |  |  |  |      |  |  |  |        | 
|---- |  | ----------------- | --- | ----- |  | ----- | - | ---------- |  | ----- | --- | ----- |  |  | ------ |  |  |  | ---- |  |  |  | ------ | 
|     |  |                  
|     |  | Development Wells
|     |  |                  
|     |  |                   |     |      
|     |  | Gross             |     | Net  
|     |  |                   |     |      
|     |  |                   |     | Dry   |  |       |   |            |  | Dry   |     |      
|     |  | Productive        |     | Holes |  | Total |   | Productive |  | Holes |     | Total
|     |  |                   |     |       |  |       |   |            |  |       |     |      
|2001 |  |                   | 101 |       |  |       | 1 |            |  |       | 102 |       |  |  | 95.98  |  |  |  | 1.00 |  |  |  | 96.98  | 
|2002 |  |                   | 104 |       |  |       | 3 |            |  |       | 107 |       |  |  | 104.00 |  |  |  | 3.00 |  |  |  | 107.00 | 
|2003 |  |                   | 81  |       |  |       | 5 |            |  |       | 86  |       |  |  | 80.60  |  |  |  | 5.00 |  |  |  | 85.60  | 

In 2003, we continued development of our Cymric
field onshore California by drilling 23 development wells. This
field contains 35% of our total net proved equivalent reserves
as of December 31, 2003. Nine additional wells are planned
for 2004. Thirty development wells were drilled in our most
underdeveloped area, the Belridge field, in 2003. This field
contains 6% of our total net proved equivalent reserves.
Twenty-six development wells are planned for 2004. Twenty-one
development wells were drilled in the Midway-Sunset field in
2003. Net proved equivalent reserves for this field contain 9%
of our total net proved equivalent reserves. Six additional
wells are planned for 2004, four of which target a frontier
area. Although no new wells were drilled in 2003, four
development wells are planned in 2004 at the Buena Vista Hills
field. The Buena Vista Hills field is our largest California gas
producing field and contains 3% of our total net proved
equivalent reserves.

During 2003, we implemented a nine well
development program at our West Texas Pakenham field. The
program consisted of six shallow Wolfcamp completions, three
thrusted completions and one well which failed to reach the
Ellenburger objective. During the drilling of the initial
Ellenburger well, we encountered unfavorable borehole
conditions, forcing us to abandon the wellbore. Early in the
fourth quarter of 2003, we spudded an Ellenburger replacement
well. The plans for 2004 include the drilling of eight
development wells, and the completion of our first Ellenburger
well.

Acquisitions and Divestitures of Oil and Gas
Producing Properties

We have, from time to time, been an active
participant in the market for oil and gas properties. We also
seek to divest lower growth assets at times when those assets
are valued highly by the marketplace.



| |             
| | ------------
| | Acquisitions

|     |      |          |  |                                            |  |   |       | 
|---- | ---- | -------- |  | ------------------------------------------ |  | - | ----- | 
|Year |      | Property |  | Acquisition Price                         
|     |      |          |  |                                           
|     |      |          |  | (In millions)                             
|     | 2003 |          |  | Point Pedernales 20% interest              |  | $ | 0.7   | 
|     | 2002 |          |  | Athanor Resources (Pakenham field)         |  |   | 101.4 | 
|     | 2001 |          |  | Kern County properties southeast of Cymric |  |   | 28.5  | 

6



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##### Table of Contents





| |             
| | ------------
| | Divestitures

|     |      |          |  |                                                                |  |   |      | 
|---- | ---- | -------- |  | -------------------------------------------------------------- |  | - | ---- | 
|Year |      | Property |  | Sales Price                                                   
|     |      |          |  |                                                               
|     |      |          |  | (In millions)                                                 
|     | 2003 |          |  | Brea-Olinda                                                    |  | $ | 59.0 | 
|     | 2003 |          |  | Orcutt Hill                                                    |  |   | 12.9 | 
|     | 2003 |          |  | Union Island                                                   |  |   | 10.5 | 
|     | 2002 |          |  | Eastern Properties located in Texas, Alabama and
    Louisiana |  |   | 9.0  | 
|     | 2000 |          |  | Las Cinegas                                                    |  |   | 4.6  | 

Real Estate

In 1996, along with our acquisition of certain
California oil and gas properties, we acquired tracts of land in
Orange and Santa Barbara Counties in California, and nearly
8,000 acres of agricultural property in the central valley
of California.

In 2003, we sold a significant portion of our
real estate portfolio. On December 30, 2003, we sold our
810 acre Tonner Hills residential development property to
affiliates of Shea Homes Limited Partnership and Standard
Pacific Corp. for approximately $47 million. We received
$16 million of the purchase price on the sale date, and we
anticipate receiving $22.5 million of the purchase price by
no later than March 29, 2004. The remaining
$8.5 million of the purchase price will be received by us
when certain habitat restoration work is completed by us.
Because of the continuing involvement with Tonner Hills, we have
not recorded this transaction as a sale in 2003.

In a separate transaction on December 30,
2003, we sold an office building and contiguous acreage in
Orcutt, Santa Barbara County, California to a private
entity for approximately $2.9 million. We still own
approximately 596 acres of real estate in Santa Barbara
County, California which is generally unaffected by oil field
operations. As of December 31, 2003 this acreage remained
classified as an asset held for sale.

Markets

The markets for hydrocarbons continue to be quite
volatile. Our financial condition, operating results, future
growth and the carrying value of our oil and gas properties are
substantially dependent on oil and gas prices. The ability to
maintain or increase our borrowing capacity and to obtain
additional capital on attractive terms is also substantially
dependent upon oil and gas prices. Prices for oil and gas are
subject to large fluctuations in response to relatively minor
changes in the supply of and demand for oil and gas, market
uncertainty and a variety of additional factors beyond our
control. These factors include weather conditions in the United
States, the condition of the United States economy, the actions
of the Organization of Petroleum Exporting Countries,
governmental regulation, political stability in the Middle East
and elsewhere, the foreign supply of oil and gas, the price of
foreign oil imports and the availability of alternate fuel
sources. Any substantial and extended decline in the price of
oil and gas could have an adverse effect on the carrying value
of our proved reserves, borrowing capacity, our ability to
obtain additional capital, and our revenues, profitability and
cash flows from operations.

The price of natural gas and the threat of
electrical disruptions are factors that can create volatility in
our California oil operations. Since we consume natural gas to
generate steam for our thermal operations, in 2002, we entered
into certain natural gas purchase contracts and hedged our crude
oil sales to protect the economic margin on a portion of our
thermal oil production beginning in 2003.

In California, we generate a total of 15
Megawatts (MW) of power at various sites and consume
approximately 65% in our operations. Three turbines in Kern
County produce 12 MW of power and cogenerate 15% of our
total steam needs in thermal operation. By self-generating power
consumption in Kern County, we have reduced our exposure to
rising electricity prices. With the exception of the Point
Pedernales field, for which we have contracted for firm electric
power, most of our facilities receive power under interruptible
service contracts. Considering the fact that California has
experienced shortages of electricity in the past and some of our
facilities receive interruptible service, we could experience
periodic power interruptions. In addition, the State of
California could increase power costs, change existing rules or
impose new rules or regulations with respect to power that could
impact our operating costs.

7



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##### Table of Contents



Production of California San Joaquin Valley
heavy oil (defined herein as those fields which produce
primarily 15o API quality crude oil or heavier
through thermal operations) constituted 51% of our total 2003
crude output. In addition, properties which produce primarily
other grades of relatively heavy oil (generally, 20o
API or heavier, but produced through non-thermal operations)
constituted 14% of our total 2003 crude output. The market price
for California heavy 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. We entered into a 15-year contract, effective
January 1, 2000, to sell all of our current and future
California crude oil production to ConocoPhillips. The contract
provides pricing based on a fixed percentage of the NYMEX crude
oil price for each type of crude oil that we produce in
California. Effective January 1, 2003, we renegotiated this
contract relative to our Point Pedernales production, and
increased our NYMEX price realization 14.5%. Effective
January 1, 2004, the entire contract pricing relationship
was renegotiated increasing our effective price realization by
approximately 11% on all crude oil purchased by ConocoPhillips
which is 85% of our California crude oil production. While the
contract does not reduce our exposure to price volatility, it
does effectively eliminate the risk of widening basis
differential between the NYMEX price and the field price of our
California oil production. In doing so, the contract makes it
substantially easier for us to hedge our realized prices. The
ConocoPhillips contract permits us, under certain circumstances,
to separately market up to 10% of our California crude oil
production. We exercised this right each year and have sold
5,000 BOPD of our San Joaquin Valley oil production to a
third party under a one-year contract containing NYMEX pricing.

Our Yombo field production in Marine 1 Permit
offshore Congo produces a relatively heavy crude oil
(16-20o API gravity) which is processed into a
low-sulfur, No. 6 fuel oil product for sale to worldwide
markets. Production from this property constituted 11% of our
total 2003 oil production. 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.

Sales to ConocoPhillips Corporation accounted for
65%, 73% and 63% of 2003, 2002 and 2001 oil and gas revenues.
Sales to Valero Marketing accounted for 11% of 2003 oil and gas
revenues and sales to Torch Energy Marketing (TEMI)
accounted for 23% of 2001. In January 2003, we brought in house
the marketing of our oil production. Effective January 2004, we
terminated our contract with Coral Energy for the marketing of
natural gas which function has also been brought in house. The
loss of any single significant customer or contract could have a
material adverse short-term effect. However, our management does
not believe that the loss of any single significant customer or
contract would materially affect our business in the long-term.

Regulation



| |                       
| | ----------------------
| | Oil and Gas Regulation

The availability of a ready market for oil and
gas production depends upon numerous factors beyond our control.
These factors include state and federal regulation of oil and
gas production and transportation, as well as regulations
governing environmental quality and pollution control, state
limits on allowable rates of production by a well or proration
unit, the amount of oil and gas available for sale, the
availability of adequate pipeline and other transportation and
processing facilities and the marketing of competitive fuels.
For example, a productive gas well may be shut-in
because of an over-supply of gas or lack of an available gas
pipeline in the areas in which we may conduct operations. State
and federal regulations are generally intended to prevent waste
of oil and gas, protect rights to produce oil and gas between
owners in a common reservoir, and control contamination of the
environment. Pipelines and gas plants are also subject to the
jurisdiction of various Federal, state and local agencies which
may affect the rates at which they are able to process or
transport gas from our properties.

Our sales of natural gas are affected by the
availability, terms and costs of transportation. The rates,
terms and conditions applicable to the interstate transportation
of gas by pipelines are regulated by the Federal Energy
Regulatory Commission (FERC) under the Natural Gas
Acts (NGA), as well as under Section 311 of the
Natural Gas Policy Act (NGPA). Since 1985, the FERC
has implemented regulations

8



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##### Table of Contents



intended to increase competition within the gas
industry by making gas transportation more accessible to gas
buyers and sellers on an open-access, non-discriminatory basis.


Our sales of oil are also affected by the
availability, terms and costs of transportation. The rates,
terms, and conditions applicable to the interstate
transportation of oil by pipelines are regulated by the FERC
under the Interstate Commerce Act. FERC has implemented a
simplified and generally applicable ratemaking methodology for
interstate oil pipelines to fulfill the requirements of Title
VIII of the Energy Policy Act of 1992 comprised of an indexing
system to establish ceilings on interstate oil pipeline rates.
The FERC has announced several important transportation-related
policy statements and rule changes, including a statement of
policy and final rule issued February 25, 2000 concerning
alternatives to its traditional cost-of-service rate-making
methodology to establish the rates interstate pipelines may
charge for their services. The final rule revises FERCs
pricing policy and current regulatory framework to improve the
efficiency of the market and further enhance competition in
natural gas markets.

With respect to transportation of natural gas on
the Outer Continental Shelf (OCS), the FERC
requires, as a part of its regulation under the Outer
Continental Shelf Lands Act (OCSLA), that all
pipelines provide open and non-discriminatory access to both
owner and non-owner shippers. Although to date the FERC has
imposed light-handed regulation on offshore facilities that meet
its traditional test of gathering status, it has the authority
to exercise jurisdiction under the OCSLA over gathering
facilities, if necessary, to permit non-discriminatory access to
service. For those facilities transporting natural gas across
the OCS that are not considered to be gathering facilities, the
rates, terms and conditions applicable to this transportation
are regulated by FERC under the NGA and NGPA, as well as the
OCSLA. With respect to the transportation of oil and condensate
on or across the OCS, the FERC requires, as part of its
regulation under the OCSLA, that all pipelines provide open and
non-discriminatory access to both owner and non-owner shippers.
Accordingly, the FERC has the authority to exercise jurisdiction
under the OCSLA, if necessary, to permit non-discriminatory
access to service.

In the event we conduct operations on federal,
state or Indian oil and gas leases, such operations must comply
with numerous regulatory restrictions, including various
nondiscrimination statutes, royalty and related valuation
requirements, and certain of such operations must be conducted
pursuant to certain on-site security regulations and other
appropriate permits issued by the Bureau of Land Management
(BLM) or Minerals Management Service
(MMS) or other appropriate federal or state agencies.

Our OCS leases in federal waters are administered
by the MMS and require compliance with detailed MMS regulations
and orders. The MMS has promulgated regulations implementing
restrictions on various production-related activities, including
restricting the flaring or venting of natural gas. Under certain
circumstances, the MMS may require any of our operations on
federal leases to be suspended or terminated. Any such
suspension or termination could materially and adversely affect
our financial condition and operations. On March 15, 2000,
the MMS issued a final rule effective June 1, 2000, that
amends its regulations governing the calculation of royalties
and the valuation of crude oil produced from federal leases.
Among other matters, this rule amends the valuation procedure
for the sale of federal royalty oil by eliminating posted prices
as a measure of value and relying instead on arms length
sales prices and spot market prices as market value indicators.
Because we generally sell our production to third parties and
pay royalties based on proceeds actually received from the sale
of production from federal leases, it is not anticipated that
this final rule will have a substantial impact on us.

The Mineral Leasing Act of 1920 (Mineral
Act) prohibits direct or indirect ownership of any
interest in federal onshore oil and gas leases by a foreign
citizen of a country that denies similar or like
privileges to citizens of the United States. Such
restrictions on citizens of a non-reciprocal country
include ownership or holding or controlling stock in a
corporation that holds a federal onshore oil and gas lease. If
this restriction is violated, the corporations lease can
be canceled in a proceeding instituted by the United States
Attorney General. Although the regulations of the BLM (which
administers the Mineral Act) provide for agency designations of
non-reciprocal countries, there are presently no such
designations in effect. We own interests in numerous federal
onshore oil and gas leases. It is possible that holders of
equity interests in us may be citizens of foreign countries,
which at some time in the future might be determined to be
non-reciprocal under the Mineral Act.

9



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Our pipelines used to gather and transport our
oil and gas are subject to regulation by the Department of
Transportation (DOT) under the Hazardous Liquids
Pipeline Safety Act of 1979, as amended (HLPSA)
relating to the design, installation, testing, construction,
operation, replacement and management of pipeline facilities.
The HLPSA requires us and other pipeline operators to comply
with regulations issued pursuant to HLPSA designed to permit
access to and allowing copying of records and to make certain
reports and provide information as required by the Secretary of
Transportation.

The Pipeline Safety Act of 1992 (The
Pipeline Safety Act) amends the HLPSA in several
important respects. It requires the Research and Special
Programs Administration (RSPA) of DOT to consider
environmental impacts, as well as its traditional public safety
mandate, when developing pipeline safety regulations. In
addition, the Pipeline Safety Act mandates the establishment by
DOT of pipeline operator qualification rules requiring minimum
training requirements for operators, and requires that pipeline
operators provide maps and records to RSPA. It also authorizes
RSPA to require certain pipeline modifications as well as
operational and maintenance changes. We believe our pipelines
are in substantial compliance with HLPSA and the Pipeline Safety
Act. Nonetheless, significant expenses would be incurred if new
or additional safety measures are required.



| |                         
| | ------------------------
| | Environmental Regulation

General.Our
activities are subject to existing federal, state and local laws
and regulations governing environmental quality and pollution
control in the United States and may be subject to laws and
regulations of the Republic of Congo, West Africa. It is
anticipated that, absent the occurrence of an extraordinary
event, compliance with existing federal, state and local laws,
rules and regulations governing the release of materials in the
environment or otherwise relating to the protection of the
environment will not have a material effect upon our operations,
capital expenditures, earnings or competitive position.

Our activities with respect to exploration,
drilling and production from wells, natural gas facilities,
including the operation and construction of pipelines, plants
and other facilities for transporting, processing, treating or
storing natural gas and other products, are subject to stringent
environmental regulation by state and federal authorities
including the Environmental Protection Agency (EPA).
Such regulation can increase the cost of planning, designing,
installing and operating such facilities. In most instances, the
regulatory requirements relate to water and air pollution
control measures. (See Note 13 to the Notes to the
Consolidated Financial Statements).

With respect to our oil and gas operations in
California, we have significant exit cost liabilities. These
liabilities include costs for dismantlement, rehabilitation and
abandonment. We are not indemnified for any part of these exit
costs. (See Note 3 to the Notes to the Consolidated
Financial Statements).

Waste Disposal.We
currently own or lease, and have in the past owned or leased,
numerous properties that have been used for production of oil
and gas for many years. Although we utilized operating and
disposal practices that were standard in the industry at the
time, hydrocarbons or other wastes may have been disposed of or
released on or under the properties that we currently own or
lease or properties that we have in the past owned or leased. In
addition, many of these properties have been operated by third
parties over whom we had no control as to such entities
treatment of hydrocarbons or other wastes or the manner in which
such substances may have been disposed of or released. State and
federal laws applicable to oil and gas wastes and properties
have become stricter. Under new laws, we could be required to
remediate property, including ground water, containing or
impacted by previously disposed wastes (including wastes
disposed of or released by prior owners or operators) or to
perform remedial plugging operations to prevent future or
mitigate existing contamination.

We may generate wastes, including hazardous
wastes that are subject to the federal Resource Conservation and
Recovery Act (RCRA) and comparable state statutes.
The EPA has limited the disposal options for certain wastes that
are designated as hazardous under RCRA (Hazardous
Wastes). Furthermore, it is possible that certain wastes
generated by our oil and gas operations that are currently
exempt from treatment as Hazardous Wastes may in the future be
designated as Hazardous Wastes, and therefore be subject to more
rigorous and costly operating and disposal requirements.

10



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##### Table of Contents



Superfund.The
federal Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), also known as the
Superfund law, generally imposes joint and several
liability for costs of investigation and remediation and for
natural resource damages, without regard to fault or the
legality of the original conduct, on certain classes of persons
with respect to the release into the environment of substances
designated under CERCLA as hazardous substances (Hazardous
Substances). These classes of persons or so-called
potentially responsible parties (PRPs) include
the current and certain past owners and operators of a facility
where there is or has been a release or threat of release of a
Hazardous Substance and persons who disposed of or arranged for
the disposal of the Hazardous Substances found at such a
facility. CERCLA also authorizes the EPA and, in some cases,
third parties to take actions in response to threats to the
public health or the environment and to seek to recover from the
PRPs the costs of such action. Although CERCLA generally
exempts petroleum from the definition of Hazardous Substances in
the course of our operations, we may have generated and may
generate wastes that fall within CERCLAs definition of
Hazardous Substances. We may also be an owner of facilities on
which Hazardous Substances have been released by previous owners
or operators. We may be responsible under CERCLA for all or part
of the costs to clean up facilities at which such substances
have been released and for natural resource damages. Crude oil
exempt under Superfund may be modified increasing compliance
costs. We have not, to our knowledge been named a PRP under
CERCLA nor do we know of any prior owners or operators of our
properties that are named as PRPs related to their
ownership or operation of such property.

Air Emissions.Our
operations are subject to local, state and federal regulations
for the control of emissions of air pollution. Local air quality
districts do much of the air quality regulation of sources in
California. California requires new and modified sources of air
pollutants to obtain permits prior to commencing construction.
Major sources of air pollutants are subject to more stringent,
federally imposed permitting requirements, including additional
permits. Because of the severity of the ozone
(smog) problems in portions of California, the state has
the most severe restrictions on the emissions of volatile
organic compounds (VOC) and nitrogen oxides (Nox) of any
state. Producing wells, gas plants and electric generating
facilities, all of which are owned by us generate VOC and Nox.
Some of our producing wells are in counties that are designated
as nonattainment for ozone and are therefore potentially subject
to restrictive emission limitations and permitting requirements.
If the ozone problems in the state are not resolved by the
deadlines imposed by the federal Clean Air Act (2005 
2010), or on schedule to meet the standards even more
restrictive requirements may be imposed including financial
penalties based upon the quantity of ozone producing emissions.
California also operates a stringent program to control
hazardous (toxic) air pollutants, which might require
installation of additional controls. Administrative enforcement
actions for failure to comply strictly with air pollution
regulations or permits are generally resolved by payment of
monetary fines and correction of any identified deficiencies.
Alternatively, regulatory agencies could require us to forego
construction, modification or operation of certain air emission
sources, although we believe that in the latter cases we would
have enough permitted or permittable capacity to continue our
operations without a material adverse effect on any particular
producing field.

Clean Water Act.The
Clean Water Act (CWA) imposes restrictions and
strict controls regarding the discharge of wastes, including
produced waters and other oil and natural gas wastes, into
waters of the United States, a term broadly defined. These
controls have become more stringent over the years, and it is
probable that additional restrictions will be imposed in the
future. Permits must be obtained to discharge pollutants into
federal waters. The CWA provides for civil, criminal and
administrative penalties for unauthorized discharges of oil,
hazardous substances and other pollutants. It imposes
substantial potential liability for the costs of removal or
remediation associated with discharges of oil or hazardous
substances. State laws governing discharges to water also
provide varying civil, criminal and administrative penalties and
impose liabilities in the case of a discharge of petroleum or it
derivatives, or other hazardous substances, into state waters.
In addition, the EPA has promulgated regulations that may
require us to obtain permits to discharge storm water runoff,
including discharges associated with construction activities. In
the event of an unauthorized discharge of wastes, we may be
liable for penalties and costs.

Oil Pollution Act.The Oil Pollution Act of 1990 (OPA), which amends
and augments oil spill provisions of CWA, imposes certain duties
and liabilities on certain responsible parties
related to the prevention of oil spills and damages resulting
from such spills in United States waters and adjoining
shorelines.

11



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##### Table of Contents



A liable responsible party includes
the owner or operator of a facility or vessel, that is a source
of an oil discharge or poses the substantial threat of
discharge, or the lessee or permittee of the area in which a
facility covered by OPA is located. OPA assigns joint and
several liability, without regard to fault, to each liable party
for oil removal costs, remediation of environmental damage and a
variety of public and private damages. Few defenses exist to the
liability imposed by OPA. In the event of an oil discharge, or
substantial threat of discharge from our properties, vessels and
pipelines, we may be liable for costs and damages.


The OPA also imposes ongoing requirements on a
responsible party, including proof of financial responsibility
to cover at least some costs of a potential spill. Certain
amendments to the OPA that were enacted in 1996 require owners
and operators of offshore facilities that have a worst case oil
spill potential of more than 1,000 barrels to demonstrate
financial responsibility in amounts ranging from
$10 million in specified state waters and $35 million
in federal outer continental shelf waters, with higher amounts,
up to $150 million based upon worst case oil-spill
discharge volume calculations. We believe that we currently have
established adequate proof of financial responsibility for our
offshore facilities.

California Coastal Act.The California Coastal Act regulates
the conservation and development of Californias coastal
resources. The California Coastal Commission (The
Commission) works with local government to make permit
decisions for new development in certain coastal areas and
reviews local coastal programs, such as land use restrictions.
The Commission also works with the California State Office of
Oil Spill Prevention and Response to protect against and respond
to coastal oil spills. The Commission has direct regulatory
authority over offshore oil and gas development within the
States three mile jurisdiction and has authority, through
the Federal Coastal Zone Management Act, over federally
permitted projects that affect the States coastal zone
resources. We conduct activities that may be subject to the
California Coastal Act and the jurisdiction of The Commission.

Our management believes that we are in
substantial compliance with current applicable environmental
laws and regulations and that continued compliance will not have
a material adverse impact on us.

Competition

We operate in the highly competitive areas of oil
and gas exploration, development and production. The
availability of funds and information relating to a property,
the standards established by us for the minimum projected return
on investment and the availability of alternate fuel sources are
factors that affect our ability to compete in the marketplace.
Competitors include major integrated oil companies and a
substantial number of independent energy companies, many of
which possess greater financial and other resources. We compete
to acquire producing properties, exploration leases, licenses,
concessions and marketing agreements.

Personnel

At December 31, 2003, we had 397 full time
employees.






|        |           
|------- | ----------
|Item 2. | Properties

A description of our properties is included in
Item 1, Business, and is incorporated herein by reference.






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

See Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations, which
is incorporated herein by reference.






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of matters to a vote of security
    holders

None.

12



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##### Table of Contents






PART II






|        |                                                                              
|------- | -----------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common
    Equity and Related Stockholder Matters

Our common stock is traded on the New York
Stock Exchange under the Symbol NEV. On February 27, 2004,
we had 20,318,979 shares of common stock outstanding. There
were approximately 927 stockholders of record and approximately
3,378 additional beneficial owners as of February 27, 2004.
We have not paid dividends on our common stock and do not
anticipate paying cash dividends in the immediate future. In
addition, certain restrictions contained in our financing
arrangements restrict the payment of dividends. See Note 9
to the Notes to Consolidated Financial Statements. The high and
low recorded prices of our common stock during 2003 and 2002 are
presented in the following table.

|     |                |              |   |       |  |  |   |       | 
|---- | -------------- | ------------ | - | ----- |  |  | - | ----- | 
|     |                |             
|     |                | Market Price
|     |                |             
|     |                | High         |   | Low  
|     |                |              |   |      
|2003 |                |              |   |       |  |  |   |      
|     | First Quarter  |              | $ | 13.55 |  |  | $ | 10.63 | 
|     | Second Quarter |              |   | 18.01 |  |  |   | 12.55 | 
|     | Third Quarter  |              |   | 19.65 |  |  |   | 15.73 | 
|     | Fourth Quarter |              |   | 24.95 |  |  |   | 18.69 | 
|2002 |                |              |   |       |  |  |   |      
|     | First Quarter  |              | $ | 15.58 |  |  | $ | 13.15 | 
|     | Second Quarter |              |   | 16.45 |  |  |   | 13.60 | 
|     | Third Quarter  |              |   | 15.90 |  |  |   | 9.00  | 
|     | Fourth Quarter |              |   | 14.55 |  |  |   | 10.56 | 



| |                           
| | --------------------------
| | Treasury Stock Repurchases

Our Board of Directors had authorized the open
market repurchase of up to 5.6 million shares of common
stock. Repurchases may be made at times and at prices deemed
appropriate by management and consistent with the authorization
of our Board. There have been no shares repurchased since 2001.
As of December 31, 2003, we had 3.5 million shares of
treasury stock, which shares will be cancelled should the merger
with Plains be consummated.



| |                        
| | -----------------------
| | Shareholder Rights Plan

In 1997, we adopted a Shareholder Rights Plan
(Rights Plan) to protect our shareholders from
coercive or unfair takeover tactics. In February 2004, the Board
of Directors approved the amendment of the rights plan to permit
a merger with Plains without triggering the provisions of the
rights plan.



| |                            
| | ---------------------------
| | Executive Compensation Plan

In 1997, we adopted a plan to encourage senior
executives to personally invest in our common stock, and to
regularly review executives ownership versus targeted
ownership objectives. These incentives include a deferred
compensation plan that gives key executives the ability to defer
all or a portion of their salaries and bonuses and invest in our
common stock or make other investments at the employees
discretion. All common stock acquired is held in a benefit
trust. Target levels of ownership are based on multiples of base
salary and are administered by the Compensation Committee of the
Board of Directors. The deferred compensation plan applies to
certain highly compensated employees and all executives at a
level of Vice President and above. The deferred compensation
plan was amended in 2003 to offer a 15% discount on investments
in our common stock up to $30,000 annually.

13



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

The following selected financial data should be
read in conjunction with the consolidated financial statements
and supplementary information included in Item 8, Financial
Statements and Supplementary Data.

|                        |                                                                                                                    |                                                         |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |  |   |         |         | 
|----------------------- | ------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- |  | - | ------- | ------- | 
|                        |                                                                                                                    |                                                        
|                        |                                                                                                                    | As of and for the Years ended December 31,             
|                        |                                                                                                                    |                                                        
|                        |                                                                                                                    | 2003                                                    |   | 2002    |         | 2001 |   | 2000    |         | 1999
|                        |                                                                                                                    |                                                         |   |         |         |      |   |         |         |     
|                        |                                                                                                                    |                                                        
|                        |                                                                                                                    | (In thousands, except per share data)                  
|Operating Results Data  |                                                                                                                    |                                                         |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |  |   |        
|                        | Revenues                                                                                                           |                                                         |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |  |   |         |        
|                        |                                                                                                                    | Oil and gas revenues                                    |   | $       | 369,975 |      |   | $       | 307,831 |      |   | $       | 310,806 |   |   | $       | 268,799 |  |   | $       | 208,003 | 
|                        |                                                                                                                    | Other                                                   |   |         | 1,362   |      |   |         | 4,070   |      |   |         | 273     |   |   |         | 2,358   |  |   |         | 4,778   | 
|                        |                                                                                                                    |                                                         |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |  |   |        
|                        |                                                                                                                    | Total revenues                                          |   |         | 371,337 |      |   |         | 311,901 |      |   |         | 311,079 |   |   |         | 271,157 |  |   |         | 212,781 | 
|                        | Costs and expenses                                                                                                 |                                                         |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |  |   |         |        
|                        |                                                                                                                    | Lease operating expense                                 |   |         | 159,832 |      |   |         | 132,954 |      |   |         | 160,086 |   |   |         | 135,087 |  |   |         | 120,328 | 
|                        |                                                                                                                    | Exploration                                             |   |         | 2,115   |      |   |         | 4,541   |      |   |         | 22,058  |   |   |         | 9,774   |  |   |         | 14,017  | 
|                        |                                                                                                                    | Depreciation, depletion, amortization and
    accretion |   |         | 70,810  |      |   |         | 73,128  |      |   |         | 70,554  |   |   |         | 58,248  |  |   |         | 69,703  | 
|                        |                                                                                                                    | Impairments(1)                                          |   |         |        |      |   |         |        |      |   |         | 103,490 |   |   |         |        |  |   |         |        | 
|                        |                                                                                                                    | General and administrative                              |   |         | 28,457  |      |   |         | 25,877  |      |   |         | 36,904  |   |   |         | 32,974  |  |   |         | 32,266  | 
|                        |                                                                                                                    | Interest expense                                        |   |         | 29,793  |      |   |         | 37,943  |      |   |         | 43,006  |   |   |         | 37,472  |  |   |         | 33,110  | 
|                        |                                                                                                                    | Loss on early extinguishment of debt(2)                 |   |         | 12,578  |      |   |         |        |      |   |         |        |   |   |         |        |  |   |         |        | 
|                        |                                                                                                                    | Dividends on TECONS(3)                                  |   |         | 6,613   |      |   |         | 6,613   |      |   |         | 6,613   |   |   |         | 6,613   |  |   |         | 6,613   | 
|                        | Income (loss) from continuing operations                                                                           |                                                         |   | 37,089  |         |      |   | 23,079  |         |      |   | (91,371 | )       |   |   | (6,878  | )       |  |   | 25,415  |        
|                        | Income (loss) from discontinued operations,
    including gain/loss on disposal, net of income taxes               |                                                         |   | 5,894   |         |      |   | (10,804 | )       |      |   | 12,200  |         |   |   | 19,309  |         |  |   | 6,027   |        
|                        | Cumulative effect of a change in accounting
    principle, net of income tax(4)                                    |                                                         |   | 8,496   |         |      |   |        |         |      |   |        |         |   |   | (796    | )       |  |   |        |        
|                        | Net income (loss)(5)                                                                                               |                                                         |   | 51,479  |         |      |   | 12,275  |         |      |   | (79,171 | )       |   |   | 11,635  |         |  |   | 31,442  |        
|                        | Earnings Per Share                                                                                                 |                                                         |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |  |   |         |        
|                        |                                                                                                                    | Basic                                                   |   |         | 2.66    |      |   |         | 0.70    |      |   |         | (4.73   | ) |   |         | 0.67    |  |   |         | 1.62    | 
|                        |                                                                                                                    | Diluted                                                 |   |         | 2.62    |      |   |         | 0.69    |      |   |         | (4.73   | ) |   |         | 0.64    |  |   |         | 1.61    | 
|Financial Position Data |                                                                                                                    |                                                         |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |  |   |        
|                        | Total assets                                                                                                       |                                                         | $ | 844,976 |         |      | $ | 855,171 |         |      | $ | 839,812 |         |   | $ | 848,024 |         |  | $ | 760,030 |        
|                        | Senior Subordinated Notes                                                                                          |                                                         |   | 225,000 |         |      |   | 409,577 |         |      |   | 409,577 |         |   |   | 409,727 |         |  |   | 259,750 |        
|                        | Bank Credit Facility                                                                                               |                                                         |   | 15,000  |         |      |   | 28,700  |         |      |   | 41,500  |         |   |   |        |         |  |   | 81,000  |        
|                        | Long-term liability to unconsolidated
    affiliate(3)                                                             |                                                         |   | 115,000 |         |      |   |        |         |      |   |        |         |   |   |        |         |  |   |        |        
|                        |                                                                                                                    |                                                         |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |  |   |        
|                        |                                                                                                                    | Total debt                                              |   |         | 355,000 |      |   |         | 438,277 |      |   |         | 451,077 |   |   |         | 409,727 |  |   |         | 340,750 | 
|                        | Interest rate swaps  fair value
    adjustment                                                                    |                                                         |   | (153    | )       |      |   | 2,161   |         |      |   | (633    | )       |   |   |        |         |  |   |        |        
|                        | Interest rate swaps  termination gain
    (6)                                                                     |                                                         |   | 14,364  |         |      |   | 11,673  |         |      |   |        |         |   |   |        |         |  |   |        |        
|                        |                                                                                                                    |                                                         |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |  |   |        
|                        |                                                                                                                    | Long-term debt                                          |   |         | 369,211 |      |   |         | 452,111 |      |   |         | 450,444 |   |   |         | 409,727 |  |   |         | 340,750 | 
|                        |                                                                                                                    |                                                         |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |  |   |        
|                        | Company-Obligated Mandatorily Redeemable
    Convertible Preferred Securities of Nuevo Financing I
    (TECONS)(3) |                                                         |   |        |         |      |   | 115,000 |         |      |   | 115,000 |         |   |   | 115,000 |         |  |   | 115,000 |        



---



|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The impairment in 2001 related to our Santa
    Clara, Huntington Beach, Pitas Point, Masseko (Congo) and Point
    Pedernales fields and certain other oil and gas properties.

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | During 2003, we repaid $184.6 million of our
    9 1/2% Senior Subordinated Notes due in 2006 and 2008 and
    paid a premium of $8.7 million to call the notes prior to
    their maturity. Additionally, we expensed the unamortized
    financing costs related to the retired notes of
    $3.9 million.                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(3) | The adoption of FIN 46R, Consolidation of
    Variable Interest Entities, at December 31, 2003
    required us to deconsolidate our investment in Nuevo
    Financing I and our TECONS. See Note 2 to the Notes to
    the Consolidated Financial Statements. As a result, our
    5 3/4% Convertible Subordinated Debentures due
    December 15, 2026 are included in our long-term debt as
    long-term liability to an unconsolidated affiliate at
    December 31, 2003. Additionally, dividends on the TECONS
    will no longer be reported in our results of operations but
    instead will be reflected as interest expense on long-term
    liability to unconsolidated affiliate.
|   
|(4) | In January 2003, we adopted SFAS No. 143. In
    connection with the initial application, we recorded a
    cumulative effect of change in accounting principle, net of
    taxes, of approximately $8.5 million as an increase to
    income. (See Note 3 to Consolidated Financial Statements).                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(5) | No common stock dividends have been declared
    since our formation. See Note 7 to the Notes to
    Consolidated Financial Statements concerning restrictions on the
    payment of common stock dividends.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(6) | During 2003 and 2002 we terminated interest rate
    swap agreements that hedged our 9 1/2% and 9 3/8%
    Senior Subordinated Notes resulting in a termination gain of
    $14.4 million in 2003 and $11.7 million in 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Nuevo Energy is engaged in the acquisition,
exploitation, development, exploration and production of crude
oil and natural gas. Our core areas in the U.S. are onshore
and offshore California and West Texas. We also have
international crude oil production offshore the Republic of
Congo. The following review should be read in conjunction with
our Consolidated Financial Statements and Notes thereto.

Proposed Merger with Plains Exploration and
Production Company

On February 12, 2004, we entered into an
agreement and plan of merger under the terms of which it is
anticipated that we will be merged with Plains
Exploration & Production Company (Plains)
or alternatively become a wholly owned subsidiary of Plains.
Under the terms of the agreement, our stockholders will receive
1.765 shares of Plains common stock in exchange for each
Nuevo common share. Following the merger, it is expected that
our stockholders will own 47% of the combined company. The
proposed merger is subject to approval by the stockholders of
both companies as well as other customary closing conditions.

Executive Summary  2003
Operational and Financial Highlights

In 2003, we increased production from continuing
operations by 4% to 48,800 BOE per day compared to 2002,
while at the same time maintaining discipline over capital
spending. In fact, our capital spending (excluding acquisitions)
was $66.7 million in 2003 compared to $80.2 million in
2002. Both crude oil and natural gas prices were up in 2003
compared to 2002. Our realized crude oil and liquids price
increased 11% from 2002, and our realized natural gas price was
up 46% versus 2002. Strong commodity prices combined with higher
production contributed to a 19% increase in revenues and a 61%
increase in income from continuing operations.

Within this environment we achieved our top
priorities for the year of monetizing non-core assets and
transforming our balance sheet by reducing our long-term debt.
In 2003, we sold three non-core oil and gas properties in
California: Brea-Olinda ($59.0 million), Orcutt Hill
($12.9 million) and Union Island ($10.5 million). In
addition, in December 2003 we sold two real estate properties in
California: the Tonner Hills development project
($47 million) and the Orcutt office building and contiguous
acreage ($2.9 million). With regard to the $47 million
sales price for Tonner Hills, we received $16 million in
December, we expect to receive $22.5 million in late March
2004, and we will receive $8.5 million when we complete
habitat restoration activities.

We used the cash proceeds from these non-core
asset sales, combined with net cash from operating activities,
to transform our balance sheet by reducing long-term debt by
$198.3 million during 2003. We redeemed $184.6 million
of our high cost debt (9 1/2% Notes) and paid down
$13.7 million of our bank debt. This debt reduction reduced
our interest expense in 2003 by $8.2 million compared to
2002. We did, however, incur $12.6 million in costs
associated with the early extinguishment of our Notes.

In addition to debt reduction, our balance sheet
was also aided by the higher commodity prices and increased
production as we recorded net income of $51.5 million and
increased stockholders equity by $47.6 million during
2003.

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##### Table of Contents



Results of Operations

Our results of operations are significantly
affected by fluctuations in oil and gas prices. The following
table reflects our production and average prices for crude oil
and natural gas:

|                      |                         |                         |       |       |         |      |         |   |         |      |         |   |         |      |         | 
|--------------------- | ----------------------- | ----------------------- | ----- | ----- | ------- | ---- | ------- | - | ------- | ---- | ------- | - | ------- | ---- | ------- | 
|                      |                         |                        
|                      |                         | Year Ended December 31,
|                      |                         |                        
|                      |                         | 2003                    |       | 2002  |         | 2001
|                      |                         |                         |       |       |         |     
|Crude Oil and Liquids |                         |                         |       |       |         |      |         |   |         |      |         |  
|                      | Sales Volumes (MBbls/d) |                         |       |       |         |      |         |   |         |      |         |   |        
|                      |                         | Domestic                |       |       | 37.6    |      |         |   | 36.5    |      |         |   | 36.0    |     
|                      |                         | International           |       |       | 4.8     |      |         |   | 5.1     |      |         |   | 5.2     |     
|                      |                         |                         |       |       |         |      |         |   |         |      |         |  
|                      |                         |                         | Total |       |         | 42.4 |         |   |         | 41.6 |         |   |         | 41.2 |        
|                      |                         |                         |       |       |         |      |         |   |         |      |         |  
|                      | Sales Prices ($/Bbl)    |                         |       |       |         |      |         |   |         |      |         |   |        
|                      |                         | Unhedged                |       | $     | 23.19   |      |         | $ | 18.83   |      |         | $ | 19.01   |     
|                      |                         | Hedged                  |       |       | 20.30   |      |         |   | 18.21   |      |         |   | 15.84   |     
|                      | Revenues ($/thousands)  |                         |       |       |         |      |         |   |         |      |         |   |        
|                      |                         | Domestic                |       | $     | 315,619 |      |         | $ | 254,877 |      |         | $ | 250,627 |     
|                      |                         | International           |       |       | 42,953  |      |         |   | 31,967  |      |         |   | 36,015  |     
|                      |                         | Marketing Fees          |       |       | (6      | )    |         |   | (936    | )    |         |   | (957    | )   
|                      |                         | Hedging                 |       |       | (44,681 | )    |         |   | (9,414  | )    |         |   | (47,558 | )   
|                      |                         |                         |       |       |         |      |         |   |         |      |         |  
|                      |                         |                         |       | Total |         | $    | 313,885 |   |         | $    | 276,494 |   |         | $    | 238,127 | 
|                      |                         |                         |       |       |         |      |         |   |         |      |         |  
|Natural Gas           |                         |                         |       |       |         |      |         |   |         |      |         |  
|                      | Sales Volumes (MMcf/d)  |                         |       |       |         |      |         |   |         |      |         |   |        
|                      |                         | Domestic                |       |       | 38.5    |      |         |   | 31.5    |      |         |   | 27.2    |     
|                      |                         |                         |       |       |         |      |         |   |         |      |         |  
|                      | Sales Prices ($/Mcf)    |                         |       |       |         |      |         |   |         |      |         |   |        
|                      |                         | Unhedged                |       | $     | 4.14    |      |         | $ | 2.73    |      |         | $ | 7.31    |     
|                      |                         | Hedged                  |       |       | 3.99    |      |         |   | 2.72    |      |         |   | N/A     |     
|                      | Revenues ($/thousands)  |                         |       |       |         |      |         |   |         |      |         |   |        
|                      |                         | Domestic                |       | $     | 58,924  |      |         | $ | 32,176  |      |         | $ | 73,617  |     
|                      |                         | Marketing Fees          |       |       | (697    | )    |         |   | (790    | )    |         |   | (938    | )   
|                      |                         | Hedging                 |       |       | (2,137  | )    |         |   | (49     | )    |         |   |        |     
|                      |                         |                         |       |       |         |      |         |   |         |      |         |  
|                      |                         |                         |       | Total |         | $    | 56,090  |   |         | $    | 31,337  |   |         | $    | 72,679  | 
|                      |                         |                         |       |       |         |      |         |   |         |      |         |  

Year Ended December 31, 2003 Compared to
Year Ended December 31, 2002

We reported net income of $51.5 million, or
$2.62 per diluted share for 2003 as compared to net income
of $12.3 million, or $0.69 per diluted share for 2002.



| |         
| | --------
| | Revenues

Oil and Gas
Revenues.Oil and gas revenues
increased 20% to $370.0 million in 2003 from $307.8 in
2002, due to higher oil and gas prices and volumes. The realized
oil price was $20.30 per Bbl, an increase of $2.09 per
Bbl from 2002. Crude oil production averaged 42.4 MBbls/day
in 2003, an increase of 0.8 MBbls/day from 2002. The
increased production was due to a full year of production from
the Athanor acquisition (Pakenham field), additional interest
purchased in our Point Pedernales property offshore California
and the results of our drilling program onshore California in
our Belridge Field. The increase was offset by natural
production decline in onshore and offshore California and
production curtailed for our drilling and workover program
onshore California. We incurred hedging losses related to oil
sales of $44.7 million in

17



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##### Table of Contents



2003 compared to hedging losses of $9.4 in 2002.
In 2002, we implemented a new hedging strategy based on our
pricing model which provides that we hedge an increased amount
of production as market prices increase. Our pricing model did
not plan for market prices to climb near historical highs; as a
result, we fully hedged the amount of oil permitted under our
hedging strategy as prices continued to rise. The hedge loss is
determined by comparing year end market price to hedge price.
Natural gas production averaged 38.5 MMcf/day in 2003, an
increase of 22% from 31.5 MMcf/day in 2002 primarily due to
a full year of production from the Athanor acquisition,
partially offset by production declines from our offshore
California properties. The realized natural gas price in 2003
was $3.99 per Mcf, up 47% from $2.72 in 2002. Our hedging
of gas production commenced with our acquisition of Athanor and
we had a hedging loss related to natural gas sales of
$2.1 million in 2003; our loss is due to events similar to
our oil hedge loss.


Other Revenue.Other
revenue of $1.4 million in 2003 was $2.7 million lower
than 2002 which included the receipt of $3.0 million of
business interruption insurance recoveries.



| |                   
| | ------------------
| | Costs and Expenses

|                                |                                                         |      |      |         |   |          |      |            |   |   |      |        |   |  |    |      |   
|------------------------------- | ------------------------------------------------------- | ---- | ---- | ------- | - | -------- | ---- | ---------- | - | - | ---- | ------ | - |  | -- | ---- | --
|                                |                                                         |      |      |         |   |         
|                                |                                                         |      |      |         |   | Variance
|                                |                                                         |      |      |         |   |         
|                                |                                                         | 2003 |      | 2002    |   | Amount   |      | Percentage
|                                |                                                         |      |      |         |   |          |      |           
|                                | Lease operating expenses                                |      | $    | 159,832 |   |          | $    | 132,954    |   |   | $    | 26,878 |   |  |    | 20   | % 
|                                | Exploration costs                                       |      |      | 2,115   |   |          |      | 4,541      |   |   |      | (2,426 | ) |  |    | (53  | %)
|                                | Depletion, depreciation, amortization and
    accretion |      |      | 70,810  |   |          |      | 73,128     |   |   |      | (2,318 | ) |  |    | (3   | %)
|                                | General and administrative                              |      |      | 28,457  |   |          |      | 25,877     |   |   |      | 2,580  |   |  |    | 10   | % 
|                                | Loss on assets held for sale                            |      |      |        |   |          |      | 1,253      |   |   |      | (1,253 | ) |  |    | (100 | %)
|                                | Other                                                   |      |      | 1,256   |   |          |      | 1,930      |   |   |      | (674   | ) |  |    | (35  | %)
|                                | Loss (gain) on disposition of properties                |      |      | (5,824  | ) |          |      | (16,588    | ) |   |      | 10,764 |   |  |    | (65  | %)
|                                |                                                         |      |      |         |   |          |      |            |   |   |      |        |   |  |    |     
|                                |                                                         |      | $    | 256,646 |   |          | $    | 223,095    |   |   | $    | 33,551 |   |  |    | 15   | % 
|                                |                                                         |      |      |         |   |          |      |            |   |   |      |        |   |  |    |     
|Lease Operating Expense per BOE |                                                         | $    | 8.98 |         |   | $        | 7.77 |            |   | $ | 1.21 |        |   |  | 16 | %   
|                                | Domestic                                                |      |      | 9.31    |   |          |      | 8.03       |   |   |      | 1.28   |   |  |    | 16   | % 
|                                | International                                           |      |      | 5.96    |   |          |      | 5.71       |   |   |      | 0.25   |   |  |    | 4    | % 

Costs and Expenses.Lease operating expenses (LOE) of
$159.8 million in 2003 increased 20% from 2002. The
increase in LOE is primarily due to the increase in the cost of
producing steam, which uses natural gas as a feedstock and is
injected into reservoirs to facilitate the production of heavy
California oil. Additionally, LOE increased due to a full year
of field costs included for the Pakenham field and additional
interest purchased in the Point Pedernales field. Exploration
costs of $2.1 million in 2003 were $2.4 million lower
than 2002 as the $2.3 million write off of the Anaguid
permit in Tunisia was included in 2002. Depreciation, depletion,
amortization and accretion (DD&A) was
$70.8 million in 2003 compared to $73.1 million in
2002. The decrease is primarily due to a reduction in the
depletion rate from $4.28 per BOE in 2002 to $3.98 per
BOE in 2003, caused by sales of assets with higher cost per BOE
which was partially offset by increased production without a
corresponding increase in proved reserves. The decrease in the
depletion rate is also offset by accretion of asset retirement
obligation of approximately $9.1 million as a result of the
implementation of SFAS No. 143, Accounting for
Asset Retirement Obligations, which we adopted on
January 1, 2003. General and administrative costs increased
to approximately $28.5 million in 2003 from
$25.9 million in 2002 due to higher employee expenses
related to the attainment of bonus targets, and non-cash costs
associated with the issuance of restricted stock in January
2003. Both incentives related to our improved performance.

Gain on Disposition of
Properties.Our net gain from the
disposition of properties in 2003 of $5.8 million included
$4.5 million from the release of escrow related to the sale
of Ventura properties in 1999, and $1.5 million from sale
of our Orcutt office building in California.

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##### Table of Contents



Derivative Loss.Our
derivative loss in 2003 was approximately $5.8 million,
primarily made up of mark to market on derivative instruments
that do not qualify as a hedge under SFAS 133.

Interest Expense.Interest expense of approximately $29.8 million, a decrease
of $8.1 million from $37.9 million in 2002 is due to
the repayment of $184.6 million of 9 1/2% Senior
Subordinated Notes due in 2006 and 2008.

Loss from the Early Extinguishment of
Debt.During 2003, we repaid
$184.6 million of our 9 1/2% Senior Subordinated
Notes due in 2006 and 2008 and paid a premium of
$8.7 million to call the notes prior to their maturity.
Additionally, we expensed the unamortized financing costs
related to the retired notes of $3.9 million.

Dividends on TECONS.Dividends on the TECONS were $6.6 million in 2003 and 2002.
The TECONS pay dividends at a rate of 5.75% (See Note 10 to
the Notes to Consolidated Financial Statements.)

Income Tax.Income
tax expense was $23.1 million including current tax of
$2.1 million in 2003 compared to $16.7 million in 2002
which had $1.3 million of current tax. Our effective income
tax rate was 39.2% in 2003 and 41.7% in 2002.

Discontinued
Operations.We had income from
discontinued operations of $5.9 million in 2003 compared to
a loss of $10.8 million in 2002. In 2003, we sold our
Brea-Olinda, Union Island and Orcutt Hill properties located
onshore California. We had total revenue from operations of
these properties of $11.4 million, a gain on sale of Union
Island of $7.9 million and loss on sale of Orcutt Hill of
$4.6 million. In 2002, the income from discontinued
operations consisted of after-tax operating income from our
Eastern properties which were sold in 2002 and operating income
from the Brea-Olinda, Union Island and Orcutt Hill properties.

Cumulative Effect of Change in Accounting
Principle.In January 2003, we adopted
SFAS No. 143. In connection with the initial
application, we recorded a cumulative effect of change in
accounting principle, net of taxes, of $8.5 million as an
increase to income (See Note 3 to the Consolidated
Financial Statements). As a result of adopting FIN46R,
Consolidation of Variable Interest Entities, at
December 31, 2003, we are required to deconsolidate the
Nuevo Financing I Business Trust which issued our TECONS.
As a result, our 5.75% Convertible Subordinated Debentures due
December 15, 2026 are included in our long-term debt as a
long-term liability to an unconsolidated affiliate.
Additionally, dividends on the TECONS will no longer be reported
in our results of operations and instead will be reflected as
interest expense on long-term liability to unconsolidated
affiliate beginning in 2004.

Year Ended December 31, 2002 Compared to
Year Ended December 31, 2001

We reported net income of $12.3 million, or
$0.69 per diluted share for 2002 as compared to a net loss
of $79.2 million, or ($4.73) per diluted share in 2001.



| |         
| | --------
| | Revenues

Oil and Gas
Revenues.Oil and gas revenues were
$307.8 million in 2002 compared to $310.8 million in
2001 principally due to lower natural gas prices in 2002 which
were partially offset by higher crude oil prices realized, lower
hedging losses and higher crude oil and natural gas production
in 2002. The realized oil price in 2002 was $18.21 per Bbl,
an increase of $2.37 per Bbl from 2001. Crude oil
production averaged 41.6 MBbls/day in 2002, an increase of
0.4 MBbls/day from 2001. The increased production was due
to higher production at Point Pedernales and Santa Clara
due to improved performance which was partially offset by lower
production at Cymric where production was curtailed for well
repairs. We reported a hedging loss related to crude oil sales
of $9.4 million in 2002 compared to a hedging loss of
$47.6 million in 2001. Natural gas production averaged
31.5 MMcf per day in 2002, an increase of 16% from
27.2 MMcf per day in 2001 primarily due to production from
the Pakenham field acquired in September 2002. The realized
natural gas price in 2002 was $2.72 per Mcf, which
decreased 63% from $7.31 per Mcf in 2001.

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Other Revenue.Other
revenue of $4.1 million in 2002 was $3.8 million
higher than 2001 principally due to $3.0 million of
business interruption insurance recoveries received in 2002,
related to the repair of our pipelines at the Point Pedernales
field.



| |                   
| | ------------------
| | Costs and Expenses

|                                |                                          |      |      |         |   |          |      |            |   |   |       |          |   |  |      |       |  
|------------------------------- | ---------------------------------------- | ---- | ---- | ------- | - | -------- | ---- | ---------- | - | - | ----- | -------- | - |  | ---- | ----- | -
|                                |                                          |      |      |         |   |         
|                                |                                          |      |      |         |   | Variance
|                                |                                          |      |      |         |   |         
|                                |                                          | 2002 |      | 2001    |   | Amount   |      | Percentage
|                                |                                          |      |      |         |   |          |      |           
|                                | Lease operating expenses                 |      | $    | 132,954 |   |          | $    | 160,086    |   |   | $     | (27,132  | ) |  |      | (17%  | )
|                                | Exploration costs                        |      |      | 4,541   |   |          |      | 22,058     |   |   |       | (17,517  | ) |  |      | (79%  | )
|                                | Depletion, depreciation and amortization |      |      | 73,128  |   |          |      | 70,554     |   |   |       | 2,574    |   |  |      | 4%    |  
|                                | Impairment of oil and gas properties     |      |      |        |   |          |      | 103,490    |   |   |       | (103,490 | ) |  |      | (100% | )
|                                | General and administrative               |      |      | 25,877  |   |          |      | 36,904     |   |   |       | (11,027  | ) |  |      | (30%  | )
|                                | Restructuring and severance charges      |      |      |        |   |          |      | 4,859      |   |   |       | (4,859   | ) |  |      | (100% | )
|                                | Loss on assets held for sale             |      |      | 1,253   |   |          |      | 3,494      |   |   |       | (2,241   | ) |  |      | (64%  | )
|                                | Other                                    |      |      | 1,930   |   |          |      | 14,928     |   |   |       | (12,998  | ) |  |      | (87%  | )
|                                | Loss (gain) on disposition of properties |      |      | (16,588 | ) |          |      | (882       | ) |   |       | (15,706  | ) |  |      | 1781% |  
|                                |                                          |      |      |         |   |          |      |            |   |   |       |          |   |  |      |      
|                                |                                          |      | $    | 223,095 |   |          | $    | 415,491    |   |   | $     | (192,396 | ) |  |      | (46%  | )
|                                |                                          |      |      |         |   |          |      |            |   |   |       |          |   |  |      |      
|Lease Operating Expense per BOE |                                          | $    | 7.77 |         |   | $        | 9.59 |            |   | $ | (1.82 | )        |   |  | (19% | )    
|                                | Domestic                                 |      |      | 8.03    |   |          |      | 9.87       |   |   |       | (1.84    | ) |  |      | (19%  | )
|                                | International                            |      |      | 5.71    |   |          |      | 7.44       |   |   |       | (1.73    | ) |  |      | (23%  | )

Costs and Expenses.Lease operating expenses
(LOE) of $133.0 million in 2002 decreased 17%
from 2001. We use gas as a feedstock to generate steam which is
injected into reservoirs to facilitate the production of heavy
California oil. Excluding the cost of steam used in our oil
production operations, LOE decreased 12% in 2002 compared to
2001. Exploration costs of $4.5 million in 2002 were
$17.6 million lower than $22.1 million in 2001. The
2002 exploration costs included a $2.3 million non-cash
write off of the Anaguid permit in Tunisia which was conveyed to
third parties while the 2001 costs included $14.1 million
of dry hole costs. Depreciation, depletion and amortization
(DD&A) was $73.1 million in 2002 compared
to $70.6 million in the prior year primarily due to higher
production and a higher DD&A rate. The DD&A rate was
$4.28 per BOE in 2002 compared to $4.23 per BOE in
2001. We had no impairments in 2002 compared to
$103.5 million in 2001. The impairment in 2001 related to
our Santa Clara, Huntington Beach, Pitas Point, Masseko
(Congo) and Point Pedernales fields and certain other oil and
gas properties. Due to lower outsourcing costs, legal fees and
project costs, general and administrative expense of
$25.9 million in 2002 was $11.0 million lower than
2001. In 2002, there were no restructuring and severance charges
as compared to $4.9 million in 2001. The 2001 restructuring
charges of $4.9 million were related to the termination of
two outsourcing contracts and the reorganization of our
exploration and production operations. Other expenses were
$1.9 million in 2002 compared to $14.9 million in 2001
which included the termination of hedging contracts with Enron
and various consulting and legal costs.

Loss on Assets Held for Sale.In 2002, we made the decision to sell
certain real estate in California. Accordingly, we transferred
the underlying net book value of this real estate to assets held
for sale and recorded a $1.3 million loss, representing the
write down to its estimated fair market value, less costs to
sell. In 2001, we made the decision not to proceed with our
power plant project in Santa Barbara and Kern County
California and transferred our remaining equipment to assets
held for sale and recorded a $3.5 million loss representing
the write down to estimated fair market value less estimated
costs to sell these assets. (See Note 5 to the Consolidated
Financial Statements.)

Gain on Disposition of Properties.Our net gain from the sales of assets
for 2002 of $16.6 million was primarily related to the
settlement agreement with ExxonMobil, where we conveyed to them
our interest in the Santa Ynez Unit, our non-consent interest in
the adjacent Pescado field and relinquished our right to
participate in the Sacate field, all of which were classified as
unproved properties. In 2001, the gain on

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##### Table of Contents



disposition of properties of $0.9 million is
primarily related to the gain of $1.1 million from our sale
of a parcel of real estate in Brea, California.


Derivative Gain (Loss).Our derivative loss was in 2002
$4.7 million primarily comprised of mark-to-market losses
on derivatives which did not qualify as hedges under
SFAS 133 and ineffectiveness on hedges.

Interest Expense.Interest expense of $37.9 million
in 2002 decreased 12% compared to interest expense of
$43.0 million in 2001 due to the benefit of our interest
rate swaps in 2002 of $5.4 million.

Dividends on TECONS.Dividends on the TECONS were
$6.6 million in 2002 and 2001. The TECONS pay dividends at
a rate of 5 3/4%. (See Note 8 to the Notes to
Consolidated Financial Statements.)

Income Tax.We had
income tax expense of $16.7 million including current tax
of $1.3 million in 2002 compared to a tax benefit of
$61.1 million in 2001 which had no current tax. The current
tax relates to California State income tax which deferred the
use of net operating losses for two years. Our effective income
tax rate was 41.7% in 2002 and 40.1% in 2001.

Discontinued Operations.We had a loss from discontinued
operations of $10.8 million in 2002 compared to income of
$12.2 million in 2001. In 2002, we sold our properties
located in Texas, Alabama and Louisiana (Eastern properties) for
approximately $9.0 million and recognized a
$0.9 million after-tax loss. We also made the decision to
sell our Brea-Olinda field in California in 2002 and recognized
a $30.5 million loss in connection with writing down the
associated assets to their estimated fair value less our costs
to sell them. In 2001 the income from discontinued operations
consists of after-tax operating income from our Eastern
properties, Brea-Olinda, Union Island and Orcutt fields.

Capital Resources and Liquidity

Our principal requirements for cash, other than
working capital needs for existing operations, are costs of
development of oil and gas properties, retirement of higher cost
debt and the acquisition of oil and gas properties. We have
historically funded our development program, debt repayments and
acquisitions with cash flow from operations, bank financing,
public and private placements of debt and equity securities,
property divestitures and joint ventures with industry
participants. We believe that our liquidity and capital
resources are sufficient to meet our obligations.

At December 31, 2003, our current
liabilities exceeded our current assets due primarily to the
mark-to- market on our price risk management activities, which
resulted in a current liability of $35 million. We
anticipate paying our hedging liability with cash from
operations.



| |          
| | ---------
| | Cash flow

|                                                        |  |                |          |      |  |      |          |   |  |   |          |  
|------------------------------------------------------- |  | -------------- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                                        |  | 2003           |          | 2002 |  | 2001
|                                                        |  |                |          |      |  |     
|                                                        |  |               
|                                                        |  | (In thousands)
|Net cash provided by operating activities               |  | $              | 165,781  |      |  | $    | 122,728  |   |  | $ | 88,894   |  
|Net cash provided by (used in) investing
    activities |  |                | 36,043   |      |  |      | (114,514 | ) |  |   | (164,093 | )
|Net cash provided by (used in) financing
    activities |  |                | (200,595 | )    |  |      | (10,277  | ) |  |   | 42,862   |  

Year Ended December 31, 2003 Compared to
Year Ended December 31, 2002

Operating cash flow increased due to revenue
increases as a result of improved pricing for oil and natural
gas and increased production from our properties, which was
partially offset by increased lease operating costs. Oil and
liquids prices improved 11%, while production improved 2%. Gas
prices improved 47% while production improved approximately 22%.
Lease operating costs increased $26.9 million primarily due
to higher steam costs and field costs for our Pakenham field
purchased in 2002 and acquisition of an additional interest in
Point Pedernales.

We generated $36.0 million of cash flow from
investing activities during 2003 as a result of asset sales of
approximately $101 million, an increase from
$74 million in the prior year, as a result of the sale of
our Brea-

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Olinda, Union Island and Orcutt Hill properties.
Additionally, less cash was used in additions to oil and gas
properties as management continues to contain costs and be
selective in spending. 2002 cash used included $61 million
to purchase Athanor, and no similar acquisition was made in 2003.


Cash used in financing activities increased
$190.3 million due to the repayment of the
9 1/2% Senior Subordinated Notes due 2006 and 2008 and
bank debt, which was partially offset by an increase in proceeds
from issuance of common stock of approximately $5.1 million.

Year Ended December 31, 2002 Compared to
December 31, 2001

Operating cash flow improved due to containment
of cash operating expenses, including lease operating,
exploration and general and administrative expenses. Lease
operating expense decreased $27.1 million, exploration
expense decreased $17.5 million and general and
administrative expense decreased $11.0 million principally
due to the termination of the California exploration program and
terminating outsource agreements for the California field
operations, accounting, treasury and land administration.

Cash flow used in investing activities decreased
due a $58.8 million reduction in additions to oil and gas
properties, offset by a $32.9 million increase in
acquisitions in 2002. The reduction in additions to oil and gas
properties resulted from the implementation of a more
disciplined capital allocation process. In 2002 we acquired
Athanor resources for $61.3 million cash plus other
consideration, compared to 2001 purchase of additional acreage
in Kern County, California for $28.5 million. Additionally,
proceeds from the sale of properties increased
$20.8 million in 2002, as a result of the sale of our
Eastern properties.

Asset Dispositions

Proceeds from asset dispositions were
$101 million, $27 million and $6 million during
2003, 2002 and 2001 as management has actively sought buyers for
our non-core and marginal assets. In 2003, we sold three
non-core oil and gas properties in California: Brea-Olinda
($59.0 million), Orcutt Hill ($12.9 million) and Union
Island ($10.5 million).

We disposed of a significant portion of our
remaining real estate portfolio in 2003, including our Tonner
Hills residential development property for approximately
$47 million on December 30, 2003. We received
$16 million of the purchase price on the sale date, which
we included in other current liabilities as a deposit related to
the purchase. We anticipate receiving an additional
$22.5 million on March 29, 2004, and this amount will
also be reflected as a deposit. The remaining $8.5 million
will be received by us once we have completed certain habitat
restoration. Because of the continuing involvement with Tonner
Hills, we have not recorded this transaction as a sale in 2003.
We currently have assets held for sale of approximately
$38.3 million including $36.3 million related to
Tonner Hills and $2.0 million related to parcels of real
estate in California which we expect to sell in 2004.

Credit Facility

Our bank credit facility provides for secured
revolving credit availability including issuance of letters of
credit of up to $250 million from a bank group led by Bank
of America, NA; Bank One, NA and Bank of Montreal, and expires
on June 7, 2005. At year end 2003, we had $15 million
outstanding under the Credit Facility and two letters of credit
outstanding in the amount of $1.6 million. Amounts borrowed
under the credit facility bear interest at a rate of 2.02%.

Availability under the Credit Facility is
determined pursuant to a semi-annual borrowing base
determination which establishes the maximum borrowings that may
be outstanding under the Credit Facility. The borrowing base is
determined by a 60% vote of participant banks (two-thirds in the
event of an increase in the borrowing base), each of which bases
its judgment on: (i) the present value of our oil and gas
reserves based on their own assumptions regarding future prices,
production, costs, risk factors and discount rates, and
(ii) projected cash flow coverage ratios calculated under
varying scenarios. If amounts outstanding under the Credit
Facility exceed the borrowing base, as redetermined from time to
time, we would be required to repay

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such excess over a defined period of time. We
have a $200.0 million borrowing base under our Credit
Facility with $183.4 million available at December 31,
2003.


Our Credit Agreement has covenants which limit
certain restricted payments and investments, guarantees and
indebtedness, prepayments of subordinated and certain other
indebtedness, mergers and consolidations, on certain types of
acquisitions and on the issuance of certain securities by
subsidiaries, liens, sales of properties, transactions with
affiliates, derivative contracts and debt in subsidiaries. We
are also required to maintain certain financial ratios and
conditions, including without limitation, an EBITDAX to fixed
charge coverage ratio and a funded debt to capitalization ratio.
At December 31, 2003, we were in compliance with all
covenants of the Credit Agreement.

EBITDAX to fixed charge coverage ratio.At December 31, 2003, based on
bank covenants, the EBITDAX to fixed charge coverage ratio was
5.0x, compared to 3.7x in 2002 and 2.7x in 2001. Our Credit
Agreement requires the EBITDAX to fixed charge coverage ratio to
be 2.0x at December 31, 2003.

Funded debt to capitalization ratio.At December 31, 2003, based on
bank covenants, total capitalization is approximately
$635 million, consisting of approximately $240 million
of debt and approximately $395 million of equity, resulting
in a debt to capitalization ratio of 38% compared to 57% in 2002
and 62% in 2001. The improvement in our debt to capitalization
ratio is due to the repayment of approximately $183 million
of our 9 1/2% Senior Subordinated Debt due 2008 and
the remaining $2 million of our 9 1/2% Senior
Subordinated Debt due 2006. The improvement in our debt to
capitalization ratio in 2002 from 2001 is due to a reduction in
the credit facility of approximately $13 million, increased
common stock outstanding as a result of the Athanor acquisition
of approximately $20 million and improved net income,
resulting in an increase in retained earnings of approximately
$12 million.

During February 2004, we repaid the remaining
$75 million on our 9 1/2% Senior Subordinated
Debt due 2008, which will improve our funded debt to
capitalization ratio.

Senior Subordinated Notes

At December 31, 2003 we had senior
subordinated notes outstanding of $225 million, including
$75 million of our 9 1/2% Senior Subordinated
Notes due June 1, 2008 and $150 million of our
9 3/8% Senior Subordinated Notes due October 1,
2010. We repaid the remaining $75 million of
9 1/2% Senior Subordinated Notes in February 2004.

The 9 3/8% Senior Subordinated Notes
are redeemable, in whole or in part, at our option, on or after
October 2005, under certain conditions. We are not required to
make mandatory redemption or sinking fund payments with respect
to these Notes. The indenture contains covenants that, among
other things, limit our ability to incur additional
indebtedness, limit restricted payments, limit issuances and
sales of capital stock by restricted subsidiaries, limit
dispositions of proceeds from asset sales, limit dividends and
other payment restrictions affecting restricted subsidiaries,
and restrict mergers, consolidations or sales of assets.

Long-term Liability to Unconsolidated
Affiliate

In December 1996, we issued $115 million of
5 3/4% Convertible Subordinated Debentures due
December 15, 2026, which were issued to Nuevo
Financing I Business Trust, a wholly owned subsidiary, to
facilitate the offering of the TECONS. Interest on these
Debentures accrues at 5 3/4% per annum and is payable
quarterly on March 15, June 15, September 15 and
December 15. The Debentures are redeemable, in whole or in
part, at our option, upon not less than 30 or more than
60 days notice, on or after December 15, 1999, under
certain conditions. We are required to redeem the Debentures at
100% in the event of a tax or legal structure change as defined
in the agreement. The holder of the Debentures has the right,
exercisable at any time prior to the close of business on
December 15, 2026, to convert the principal amount into
shares of our common stock at a conversion rate of
0.8421 shares for each Debenture, subject to adjustment
under certain circumstances. We are not required to make sinking
fund payments with respect to the Debentures.

23



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##### Table of Contents



Interest Rate Swap

During the fourth quarter of 2003, we entered
into an interest rate swap agreement with a notional amount of
$100 million, to hedge a portion of the fair value of our
9 3/8% Senior Subordinated Notes due 2010. This swap
is designated as fair value hedge and is reflected as a decrease
in long-term debt of $0.2 million as of December 31,
2003, with a corresponding increase in long-term liabilities.
Under the terms of the agreement, the counterparty pays us a
weighted average fixed annual rate of 9 3/8% on total
notional amount of $100 million, and we pay the
counterparty a variable annual rate equal to the six-month LIBOR
rate plus a weighted average rate of 5.02%.

Common Stock

Our Board of Directors has authorized the
issuance of up to 50.0 million shares, and at
December 31, 2003 we have approximately 23.2 million
shares issued and 19.7 million shares outstanding.

Our Board of Directors has authorized the open
market repurchase of up to 5.6 million shares of common
stock. Repurchases may be made at times and at prices deemed
appropriate by management and consistent with the authorization
of our Board. There were no shares repurchased in 2003. As of
December 31, 2003, we had 3.5 million shares of
treasury stock.

Joint Venture Formation

The exploration and development of oil and gas
reserves requires substantial capital expenditures. In order to
reduce our investment in a particular project, we may form joint
ventures and seek joint venture partners to share the costs.

Contractual Cash Obligations

The following table summarizes our contractual
cash obligations by payment due date:

|                            |                                    |                |         |           |  |           |       |           |  |         |        |        |  |   |        |         |  |   |         |         | 
|--------------------------- | ---------------------------------- | -------------- | ------- | --------- |  | --------- | ----- | --------- |  | ------- | ------ | ------ |  | - | ------ | ------- |  | - | ------- | ------- | 
|                            |                                    |                |         | Less than |  |           |       |           |  | After 5
|                            |                                    | Total          |         | 1 Year    |  | 1-3 Years |       | 4-5 Years |  | Years  
|                            |                                    |                |         |           |  |           |       |           |  |        
|                            |                                    |               
|                            |                                    | (In thousands)
|Long-term debt              |                                    | $              | 340,000 |           |  | $         |      |           |  | $       |       |        |  | $ | 75,000 |         |  | $ | 265,000 |        
|Operating leases            |                                    |                | 6,079   |           |  |           | 1,492 |           |  |         | 2,701  |        |  |   | 1,616  |         |  |   | 270     |        
|Capital commitments         |                                    |                | 5,470   |           |  |           | 75    |           |  |         | 5,395  |        |  |   |       |         |  |   |        |        
|Asset retirement obligation |                                    |                | 102,921 |           |  |           |      |           |  |         | 11,038 |        |  |   | 34,918 |         |  |   | 56,965  |        
|                            |                                    |                |         |           |  |           |       |           |  |         |        |        |  |   |        |         |  |   |         |        
|                            | Total contractual cash obligations |                | $       | 454,470   |  |           | $     | 1,567     |  |         | $      | 19,134 |  |   | $      | 111,534 |  |   | $       | 322,235 | 
|                            |                                    |                |         |           |  |           |       |           |  |         |        |        |  |   |        |         |  |   |         |        



| |               
| | --------------
| | Long-term Debt

The following table details our long-term debt
(excluding outstanding borrowings under our bank credit facility
and interest rate swaps) at December 31, 2003:

|                                                |                |                |         |         | 
|----------------------------------------------- | -------------- | -------------- | ------- | ------- | 
|                                                |                | (In thousands)
|9 3/8% Senior Subordinated Notes due
    2010   |                | $              | 150,000 |        
|9 1/2% Senior Subordinated Notes due
    2008   |                |                | 75,000  |        
|Long-term liability to unconsolidated affiliate |                |                | 115,000 |        
|                                                |                |                |         |        
|                                                | Long-term debt |                | $       | 340,000 | 
|                                                |                |                |         |        

See Note 9 to the Consolidated Financial
Statements for a description of our long-term debt and see
Note 13 to the Consolidated Financial Statements for a
description of our operating leases.

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| |                    
| | -------------------
| | Capital Commitments

At December 31, 2003, we had
$5.5 million of capital commitments related to real estate
in California. Our other planned capital projects are
discretionary in nature, with no substantial capital commitments
made in advance of the actual expenditures.

Commercial Commitments

The following table summarizes our Commercial
Commitments by date of expiration.

|                     |                              |                |        |                                            |  |             |   |             |  |       |        |        |  |   |   |   |  |   |   |   | 
|-------------------- | ---------------------------- | -------------- | ------ | ------------------------------------------ |  | ----------- | - | ----------- |  | ----- | ------ | ------ |  | - | - | - |  | - | - | - | 
|                     |                              |                |        |                                           
|                     |                              |                |        | Amount of Commitment Expiration Per Period
|                     |                              |                |        |                                           
|                     |                              | Total Amount   |        | Less than                                  |  |             |   | After 5    
|                     |                              | Committed      |        | 1 Year                                     |  | 1  3 Years |   | 4  5 Years |  | Years
|                     |                              |                |        |                                            |  |             |   |             |  |      
|                     |                              |               
|                     |                              | (In thousands)
|Bank credit facility |                              | $              | 15,000 |                                            |  | $           |  |             |  | $     | 15,000 |        |  | $ |  |   |  | $ |  |  
|Letters of credit    |                              |                | 1,565  |                                            |  |             |  |             |  |       | 1,565  |        |  |   |  |   |  |   |  |  
|                     |                              |                |        |                                            |  |             |   |             |  |       |        |        |  |   |   |   |  |   |   |  
|                     | Total commercial commitments |                | $      | 16,565                                     |  |             | $ |            |  |       | $      | 16,565 |  |   | $ |  |  |   | $ |  | 
|                     |                              |                |        |                                            |  |             |   |             |  |       |        |        |  |   |   |   |  |   |   |  

See Note 9 to the Consolidated Financial
Statements for a description of our bank credit facility and
letters of credit.

Critical Accounting Policies and
Estimates

Our discussion and analysis of our financial
condition and results of operations is based upon our
consolidated financial statements which have been prepared in
accordance with accounting principles generally accepted in the
United States of America (GAAP). The preparation of
our financial statements requires us to make estimates and
judgments that affect the reported amount of assets,
liabilities, revenues and expenses. We consider an accounting
estimate to be critical if (1) it requires assumptions to
be made that were uncertain at the time the estimate was made;
and (2) changes in the estimate or different estimates that
could have been selected could have a material impact on our
results of operations or financial condition. We believe the
following critical accounting policies reflect our significant
estimates and judgments used in the preparation of our financial
statements:

Property, Plant and Equipment.We account for our crude oil and
natural gas operations using the successful efforts method of
accounting. Under this method of accounting, all costs
associated with oil and gas lease acquisition costs, successful
exploratory wells and all development wells are capitalized and
amortized on a unit-of-production basis over the remaining life
of proved developed reserves and proved reserves on a field
basis. Unproved leasehold costs are capitalized pending the
results of exploration efforts. Exploration costs, including
geological and geophysical expenses, exploratory dry holes and
delay rentals, are charged to expense when incurred.

Proved reserves are the estimated quantities of
crude oil, condensate and natural gas that geological and
engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing
economic and operating conditions at the end of the respective
years. Proved developed reserves are those reserves expected to
be recovered through existing equipment and operating methods.

Our rate of recording depreciation, depletion and
amortization expense (DD&A) and our tests of
impairment of proved properties are impacted by our estimation
of proved reserves. There are numerous uncertainties in
estimating crude oil and natural gas reserve quantities,
projecting future production rates and projecting the timing of
future development expenditures. Oil and gas reserve engineering
must be recognized as a subjective process of estimating
underground accumulations of oil and gas that cannot be measured
in an exact way and estimates of other engineers might differ
materially from those of Ryder Scott. The accuracy of any
reserve estimate is a function of the quantity of available data
and of engineering and geological interpretation and judgment.
Accordingly, these estimates are subject to change as additional
information becomes available.

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We review our proved properties at the field
level when management determines that events or circumstances
indicate that the recorded carrying value of the properties may
not be recoverable. If the carrying amount of an asset exceeds
the sum of the undiscounted estimated future net cash flows, we
recognize impairment expense equal to the difference between the
carrying value and the fair value of the asset which is
estimated to be the expected present value of future net cash
flows from proved reserves, utilizing a risk-free rate of
return. Unproved leasehold costs are reviewed periodically and a
loss is recognized to the extent, if any, that the cost of the
property has been impaired.

Reduction in reserve estimates may result in
increased DD&A expense and increased impairment of proved
properties. Additionally, availability under our credit facility
is determined in part by the present value of our oil and gas
reserves based on our bankers assumptions regarding future
prices, production, costs, risk factors and discount rates. If
amounts outstanding under the credit facility exceed the
borrowing base, we would be required to repay such excess over a
period of time, which would affect our financial condition.

Goodwill.We
recorded goodwill in connection with the purchase of Athanor.
Goodwill was attributed to a premium paid for Athanor because
the acquisition added a new core area with increasing growth
opportunities, diversified our asset base with higher margin
natural gas properties and was financed with a component of
equity. SFAS No. 142 requires that goodwill of a
reporting unit be tested for impairment annually at a reporting
unit level. The reporting unit used to evaluate and measure
goodwill for impairment is determined primarily from the manner
in which the business is managed. A reporting unit is an
operating segment or a component which is one level below an
operating segment. A component is a reporting unit if the
component constitutes a business for which discrete financial
information is available and segment management regularly
reviews the operating results of that component. However, two or
more components of an operating segment shall be aggregated and
deemed a single reporting unit if the components have similar
economic characteristics. An operating segment is deemed to be a
reporting unit if all of its components are economically similar.

We have identified four operating segments,
Onshore California, Offshore California, West Texas and Congo.
Components within these operating segments are oil and gas
producing fields. We have determined that the oil and gas
producing fields do not constitute individual businesses as they
share exploration and production field personnel within their
geographic area. Additionally, we believe that the components
within each of our operating segments, the oil and gas producing
fields, are economically similar as (1) the nature of the
products and services, (2) the nature of the production
process, (3) the type of class of customer for the products
and services, (4) the methods used to distribute their
products or provide their services and (5) the nature of
the regulatory environment are similar. As a result, the
goodwill has been assigned to the West Texas operating segment,
which we consider to be a reporting unit. If the company were to
reorganize or revise its manner of managing the assets, the
reporting unit could change, and if the reporting unit were
determined to be at a lower level, recognition of goodwill
impairment may result that did not occur with the reporting unit
at a higher level.

The fair value of each reporting unit that has
goodwill is determined and compared to the carrying amount of
the reporting unit. We determined the fair value of the
reporting unit by comparing it to recent sales prices of similar
oil and gas reserves. The selection of a valuation methodology
and inputs to determine the fair value of the reporting unit
require judgment, since we rely on oil and gas reserve reports
are subject to changes as disclosed under property, plant and
equipment. Changes to the valuation method, failure to replace
oil and gas reserves at the same or better rate than they are
produced, or decline in sales prices of oil and gas producing
assets, could result in the impairment of goodwill. We performed
our goodwill impairment test in the fourth quarter, which
resulted in no impairment. We would also perform testing at
interim dates upon the occurrence of significant events
including potential impairment; a significant adverse change in
legal factors or business climate; adverse action or assessment
by a regulator; a more-likely-than-not expectation that a
reporting unit will be sold; significant adverse trends in
current and future oil and gas prices; nationalization of any of
the Companys oil and gas properties; or, significant
increases in a reporting units carrying value relative to
its fair value.

Asset Retirement Obligations.The computation of our asset
retirement obligations was prepared in accordance with
SFAS No. 143, Accounting for Asset Retirement
Obligations, which requires us to record the

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fair value of liabilities for retirement
obligations of long-lived assets. Our asset retirement
obligations arise from the requirement that we must pay our
share to plug and abandon our oil and gas wells and offshore
platforms, and facilities.


Our computation of asset retirement obligations
requires us to make assumptions and judgments concerning whether
we have a legal obligation, the settlement amount, timing of the
settlement, inflation factors, credit adjusted discount rate and
changes in the legal, regulatory, environmental and political
environments. Estimating the future cost of asset retirement is
difficult due to the long time period over which the costs will
be incurred and the rapid changes in environmental law and
technologies available for the removal of assets. We estimated
our liability based on the best information available to us at
this time. Revisions to the liability could occur due to changes
in the timing and actual plugging and abandonment costs.

Derivative Financial Instruments and Price
Risk Management Activities.We use
price risk management activities to manage non-trading market
risks. We use derivative financial instruments such as swaps,
collars and put options to hedge the impact of market price risk
exposures on our crude oil and natural gas production, natural
gas purchases and to mitigate our exposure to interest rate
risk. We account for our derivatives under
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, and have designated derivative
instruments that qualify for hedge accounting as cash flow
hedges for commodity related contracts and fair value hedges for
interest rate contracts. Derivatives that do not qualify for
hedge accounting are carried on the balance sheet at fair value,
and changes in fair value are recognized in earnings.

The estimation of fair values for our hedging
derivatives requires judgment. We estimate the fair values of
our derivatives on a monthly basis using market based quotes.
The market based quotes are compared to the prices fixed by the
hedge agreements, and resulting estimated future cash inflows
(outflows) over the lives of the hedges are discounted
using our current borrowing rates under our revolving credit
facility. These pricing and discounting variables are sensitive
to market volatility as well as changes in future price
forecasts, regional price differentials and interest rates.
Currently, all of our derivative instruments are hedges of the
price of crude oil and natural gas production and interest
rates. We are not involved in any derivative trading activities.

SFAS No. 133 is complex and subject to
interpretation in its application. In 1998, the FASB established
the Derivative Implementation Group task force to consider and
publish interpretations of issues arising from the
implementation of SFAS No. 133. As additional issues
are reviewed, it is possible that interpretations could affect
our method of accounting for derivatives, which could affect our
results of operations and financial condition.

Income Taxes.Currently payable income taxes
represent the liability related to our income tax return for the
current year. Deferred income taxes, accounted for under the
asset and liability method of accounting for income taxes, are
recognized for the tax consequences of temporary differences by
applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts
and the tax basis of existing assets and liabilities. Our
computation of deferred tax assets or liabilities includes
determining whether the differences in the financial statement
carrying amount and tax basis are permanent or temporary, the
timing of the reversal of temporary differences and the
statutory tax rate to be used. Changes in current tax laws and
applicable statutory tax rates could affect the valuation of
deferred tax assets and liabilities, impacting the income tax
provisions. The effect on deferred taxes of a change in tax
rates is recognized in income in the period the change occurs.
In late 2003, we became a current taxpayer in Congo.

We periodically assess, by tax jurisdiction, the
ability to realize recorded deferred tax assets based on our
assessment of future earnings outlook. Significant declines in
taxable income could materially impact the realizable value of
deferred tax assets.

New Accounting Pronouncements

See Item 1, Financial Statements,
Note 2, which is incorporated herein by reference.

Contingencies and Other Matters

See Item 1, Financial Statements
Note 13, which is incorporated herein by reference.

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RISK FACTORS AND CAUTIONARY STATEMENT FOR
PURPOSES OF THE SAFE HARBOR

PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995


This report contains or incorporates by reference
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
document, including without limitation, statements in
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations regarding our
financial position, estimated quantities and net present values
of reserves, business strategy, plans and objectives of our
management for future operations and covenant compliance, are
forward looking statements. We can give no assurances that the
assumptions upon which such forward-looking statements are based
will prove to be correct. Important factors that could cause
actual results to differ materially from our expectations are
included throughout this document. The Cautionary Statements
expressly qualify all subsequent written and oral
forward-looking statements attributable to us or persons acting
on our behalf.

Volatility of Oil and Gas Prices

Prices for oil and gas are subject to large
fluctuations in response to relatively minor changes in the
supply of and demand for oil and gas, market uncertainty and a
variety of additional factors beyond our control. These factors
include but are not limited to weather conditions in the United
States, the condition of the United States economy, the actions
of the Organization of Petroleum Exporting Countries
(OPEC), governmental regulation, political stability
in the Middle East and elsewhere, the foreign supply of oil and
gas, the price of foreign oil imports and the availability of
alternate fuel sources and transportation interruption. Any
substantial and extended decline in the price of oil or gas
would have an adverse effect on the carrying value of our proved
reserves, borrowing capacity, our ability to obtain additional
capital, and our revenues, profitability and cash flows from
operations.

Volatile oil and gas prices make it difficult to
estimate the value of producing properties for acquisition and
divestiture and often cause disruption in the market for oil and
gas producing properties, as buyers and sellers have difficulty
agreeing on such value. Price volatility also makes it difficult
to budget for and project the return on acquisitions and
development and exploitation projects.

Pricing of Heavy Oil Production

A portion of our production is California heavy
oil. The market price for California heavy oil differs
substantially from the established market indices for oil and
gas, principally due to the higher transportation and refining
costs associated with heavy oil. As a result, the price received
for heavy oil is generally lower than the price for medium and
light oil, and the production costs associated with heavy oil
are relatively higher than for lighter grades. The margin (sales
price minus production costs) on heavy oil sales is generally
less than that of lighter oil, and the effect of material price
decreases will more adversely affect the profitability of heavy
oil production compared with lighter grades of oil. (See
Risk Management and Hedging Policy below for
discussion of our crude oil sales contract which expires in
2013).

Reserve Replacement Risks

Our future performance depends upon the ability
to find, develop and acquire additional oil and gas reserves
that are economically recoverable. Without successful
exploration, exploitation or acquisition activities, our
reserves and revenues will decline. No assurances can be given
that we will be able to find and develop or acquire additional
reserves at an acceptable cost.

The successful acquisition and development of oil
and gas properties requires an assessment of recoverable
reserves, future oil and gas prices and operating costs,
potential environmental and other liabilities and other factors.
Such assessments are necessarily inexact and their accuracy
inherently uncertain. In addition, no assurances can be given
that our exploitation and development activities will result in
any increase in reserves. Our operations may be curtailed,
delayed or canceled as a result of lack of adequate capital and
other factors, such as title problems, weather, compliance with
governmental regulations or price controls,

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mechanical difficulties or shortages or delays in
the delivery of equipment. In addition, the costs of
exploitation and development may materially exceed initial
estimates.


Substantial Capital Requirements

We make, and will continue to make, substantial
capital expenditures for the exploitation, exploration,
acquisition and production of oil and gas reserves.
Historically, these expenditures were financed with cash
generated by operations, proceeds from bank borrowings and the
proceeds of debt and equity issuances. We believe that we will
have sufficient cash provided by operating activities and
borrowings under our bank credit facility to fund planned
capital expenditures. If revenues or our borrowing base decrease
as a result of lower oil and gas prices, operating difficulties
or declines in reserves, we may have limited ability to expend
the capital necessary to undertake or complete future drilling
programs. There can be no assurance that additional debt or
equity financing or cash generated by operations will be
available to meet these requirements.

Uncertainty of Estimates of Reserves and
Future Net Cash Flows

Estimates of economically recoverable oil and gas
reserves and of future net cash flows are based upon a number of
variable factors and assumptions, all of which are to some
degree speculative and may vary considerably from actual
results. Therefore, actual production, revenues, taxes, and
development and operating expenditures may not occur as
estimated. Future results of operations will depend upon our
ability to develop, produce and sell our oil and gas reserves.
The reserve data included herein are estimates only and are
subject to many uncertainties. Actual quantities of oil and gas
may differ considerably from the amounts set forth herein. In
addition, different reserve engineers may make different
estimates of reserve quantities and cash flows based upon the
same available data.

Operating Risks

Our operations are subject to risks inherent in
the oil and gas industry, such as blowouts, cratering,
explosions, uncontrollable flows of oil, gas or well fluids,
fires, pollution, earthquakes and other environmental risks.
These risks could result in substantial losses due to injury and
loss of life, severe damage to and destruction of property and
equipment, pollution and other environmental damage and
suspension of operations. Our offshore operations are subject to
a variety of operating risks peculiar to the marine environment,
such as hurricanes or other adverse weather conditions, to more
extensive governmental regulation, including regulations that
may, in certain circumstances, impose strict liability for
pollution damage, and to interruption or termination of
operations by governmental authorities based on environmental or
other considerations. Our operations could result in liability
for personal injuries, property damage, oil spills, discharge of
hazardous materials, remediation and clean-up costs and other
environmental damages. We could be liable for environmental
damages caused by previous property owners. As a result,
substantial liabilities to third parties or governmental
entities may be incurred, the payment of which could have a
material adverse effect on our financial condition and results
of operations. We maintain insurance coverage for our
operations, including limited coverage for sudden environmental
damages and for existing contamination, but do not believe that
insurance coverage for environmental damages that occur over
time or insurance coverage for the full potential liability that
could be caused by sudden environmental damages is available at
a reasonable cost, and we may be subject to liability or may
lose substantial portions of our properties in the event of
certain environmental damages.

Foreign Investments

Our foreign investments involve risks typically
associated with investments in emerging markets such as
uncertain political, economic, legal and tax environments and
expropriation and nationalization of assets. We attempt to
conduct our business and financial affairs so as to protect
against political and economic risks applicable to operations in
the various countries where we operate, but there can be no
assurance that we will be successful in protecting against such
risks.

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Our international assets and operations are
subject to various political, economic and other uncertainties,
including, among other things, the risks of war, expropriation,
nationalization, renegotiation or nullification of existing
contracts, taxation policies, foreign exchange restrictions,
changing political conditions, international monetary
fluctuations, currency controls and foreign governmental
regulations that favor or require the awarding of drilling
contracts to local contractors or require foreign contractors to
employ citizens of, or purchase supplies from, a particular
jurisdiction. In addition, if a dispute arises with foreign
operations, we may be subject to the exclusive jurisdiction of
foreign courts or may not be successful in subjecting foreign
persons, especially foreign oil ministries and national oil
companies, to the jurisdiction of the United States.

Our private ownership of oil and gas reserves
under oil and gas leases in the United States differs distinctly
from our ownership of foreign oil and gas properties. In the
foreign countries in which we do business, the state generally
retains ownership of the minerals and consequently retains
control of (and in many cases, participates in) the exploration
and production of hydrocarbon reserves. Accordingly, operations
outside the United States, and estimates of reserves
attributable to properties located outside the United States,
may be materially affected by host governments through royalty
payments, export taxes and regulations, surcharges, value added
taxes, production bonuses and other charges.

Risk Management and Hedging Policy

Our risk management policy is based on the view
that oil prices revert to a mean price over the long term. To
the extent that future markets over a forward 18 to
24 month period are significantly higher than long term
norms, we will hedge production volumes up to certain maximums
set forth in our oil hedging policy approved by our Board in
March 2002 and modified in September 2003. Maximum hedged
volumes increase as the price of oil increases. Variations from
this policy require Board approval. The risk management policy
states that hedging activity that is speculative or otherwise
unrelated to our normal business activities is considered
inappropriate. We recognize the risks inherent in price
management. In order to minimize such risk, we have instituted a
set of controls addressing approval authority, trading limits
and other control procedures. All hedging activity is the
responsibility of our Senior Vice President of Planning and
Asset Management. In addition, Internal Audit, which
independently reports to the Audit Committee, reviews our risk
management activity.

We reduce our exposure to price volatility by
hedging our production through swaps, options and other
commodity derivative instruments. In a typical swap transaction,
we will have the right to receive from the counterparty to the
hedge the excess of the fixed price specified in the hedge
contract and a floating price based on a market index,
multiplied by the quantity hedged. If the floating price exceeds
the fixed price, we are required to pay the counterparty the
difference. We would be required to pay the counterparty the
difference between such prices regardless of whether our
production was sufficient to cover the quantities specified in
the hedge. Since there is not an established pricing index for
hedges of California heavy crude oil production, and the cash
market for heavy oil production in California tends to vary
widely from index prices typically used in oil hedges, we have
entered into a physical sales contract to tie our California
production to a traded NYMEX index. As such, in February 2000,
we entered into a 15-year contract, effective January 1,
2000, to sell substantially all of our current and future
California crude oil production to ConocoPhillips Corporation.
The contract provides pricing based on a fixed percentage of the
NYMEX crude oil price for each type of crude oil that we produce
in California. Consequently, the actual price received by the
Company as a percentage of NYMEX will vary with our production
mix. Effective January 1, 2004, the pricing was increased
and based on our current production mix, the price we receive
for our California oil production is expected to average
approximately 82% of WTI for 2004. While the contract does not
reduce our exposure to price volatility, it does effectively
eliminate the basis differential risk between the NYMEX price
and the field price of our California oil production, thereby
facilitating the ability to effectively hedge our realized
prices.

Insurance

The ability to secure certain insurance coverages
at prices that we consider reasonable may be impacted and other
coverages or endorsements may not be made available. No
assurance can be given that we will be able to duplicate our
current insurance package when our policies come up for renewal.

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Our Pending Merger with Plains

Our pending merger with Plains may not be
consummated. The merger agreement requires, among other things,
adoption of the merger agreement by our stockholders and
approval by Plainss stockholders of the issuance of shares
of Plains common stock to our stockholders pursuant to the
merger agreement. The merger agreement also requires termination
or expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.

Even if the merger is consummated, our
stockholders may not realize the anticipated benefits expected
to result from the combination. To be successful following the
merger, management of the combined company will need to combine
and integrate our operations and the operations of Plains into
one company. Because of the size, complexity and asset base of
each company, integration will be a difficult process that will
require substantial management attention that could detract
attention from the day-to-day business of the combined company.
If we and Plains cannot be integrated successfully, some of the
expected benefits of the merger, including expected cost
savings, may not be realized. Moreover, any difficulties
associated with the transition and integration process could
have an adverse effect on the revenue, level of expenses and
operating results of the combined company. In addition, the
combined company may not realize the accretion to various
financial measurements that we expect to result from the merger.
Finally, the combined companys debt level is expected to
be significant and will be higher than our debt level on a
stand-alone basis.

Competition/ Markets for Production

We operate in the highly competitive areas of oil
and gas exploration, exploitation, development and production.
The availability of funds and information relating to a
property, the minimum projected return on investment, the
availability of alternate fuel sources and the intermediate
transportation of oil and gas are factors which affect our
ability to compete in the marketplace. Our competitors include
major integrated oil companies and a substantial number of
independent energy companies, many of which possess greater
financial and other resources than we do.

Our heavy crude oil production in California
requires special processing treatment available only from a
limited number of refineries. Substantial damage to such a
refinery or closures or reductions in capacity due to financial
or other factors could adversely affect the market for our heavy
crude oil production.

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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    about Market Risk

We are exposed to market risk, including adverse
changes in commodity prices and interest rates.

Commodity Price Risk.We produce and sell crude oil, natural
gas and natural gas liquids, therefore our operating results can
be significantly affected by fluctuations in commodity prices
caused by changing market forces. We reduce our exposure to
price volatility by hedging our production through swaps, put
options, collars and other commodity derivative instruments. In
a typical swap transaction, if the floating price is less than
the fixed price, we will have the right to receive from the
counterparty to the hedge the excess of the fixed price
specified in the hedge contract and a floating price based on a
market index, multiplied by the quantity hedged. If the floating
price exceeds the fixed price, we are required to pay the
counterparty the difference. In a typical put option contract,
we purchase the right to receive from the counterparty the
difference, if any, between a fixed price specified in the
option less a floating market price. If the floating price is
above the fixed price, we are not entitled to a payment. A
collar contract works similarly as a put; however, we are
required to pay the difference between the floating price and
ceiling strike price of the collar if the floating price exceeds
the ceiling price. Quantities covered by crude hedges are based
on West Texas Intermediate (WTI) barrels. Prices
received for our production are expected to average 82% of
WTI, therefore, each WTI barrel effectively hedges 1.22
barrels of our production. We use hedge accounting for these
instruments, and settlements of gains or losses on these
contracts are reported as a component of oil and gas revenues
and operating cash flows in the period realized. These
agreements expose us to counterparty credit risk to the extent
that the counterparty is unable to meet their settlement
commitments to us.

At December 31, 2003, we had entered into
the following cash flow hedges:

|                    |      |           |  |             |        |       |  |           |       |         |  |       |     |  |  |  |        |  |  |   |      |  |  |  |              | 
|------------------- | ---- | --------- |  | ----------- | ------ | ----- |  | --------- | ----- | ------- |  | ----- | --- |  |  |  | ------ |  |  | - | ---- |  |  |  | ------------ | 
|                    |      |           |  |            
|                    |      | Crude Oil |  | Natural Gas
|                    |      |           |  |            
|                    |      | Bbls/ day |  | $/Bbl       |        | Index |  | MMbtu/day |       | $/MMbtu |  | Index
|                    |      |           |  |             |        |       |  |           |       |         |  |      
|Swaps for Sales     |      |           |  |             |        |       |  |           |       |         |  |       |     |  |  |  |        |  |  |   |      |  |  | 
|                    | 2004 |           |  |             |        |       |  |           |       |         |  |       |     |  |  |  |        |  |  |   |      |  |  |  |             
|                    |      | 1st Qtr   |  |             | 19,800 |       |  | $         | 25.71 |         |  |       | WTI |  |  |  | 16,500 |  |  | $ | 4.93 |  |  |  | Waha & Socal | 
|                    |      | 2nd Qtr   |  |             | 19,500 |       |  |           | 25.71 |         |  |       | WTI |  |  |  | 14,500 |  |  |   | 4.65 |  |  |  | Waha & Socal | 
|                    |      | 3rd Qtr   |  |             | 19,800 |       |  |           | 25.71 |         |  |       | WTI |  |  |  | 10,500 |  |  |   | 4.50 |  |  |  | Waha & Socal | 
|                    |      | 4th Qtr   |  |             | 21,000 |       |  |           | 25.98 |         |  |       | WTI |  |  |  | 14,500 |  |  |   | 4.64 |  |  |  | Waha & Socal | 
|                    | 2005 |           |  |             |        |       |  |           |       |         |  |       |     |  |  |  |        |  |  |   |      |  |  |  |             
|                    |      | 1st Qtr   |  |             | 17,500 |       |  |           | 24.88 |         |  |       | WTI |  |  |  | 13,000 |  |  |   | 4.75 |  |  |  | Waha & Socal | 
|                    |      | 2nd Qtr   |  |             | 14,500 |       |  |           | 24.67 |         |  |       | WTI |  |  |  | 9,500  |  |  |   | 4.66 |  |  |  | Waha         | 
|                    |      | 3rd Qtr   |  |             | 4,500  |       |  |           | 22.14 |         |  |       | WTI |  |  |  | 9,500  |  |  |   | 4.40 |  |  |  | Waha         | 
|                    |      | 4th Qtr   |  |             | 4,500  |       |  |           | 22.14 |         |  |       | WTI |  |  |  | 9,500  |  |  |   | 4.40 |  |  |  | Waha         | 
|Swaps for Purchases |      |           |  |             |        |       |  |           |       |         |  |       |     |  |  |  |        |  |  |   |      |  |  | 
|                    |      | 2004      |  |             |        |       |  |           |       |         |  |       |     |  |  |  | 8,000  |  |  |   | 3.91 |  |  |  | Socal        | 
|                    |      | 2005      |  |             |        |       |  |           |       |         |  |       |     |  |  |  | 8,000  |  |  |   | 3.85 |  |  |  | Socal        | 

At December 31, 2003, the fair market value
of these hedge positions was a loss of $40.5 million. A 10%
increase in the underlying commodity prices would increase this
loss by $33.1 million.

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Derivative
Instruments Not Designated as Hedges



| |                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In August 2003, we entered into three-way collars
    that are not designated as hedging instruments and are
    marked-to-market with changes in fair value recognized currently
    as a derivative gain/loss.

|                     |      |             |  |       |       |                        |  |  |     |  |  |   |                       | 
|-------------------- | ---- | ----------- |  | ----- | ----- | ---------------------- |  |  | --- |  |  | - | --------------------- | 
|                     |      | Bbls/day    |  | Index |       | Weighted Average Price
|                     |      |             |  |       |       |                       
|Three-Way Collars(1) |      |             |  |       |       |                        |  |  |     |  |  |  
|                     | 2004 |             |  |       |       |                        |  |  |     |  |  |   |                      
|                     |      | (Jan - Dec) |  |       | 8,000 |                        |  |  | WTI |  |  | $ | 19.28  24.00  31.00 | 



---



|    |                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | A Three-Way Collar combines a sold
    put, a purchased put and a sold call. The purchased put and sold
    put establish a floating minimum price and the sold call
    establishes a maximum price we will receive for the volumes
    under contract.

In December 2001, Enron Corp. (Enron)
and certain of its affiliates filed voluntary petitions for
reorganization under Chapter 11 of the United States
Bankruptcy Code. Once a deterioration in creditworthiness
creates uncertainty as to whether the future cash flows from the
hedging instrument will be highly effective in offsetting the
hedged risk, the derivative instrument is no longer considered
highly effective and no longer qualifies for hedge accounting
treatment. At such time, the fair value of the derivative asset
or liability is adjusted to its new fair value, with the change
in value being charged to current earnings.

We entered into call spreads in 2001 and 2000
with the anticipation of using the proceeds to offset the Unocal
Contingent payment. (See Note 13.) Subsequent to entering
into the call spreads, the market fell and as a result,
offsetting call spreads were purchased to economically nullify
the trade. All of our existing call spreads had been offset
through the purchase of a mirror spread, however, the call
spread with Enron was cancelled. (See above discussion). The
remaining mirror call spread is not designated as a hedging
instrument and is marked-to-market with changes in fair value
recognized currently as derivative gain/loss. At
December 31, 2003, the call spread matured and we
subsequently paid $4.6 million in settlement of the
obligation.

Subsequent to December 31, 2003, we entered
into the following cash flow hedges utilizing swap agreements:

|                 |      |           |  |                   |        |  |  |   |               | 
|---------------- | ---- | --------- |  | ----------------- | ------ |  |  | - | ------------- | 
|                 |      | Volume    |  |                  
|Crude Oil Hedges |      | MBbls/day |  | WTI Price ($Bbl.)
|                 |      |           |  |                  
|Collars          |      |           |  |                   |        |  |  |  
|                 | 2005 |           |  |                   |        |  |  |   |              
|                 |      | 1st Qtr.  |  |                   | 4,300  |  |  | $ | 31.75  27.00 | 
|                 |      | 2nd Qtr.  |  |                   | 6,800  |  |  |   | 30.40  27.00 | 
|                 |      | 3rd Qtr.  |  |                   | 14,400 |  |  |   | 30.03  26.00 | 
|                 |      | 4th Qtr.  |  |                   | 14,000 |  |  |   | 29.33  26.00 | 

Interest Rate Risk.We may enter into financial
instruments such as interest rate swaps to manage the impact of
changes in interest rates. Our exposure to changes in interest
rates results primarily from our long-term debt with both fixed
and floating interest rates.

In late December 2001 and early 2002, we entered
into three interest rate swap agreements with notional amounts
totaling $200.0 million to hedge the fair value of our
9 1/2% Notes due 2008 and our 9 3/8% Notes
due 2010. These swaps were designated as fair value hedges and
as interest rates fluctuated, the change in value of these
instruments was reflected as an increase or decrease of
long-term debt with a corresponding increase in long-term assets
or liabilities.

In late August and early September 2002, we
terminated our swap transactions relating to these Notes. As a
result of these terminations, we received accrued interest of
$2.2 million and the present value of the swap option of
$9.6 million on our 9 3/8% Notes and
$0.5 million in accrued interest and the present value of
the swap option of $2.5 million on our
9 1/2% Notes. The remaining gain of $9.6 million
on our 9 3/8% Notes and $2.5 million on our
9 1/2% Notes continues to be reflected as an increase
of long-term debt and is being

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amortized as a reduction to interest expense over
the life of the Notes. During the twelve months ended
December 31, 2003, we had amortized $0.9 million and
$0.4 million, respectively.


Following the termination of the three interest
rate swaps reference above, in late August and early November
2002, we entered into two new interest rate swap agreements with
notional amounts totaling $100.0 million, to hedge a
portion of the fair value of our 9 3/8% Notes due
2010. These swaps were also designated and accounted for as fair
value hedges.

In May 2003, we terminated our swap transactions
relating to these Notes. As a result of these terminations, we
received accrued interest of $0.4 million and the present
value of the swap option of $4.1 million. The remaining
gain of $4.1 million continues to be reflected as an
increase of long-term debt and is being amortized as a reduction
to interest expense over the life of the Notes. Through
December 31, 2003, we had amortized $0.2 million.

In late October 2003, we entered into an interest
rate swap agreement with a notional amount of
$100.0 million, to hedge a portion of the fair value of our
9 3/8% Notes due 2010. This swap is designated as a
fair value hedge and is reflected as a decrease in long-term
debt of $0.2 million as of December 31, 2003, with a
corresponding increase in long-term liabilities. Under the terms
of the agreement, the counterparty pays us a weighted average
fixed annual rate of 9 3/8% on total notional amount of
$100.0 million, and we pay the counterparty a variable
annual rate equal to the six-month LIBOR rate plus a weighted
average rate of 5.02%.

The fair market value of the aggregate of all our
hedging instruments was a loss of approximately $74 million
at February 27, 2004.

The following table presents principal amounts
and the related average interest rates (exclusive of fair value
hedges) by year of maturity for our debt obligations at
December 31, 2003:

|               |                       |                                    |   |      |  |      |   |        |   |            |  |       |  |            |  |   |  |  |   |         |   |  |   |         |   |  |   |         | 
|-------------- | --------------------- | ---------------------------------- | - | ---- |  | ---- | - | ------ | - | ---------- |  | ----- |  | ---------- |  | - |  |  | - | ------- | - |  | - | ------- | - |  | - | ------- | 
|               |                       | 2004                               |   | 2005 |  | 2006 |   | 2007   |   | Thereafter |  | Total |  | Fair Value
|               |                       |                                    |   |      |  |      |   |        |   |            |  |       |  |           
|               |                       |                                   
|               |                       | (In thousands, except percentages)
|Long-term debt |                       |                                    |   |      |  |      |   |        |   |            |  |       |  |            |  |   |  |  |   |         |   |  |   |         |   |  |   |        
|               | Variable rate         |                                    | $ |     |  |      | $ | 15,000 |   |            |  |      |  |            |  |  |  |  |   |        |   |  | $ | 15,000  |   |  | $ | 15,000  | 
|               | Average interest rate |                                    |   |     |  |      |   | 2.89   | % |            |  |      |  |            |  |  |  |  |   |        |   |  |   | 2.89    | % |  |   |        | 
|               | Fixed rate            |                                    |   |     |  |      |   |       |   |            |  |      |  |            |  |  |  |  | $ | 340,000 |   |  | $ | 340,000 |   |  | $ | 338,894 | 
|               | Average interest rate |                                    |   |     |  |      |   |       |   |            |  |      |  |            |  |  |  |  |   | 8.18    | % |  |   | 8.18    | % |  |   |        | 

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##### Table of Contents








|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data




INDEX TO FINANCIAL STATEMENTS AND
SCHEDULES

|                                                                                                             |  |      |    | 
|------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                                             |  | Page
|                                                                                                             |  |     
|Independent Auditors Report                                                                                 |  |      | 36 | 
|Financial Statements:                                                                                        |  |      |    | 
|Consolidated Statements of Income for the Years
    Ended December 31, 2003, 2002 and 2001                   |  |      | 37 | 
|Consolidated Balance Sheets as of
    December 31, 2003 and 2002                                             |  |      | 38 | 
|Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2003, 2002 and 2001               |  |      | 40 | 
|Consolidated Statements of Stockholders
    Equity for the Years Ended December 31, 2003, 2002
    and 2001 |  |      | 41 | 
|Consolidated Statements of Comprehensive Income
    for the Years Ended December 31, 2003, 2002 and 2001     |  |      | 42 | 
|Notes to the Consolidated Financial Statements                                                               |  |      | 43 | 
|Supplemental Schedule: Independent Auditors
    Report on Consolidated Financial Statement Schedule         |  |      | 77 | 
|Schedule II  Valuation and
    Qualifying Accounts                                                          |  |      | 78 | 

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##### Table of Contents



INDEPENDENT AUDITORS REPORT

The Board of Directors and Stockholders

Nuevo Energy Company:


We have audited the accompanying consolidated
balance sheets of Nuevo Energy Company and subsidiaries as of
December 31, 2003 and 2002, and the related consolidated
statements of income, stockholders equity, cash flows and
comprehensive income for each of the years in the three-year
period ended December 31, 2003. These consolidated
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Nuevo Energy Company and
subsidiaries as of December 31, 2003 and 2002, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2003 in
conformity with accounting principles generally accepted in the
United States of America.

As discussed in note 2, effective
January 1, 2001, the Company changed its method of
accounting for derivative instruments. As discussed in
note 3, effective January 1, 2003, the Company changed
its method of accounting for asset retirement obligations. As
discussed in note 2, effective December 31, 2003, the
Company changed its method of accounting for certain convertible
subordinated debentures.



| |         
| | --------
| | KPMG LLP

Houston, Texas

March 5, 2004


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##### Table of Contents



NUEVO ENERGY COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share
data)


|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |   |         |  
|---------------------------------------------------------------------------------------------------- | ------- | ------------------------------------------------------------------------------------ | ------- | ---- | ------- | ---- | ------- | - | ------- | - | -------- | - | ------- | -
|                                                                                                     |         |                                                                                     
|                                                                                                     |         | Year Ended December 31,                                                             
|                                                                                                     |         |                                                                                     
|                                                                                                     |         | 2003                                                                                 |         | 2002 |         | 2001
|                                                                                                     |         |                                                                                      |         |      |         |     
|Revenues                                                                                             |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     |         | Crude oil and liquids                                                                |         | $    | 313,885 |      |         | $ | 276,494 |   |          | $ | 238,127 |  
|                                                                                                     |         | Natural gas                                                                          |         |      | 56,090  |      |         |   | 31,337  |   |          |   | 72,679  |  
|                                                                                                     |         | Other                                                                                |         |      | 1,362   |      |         |   | 4,070   |   |          |   | 273     |  
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     |         |                                                                                      | 371,337 |      |         |      | 311,901 |   |         |   | 311,079  |  
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|Costs and Expenses                                                                                   |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     |         | Lease operating expenses                                                             |         |      | 159,832 |      |         |   | 132,954 |   |          |   | 160,086 |  
|                                                                                                     |         | Exploration costs                                                                    |         |      | 2,115   |      |         |   | 4,541   |   |          |   | 22,058  |  
|                                                                                                     |         | Depreciation, depletion, amortization and
    accretion                              |         |      | 70,810  |      |         |   | 73,128  |   |          |   | 70,554  |  
|                                                                                                     |         | Impairment of oil and gas properties                                                 |         |      |        |      |         |   |        |   |          |   | 103,490 |  
|                                                                                                     |         | General and administrative expenses                                                  |         |      | 28,457  |      |         |   | 25,877  |   |          |   | 36,904  |  
|                                                                                                     |         | Restructuring and severance charges                                                  |         |      |        |      |         |   |        |   |          |   | 4,859   |  
|                                                                                                     |         | Loss on assets held for sale                                                         |         |      |        |      |         |   | 1,253   |   |          |   | 3,494   |  
|                                                                                                     |         | Other                                                                                |         |      | 1,256   |      |         |   | 1,930   |   |          |   | 14,928  |  
|                                                                                                     |         | Gain on disposition of properties                                                    |         |      | (5,824  | )    |         |   | (16,588 | ) |          |   | (882    | )
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     |         |                                                                                      | 256,646 |      |         |      | 223,095 |   |         |   | 415,491  |  
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|Operating Income (Loss)                                                                              |         |                                                                                      | 114,691 |      |         |      | 88,806  |   |         |   | (104,412 | )
|                                                                                                     |         | Derivative gain (loss)                                                               |         |      | (5,842  | )    |         |   | (4,746  | ) |          |   | 226     |  
|                                                                                                     |         | Interest income                                                                      |         |      | 342     |      |         |   | 266     |   |          |   | 1,311   |  
|                                                                                                     |         | Interest expense                                                                     |         |      | (29,793 | )    |         |   | (37,943 | ) |          |   | (43,006 | )
|                                                                                                     |         | Loss on early extinguishment of debt                                                 |         |      | (12,578 | )    |         |   |        |   |          |   |        |  
|                                                                                                     |         | Dividends on TECONS                                                                  |         |      | (6,613  | )    |         |   | (6,613  | ) |          |   | (6,613  | )
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|Income (Loss) From Continuing Operations Before
    Income Taxes                                     |         |                                                                                      | 60,207  |      |         |      | 39,770  |   |         |   | (152,494 | )
|Income Tax Expense (Benefit)                                                                         |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     |         | Current                                                                              |         |      | 2,086   |      |         |   | 1,330   |   |          |   |        |  
|                                                                                                     |         | Deferred                                                                             |         |      | 21,032  |      |         |   | 15,361  |   |          |   | (61,123 | )
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     |         |                                                                                      | 23,118  |      |         |      | 16,691  |   |         |   | (61,123  | )
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|Income (Loss) From Continuing Operations                                                             |         |                                                                                      | 37,089  |      |         |      | 23,079  |   |         |   | (91,371  | )
|Income (loss) from discontinued operations,
    including gain/loss on disposal, net of income taxes |         |                                                                                      | 5,894   |      |         |      | (10,804 | ) |         |   | 12,200   |  
|Cumulative effect of a change in accounting
    principle, net of income taxes                       |         |                                                                                      | 8,496   |      |         |      |        |   |         |   |         |  
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|Net Income (Loss)                                                                                    |         | $                                                                                    | 51,479  |      |         | $    | 12,275  |   |         | $ | (79,171  | )
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|Earnings Per Share:                                                                                  |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     | Basic   |                                                                                      |         |      |         |      |         |   |         |   |          |   |        
|                                                                                                     |         | Income (Loss) from continuing operations                                             |         | $    | 1.92    |      |         | $ | 1.31    |   |          | $ | (5.46   | )
|                                                                                                     |         | Income (Loss) from discontinued operations, net
    of income taxes                  |         |      | 0.30    |      |         |   | (0.61   | ) |          |   | 0.73    |  
|                                                                                                     |         | Cumulative effect of a change in accounting
    principle, net of income tax benefit |         |      | 0.44    |      |         |   |        |   |          |   |        |  
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     |         | Net income (loss)                                                                    |         | $    | 2.66    |      |         | $ | 0.70    |   |          | $ | (4.73   | )
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     | Diluted |                                                                                      |         |      |         |      |         |   |         |   |          |   |        
|                                                                                                     |         | Income (Loss) from continuing operations                                             |         | $    | 1.89    |      |         | $ | 1.30    |   |          | $ | (5.46   | )
|                                                                                                     |         | Income (Loss) from discontinued operations, net
    of income taxes                  |         |      | 0.30    |      |         |   | (0.61   | ) |          |   | 0.73    |  
|                                                                                                     |         | Cumulative effect of a change in accounting
    principle, net of income tax benefit |         |      | 0.43    |      |         |   |        |   |          |   |        |  
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     |         | Net income (loss)                                                                    |         | $    | 2.62    |      |         | $ | 0.69    |   |          | $ | (4.73   | )
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|Weighted Average Shares Outstanding:                                                                 |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     |         | Basic                                                                                |         |      | 19,355  |      |         |   | 17,651  |   |          |   | 16,735  |  
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  
|                                                                                                     |         | Diluted                                                                              |         |      | 19,627  |      |         |   | 17,790  |   |          |   | 16,735  |  
|                                                                                                     |         |                                                                                      |         |      |         |      |         |   |         |   |          |  

See accompanying notes.

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NUEVO ENERGY COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


|                                |                                                                            |                                   |              |           |         |         |         |          |         |         | 
|------------------------------- | -------------------------------------------------------------------------- | --------------------------------- | ------------ | --------- | ------- | ------- | ------- | -------- | ------- | ------- | 
|                                |                                                                            |                                  
|                                |                                                                            | December 31,                     
|                                |                                                                            |                                  
|                                |                                                                            | 2003                              |              | 2002     
|                                |                                                                            |                                   |              |          
|ASSETS                         
|Current assets                  |                                                                            |                                   |              |           |         |         |         |         
|                                | Cash and cash equivalents                                                  |                                   | $            | 6,276     |         |         | $       | 5,047    |        
|                                | Accounts receivable, net of allowance of $216 in
    2003 and $626 in 2002 |                                   |              | 39,729    |         |         |         | 40,945   |        
|                                | Inventory                                                                  |                                   |              | 5,741     |         |         |         | 7,326    |        
|                                | Assets held for sale                                                       |                                   |              | 38,290    |         |         |         | 92,738   |        
|                                | Deferred income taxes                                                      |                                   |              | 11,906    |         |         |         | 7,683    |        
|                                | Prepaid expenses and other                                                 |                                   |              | 4,489     |         |         |         | 3,862    |        
|                                |                                                                            |                                   |              |           |         |         |         |         
|                                |                                                                            | Total current assets              |              |           | 106,431 |         |         |          | 157,601 |        
|                                |                                                                            |                                   |              |           |         |         |         |         
|Property and equipment, at cost |                                                                            |                                   |              |           |         |         |         |         
|                                | Land                                                                       |                                   |              | 5,224     |         |         |         | 5,224    |        
|                                | Oil and gas properties (successful efforts method)                         |                                   |              | 1,031,202 |         |         |         | 951,258  |        
|                                | Gas plant and other facilities                                             |                                   |              | 15,126    |         |         |         | 14,303   |        
|                                |                                                                            |                                   |              |           |         |         |         |         
|                                |                                                                            |                                   | 1,051,552    |           |         |         | 970,785 |         
|                                | Accumulated depreciation, depletion and
    amortization                   |                                   |              | (355,311  | )       |         |         | (357,072 | )      
|                                |                                                                            |                                   |              |           |         |         |         |         
|                                |                                                                            | Total property and equipment, net |              |           | 696,241 |         |         |          | 613,713 |        
|                                |                                                                            |                                   |              |           |         |         |         |         
|Deferred income taxes           |                                                                            |                                   | 17,404       |           |         |         | 43,258  |         
|Goodwill                        |                                                                            |                                   | 17,121       |           |         |         | 19,664  |         
|Other assets                    |                                                                            |                                   | 7,779        |           |         |         | 20,935  |         
|                                |                                                                            |                                   |              |           |         |         |         |         
|                                |                                                                            |                                   | Total assets |           | $       | 844,976 |         |          | $       | 855,171 | 
|                                |                                                                            |                                   |              |           |         |         |         |         

See accompanying notes.

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NUEVO ENERGY COMPANY

CONSOLIDATED BALANCE SHEETS 
(Continued)

(In thousands, except share amounts)


|                                                                                                                |                                                                                                                                                                                 |                            |                                            |         |         |         |         |          |         |         | 
|--------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ------- | ------- | ------- | ------- | -------- | ------- | ------- | 
|                                                                                                                |                                                                                                                                                                                 |                           
|                                                                                                                |                                                                                                                                                                                 | December 31,              
|                                                                                                                |                                                                                                                                                                                 |                           
|                                                                                                                |                                                                                                                                                                                 | 2003                       |                                            | 2002   
|                                                                                                                |                                                                                                                                                                                 |                            |                                            |        
|LIABILITIES AND STOCKHOLDERS
    EQUITY                                                                       
|Current liabilities                                                                                             |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|                                                                                                                | Accounts payable                                                                                                                                                                |                            | $                                          | 38,707  |         |         | $       | 34,323   |        
|                                                                                                                | Accrued interest                                                                                                                                                                |                            |                                            | 3,663   |         |         |         | 5,169    |        
|                                                                                                                | Accrued drilling costs                                                                                                                                                          |                            |                                            | 5,568   |         |         |         | 8,035    |        
|                                                                                                                | Accrued lease operating costs                                                                                                                                                   |                            |                                            | 13,558  |         |         |         | 15,598   |        
|                                                                                                                | Price risk management activities                                                                                                                                                |                            |                                            | 35,005  |         |         |         | 20,884   |        
|                                                                                                                | Other accrued liabilities                                                                                                                                                       |                            |                                            | 42,447  |         |         |         | 16,735   |        
|                                                                                                                |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|                                                                                                                |                                                                                                                                                                                 | Total current liabilities  |                                            |         | 138,948 |         |         |          | 100,744 |        
|                                                                                                                |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|Long-Term debt                                                                                                  |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|                                                                                                                | Senior subordinated notes                                                                                                                                                       |                            |                                            | 225,000 |         |         |         | 409,577  |        
|                                                                                                                | Bank credit facility                                                                                                                                                            |                            |                                            | 15,000  |         |         |         | 28,700   |        
|                                                                                                                | Long-term liability to unconsolidated affiliate                                                                                                                                 |                            |                                            | 115,000 |         |         |         |         |        
|                                                                                                                |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|                                                                                                                |                                                                                                                                                                                 | Total debt                 |                                            |         | 355,000 |         |         |          | 438,277 |        
|                                                                                                                | Interest rate swaps  fair value
    adjustment                                                                                                                                 |                            |                                            | (153    | )       |         |         | 2,161    |        
|                                                                                                                | Interest rate swaps  termination gain                                                                                                                                          |                            |                                            | 14,364  |         |         |         | 11,673   |        
|                                                                                                                |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|                                                                                                                |                                                                                                                                                                                 | Long-term debt             |                                            |         | 369,211 |         |         |          | 452,111 |        
|                                                                                                                |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|Asset retirement obligation                                                                                     |                                                                                                                                                                                 |                            | 102,921                                    |         |         |         |        |         
|Price risk management activities                                                                                |                                                                                                                                                                                 |                            | 10,512                                     |         |         |         | 4,198   |         
|Other long-term liabilities                                                                                     |                                                                                                                                                                                 |                            | 1,555                                      |         |         |         | 8,842   |         
|Company-obligated mandatorily redeemable
    convertible preferred securities of Nuevo Financing I
    (TECONS) |                                                                                                                                                                                 |                            |                                           |         |         |         | 115,000 |         
|Commitments and contingencies (Note 13)                                                                         |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|Stockholders equity                                                                                            |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|                                                                                                                | Preferred stock, $1.00 par value,
    10,000,000 shares authorized; 7% Cumulative Convertible
    Preferred Stock, none issued and outstanding                                  |                            |                                            |        |         |         |         |         |        
|                                                                                                                | Common stock, $0.01 par value,
    50,000,000 shares authorized, 23,151,781 and
    23,048,388 shares issued and 19,682,494 and
    19,110,102 shares outstanding, respectively |                            |                                            | 232     |         |         |         | 230      |        
|                                                                                                                | Additional paid-in capital                                                                                                                                                      |                            |                                            | 397,628 |         |         |         | 388,479  |        
|                                                                                                                | Treasury stock, at cost, 3,469,287 and
    3,867,691 shares, respectively                                                                                                       |                            |                                            | (68,048 | )       |         |         | (75,683  | )      
|                                                                                                                | Deferred stock compensation and other                                                                                                                                           |                            |                                            | (6,512  | )       |         |         | (605     | )      
|                                                                                                                | Accumulated other comprehensive income                                                                                                                                          |                            |                                            | (24,614 | )       |         |         | (11,468  | )      
|                                                                                                                | Accumulated deficit                                                                                                                                                             |                            |                                            | (76,857 | )       |         |         | (126,677 | )      
|                                                                                                                |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|                                                                                                                |                                                                                                                                                                                 | Total stockholders equity |                                            |         | 221,829 |         |         |          | 174,276 |        
|                                                                                                                |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         
|                                                                                                                |                                                                                                                                                                                 |                            | Total liabilities and stockholders equity |         | $       | 844,976 |         |          | $       | 855,171 | 
|                                                                                                                |                                                                                                                                                                                 |                            |                                            |         |         |         |         |         

See accompanying notes.

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##### Table of Contents



NUEVO ENERGY COMPANY

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands)


|                                                 |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |          |        |         |          |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | ----------------------- | --------------------------------------------------------- | ------------------------------------------------------- | ----- | ------ | -------- | ------- | ----- | ------- | -------- | -------- | ------ | ------- | -------- | -
|                                                 |                                                                                             |                        
|                                                 |                                                                                             | Year Ended December 31,
|                                                 |                                                                                             |                        
|                                                 |                                                                                             | 2003                    |                                                           | 2002                                                    |       | 2001  
|                                                 |                                                                                             |                         |                                                           |                                                         |       |       
|Cash flows from operating activities             |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|                                                 | Net income (loss)                                                                           |                         | $                                                         | 51,479                                                  |       |        | $        | 12,275  |       |         | $        | (79,171  | )     
|                                                 | Adjustments to reconcile net income (loss) to net
    cash provided by operating activities |                         |                                                           |                                                         |       |        |          |         |       |         |          |          |       
|                                                 |                                                                                             |                         | Depreciation, depletion, amortization and
    accretion   |                                                         |       | 70,810 |          |         |       | 73,128  |          |          |        | 70,554  |         
|                                                 |                                                                                             |                         | Deferred income taxes                                     |                                                         |       | 21,032 |          |         |       | 15,361  |          |          |        | (61,123 | )       
|                                                 |                                                                                             |                         | Dry hole costs                                            |                                                         |       | 271    |          |         |       | 297     |          |          |        | 14,138  |         
|                                                 |                                                                                             |                         | Amortization of debt financing costs                      |                                                         |       | 1,909  |          |         |       | 2,532   |          |          |        | 2,399   |         
|                                                 |                                                                                             |                         | Loss on early extinguishment of debt                      |                                                         |       | 12,578 |          |         |       |        |          |          |        |        |         
|                                                 |                                                                                             |                         | Impairment of oil and gas properties                      |                                                         |       |       |          |         |       |        |          |          |        | 103,490 |         
|                                                 |                                                                                             |                         | Net gain on sales of assets                               |                                                         |       | (5,824 | )        |         |       | (16,588 | )        |          |        | (882    | )       
|                                                 |                                                                                             |                         | Loss on assets held for sale                              |                                                         |       |       |          |         |       | 1,253   |          |          |        | 3,494   |         
|                                                 |                                                                                             |                         | Non-cash effect of discontinued operations                |                                                         |       | 471    |          |         |       | 30,317  |          |          |        | 13,767  |         
|                                                 |                                                                                             |                         | Cumulative effect of a change in accounting
    principle |                                                         |       | (8,496 | )        |         |       |        |          |          |        |        |         
|                                                 |                                                                                             |                         | Other                                                     |                                                         |       | 8,138  |          |         |       | 8,540   |          |          |        | 6,911   |         
|                                                 | Working capital changes, net of non-cash
    transactions                                   |                         |                                                           |                                                         |       |        |          |         |       |         |          |          |       
|                                                 |                                                                                             |                         | Accounts receivable                                       |                                                         |       | 1,780  |          |         |       | 9,341   |          |          |        | 23,043  |         
|                                                 |                                                                                             |                         | Accounts payable                                          |                                                         |       | 7,797  |          |         |       | (6,578  | )        |          |        | 9,876   |         
|                                                 |                                                                                             |                         | Accrued liabilities and other                             |                                                         |       | 3,836  |          |         |       | (7,150  | )        |          |        | (17,602 | )       
|                                                 |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|                                                 |                                                                                             |                         |                                                           | Net cash provided by operating activities               |       |        | 165,781  |         |       |         | 122,728  |          |        |         | 88,894   |  
|                                                 |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|Cash flows from investing activities             |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|                                                 | Additions to oil and gas properties                                                         |                         |                                                           | (61,636                                                 | )     |        |          | (74,472 | )     |         |          | (133,228 | )     
|                                                 | Acquisition of Athanor Resources, Inc.                                                      |                         |                                                           |                                                        |       |        |          | (61,312 | )     |         |          |         |       
|                                                 | Acquisitions of oil and gas properties                                                      |                         |                                                           |                                                        |       |        |          |        |       |         |          | (28,456  | )     
|                                                 | Proceeds from sales of properties                                                           |                         |                                                           | 85,002                                                  |       |        |          | 26,968  |       |         |          | 6,145    |       
|                                                 | Deposit received on real estate sale                                                        |                         |                                                           | 15,931                                                  |       |        |          |        |       |         |          |         |       
|                                                 | Other proceeds                                                                              |                         |                                                           | 1,841                                                   |       |        |          |        |       |         |          |         |       
|                                                 | Additions to other properties                                                               |                         |                                                           | (5,095                                                  | )     |        |          | (5,698  | )     |         |          | (8,554   | )     
|                                                 |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|                                                 |                                                                                             |                         |                                                           | Net cash provided by (used in) investing
    activities |       |        | 36,043   |         |       |         | (114,514 | )        |        |         | (164,093 | )
|                                                 |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|Cash flows from financing activities             |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|                                                 | Net borrowings of credit facility                                                           |                         |                                                           | (13,700                                                 | )     |        |          | (12,800 | )     |         |          | 41,500   |       
|                                                 | Payments of long-term debt                                                                  |                         |                                                           | (184,577                                                | )     |        |          |        |       |         |          | (150     | )     
|                                                 | Premium paid for redemption of notes                                                        |                         |                                                           | (8,692                                                  | )     |        |          |        |       |         |          |         |       
|                                                 | Proceeds from exercise of stock options                                                     |                         |                                                           | 6,374                                                   |       |        |          | 1,229   |       |         |          | 3,694    |       
|                                                 | Purchase of treasury shares                                                                 |                         |                                                           |                                                        |       |        |          |        |       |         |          | (2,085   | )     
|                                                 | Other                                                                                       |                         |                                                           |                                                        |       |        |          | 1,294   |       |         |          | (97      | )     
|                                                 |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|                                                 |                                                                                             |                         |                                                           | Net cash provided by (used in) financing
    activities |       |        | (200,595 | )       |       |         | (10,277  | )        |        |         | 42,862   |  
|                                                 |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|Increase (decrease) in cash and cash equivalents |                                                                                             |                         | 1,229                                                     |                                                         |       |        | (2,063   | )       |       |         | (32,337  | )       
|Cash and cash equivalents                        |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|                                                 |                                                                                             | Beginning of year       |                                                           |                                                         | 5,047 |        |          |         | 7,110 |         |          |          | 39,447 |        
|                                                 |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         
|                                                 |                                                                                             | End of year             |                                                           | $                                                       | 6,276 |        |          | $       | 5,047 |         |          | $        | 7,110  |        
|                                                 |                                                                                             |                         |                                                           |                                                         |       |        |          |         |       |         |          |         

See accompanying notes.

40



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##### Table of Contents



NUEVO ENERGY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

(In thousands)


|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |          |         |  
|-------------------------------------- | --------------------------------------- | ------------------------------------------------------------- |  | ------ | --- | ------ | ------- | -------- | ------- | ------ |  | ------ | ----- | - | ------- | -------- | ------- | - |  | ------ | ---- | - | ------- | -------- | ------- | -
|                                       |                                         |                                                               |  |        |     |       
|                                       |                                         | 2003                                                          |  | 2002   |     | 2001  
|                                       |                                         |                                                               |  |        |     |       
|                                       |                                         | Shares                                                        |  | Amount |     | Shares |         | Amount   |         | Shares |  | Amount
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |       
|Common Stock                           |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, beginning of year              |                                                               |  | 19,110 |     |        | $       | 230      |         |        |  | 16,880 |       |   | $       | 209      |         |   |  | 16,632 |      |   | $       | 206      |        
|                                       | Issuances and purchases of common stock |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |          |        
|                                       |                                         | Acquisition of Athanor Resources,
    Inc.                    |  |        |    |        |         |          |        |        |  |        | 1,970 |   |         |          | 20      |   |  |        |     |   |         |          |        |  
|                                       |                                         | Employee stock compensation and plans                         |  |        | 572 |        |         |          | 2       |        |  |        | 260   |   |         |          | 1       |   |  |        | 376  |   |         |          | 3       |  
|                                       |                                         | Purchase of treasury stock                                    |  |        |    |        |         |          |        |        |  |        |      |   |         |          |        |   |  |        | (128 | ) |         |          |        |  
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, end of year                    |                                                               |  | 19,682 |     |        | $       | 232      |         |        |  | 19,110 |       |   | $       | 230      |         |   |  | 16,880 |      |   | $       | 209      |        
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|Additional Paid-In Capital             |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, beginning of year              |                                                               |  |        |     |        | $       | 388,479  |         |        |  |        |       |   | $       | 366,792  |         |   |  |        |      |   | $       | 361,643  |        
|                                       |                                         | Acquisition of Athanor Resources,
    Inc.                    |  |        |     |        |         |          |        |        |  |        |       |   |         |          | 20,066  |   |  |        |      |   |         |          |        |  
|                                       |                                         | Exercise of stock options                                     |  |        |     |        |         |          | 1,413   |        |  |        |       |   |         |          | 1,785   |   |  |        |      |   |         |          | 4,463   |  
|                                       |                                         | Employee stock compensation and plans                         |  |        |     |        |         |          | 7,736   |        |  |        |       |   |         |          | (164    | ) |  |        |      |   |         |          | 686     |  
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, end of year                    |                                                               |  |        |     |        | $       | 397,628  |         |        |  |        |       |   | $       | 388,479  |         |   |  |        |      |   | $       | 366,792  |        
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|Accumulated Deficit                    |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, beginning of year              |                                                               |  |        |     |        | $       | (126,677 | )       |        |  |        |       |   | $       | (138,952 | )       |   |  |        |      |   | $       | (59,781  | )      
|                                       |                                         | Loss on issue of treasury shares                              |  |        |     |        |         |          | (1,659  | )      |  |        |       |   |         |          |        |   |  |        |      |   |         |          |        |  
|                                       |                                         | Net income (loss)                                             |  |        |     |        |         |          | 51,479  |        |  |        |       |   |         |          | 12,275  |   |  |        |      |   |         |          | (79,171 | )
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, end of year                    |                                                               |  |        |     |        | $       | (76,857  | )       |        |  |        |       |   | $       | (126,677 | )       |   |  |        |      |   | $       | (138,952 | )      
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|Accumulated Other Comprehensive Income |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, beginning of year              |                                                               |  |        |     |        | $       | (11,468  | )       |        |  |        |       |   | $       | 11,534   |         |   |  |        |      |   | $       |         |        
|                                       |                                         | Other comprehensive income                                    |  |        |     |        |         |          | (13,146 | )      |  |        |       |   |         |          | (23,002 | ) |  |        |      |   |         |          | 11,534  |  
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, end of year                    |                                                               |  |        |     |        | $       | (24,614  | )       |        |  |        |       |   | $       | (11,468  | )       |   |  |        |      |   | $       | 11,534   |        
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|Treasury Stock                         |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, beginning of year              |                                                               |  |        |     |        | $       | (75,683  | )       |        |  |        |       |   | $       | (75,855  | )       |   |  |        |      |   | $       | (74,703  | )      
|                                       |                                         | Issuance related to employee stock compensation
    and plans |  |        |     |        |         |          | 7,635   |        |  |        |       |   |         |          | 172     |   |  |        |      |   |         |          | 933     |  
|                                       |                                         | Purchase of treasury stock                                    |  |        |     |        |         |          |        |        |  |        |       |   |         |          |        |   |  |        |      |   |         |          | (2,085  | )
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       |                                         |                                                               |  |        |     | $      | (68,048 | )        |         |        |  |        |       | $ | (75,683 | )        |         |   |  |        |      | $ | (75,855 | )       
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|Deferred Compensation and Other        |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, beginning of year              |                                                               |  |        |     |        | $       | (605     | )       |        |  |        |       |   | $       | (3,821   | )       |   |  |        |      |   | $       | (4,248   | )      
|                                       |                                         | Deferred compensation                                         |  |        |     |        |         |          | (5,466  | )      |  |        |       |   |         |          | 1,422   |   |  |        |      |   |         |          | (300    | )
|                                       |                                         | Stock acquired by benefit trust                               |  |        |     |        |         |          | (441    | )      |  |        |       |   |         |          | (172    | ) |  |        |      |   |         |          | (933    | )
|                                       |                                         | Withdrawal from benefit trust                                 |  |        |     |        |         |          |        |        |  |        |       |   |         |          | 1,966   |   |  |        |      |   |         |          | 1,660   |  
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|                                       | Balance, end of year                    |                                                               |  |        |     |        | $       | (6,512   | )       |        |  |        |       |   | $       | (605     | )       |   |  |        |      |   | $       | (3,821   | )      
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         
|Total Stockholders Equity             |                                         |                                                               |  |        |     | $      | 221,829 |          |         |        |  |        |       | $ | 174,276 |          |         |   |  |        |      | $ | 159,907 |         
|                                       |                                         |                                                               |  |        |     |        |         |          |         |        |  |        |       |   |         |          |         |   |  |        |      |   |         |         

See accompanying notes.

41



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##### Table of Contents



NUEVO ENERGY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME

(In thousands)


|                     |                   |                         |                                                                |                                                                                                                                                            |                            |      |         |         |         |   |         |         |         |   |         |        | 
|-------------------- | ----------------- | ----------------------- | -------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------ | 
|                     |                   |                        
|                     |                   | Year Ended December 31,
|                     |                   |                        
|                     |                   | 2003                    |                                                                | 2002                                                                                                                                                       |                            | 2001
|                     |                   |                         |                                                                |                                                                                                                                                            |                            |     
|Comprehensive Income |                   |                         |                                                                |                                                                                                                                                            |                            |      |         |         |         |   |         |        
|                     | Net income (loss) |                         | $                                                              | 51,479                                                                                                                                                     |                            |      | $       | 12,275  |         |   | $       | (79,171 | )      
|                     |                   |                         | Unrealized gains (losses) from cash flow hedging
    activity: |                                                                                                                                                            |                            |      |         |         |         |   |         |         |         |   |        
|                     |                   |                         |                                                                | Cumulative effect transition adjustment (net of
    income tax benefit of $10,784 in 2001)                                                                 |                            |      |        |         |         |   |        |         |         |   | (15,976 | )     
|                     |                   |                         |                                                                | Reclassification adjustment of settled contracts
    (net of income taxes of $18,390 in 2003, $3,262 in 2002 and
    $19,202 in 2001)                      |                            |      | 28,523  |         |         |   | 4,753   |         |         |   | 28,446  |       
|                     |                   |                         |                                                                | Changes in fair value of derivative instruments
    during the period (net of income tax benefit of $26,866 in 2003,
    $19,049 in 2002 and $632 in 2001) |                            |      | (41,669 | )       |         |   | (27,755 | )       |         |   | (936    | )     
|                     |                   |                         |                                                                |                                                                                                                                                            |                            |      |         |         |         |   |         |        
|                     |                   |                         |                                                                |                                                                                                                                                            | Other comprehensive income |      |         | (13,146 | )       |   |         | (23,002 | )       |   |         | 11,534 | 
|                     |                   |                         |                                                                |                                                                                                                                                            |                            |      |         |         |         |   |         |        
|                     |                   | Comprehensive income    |                                                                | $                                                                                                                                                          | 38,333                     |      |         | $       | (10,727 | ) |         | $       | (67,637 | )
|                     |                   |                         |                                                                |                                                                                                                                                            |                            |      |         |         |         |   |         |        

See accompanying notes.

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##### Table of Contents



NUEVO ENERGY COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS



|   |             
|-- | ------------
|1. | Organization

Nuevo Energy Company (Nuevo) was
formed as a Delaware corporation on March 2, 1990, to
acquire the businesses of certain public and private
partnerships (collectively Predecessor
Partnerships). On July 9, 1990, the plan of
consolidation (Plan of Consolidation) was approved
by limited partners owning a majority of units of limited
partner interests in the partnerships whereby the net assets of
the Predecessor Partnerships, which were subject to the Plan of
Consolidation, were exchanged for Common Stock of Nuevo
(Common Stock). All references to the
Company include Nuevo and its majority and
wholly-owned subsidiaries, unless otherwise indicated or the
context indicates otherwise.

We are engaged in the acquisition, exploitation,
development, exploration and production of crude oil and natural
gas. Our principal oil and gas properties are located
domestically onshore and offshore California and West Texas, and
internationally offshore the Republic of Congo, West Africa.

We have entered into a definitive agreement to be
merged with Plains Exploration & Production Company
(Plains) in a stock transaction valued at
approximately $945 million, based on Plains closing
price on February 11, 2004. If completed, Plains will issue
up to 37.4 million shares to our stockholders and assume
$234 million of net debt (as of December 31, 2003) and
$115 million of Trust Convertible Preferred Securities.
Under the terms of the transaction, our stockholders will
receive 1.765 shares of Plains common stock for each
share of our common stock.

The transaction is expected to qualify as a tax
free reorganization under Section 368(a) and is expected to
be tax free to Plains stockholders and tax free for the
stock consideration received by our stockholders. The Boards of
Directors of both companies have approved the merger agreement
and each has recommended it to their respective stockholders for
approval. Consummation of the transaction is subject to
shareholder approval from both companies and other customary
conditions.



|   |                                               
|-- | ----------------------------------------------
|2. | Summary of Significant Accounting
    Policies



| |                            
| | ---------------------------
| | Principles of Consolidation

Our consolidated financial statements include the
accounts of Nuevo and our majority and wholly-owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

As a result of adopting FIN 46R,
Consolidation of Variable Interest Entities, at
December 31, 2003, we are required to deconsolidate our
wholly owned Nuevo Financing I Business Trust subsidiary.
See New Accounting Pronouncements.



| |                       
| | ----------------------
| | Oil and Gas Properties

We use the successful efforts method to account
for our investments in oil and gas properties. Under the
successful efforts method, oil and gas lease acquisition costs
and intangible drilling costs associated with exploration
efforts that result in the discovery of proved reserves and
costs associated with development drilling, whether or not
successful, are capitalized when incurred. When a proved
property is sold, ceases to produce or is abandoned, a gain or
loss is recognized. When an entire interest in an unproved
property is sold for cash or cash equivalent, a gain or loss is
recognized, taking into consideration any recorded impairment.
When a partial interest in an unproved property is sold, the
amount received is treated as a reduction of the cost of the
interest retained.

Costs of successful wells, development dry holes
and proved leases are capitalized and depleted on a
unit-of-production basis over the remaining proved reserves.
Capitalized drilling costs are depleted on a unit-of-production
basis over the lives of the remaining proved developed reserves.
See Note 3 for a discussion of the provisions of
SFAS No. 143, which was adopted effective
January 1, 2003.

43



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets requires that
long-lived assets that are to be disposed of by sale be measured
at the lower of book value or fair value less cost to sell. The
standard also expanded the scope of discontinued operations to
include all components of an entity with operations that can be
distinguished from the rest of the entity and that will be
eliminated from the ongoing operations of the entity in a
disposal transaction. We adopted the provisions of this
statement effective January 1, 2002 and have presented
certain property dispositions as discontinued operations in
accordance with SFAS No. 144. (See Note 5).

We review our long-lived assets to be held and
used, including proved oil and gas properties accounted for
using the successful efforts method of accounting, on a
depletable unit basis whenever events or circumstances indicate
that the carrying value of those assets may not be recoverable.
SFAS No. 144 requires an impairment loss to be
recognized when the carrying amount of an asset exceeds the sum
of the undiscounted estimated future net cash flows and we
recognize an impairment loss equal to the difference between the
carrying value and the fair value of the asset. Fair value is
estimated to be the expected present value of future net cash
flows from proved reserves, utilizing a risk-free rate of
return. Also, in accordance with SFAS No. 144, when
the proved properties are classified as held for sale, if the
carrying amount of the assets is greater than their fair market
value less our estimated costs to sell them, the difference, if
significant, is recognized as a loss in that period and the
associated results of operations are accounted for as
discontinued. We recorded impairments required to be taken in
2003 and 2002 on properties designated as assets held for sale.
During 2001, we recorded an impairment totaling
$103.5 million on our Santa Clara, Huntington Beach,
Pitas Point, Masseko (Congo) and Point Pedernales fields and
certain other oil and gas properties.

Unproved leasehold costs are capitalized pending
the results of exploration efforts. Significant unproved
leasehold costs are reviewed periodically and a loss is
recognized to the extent, if any, that the cost of the property
has been impaired. Exploration costs, including geological and
geophysical expenses, exploratory dry holes and delay rentals,
are charged to expense as incurred.

Interest costs associated with non-producing
leases and exploration and development projects were capitalized
only for the period that activities were in progress to bring
these projects to their intended use. The capitalization rates
were based on our weighted average cost of funds used to finance
expenditures. We capitalized $1.6 million,
$1.9 million and $2.5 million of interest costs in
2003, 2002 and 2001.

Any reference to oil and gas reserve information
in the Notes to the Consolidated Financial Statements is
unaudited.



| |                                                                          
| | -------------------------------------------------------------------------
| | Derivative Financial Instruments and Price
    Risk Management Activities

We use price risk management activities to manage
non-trading market risks. We use derivative financial
instruments such as swaps, collars and put options to hedge the
impact market price risk exposures on our crude oil and natural
gas production and to mitigate our exposure to interest rate
risk.

All of our derivative instruments are recognized
on the balance sheet at their fair value. We currently use
swaps, collars and put options to hedge our exposure to material
changes in the future price of crude oil and natural gas and
interest rate swaps to hedge the fair value of our long-term
debt.

On the date we enter into a derivative contract,
we designate the derivative as either a hedge of the fair value
of a recognized asset, liability or firm commitment (fair
value hedge), as a hedge of the variability of cash flows
to be received or paid (cash flow hedge), or elect
not to designate the derivative as a hedge. Changes in the fair
value of a derivative that is highly effective as, and that is
designated and qualifies as, a fair value hedge, along with the
change in fair value of the hedged asset or liability that is
attributable to the hedged risk (including losses or gains on
firm commitments), are recorded in current period earnings.
Changes in the fair value of a cash flow hedge are recorded in
other comprehensive income (loss) until the

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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

hedged transaction occurs. At December 31,
2003, we had cash flow hedges, fair value hedges and derivatives
not designated as a hedge. (See Note 14.)

We formally document all relationships between
hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking various
hedge transactions. This process includes linking all
derivatives that are designated as cash flow hedges to
forecasted transactions. We also formally assess, both at the
hedges inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly
effective in offsetting changes in cash flows of hedged
transactions. When it is determined that a derivative is not
highly effective as a hedge or that it has ceased to be a highly
effective hedge, we discontinue hedge accounting prospectively.

When hedge accounting is discontinued because it
is probable that a forecasted transaction will not occur, the
derivative will continue to be carried on the balance sheet at
its fair value, and gains and losses that were accumulated in
other comprehensive income will be recognized in earnings
immediately. In all other situations in which hedge accounting
is discontinued, the derivative will be carried at its fair
value on the balance sheet, with changes in its fair value
recognized in earnings prospectively.

At December 31, 2003, we had recorded
$24.6 million, net of related taxes of $15.9 million,
of cumulative hedging losses in other comprehensive income,
which will be reclassified to earnings within the next
12 months. The amounts ultimately reclassified to earnings
will vary due to changes in the fair value of the open
derivative contracts prior to settlement.

As a result of hedging transactions, oil and gas
revenues were reduced by $46.8 million, $9.4 million
and $47.6 million in 2003, 2002 and 2001. The portion of
our derivative financial instruments that were ineffective or
did not qualify for hedge accounting totaled $5.8 million
in 2003 and was recorded in derivative gain/loss in the
accompanying consolidated statements of income.



| |                                         
| | ----------------------------------------
| | Goodwill and Other Intangible
    Assets

SFAS No. 142, Goodwill and Other
Intangible Assets requires discontinuing amortization of
goodwill after 2001 and requires that goodwill be tested at
least annually for impairment. The impairment test requires
allocating goodwill and all other assets and liabilities to
business levels referred to as reporting units. The fair value
of each reporting unit that has goodwill is determined and
compared to the book value of the reporting unit. If the fair
value of the reporting unit is less than the book value
(including goodwill), then a second test is performed to
determine the amount of the impairment.

If the second test is necessary, the fair value
of the reporting units individual assets and liabilities
is deducted from the fair value of the reporting unit. This
difference represents the implied fair value of goodwill, which
is compared to the book value of the reporting units
goodwill. Any excess of the book value of goodwill over the
implied fair value of goodwill is the amount of the impairment.

The goodwill impairment test is performed
annually, and also at interim dates upon the occurrence of
significant events. Significant events include: a significant
adverse change in legal factors or business climate; an adverse
action or assessment by a regulator; a more-likely-than-not
expectation that a reporting unit or significant portion of a
reporting unit will be sold; significant adverse trends in
current and future oil and gas prices; nationalization of any of
the Companys oil and gas properties; or, significant
increases in a reporting units carrying value relative to
its fair value.

We recorded $17.1 million of goodwill in
connection with our acquisition of Athanor Resources, Inc. in
2002 (See Note 12). The goodwill is recorded in our West
Texas reporting unit. The annual impairment test is performed in
the fourth quarter of each year, or more often if required.

45



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                     
| | --------------------
| | Comprehensive Income

Comprehensive income includes net income and all
changes in other comprehensive income. Changes in other
comprehensive income include changes in the fair value of
derivatives designated as cash flow hedges.



| |                          
| | -------------------------
| | Environmental Liabilities

Environmental expenditures that relate to current
or future revenues are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past
operations, and do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when
environmental assessments and/or clean-ups are probable, and the
costs can be reasonably estimated. Generally, the timing of
these accruals coincides with our commitment to a formal plan of
action. As of December 31, 2003, we had accrued
approximately $0.6 million for future environmental
expenditures.



| |              
| | -------------
| | Contingencies

We recognize liabilities for contingencies when
we have an exposure that, when fully analyzed, indicates it is
both probable and that the amount can be reasonably estimated.
Funds spent to remedy these contingencies are charged against a
reserve, if one exists, or expensed.



| |          
| | ---------
| | Inventory

Our inventory is valued at the lower of cost or
market, with cost being determined on a first-in, first-out
(FIFO) method. We had crude oil inventory in the Congo of
$2.5 million and $3.0 million at December 31,
2003 and 2002. Our materials and supplies inventory totaled
$3.2 million and $4.3 million at December 31,
2003 and 2002.



| |                                                     
| | ----------------------------------------------------
| | Recognition of Crude Oil and Natural Gas
    Revenue

Crude oil and natural gas revenue is recognized
when title to the commodities produced passes to the purchaser.
We use the entitlement method for recording sales of crude oil
and natural gas from producing wells. Under the entitlement
method, revenue is recorded based on our net revenue interest in
production. Deliveries of crude oil and natural gas in excess of
our net revenue interests are recorded as liabilities and
under-deliveries are recorded as assets. Production imbalances
are recorded at the lower of the sales price in effect at the
time of production or the current market value. Substantially
all such amounts are anticipated to be settled with production
in future periods. At December 31, 2003 and 2002, our
imbalances were insignificant.



| |             
| | ------------
| | Income Taxes

Deferred income taxes are accounted for under the
asset and liability method of accounting for income taxes. Under
this method, deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted
statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax
basis of existing assets and liabilities. The effect on deferred
taxes of a change in tax rates is recognized in income in the
period the change occurs.



| |                         
| | ------------------------
| | Statements of Cash Flows

For cash flow presentation purposes, we consider
all highly liquid money market instruments with an original
maturity of three months or less to be cash equivalents.
Interest paid in cash, including amounts capitalized, for 2003,
2002, and 2001 was $31.4 million, $35.4 million, and
$38.3 million. Net amounts paid (refunded) in cash for
income taxes for 2003, 2002, and 2001 were $1.8 million,
$(1.5) million, and $0.4 million.

46



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                 
| | ----------------
| | Use of Estimates

In order to prepare these financial statements in
conformity with accounting principles generally accepted in the
United States of America, our management has made a number of
estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and
liabilities, as well as reserve information, which affects the
depletion calculation. Actual results could differ from those
estimates.



| |                         
| | ------------------------
| | Stock-Based Compensation

We account for stock compensation plans under the
intrinsic value method of Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees. No
compensation expense is recognized for stock options that had an
exercise price equal to their market value of the underlying
common stock on the date of grant. As allowed by
SFAS No. 123, Accounting for Stock-Based
Compensation, we have continued to apply APB Opinion
No. 25 for purposes of determining net income. In December
2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and
Disclosure  an amendment of FASB Statement
No. 123 to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. Additionally,
the statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect
of the method used on reported results. Had compensation expense
for stock-based compensation been determined based on the fair
value at the date of grant, our net income and earnings per
share would have been as follows:

|                              |         |                                                                                                                                            |                       |      |        |      |        |  |        |      |         |   |        |       |  
|----------------------------- | ------- | ------------------------------------------------------------------------------------------------------------------------------------------ | --------------------- | ---- | ------ | ---- | ------ |  | ------ | ---- | ------- | - | ------ | ----- | -
|                              |         |                                                                                                                                           
|                              |         | Year Ended December 31,                                                                                                                   
|                              |         |                                                                                                                                           
|                              |         | 2003                                                                                                                                       |                       | 2002 |        | 2001
|                              |         |                                                                                                                                            |                       |      |        |     
|                              |         |                                                                                                                                           
|                              |         | (In thousands, except per share data)                                                                                                     
|Net income (loss) as reported |         | $                                                                                                                                          | 51,479                |      |        | $    | 12,275 |  |        | $    | (79,171 | )
|                              | Add:    |                                                                                                                                            |                       |      |        |      |        |  |        |      |         |   |       
|                              |         | Stock based employee compensation expense
    included in reported net income, net of related income tax                                   |                       |      | 1,079  |      |        |  | 755    |      |         |   | 310    |      
|                              | Deduct: |                                                                                                                                            |                       |      |        |      |        |  |        |      |         |   |       
|                              |         | Total stock based employee compensation expense
    determined under fair value based method for all awards, net of
    related income tax |                       |      | (2,115 | )    |        |  | (4,777 | )    |         |   | (4,316 | )    
|                              |         |                                                                                                                                            |                       |      |        |      |        |  |        |      |         |  
|Pro forma net income (loss)   |         | $                                                                                                                                          | 50,443                |      |        | $    | 8,253  |  |        | $    | (83,177 | )
|                              |         |                                                                                                                                            |                       |      |        |      |        |  |        |      |         |  
|Earnings per share:           |         |                                                                                                                                            |                       |      |        |      |        |  |        |      |         |  
|                              |         |                                                                                                                                            | Basic  as reported   |      | $      | 2.66 |        |  | $      | 0.70 |         |   | $      | (4.73 | )
|                              |         |                                                                                                                                            | Basic  pro forma     |      |        | 2.61 |        |  |        | 0.47 |         |   |        | (4.97 | )
|                              |         |                                                                                                                                            | Diluted  as reported |      |        | 2.62 |        |  |        | 0.69 |         |   |        | (4.73 | )
|                              |         |                                                                                                                                            | Diluted  pro forma   |      |        | 2.57 |        |  |        | 0.46 |         |   |        | (4.97 | )

The weighted-average fair value of options
granted during 2003, 2002 and 2001 was $9.87, $8.20 and $6.23.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions: expected stock price
volatility of 44.5% in 2003 and 2002 and 54.5% in 2001; risk
free interest of 4% in 2003, 2002 and 2001; and average expected
option lives of eight years in 2003 and 2002 and three years in
2001.

We granted 372,574, 25,465 and 47,520 shares
of restricted stock in 2003, 2002 and 2001. The weighted-average
fair value of restricted common stock granted during 2003, 2002
and 2001 was $19.15, $13.99 and $14.43, respectively.

47



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                    
| | -------------------
| | Functional Currency

Our functional currency for all operations is the
U.S. dollar.



| |                  
| | -----------------
| | Reclassifications

Certain reclassifications of prior period amounts
have been made to conform to the current presentation. The
unaudited quarterly data footnote (Note 17) also
reflects reclassifications to conform with current presentation.
These reclassifications had no effect on net income or earnings
per share.



| |                              
| | -----------------------------
| | New Accounting Pronouncements

Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and
Equity.In May 2003, the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 establishes standards for how
an issuer classifies and measures three classes of freestanding
financial instruments (mandatorily redeemable instruments,
instruments with repurchase obligations, instruments with
obligations to issue a variable number of shares) with
characteristics of both liabilities and equity. Instruments
within the scope of the statement must be classified as
liabilities on the balance sheet. SFAS No. 150 was
effective for all freestanding financial instruments entered
into or modified after May 31, 2003, and otherwise was
effective at the beginning of the first interim period beginning
after June 15, 2003. We have not entered into any financial
instruments within the scope of SFAS No. 150 since
May 31, 2003, nor do we currently hold any significant
financial instruments within the scope. SFAS No. 150
does not apply to convertible bonds, consequently our TECONS are
not within the scope of SFAS No. 150.

Guarantors Accounting and Disclosure
Requirements.The FASB issued
Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of the Indebtedness of
Others, in November 2002, which clarifies the requirements
of SFAS No. 5, Accounting for Contingencies,
relating to a guarantors accounting for and disclosures of
certain guarantees issued. FIN 45 requires enhanced
disclosures for certain guarantees. It also requires that
certain guarantees issued or modified after December 31,
2002, including certain third-party guarantees, be recorded
initially on the balance sheet at fair value. For guarantees
issued on or before December 31, 2002, liabilities are
recorded when and if payments become probable and estimable. We
adopted FIN 45 effective January 1, 2003, and have
included the disclosure requirements of FIN 45 in
Note 13 to the consolidated financial statements. The
adoption of FIN 45 had no effect on our consolidated
financial position, results of operations or cash flows.

Consolidation of Variable Interest Entities.In December 2003, the FASB issued
Interpretation No. 46 (revised December 2003),
(FIN 46R), Consolidation of Variable
Interest Entities(VIEs), replacing
Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an
interpretation of Accounting Research Bulletin No. 51,
issued in January 2003. FIN 46R was issued to replace
FIN 46 and to provide clarification of key terms,
additional exemptions for application and an extended initial
application period. FIN 46R requires certain VIEs be
consolidated by the primary beneficiary of the entity if the
equity investors in the entity do not have the characteristics
of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties.
FIN 46 was effective for all VIEs created or acquired after
January 31, 2003. For VIEs created or acquired prior to
February 1, 2003, the provisions of FIN 46 was
required to be applied for the first interim or annual period
beginning after June 15, 2003. We had no contractual
relationship or other business relationship with a variable
interest entity and therefore the adoption of FIN 46 had no
effect on our consolidated financial position, results of
operations or cash flows.

We adopted FIN 46R on December 31,
2003. As a result of adopting FIN 46R, we were required to
deconsolidate our Nuevo Financing I business trust and our
TECONS. Accordingly, our 5 3/4% Convertible

48



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Subordinated Debentures due December 15,
2026, have been included in long-term liabilities as a long-term
liability to an unconsolidated affiliate at December 31,
2003. Beginning in 2004, dividends on the TECONS will no longer
be reported in our results of operations; instead, we will be
reflecting the dividends as interest expense on the income
statement.

The FASB issued SFAS No. 141,
Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets in June 2001. We
adopted the provisions of these statements on July 1, 2001
and January 1, 2002, respectively. SFAS No. 141
requires all business combinations initiated after June 30,
2001 to be accounted for using the purchase method.
SFAS No. 142 addresses accounting and reporting of
acquired goodwill and other intangible assets. This statement
requires that, at a minimum, all intangible assets be aggregated
and presented as a separate line item on the balance sheet. A
reporting issue has arisen regarding the application of certain
provisions of SFAS No. 141 and SFAS No. 142 for
companies in the extractive industries, including oil and gas
companies. The issue is whether SFAS No. 142 requires
registrants to classify the costs of mineral rights associated
with extracting oil and gas as intangible assets in the balance
sheet, apart from other capitalized oil and gas property costs,
and to provide specific footnote disclosures.

The Emerging Issues Task Force has added the
treatment of oil and gas mineral rights to an upcoming agenda
which may result in a change in how we are currently classifying
these costs. Historically, we have included the costs of mineral
rights associated with extracting oil and gas as a component of
oil and gas properties pursuant to the provisions of
SFAS No. 19, Financial Accounting and Reporting by
Oil and Gas Companies. If it is ultimately determined that
SFAS No. 142 requires these costs to be classified as
a separate intangible asset line item on the balance sheet, we
would be required to reclassify approximately $95 million
and $101 million at December 31, 2003 and
December 31, 2002, respectively, out of oil and gas
properties into a separate intangible assets line item on the
balance sheet. To calculate these amounts, we deducted our
estimate of the fair value of tangible oil and gas equipment
acquired in the merger with Athanor Resources, Inc. in 2002 from
the amount of the purchase price allocated to property, plant
and equipment. Our results of operations would not be affected
since such intangible assets would continue to be depleted and
assessed for impairment in accordance with successful efforts
accounting rules. The classification of these costs as
intangible assets would not have any impact on our compliance
with the covenants under our debt agreements.



|   |                             
|-- | ----------------------------
|3. | Asset Retirement Obligations

SFAS No. 143, Accounting for Asset
Retirement Obligations requires a liability to be recorded
relating to the eventual retirement and removal of assets used
in our business. The liability is discounted to its present
value, with a corresponding increase to the related asset value.
Over the life of the asset, the liability will be accreted to
its future value and eventually extinguished when the asset is
taken out of service. We adopted the provisions of
SFAS No. 143 on January 1, 2003 to record our
asset retirement obligation to plug and abandon oil and gas
wells, offshore platforms and facilities. In connection with the
initial application of SFAS No. 143, we recorded a
cumulative effect of change in accounting principle, net of
taxes, of $8.5 million as an increase to net income. In
addition, we recorded an asset retirement obligation for oil and
gas properties and equipment

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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

of $92.7 million. The following table rolls
forward our asset retirement obligation in accordance with the
provisions of SFAS No. 143:

|                                      |  |                   |         |  
|------------------------------------- |  | ----------------- | ------- | -
|                                      |  | Year Ended       
|                                      |  | December 31, 2003
|                                      |  |                  
|                                      |  | (In thousands)   
|Beginning asset retirement obligation |  | $                 | 92,680  |  
|Liabilities incurred during period(1) |  |                   | 2,643   |  
|Liabilities settled during period     |  |                   | (1,159  | )
|Accretion expense                     |  |                   | 9,089   |  
|Revisions                             |  |                   | (332    | )
|                                      |  |                   |         |  
|Ending asset retirement obligation    |  | $                 | 102,921 |  
|                                      |  |                   |         |  



---



|    |                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------
|(1) | Consists of $2.4 million related to
    acquisitions and $0.2 million associated with new domestic
    wells drilled.

The following table summarizes the pro forma
basis as required by SFAS No. 143, had we adopted the
provisions of SFAS No. 143 prior to January 1,
2003:

|                  |  |                       |        | 
|----------------- |  | --------------------- | ------ | 
|                  |  | Pro forma Asset      
|Adoption Date     |  | Retirement Obligation
|                  |  |                      
|                  |  | (In thousands)       
|December 31, 2002 |  | $                     | 92,680 | 
|December 31, 2001 |  |                       | 84,182 | 
|January 1, 2001   |  |                       | 76,461 | 

In addition, pro forma net income and earnings
per share for the years ended December 31, 2002 and 2001
for the change in accounting had SFAS No. 143 been
implemented during these periods would have been as follows:

|                                        |             |                       |   |        |  |  |   |         |  
|--------------------------------------- | ----------- | --------------------- | - | ------ |  |  | - | ------- | -
|                                        |             | 2002                  |   | 2001  
|                                        |             |                       |   |       
|                                        |             |                      
|                                        |             | (In thousands, except
|                                        |             | per share data)      
|Net income (loss)                       |             |                       |   |        |  |  |   |        
|                                        | As reported |                       | $ | 12,275 |  |  | $ | (79,171 | )
|                                        | Pro forma   |                       |   | 14,799 |  |  |   | (75,607 | )
|Net income (loss) per share  reported  |             |                       |   |        |  |  |   |        
|                                        | Basic       |                       |   | 0.70   |  |  |   | (4.73   | )
|                                        | Diluted     |                       |   | 0.69   |  |  |   | (4.73   | )
|Net income (loss) per share  pro forma |             |                       |   |        |  |  |   |        
|                                        | Basic       |                       |   | 0.84   |  |  |   | (4.52   | )
|                                        | Diluted     |                       |   | 0.83   |  |  |   | (4.52   | )



|   |                   
|-- | ------------------
|4. | Earnings Per Share



| |                
| | ---------------
| | EPS Computation

SFAS No. 128, Earnings per
Share, requires a reconciliation of the numerator (income)
and denominator (shares) of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. In
2001, the weighted average shares held by benefit trust of
145,000 are not included in the calculation of diluted loss per
share due to their anti-dilutive effect. In 2001, stock options
were excluded from the calculation of diluted loss per share due
to their anti-dilutive effect. We had 0.9 million and
2.1 million

50



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

stock options in 2003 and 2002 which were not
included in the calculation of diluted earnings per share
because the option exercise price exceeded the average market
price. We also have 2.3 million Term Convertible
Securities, Series A (TECONS) that were not
included in the calculation of diluted earnings (loss) per share
in 2003, 2002 or 2001 due to their anti-dilutive effect. The
reconciliation is as follows:

|                                                                                 |                              |                                 |        |        |  |        |        |        |  |      |        |        |   |  |        |    |  |   |         |   |  |  |        |   | 
|-------------------------------------------------------------------------------- | ---------------------------- | ------------------------------- | ------ | ------ |  | ------ | ------ | ------ |  | ---- | ------ | ------ | - |  | ------ | -- |  | - | ------- | - |  |  | ------ | - | 
|                                                                                 |                              |                                
|                                                                                 |                              | For the Year Ended December 31,
|                                                                                 |                              |                                
|                                                                                 |                              |                                 |        |        |  |       
|                                                                                 |                              | 2003                            |        | 2002   |  | 2001  
|                                                                                 |                              |                                 |        |        |  |       
|                                                                                 |                              | Net                             |        | Common |  | Net    |        | Common |  | Net  |        | Common
|                                                                                 |                              | Income                          |        | Shares |  | Income |        | Shares |  | Loss |        | Shares
|                                                                                 |                              |                                 |        |        |  |        |        |        |  |      |        |       
|                                                                                 |                              |                                
|                                                                                 |                              | (In thousands)                 
|Income (loss) before cumulative effect available
    for Common shares  Basic   |                              | $                               | 42,983 |        |  |        | 19,355 |        |  | $    | 12,275 |        |   |  | 17,651 |    |  | $ | (79,171 | ) |  |  | 16,735 |  
|Effect of dilutive securities:                                                   |                              |                                 |        |        |  |        |        |        |  |      |        |        |   |  |        |    |  |   |         |   |  |  |        |  
|                                                                                 | Stock options                |                                 |        |       |  |        |        | 146    |  |      |        |       |   |  |        | 52 |  |   |         |  |  |  |        |  | 
|                                                                                 | Restricted stock             |                                 |        |       |  |        |        | 126    |  |      |        |       |   |  |        | 24 |  |   |         |  |  |  |        |  | 
|                                                                                 | Shares held by Benefit Trust |                                 |        |       |  |        |        |       |  |      |        | (8     | ) |  |        | 63 |  |   |         |  |  |  |        |  | 
|                                                                                 |                              |                                 |        |        |  |        |        |        |  |      |        |        |   |  |        |    |  |   |         |   |  |  |        |  
|Income (loss) before cumulative effect available
    for Common shares  Diluted |                              | $                               | 42,983 |        |  |        | 19,627 |        |  | $    | 12,267 |        |   |  | 17,790 |    |  | $ | (79,171 | ) |  |  | 16,735 |  
|                                                                                 |                              |                                 |        |        |  |        |        |        |  |      |        |        |   |  |        |    |  |   |         |   |  |  |        |  



|   |                        
|-- | -----------------------
|5. | Discontinued Operations

We sold our Eastern properties located in Texas,
Alabama and Louisiana in 2002 and sold our Brea-Olinda, Union
Island and Orcutt Hill oil and gas properties located in
California in 2003. The historical results of operations of
these properties are classified as discontinued operations in
our statements of income. The following table reflects revenue,
gain/loss on disposition and pre-tax income for the periods
presented:

|                   |                       |                         |   |        |   |      |   |         |   |  |   |        | 
|------------------ | --------------------- | ----------------------- | - | ------ | - | ---- | - | ------- | - |  | - | ------ | 
|                   |                       |                        
|                   |                       | Year Ended December 31,
|                   |                       |                        
|                   |                       | 2003                    |   | 2002   |   | 2001
|                   |                       |                         |   |        |   |     
|                   |                       |                        
|                   |                       | (In thousands)         
|Brea-Olinda        |                       |                         |   |        |   |      |   |         |   |  |   |       
|                   | Revenue               |                         | $ | 3,246  |   |      | $ | 16,390  |   |  | $ | 18,005 | 
|                   | Loss on disposition   |                         |   | (31    | ) |      |   | (30,466 | ) |  |   |       | 
|                   | Pre-tax income (loss) |                         |   | 2,675  |   |      |   | (22,465 | ) |  |   | 7,731  | 
|Union Island       |                       |                         |   |        |   |      |   |         |   |  |   |       
|                   | Revenue               |                         |   | 1,575  |   |      |   | 2,431   |   |  |   | 7,189  | 
|                   | Gain on disposition   |                         |   | 7,889  |   |      |   |        |   |  |   |       | 
|                   | Pre-tax income        |                         |   | 9,302  |   |      |   | 1,518   |   |  |   | 5,799  | 
|Orcutt Hill        |                       |                         |   |        |   |      |   |         |   |  |   |       
|                   | Revenue               |                         |   | 6,609  |   |      |   | 8,724   |   |  |   | 9,039  | 
|                   | Loss on disposition   |                         |   | (4,578 | ) |      |   |        |   |  |   |       | 
|                   | Pre-tax income (loss) |                         |   | (1,662 | ) |      |   | 2,389   |   |  |   | 2,229  | 
|Eastern Properties |                       |                         |   |        |   |      |   |         |   |  |   |       
|                   | Revenue               |                         |   |       |   |      |   | 3,216   |   |  |   | 8,330  | 
|                   | Loss on disposition   |                         |   |       |   |      |   | (1,045  | ) |  |   |       | 
|                   | Pre-tax income (loss) |                         |   |       |   |      |   | (157    | ) |  |   | 4,607  | 

51



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                    
|-- | -------------------
|6. | Accounts Receivable

Our accounts receivable and allowance for
doubtful accounts consisted of the following at December 31:

|                                |  |                |        |      |  |   |        | 
|------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | 
|                                |  | 2003           |        | 2002
|                                |  |                |        |     
|                                |  |               
|                                |  | (In thousands)
|Oil and gas sales               |  | $              | 32,604 |      |  | $ | 31,551 | 
|Joint interest billings         |  |                | 2,584  |      |  |   | 4,070  | 
|Other                           |  |                | 4,541  |      |  |   | 5,324  | 
|                                |  |                |        |      |  |   |        | 
|                                |  | $              | 39,729 |      |  | $ | 40,945 | 
|                                |  |                |        |      |  |   |        | 
|Allowance for doubtful accounts |  | $              | 216    |      |  | $ | 626    | 
|                                |  |                |        |      |  |   |        | 



|   |                     
|-- | --------------------
|7. | Stockholders Equity



| |                           
| | --------------------------
| | Common and Preferred Stock

Our Certificate of Incorporation authorizes the
issuance of up to 50 million shares of Common Stock and
10 million shares of Preferred Stock, the terms,
preferences, rights and restrictions of which are established by
our Board of Directors. All shares of Common Stock have equal
voting rights of one vote per share on all matters to be voted
upon by stockholders. Cumulative voting for the election of
directors is not permitted. Certain restrictions contained in
our loan agreements limit the amount of dividends that may be
declared. Under the terms of the most restrictive covenant in
our indenture for the 9 1/2% Senior Subordinated Notes
due 2008 described in Note 9, we and our restricted
subsidiaries had $20.5 million available for the payment of
dividends and share repurchases at December 31, 2003. We
have not paid dividends on our Common Stock and do not
anticipate the payment of cash dividends in the immediate future.



| |                           
| | --------------------------
| | Treasury Stock Repurchases

Our Board of Directors has authorized the open
market repurchase of up to 5.6 million shares of common
stock. Repurchases may be made at times and at prices deemed
appropriate by management and consistent with the authorization
of our Board. There were no shares repurchased during 2003. As
of December 31, 2003, we had 3.5 million shares of
treasury stock.



| |                        
| | -----------------------
| | Shareholder Rights Plan

In 1997, we adopted a Shareholder Rights Plan to
protect our shareholders from coercive or unfair takeover
tactics. Under the Shareholder Rights Plan, each outstanding
share and each share of subsequently issued common stock has
attached to it one Right. Generally, in the event a person or
group (Acquiring Person) acquires or announces an
intention to acquire beneficial ownership of 15% or more of the
outstanding shares of common stock without our prior consent, or
we are acquired in a merger or other business combination, or
50% or more of our assets or earning power is sold, each holder
of a Right will have the right to receive, upon exercise of the
Right, that number of shares of common stock of the acquiring
company, which at the time of such transaction will have a
market price of two times the exercise price of the Right. We
may redeem the Right for $.01 at any time before a person or
group becomes an Acquiring Person without prior approval. The
Rights will expire on March 21, 2007, subject to earlier
redemption by us.

In 2000, we amended the Shareholder Rights Plan
to provide that if we receive and consummate a transaction
pursuant to a qualifying offer, the provisions of the
Shareholder Rights Plan are not triggered. In general, a
qualifying offer is an all cash, fully-funded tender offer for
all outstanding common shares by a person who, at the
commencement of the offer, beneficially owns less than five
percent of the outstanding common shares. A qualifying offer
must remain open for at least 120 days, must be conditioned
on the person

52



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

commencing the qualifying offer acquiring at
least 75% of the outstanding common shares and the per share
consideration must exceed the greater of (1) 135% of the highest
closing price of the common shares during the one-year period
prior to the commencement of the qualifying offer or
(2) 150% of the average closing price of the common shares
during the 20 day period prior to the commencement of the
qualifying offer.

In February 2004, the Board of Directors approved
the amendment of the plan to permit a merger with Plains without
triggering the provisions of the plan.



| |                            
| | ---------------------------
| | Executive Compensation Plan

In 1997, we adopted a plan to encourage senior
executives to personally invest in our stock, and to regularly
review executives ownership versus targeted ownership
objectives. These incentives include a deferred compensation
plan (the Plan) that gives key executives the
ability to defer all or a portion of their salaries and bonuses
and invest in our common stock or make other investments at the
employees discretion. The Plan was amended in 2003 to
offer a 15% discount on investments in our common stock up to
$30,000 annually. Stock is held in a benefit trust and stock
acquired at a discount is restricted for a two-year period.
Target levels of ownership are based on multiples of base salary
and are administered by the Compensation Committee of the Board
of Directors. Upon withdrawal from the Plan, the obligation to
the employee is settled with the invested assets. The Plan
applies to certain highly compensated employees and all
executives at a level of Vice-President and above. The stock
held in the benefit trust (99,369 shares,
70,595 shares and 122,995 shares at December 31,
2003, 2002 and 2001) was accounted for as a liability at market
value, with any changes in market value charged or credited to
general and administrative expense until July 2002. Using this
approach, we recorded a net benefit of $0.2 million in 2001
related to deferred compensation. In July 2002, the Plan was
further amended to remove the right to receive withdrawals in
cash resulting in a reclassification of the $1.1 million
liability into shareholders equity. The deferred
compensation obligation is now classified in shareholders
equity and changes in the fair value of the obligation are not
recognized.



| |                      
| | ---------------------
| | Director Compensation

Non-employee directors may elect to receive all
or part of an annual cash retainer of $30,000 in restricted
shares of our Common Stock at a 33% increase in value. The
election must be made in increments of 25% ($7,500). Therefore,
for each $7,500 of compensation for which the election is
exercised, the director would receive $9,975 in restricted
stock. Beginning in 2003, each non-employee director also
receives a semi-annual grant of 2,125 restricted shares of our
common stock. All restricted shares are subject to a three-year
restricted period. Directors have the option of deferring
delivery of restricted shares beyond the three-year period.
Directors also receive $1,000 for each committee meeting
attended while committee chairpersons receive $1,500. Directors
may also elect to receive restricted shares for committee
meetings at a 33% discount.



| |                      
| | ---------------------
| | Stock Incentive Plans

In 1990, we established the 1990 Stock Option
Plan; in 1993, the Board of Directors adopted the Nuevo Energy
Company 1993 Stock Incentive Plan; and in 1999, the Board of
Directors adopted the Nuevo Energy Company 1999 Stock Incentive
Plan (collectively, the Stock Incentive Plans). In
2001, the Board of Directors adopted the 2001 Stock Incentive
Plan as well as individual incentive plans to induce Janet F.
Clark, our former Senior Vice President and Chief Financial
Officer and George B. Nilsen, our Senior Vice President,
Planning and Asset Management to accept employment with us. The
purpose of the Stock Incentive Plans is to provide our directors
and key employees with performance incentives and to provide a
means of encouraging these individuals to own our stock.

In November 2002, the Compensation Committee of
the Board of Directors approved an increase of
250,000 shares under the 2001 Stock Incentive Plan,
increasing the total maximum number of incentive shares
available under the Stock Incentive Plans to
5,250,000 shares. Options or Restricted Shares are granted

53



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

under the Stock Incentive Plans on the basis of
the grantees contribution to us. No option may exceed a
term of more than ten years. Options granted under the Stock
Incentive Plans may be either incentive stock options or options
that do not qualify as incentive stock options. Our Compensation
Committee is authorized to designate the recipients of options,
the dates of grants, the number of shares subject to options,
the option price, the terms of payment upon exercise of the
options, and the time during which the options may be exercised.
Options for officers vest over a term of one to three years, as
specified by the Compensation Committee. Officers who have met
their targeted stock ownership requirement receive accelerated
vesting on all options issued prior to October 15, 2001.
The Company granted 10,500 options in 2003 and all the remaining
incentive grants were made in the form of Restricted Shares.

The following table details the summary of
activity in the stock option plans during the three years ended
2003:

|                                 |           |         |           |                |   |   |       |       | 
|-------------------------------- | --------- | ------- | --------- | -------------- | - | - | ----- | ----- | 
|                                 |           |         |           | Weighted-     
|                                 |           |         |           | Average       
|                                 |           | Options |           | Exercise Price
|                                 |           |         |           |               
|Outstanding at January 1, 2001   |           |         | 2,772,918 |                |   | $ | 21.94 |      
|                                 | Granted   |         |           | 875,026        |   |   |       | 15.51 | 
|                                 | Exercised |         |           | (287,000       | ) |   |       | 12.93 | 
|                                 | Canceled  |         |           | (102,525       | ) |   |       | 33.88 | 
|                                 |           |         |           |                |   |   |       |      
|Outstanding at December 31, 2001 |           |         | 3,258,419 |                |   |   | 20.62 |      
|                                 | Granted   |         |           | 487,750        |   |   |       | 14.79 | 
|                                 | Exercised |         |           | (105,675       | ) |   |       | 11.99 | 
|                                 | Canceled  |         |           | (938,245       | ) |   |       | 29.13 | 
|                                 |           |         |           |                |   |   |       |      
|Outstanding at December 31, 2002 |           |         | 2,702,249 |                |   |   | 16.96 |      
|                                 | Granted   |         |           | 10,500         |   |   |       | 16.12 | 
|                                 | Exercised |         |           | (408,328       | ) |   |       | 15.61 | 
|                                 | Canceled  |         |           | (390,031       | ) |   |       | 15.77 | 
|                                 |           |         |           |                |   |   |       |      
|Outstanding at December 31, 2003 |           |         | 1,914,390 |                |   |   | 17.49 |      
|                                 |           |         |           |                |   |   |       |      

We had options exercisable of 1,560,730 (weighted
average exercise price of $18.01), 2,053,416 (weighted average
exercise price of $17.89) and 2,728,494 (weighted average
exercise price of $21.80) at December 31, 2003, 2002 and
2001. Detail of stock options outstanding and options
exercisable at December 31, 2003 follows:

|                         |  |             |           |                   |  |                   |      |        |  |                   |       |  |  |  |           |  |  |   |       | 
|------------------------ |  | ----------- | --------- | ----------------- |  | ----------------- | ---- | ------ |  | ----------------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                         |  |             |           |                   |  |                  
|                         |  | Outstanding |           |                  
|                         |  |             |           | Exercisable      
|                         |  |             |           | Weighted- Average |  |                   |      |       
|                         |  |             |           | Remaining Life    |  | Weighted- Average |      |        |  | Weighted- Average
|Range of Exercise Prices |  | Number      |           | (Years)           |  | Exercise Price    |      | Number |  | Exercise Price   
|                         |  |             |           |                   |  |                   |      |        |  |                  
|$10.31 to $15.42         |  |             | 895,065   |                   |  |                   | 7.68 |        |  | $                 | 13.66 |  |  |  | 609,571   |  |  | $ | 13.09 | 
|$15.50 to $19.12         |  |             | 739,525   |                   |  |                   | 5.64 |        |  |                   | 16.82 |  |  |  | 671,359   |  |  |   | 16.84 | 
|$20.38 to $29.88         |  |             | 149,800   |                   |  |                   | 2.09 |        |  |                   | 25.02 |  |  |  | 149,800   |  |  |   | 25.02 | 
|$34.00 to $47.88         |  |             | 130,000   |                   |  |                   | 3.80 |        |  |                   | 38.99 |  |  |  | 130,000   |  |  |   | 38.99 | 
|                         |  |             |           |                   |  |                   |      |        |  |                   |       |  |  |  |           |  |  |   |       | 
|                         |  |             | 1,914,390 |                   |  |                   |      |        |  |                   |       |  |  |  | 1,560,730 |  |  |   |       | 
|                         |  |             |           |                   |  |                   |      |        |  |                   |       |  |  |  |           |  |  |   |       | 

54



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                                                                                                   
|-- | --------------------------------------------------------------------------------------------------
|8. | Company-Obligated Mandatorily Redeemable
    Convertible Preferred Securities of Nuevo Financing I

On December 23, 1996, the Company and Nuevo
Financing I, a statutory business trust formed under the
laws of the state of Delaware and wholly owned by us, (the
Trust), closed the offering of 2.3 million
TECONS on behalf of the Trust. The price to the public was
$50.00 per TECONS. Distributions began to accumulate from
December 23, 1996, and are payable quarterly on
March 15, June 15, September 15, and
December 15, at an annual rate of $2.875 per TECONS.
Each TECONS is convertible at any time prior to the close of
business on December 15, 2026, at the option of the holder
into shares of common stock at the rate of 0.8421 shares of
common stock for each TECONS, subject to adjustment. The sole
asset of the Trust as the obligor on the TECONS is
$118.6 million aggregate principal amount of
5 3/4% Convertible Subordinated Debentures
(Debentures) of the Company due December 15,
2026. The Debentures were issued by us to the Trust to
facilitate the offering of the TECONS. The TECONS must be
redeemed for $50.00 per TECONS plus accrued and unpaid
dividends on December 15, 2026. We own the Trust Common
Securities which have an aggregate liquidation value of 3% of
the total capital of the Trust. We will receive this amount from
the Trust upon liquidation. We guarantee the Trusts
obligations under the TECONS.

The balance sheet of the Trust at
December 31, 2003 (dollars in thousands) is as follows:

|                                                          |  |   |         | 
|--------------------------------------------------------- |  | - | ------- | 
|Receivable from Nuevo Energy Company                      |  | $ | 118,557 | 
|                                                          |  |   |         | 
|Total Assets                                              |  | $ | 118,557 | 
|                                                          |  |   |         | 
|TECONS                                                    |  | $ | 115,000 | 
|Trust Common Securities owned by Nuevo Energy
    Company |  |   | 3,557   | 
|                                                          |  |   |         | 
|Total Liabilities and Equity                              |  | $ | 118,557 | 
|                                                          |  |   |         | 

We offset the Trust Common Securities against the
balance in the receivable as we will receive the liquidation
value of the Trust Common Securities.

The Trust pays interest on the
$115.0 million and receives interest on $118.6 million
due from Nuevo Energy Company. The excess interest income
received will be paid to us as the owner of the Trust Common
Securities.

As a result of adopting FIN 46R,
Consolidation of Variable Interest Entities, at
December 31, 2003, we were required to deconsolidate our
Nuevo Financing I Business Trust. See Note 2.

55



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |               
|-- | --------------
|9. | Long-Term Debt

Our long-term debt consisted of the following:

|                                                                                     |            |                |         |         |  |   |         |         | 
|------------------------------------------------------------------------------------ | ---------- | -------------- | ------- | ------- |  | - | ------- | ------- | 
|                                                                                     |            |               
|                                                                                     |            | December 31,  
|                                                                                     |            |               
|                                                                                     |            | 2003           |         | 2002   
|                                                                                     |            |                |         |        
|                                                                                     |            |               
|                                                                                     |            | (In thousands)
|9 3/8% Senior Subordinated Notes due
    2010                                        |            | $              | 150,000 |         |  | $ | 150,000 |        
|9 1/2% Senior Subordinated Notes due
    2008(1)                                     |            |                | 75,000  |         |  |   | 257,210 |        
|9 1/2% Senior Subordinated Notes due
    2006                                        |            |                |        |         |  |   | 2,367   |        
|Long-term liability to unconsolidated affiliate                                      |            |                | 115,000 |         |  |   |        |        
|Bank credit facility (2.02% at December 31,
    2003 and 3.11% at December 31, 2002) |            |                | 15,000  |         |  |   | 28,700  |        
|                                                                                     |            |                |         |         |  |   |         |        
|                                                                                     | Total debt |                |         | 355,000 |  |   |         | 438,277 | 
|Interest rate swaps  fair value
    adjustment                                      |            |                | (153    | )       |  |   | 2,161   |        
|Interest rate swaps  termination gain                                               |            |                | 14,364  |         |  |   | 11,673  |        
|                                                                                     |            |                |         |         |  |   |         |        
|Long-term debt                                                                       |            | $              | 369,211 |         |  | $ | 452,111 |        
|                                                                                     |            |                |         |         |  |   |         |        



---



|    |                            
|--- | ---------------------------
|(1) | Redeemed February 27, 2004.



| |                          
| | -------------------------
| | 9 3/8% Notes due
    2010

On September 26, 2000, we issued
$150.0 million of 9 3/8% Senior Subordinated
Notes due October 1, 2010. Interest accrues at
9 3/8% per annum and is payable semi-annually in
arrears on April 1 and October 1. The Notes are redeemable,
in whole or in part, at our option, on or after October 1,
2005, under certain conditions. We are not required to make
mandatory redemption or sinking fund payments with respect to
these Notes. The indenture contains covenants that, among other
things, limit our ability to incur additional indebtedness,
limit restricted payments, limit issuances and sales of capital
stock by restricted subsidiaries, limit dispositions of proceeds
from asset sales, limit dividends and other payment restrictions
affecting restricted subsidiaries, and restrict mergers,
consolidations or sales of assets. The Notes are unsecured
general obligations, and are subordinated in right of payment to
all existing and future senior indebtedness. In the event of a
defined change in control, we will be required to make an offer
to repurchase all outstanding 9 3/8% Notes at 101% of
the principal amount, plus accrued and unpaid interest to the
date of redemption.



| |                          
| | -------------------------
| | 9 1/2% Notes due
    2008

In July 1999, we authorized a new issuance of
$260.0 million of 9 1/2% Senior Subordinated
Notes due June 1, 2008. In August 1999, we exchanged
$157.5 million of our 9 1/2% Notes due 2006 and
$99.9 million of our 8 7/8% Senior Subordinated
Notes due 2008. In connection with the exchange offers, we
solicited consents to proposed amendments to the indentures
under which the exchanged notes were issued. The exchange was
accounted for as a debt modification and the consideration we
paid to the holders of the exchanged 9 1/2% Notes due
2006 was $4.7 million and was accounted for as deferred
financing costs.

Interest on these Notes accrues at the rate of
9 1/2% per annum and is payable semi-annually in
arrears on June 1 and December 1. These Notes are
redeemable, in whole or in part, at our option, on or after
June 1, 2003, under certain conditions. In 2003, we
redeemed $182.2 million of these notes at 104.75% of the
principal amount plus accrued and unpaid interest. We recorded a
$12.6 million loss on early extinguishment of debt
consisting of an $8.7 million call premium and a
$3.9 million write-off of deferred financing costs. We are
not required to make mandatory redemption or sinking fund
payments on these Notes. The indenture contains covenants that,
among other things, limit our ability to incur additional
indebtedness, limit restricted

56



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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

payments, limit issuances and sales of capital
stock by restricted subsidiaries, limit dispositions of proceeds
from asset sales, limit dividends and other payment restrictions
affecting restricted subsidiaries, and restrict mergers,
consolidations or sales of assets. The 9 1/2% Notes
are unsecured general obligations, and are subordinated in right
of payment to all of our existing and future senior
indebtedness. In the event of a defined change in control, we
will be required to make an offer to repurchase all outstanding
Notes at 101% of the principal amount, plus accrued and unpaid
interest to the date of redemption. In February 2004, we
redeemed in full the remaining $75.0 million of these Notes
at 104.75% of the principal amount plus accrued and unpaid
interest.



| |                          
| | -------------------------
| | 9 1/2% Notes due
    2006

In April 1996, we issued $160.0 million of
9 1/2% Notes and in August 1999, we exchanged
$157.5 million of these Notes for 9 1/2% Notes
due 2008 and have repurchased some of the Notes in the open
market. Interest on these Notes accrues at the rate of
9 1/2% per annum and is payable semi-annually in
arrears on April 15 and October 15 and were
redeemable, in whole or in part, at our option, on or after
April 15, 2001, under certain conditions. The Notes are
unsecured general obligations, and are subordinated in right of
payment to all existing and future senior indebtedness. In April
2003, we redeemed in full the remaining $2.4 million of
these Notes at 101.58% of the principal amount plus accrued and
unpaid interest.



| |                                                    
| | ---------------------------------------------------
| | Long-term Liability to Unconsolidated
    Affiliate

In December 1996, we issued
$115.0 million of 5 3/4% Convertible Subordinated
Debentures due December 15, 2026, to Nuevo Financing I
business trust to facilitate the offering of the TECONS in
December 1996. Interest on these Debentures accrues at
5 3/4% per annum and is payable quarterly on March 15,
June 15, September 15 and December 15. The
Debentures are redeemable, in whole or in part, at our option,
upon not less than 30 or more than 60 days notice, on or
after December 15, 1999, under certain conditions. We are
required to redeem the Debentures at 100% in the event the tax
or legal structure changes as defined in the agreement. The
holder of the Debentures has the right, exercisable at any time
prior to close of business on December 15, 2026, to convert
the principal amount into shares of our common stock at a
conversion rate of 0.8421 shares for each Debenture,
subject to adjustment under certain circumstances. We are not
required to make sinking fund payments with respect to the
Debentures.



| |                    
| | -------------------
| | Interest Rate Swaps

We entered into interest rate swaps in 2003, 2002
and 2001. (See Note 14.)



| |                     
| | --------------------
| | Bank Credit Facility

Our Third Amended and Restated Credit Agreement,
dated June 7, 2000, as amended, provides for secured
revolving credit availability of up to $250 million and
issuance of letters of credit from a bank group led by Bank of
America, N.A., Bank One, NA, and Bank of Montreal until its
expiration on June 7, 2005. At December 31, 2003, we
had $15.0 million under the Credit Facility and two letters
of credit outstanding in the amount of $1.6 million.

Availability under the Credit Facility is
determined pursuant to a semi-annual borrowing base
determination which establishes the maximum borrowings that may
be outstanding under the credit facility. The borrowing base is
determined by a 60% vote of participant banks (two-thirds in the
event of an increase in the borrowing base), each of which bases
its judgement on: (i) the present value of our oil and gas
reserves based on their own assumptions regarding future prices,
production, costs, risk factors and discount rates, and
(ii) projected cash flow coverage ratios calculated under
varying scenarios. If amounts outstanding under the credit
facility exceed the borrowing base, as redetermined from time to
time, we would be required to repay

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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

such excess over a defined period of time. We
have a $200 million borrowing base under our Credit
Facility with $183.4 million available at December 31,
2003 and had outstanding $16.6 million under the agreement.

Amounts outstanding under the credit facility
bear interest at a rate equal to LIBOR plus an amount which
varies according to our Indebtedness to Capitalization ratio (as
defined in the Credit Agreement). The weighted average interest
rate was 2.9% in 2003 and 3.6% in 2002.

Our Credit Agreement has covenants which limit
certain restricted payments and investments, guarantees and
indebtedness, prepayments of subordinated and certain other
indebtedness, mergers and consolidations, on certain types of
acquisitions and on the issuance of certain securities by
subsidiaries, liens, sales of properties, transactions with
affiliates, derivative contracts and debt in subsidiaries. We
are also required to maintain certain financial ratios and
conditions, including without limitation an EBITDAX (earnings
before interest, taxes, depreciation, depletion, amortization
and exploration expenses) to fixed charge coverage ratio and a
funded debt to capitalization ratio. At December 31, 2003,
we were in compliance with all covenants of the Credit Agreement.

The amount of scheduled debt maturities during
the next five years and thereafter as of December 31, 2003 is as
follows (amounts in thousands):

|           |                       |   |         |         | 
|---------- | --------------------- | - | ------- | ------- | 
|2004       |                       | $ |        |        
|2005       |                       |   | 15,000  |        
|2006       |                       |   |        |        
|2007       |                       |   |        |        
|2008(1)    |                       |   | 75,000  |        
|Thereafter |                       |   | 265,000 |        
|           |                       |   |         |        
|           | Total debt maturities |   | $       | 355,000 | 
|           |                       |   |         |        



---

(1)Redeemed
February 27, 2004.

Based upon the quoted market price, the fair
value of the 9 3/8% Notes was estimated to be
$165.8 million and $149.4 million at December 31,
2003 and 2002; the fair value of the 9 1/2% Notes due
2008 was estimated to be $78.8 million and
$264.0 million at December 31, 2003 and 2002, and the
fair value of the 9 1/2% Notes due 2006 was estimated
to be $2.4 million at December 31, 2002. The fair
value of the long-term liability to unconsolidated affiliate is
$94.3 million at December 31, 2003. The carrying
amount of the credit facility approximates its fair value at
December 31, 2003.



|    |             
|--- | ------------
|10. | Income Taxes

The components of income before income taxes and
cumulative effect of change in accounting principle for each of
the three years in the period ended December 31, 2003, are
as follows:

|                                                          |  |      |        |      |  |      |        |  |  |   |          |  
|--------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | -------- | -
|                                                          |  | 2003 |        | 2002 |  | 2001
|                                                          |  |      |        |      |  |     
|United States                                             |  | $    | 35,085 |      |  | $    | 28,254 |  |  | $ | (144,143 | )
|Foreign                                                   |  |      | 25,122 |      |  |      | 11,516 |  |  |   | (8,351   | )
|                                                          |  |      |        |      |  |      |        |  |  |   |          |  
|Income from continuing operations before income
    taxes |  | $    | 60,207 |      |  | $    | 39,770 |  |  | $ | (152,494 | )
|                                                          |  |      |        |      |  |      |        |  |  |   |          |  

58



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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Income tax expense (benefit) is summarized as
follows:

|         |         |                                    |        |        |        |      |        |        |        |  |         |         |         |  
|-------- | ------- | ---------------------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ |  | ------- | ------- | ------- | -
|         |         |                                   
|         |         | Year Ended December 31,           
|         |         |                                   
|         |         | 2003                               |        | 2002   |        | 2001
|         |         |                                    |        |        |        |     
|         |         |                                   
|         |         | (In thousands)                    
|Current  |         |                                    |        |        |        |      |        |        |        |  |         |        
|         | Federal |                                    | $      | 341    |        |      | $      |       |        |  | $       |        |        
|         | State   |                                    |        | 276    |        |      |        | 1,330  |        |  |         |        |        
|         | Foreign |                                    |        | 1,469  |        |      |        |       |        |  |         |        |        
|         |         |                                    |        |        |        |      |        |        |        |  |         |        
|         |         |                                    | 2,086  |        |        |      | 1,330  |        |        |  |        |        
|         |         |                                    |        |        |        |      |        |        |        |  |         |        
|Deferred |         |                                    |        |        |        |      |        |        |        |  |         |        
|         | Federal |                                    |        | 19,590 |        |      |        | 14,023 |        |  |         | (49,015 | )      
|         | State   |                                    |        | 4,321  |        |      |        | 1,338  |        |  |         | (12,108 | )      
|         | Foreign |                                    |        | (2,879 | )      |      |        |       |        |  |         |        |        
|         |         |                                    |        |        |        |      |        |        |        |  |         |        
|         |         |                                    | 21,032 |        |        |      | 15,361 |        |        |  | (61,123 | )      
|         |         |                                    |        |        |        |      |        |        |        |  |         |        
|         |         | Total income tax expense (benefit) |        | $      | 23,118 |      |        | $      | 16,691 |  |         | $       | (61,123 | )
|         |         |                                    |        |        |        |      |        |        |        |  |         |        

We recorded income tax expense (benefit) of
$4.4 million, $(7.9) million and $8.2 million in
2003, 2002 and 2001 related to discontinued operations. We
recorded a tax expense of $5.7 million related to a
cumulative effect of a change in accounting principle in 2003
(see Note 3). A deferred tax benefit related to the
exercise of employee stock options of approximately
$0.6 million, $0.5 million and $0.8 million was
allocated directly to additional paid-in capital in 2003, 2002
and 2001.

Total income tax expense (benefit) differs from
the amount computed by applying the federal income tax rate to
income (loss) before income taxes and cumulative effect. The
reasons for these differences are as follows:

|                                                |                                                  |              |      |      |   |      |      |     |  |  |       |      |  
|----------------------------------------------- | ------------------------------------------------ | ------------ | ---- | ---- | - | ---- | ---- | --- |  |  | ----- | ---- | -
|                                                |                                                  |             
|                                                |                                                  | Year Ended  
|                                                |                                                  | December 31,
|                                                |                                                  |             
|                                                |                                                  | 2003         |      | 2002 |   | 2001
|                                                |                                                  |              |      |      |   |     
|Statutory federal income tax rate               |                                                  |              | 35.0 | %    |   |      | 35.0 | %   |  |  | (35.0 | )%  
|Increase (decrease) in tax rate resulting from: |                                                  |              |      |      |   |      |      |     |  |  |       |     
|                                                | State income taxes, net of federal benefit       |              |      | 5.0  |   |      |      | 6.6 |  |  |       | (5.2 | )
|                                                | Nondeductible travel and entertainment and other |              |      | 0.3  |   |      |      | 0.1 |  |  |       | 0.1  |  
|                                                | Foreign income taxes net of federal benefit      |              |      | (1.1 | ) |      |      |    |  |  |       |     |  
|                                                |                                                  |              |      |      |   |      |      |     |  |  |       |     
|                                                |                                                  |              | 39.2 | %    |   |      | 41.7 | %   |  |  | (40.1 | )%  
|                                                |                                                  |              |      |      |   |      |      |     |  |  |       |     

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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The tax effects of temporary differences that
result in significant portions of the deferred income tax assets
and liabilities and a description of the financial statement
items creating these differences are as follows:

|                                             |                                       |                |         |         |   |   |         |         |  
|-------------------------------------------- | ------------------------------------- | -------------- | ------- | ------- | - | - | ------- | ------- | -
|                                             |                                       |               
|                                             |                                       | December 31,  
|                                             |                                       |               
|                                             |                                       | 2003           |         | 2002   
|                                             |                                       |                |         |        
|                                             |                                       |               
|                                             |                                       | (In thousands)
|Net operating loss carryforwards             |                                       | $              | 44,835  |         |   | $ | 74,640  |        
|Alternative minimum tax credit carryforwards |                                       |                | 781     |         |   |   | 200     |        
|Other accrued liabilities                    |                                       |                |        |         |   |   | 1,205   |        
|Commodity hedging contracts                  |                                       |                | 15,870  |         |   |   | 7,871   |        
|State income taxes                           |                                       |                |        |         |   |   | 2,298   |        
|Foreign income taxes                         |                                       |                | 1,871   |         |   |   |        |        
|                                             |                                       |                |         |         |   |   |         |        
|                                             | Total deferred income tax assets      |                |         | 63,357  |   |   |         | 86,214  |  
|                                             | Less: valuation allowance             |                |         |        |   |   |         | (804    | )
|                                             |                                       |                |         |         |   |   |         |        
|                                             | Net deferred income tax assets        |                |         | 63,357  |   |   |         | 85,410  |  
|                                             |                                       |                |         |         |   |   |         |        
|Property and equipment                       |                                       |                | (30,667 | )       |   |   | (33,798 | )      
|Equity in foreign subsidiaries               |                                       |                | (585    | )       |   |   | (671    | )      
|Other accrued liabilities                    |                                       |                | (1,545  | )       |   |   |        |        
|State income taxes                           |                                       |                | (1,250  | )       |   |   |        |        
|                                             |                                       |                |         |         |   |   |         |        
|                                             | Total deferred income tax liabilities |                |         | (34,047 | ) |   |         | (34,469 | )
|                                             |                                       |                |         |         |   |   |         |        
|Net deferred income tax asset                |                                       | $              | 29,310  |         |   | $ | 50,941  |        
|                                             |                                       |                |         |         |   |   |         |        

At December 31, 2003, we had a net operating
loss carryforward for regular tax purposes of approximately
$128.1 million, which will begin expiring in 2018.
Alternative minimum tax credit carryforwards of
$0.8 million do not expire and may be applied to reduce
regular income tax to an amount not less than the alternative
minimum tax payable in any one year. For all periods presented
we concluded that based upon available estimates and tax
planning strategies, it was more likely than not that all of the
recorded deferred tax assets would be realized. In 2003, we
reversed a valuation allowance of a $0.8 million relating
to a capital loss carryover due to its realization in 2003.



|    |         
|--- | --------
|11. | Segments

Our operations consist of the acquisition,
exploitation, exploration, development and production of crude
oil and natural gas. We have four operating segments, Onshore
California, Offshore California, West Texas and Congo because,
in accordance with SFAS No. 131, these are the
segments that (1) engage in business activities from which
revenues are earned and expenses are incurred, (2) whose
operating results are regularly reviewed by our chief operating
decision maker to make decisions about resources to be allocated
to the segment and assess its performance and (3) for which
discrete financial information is available.

We have aggregated Onshore California, Offshore
California and West Texas into our domestic segment, which is a
reportable segment. We have aggregated these three operating
segments because we believe these operating segments have
similar economic characteristics in the following areas as
outlined in SFAS No. 131: (1) the nature of the
products and services, (2) the nature of the production
process, (3) the type of class of customer for the products
and services, (4) the methods used to distribute their
products or provide their services and (5) the nature of
the regulatory environment.

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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Our reportable segments are domestic, foreign and
other. Financial information by reportable segment is presented
below:

|                                                               |  |                |         |         |  |          |        |       |  |   |         |   |  |   |         | 
|-------------------------------------------------------------- |  | -------------- | ------- | ------- |  | -------- | ------ | ----- |  | - | ------- | - |  | - | ------- | 
|                                                               |  |               
|                                                               |  | 2003          
|                                                               |  |               
|                                                               |  | Domestic       |         | Foreign |  | Other(1) |        | Total
|                                                               |  |                |         |         |  |          |        |      
|                                                               |  |               
|                                                               |  | (In thousands)
|Revenues                                                       |  | $              | 327,009 |         |  | $        | 42,966 |       |  | $ | 1,362   |   |  | $ | 371,337 | 
|Depreciation, depletion, amortization and
    accretion        |  |                | 62,919  |         |  |          | 5,847  |       |  |   | 2,044   |   |  |   | 70,810  | 
|Income (loss) from continuing operations before
    income tax |  |                | 119,964 |         |  |          | 25,122 |       |  |   | (84,879 | ) |  |   | 60,207  | 
|Capital expenditures                                           |  |                | 64,798  |         |  |          | 1,205  |       |  |   | 728     |   |  |   | 66,731  | 
|Total assets                                                   |  |                | 646,436 |         |  |          | 45,416 |       |  |   | 153,124 |   |  |   | 844,976 | 

|                                                               |  |                |         |         |  |          |        |       |  |   |         |   |  |   |         | 
|-------------------------------------------------------------- |  | -------------- | ------- | ------- |  | -------- | ------ | ----- |  | - | ------- | - |  | - | ------- | 
|                                                               |  |               
|                                                               |  | 2002          
|                                                               |  |               
|                                                               |  | Domestic       |         | Foreign |  | Other(1) |        | Total
|                                                               |  |                |         |         |  |          |        |      
|                                                               |  |               
|                                                               |  | (In thousands)
|Revenues                                                       |  | $              | 275,853 |         |  | $        | 31,978 |       |  | $ | 4,070   |   |  | $ | 311,901 | 
|Depreciation, depletion and amortization                       |  |                | 64,562  |         |  |          | 6,198  |       |  |   | 2,368   |   |  |   | 73,128  | 
|Income (loss) from continuing operations before
    income tax |  |                | 104,649 |         |  |          | 11,516 |       |  |   | (76,395 | ) |  |   | 39,770  | 
|Capital expenditures                                           |  |                | 137,002 |         |  |          | 1,524  |       |  |   | 2,956   |   |  |   | 141,482 | 
|Total assets                                                   |  |                | 557,421 |         |  |          | 52,269 |       |  |   | 245,481 |   |  |   | 855,171 | 

|                                                               |  |                |         |         |  |          |        |       |  |   |          |   |  |   |          |  
|-------------------------------------------------------------- |  | -------------- | ------- | ------- |  | -------- | ------ | ----- |  | - | -------- | - |  | - | -------- | -
|                                                               |  |               
|                                                               |  | 2001          
|                                                               |  |               
|                                                               |  | Domestic       |         | Foreign |  | Other(1) |        | Total
|                                                               |  |                |         |         |  |          |        |      
|                                                               |  |               
|                                                               |  | (In thousands)
|Revenues                                                       |  | $              | 274,786 |         |  | $        | 36,020 |       |  | $ | 273      |   |  | $ | 311,079  |  
|Depreciation, depletion and amortization                       |  |                | 58,347  |         |  |          | 10,381 |       |  |   | 1,826    |   |  |   | 70,554   |  
|Income (loss) from continuing operations before
    income tax |  |                | (37,869 | )       |  |          | (8,351 | )     |  |   | (106,274 | ) |  |   | (152,494 | )
|Capital expenditures                                           |  |                | 148,329 |         |  |          | 20,647 |       |  |   | 1,262    |   |  |   | 170,238  |  
|Total assets                                                   |  |                | 548,186 |         |  |          | 56,404 |       |  |   | 235,222  |   |  |   | 839,812  |  



---



|    |                                              
|--- | ---------------------------------------------
|(1) | Other includes corporate income and expenses.



| |                                               
| | ----------------------------------------------
| | Credit Risks due to Certain
    Concentrations

In 2003, 2002 and 2001, we had one customer under
domestic segment that accounted for 65%, 73%, and 63% of oil and
gas revenues. In 2003 we had another customer under domestic
segment that accounted for 11% of oil and gas revenues and in
2001 we had another domestic segment customer that accounted for
23% of oil and gas revenues.

We entered into a 15-year contract, effective
January 1, 2000, to sell all of our current and future
California crude oil production to ConocoPhillips. The contract
provides pricing based on a fixed percentage of the NYMEX crude
oil price for each type of crude oil that we produce in
California. Effective January 1, 2003, we renegotiated this
contract relative to our Point Arguello production, effectively
increasing our price by 14.5% on the NYMEX price. Effective
January 1, 2004, we renegotiated our NYMEX relationship for
all production sold to ConocoPhillips increasing our effective
realization by approximately 11%. While the contract does not
reduce our exposure to price volatility, it does effectively
eliminate the risk of widening basis differential between the
NYMEX price and the field price of our California oil
production. In doing so, the

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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

contract makes it substantially easier for us to
hedge our realized prices. The ConocoPhillips contract permits,
under certain circumstances, to separately market up to ten
percent of our California crude production. We exercised this
right and sold 5,000 BOPD of our San Joaquin Valley oil
production to a third party under a two-year contract containing
NYMEX pricing in 2003 and under a one-year contract containing
NYMEX pricing in 2002 and 2001.

Our revenues are derived principally from
uncollateralized sales to customers in the oil and gas industry,
therefore, customers may be similarly affected by changes in
economic and other conditions within the industry. We have not
experienced significant credit losses in such sales. Sales of
oil and gas to ConocoPhillips are similarly uncollateralized.



|    |                                           
|--- | ------------------------------------------
|12. | Acquisition of Athanor Resources,
    Inc.

We acquired Athanor Resources, Inc. (Athanor) in
September 2002, in a transaction valued at $101.4 million,
which included the combination of $61.3 million of
available cash and additional borrowings, the issuance of
approximately $20.1 million of our common stock
(approximately 2.0 million shares) to Athanor stockholders,
and the fair value of the net liabilities assumed of
approximately $20.0 million.

The acquisition was accounted for using the
purchase method of accounting. The purchase price was finalized
during the second quarter of 2003, and the following table
summarizes the fair value of the assets acquired and liabilities
assumed at the date of acquisition.

|                              |                           |                |         |         | 
|----------------------------- | ------------------------- | -------------- | ------- | ------- | 
|                              |                           |               
|                              |                           | (In thousands)
|                              |                           |               
|Current assets                |                           | $              | 4,426   |        
|Property, plant and equipment |                           |                | 102,801 |        
|Goodwill                      |                           |                | 17,121  |        
|                              |                           |                |         |        
|                              | Total assets acquired     |                |         | 124,348 | 
|                              |                           |                |         |        
|Current liabilities           |                           |                | 4,474   |        
|Long-term debt                |                           |                | 20,000  |        
|Deferred tax liability        |                           |                | 18,477  |        
|                              |                           |                |         |        
|                              | Total liabilities assumed |                |         | 42,951  | 
|                              |                           |                |         |        
|                              | Net assets acquired       |                | $       | 81,397  | 
|                              |                           |                |         |        

The allocation of the purchase price resulted in
$17.1 million allocated to goodwill which is not expected
to be deductible for tax purposes.

The acquisition included certain non-cash
investing and financing activities not reflected in the
Consolidated Statement of Cash Flows for the year ended
December 31, 2002, as follows:

|                       |  |                |        | 
|---------------------- |  | -------------- | ------ | 
|                       |  |               
|                       |  | (In thousands)
|                       |  |               
|Common stock issued    |  | $              | 20,086 | 
|Long-term debt assumed |  |                | 20,000 | 

Subsequent to the acquisition, the long-term debt
of $20.0 million was repaid.

The following unaudited pro forma condensed
income statement information has been prepared as if the
acquisition had occurred at the beginning of the periods
presented. The historical results of operations have been
adjusted to reflect the difference between Athanors
historical depletion, depreciation and amortization

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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

and the expense calculated based on the value
allocated to the assets acquired. The information presented is
not necessarily indicative of the results of future operations
of the combined companies.

|                                         |         |                                          |         |      |      |   |         |   |       |  
|---------------------------------------- | ------- | ---------------------------------------- | ------- | ---- | ---- | - | ------- | - | ----- | -
|                                         |         | 2002                                     |         | 2001
|                                         |         |                                          |         |     
|                                         |         |                                         
|                                         |         | (In thousands, except per               
|                                         |         | share data)                             
|Revenues                                 |         | $                                        | 327,458 |      |      | $ | 344,256 |  
|Income (loss) from continuing operations |         |                                          | 24,952  |      |      |   | (82,432 | )
|Net income (loss)                        |         |                                          | 14,148  |      |      |   | (70,228 | )
|Earnings per share                       |         |                                          |         |      |      |   |         |  
|                                         | Basic   |                                          |         |      |      |   |         |   |      
|                                         |         | Income (loss) from continuing operations |         |      | 1.31 |   |         |   | (4.41 | )
|                                         |         | Net income (loss)                        |         |      | 0.74 |   |         |   | (3.75 | )
|                                         | Diluted |                                          |         |      |      |   |         |   |      
|                                         |         | Income (loss) from continuing operations |         |      | 1.30 |   |         |   | (4.41 | )
|                                         |         | Net income (loss)                        |         |      | 0.74 |   |         |   | (3.75 | )



|    |                              
|--- | -----------------------------
|13. | Commitments and Contingencies



| |                                        
| | ---------------------------------------
| | Legal Proceedings and Other
    Matters

We acquired properties from Unocal in 1996 and
are obligated to make a contingent payment based on net proceeds
received, less certain deductions, on oil sold through 2004 if
oil prices exceed thresholds set forth in the purchase and sale
agreement with Unocal. Any contingent payments paid or accrued
are accounted for as a purchase price adjustment to oil and gas
properties. We paid $10.8 million to Unocal in 2002
attributable to calendar year 2001 and recorded the payment as
an increase in oil and gas properties. In March 2003, we advised
Unocal that we had failed to take deductions to proceeds
received that we believe are permitted by the agreement.
Application of these deductions results in no payment due for
either calendar year 2001 or 2002. Unocal disputes this position
for both years. We filed suit against Unocal to recover the 2001
payment, secure a declaration of the appropriate deduction
methodology to be applied for 2002 through 2004 and to recover
attorneys fees. Unocal has answered and filed a
counterclaim claiming breach of contract and anticipatory breach
of contract seeking $16.0 million for 2002, a declaration
of the appropriate deduction methodology payment of amounts
attributable to 2003 and 2004 and attorneys fees. While
the outcome of this matter is not presently determinable, its
resolution is not expected to have a material impact on our
results of operations, financial condition or liquidity.

We have asserted a claim against Torch Energy
Advisors for matters arising out of our former outsourcing
arrangement. Among other demands, we have requested the return
of a $2.0 million working capital advance. Torch has
asserted claims for indemnity and payment of certain fees it
asserts are owed to them. These outstanding issues will be
arbitrated and are not expected to have a material impact on our
results of operations, financial condition or liquidity.

On December 18, 2002, a lawsuit was filed by
Hills for Everyone, a non-profit corporation, against Orange
County and Nuevo Energy Company challenging the adequacy of the
Environment Impact Report for our Tonner Hills project. The suit
sought to compel Orange County to set aside its decision to
adopt the Environment Impact Report and sought additional
environmental analysis and mitigation measures. We contested the
litigation. During the second quarter of 2003, we entered into a
settlement agreement with Hills for Everyone and Orange County
ending the litigation. The settlement did not have a material
impact on the project or our results of operations, financial
condition or liquidity.

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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                              
| | -----------------------------
| | Commitments and Contingencies

On December 30, 2003, we sold our Tonner
Hills residential development property for approximately
$47 million. We received $16 million of the purchase
price on the date of the sale and anticipate receiving an
additional $22.5 million on March 29, 2004. The
$16 million is currently reported in other liabilities, and
the $22.5 million will be reported in other liabilities as
these amounts are accounted for as deposits until certain
habitat restoration outlined in the purchase and sales agreement
completed by us.

On September 14, 2001, during an annual
inspection, we discovered fractures in the heat affected zone of
certain flanges on our pipeline that connects the Point
Pedernales field with onshore processing facilities. We
voluntarily elected to shut-in production in the field while
repairs were being made. The daily net production from this
field was approximately 5,000 barrels of crude oil and
1.2 MMcf of natural gas, representing approximately 11% of
our daily production. We replaced the damaged flanges, as well
as others which had not shown signs of damage. We resumed
production in January 2002. During the third quarter 2002 we
reached a final agreement with our underwriters with respect to
our business interruption claim. Accordingly, we recognized
$3.0 million of business interruption recoveries during the
third quarter 2002 which is classified in other revenue and
received payment on this claim by year-end 2002. As of
December 31, 2003, all outstanding claims have been settled.

On June 15, 2001, we experienced a failure
of a carbon dioxide treatment vessel at the Rincon Onshore
Separation Facility (ROSF) located in Ventura
County, California. There were no injuries associated with this
event. Crude oil and natural gas produced from three fields
offshore California are transported onshore by pipeline to the
ROSF plant where crude oil and water are separated and treated,
and carbon dioxide is removed from the natural gas stream. The
daily net production associated with these fields at the time of
the incident was approximately 3,000 barrels of crude oil and
2.4 MMcf of natural gas, representing approximately 6% of
our daily production. In early July 2001, crude oil production
resumed and full gas sales resumed by mid August 2001. Insurance
claims relating to the cost of repair and business interruption
(less a 30-day waiting period) were settled in the second
quarter of 2003, and we recognized income of $2.3 million
in connection with the insurance settlement.

On September 22, 2000, we were named as a
defendant in the lawsuit Thomas Wachtell et al. versus
Nuevo Energy Company in the Superior Court of Los Angeles
County, California. We settled this lawsuit in June 2002
for, among other matters, making a payment to plaintiffs of
$3.4 million, and receiving from plaintiffs certain
interests in properties and extinguishing certain contract
rights of plaintiffs. We established a reserve for this
contingency in 2001 and the settlement payment did not have a
material impact on our results of operations or financial
position.

On April 5, 2000, we filed a lawsuit against
ExxonMobil Corporation in the United States District Court for
the Central District of California, Western Division regarding
our 50% interest in the Sacate field, offshore
Santa Barbara County, California. We settled this lawsuit
in June 2002. Under the terms of the settlement agreement, we
received $16.5 million from ExxonMobil and conveyed to them
our interest in the Santa Ynez Unit, our non-consent interest in
the adjacent Pescado field and relinquished our right to
participate in the Sacate field and recorded a
$15.3 million gain related to the sale of this unproved
property.

In September 1997, there was a spill of crude oil
into the Santa Barbara Channel from a pipeline that
connects our Point Pedernales field with shore-based processing
facilities. The volume of the spill was estimated to be
163 barrels of oil. Repairs were completed by the end of
1997, and production recommenced in December 1997. The costs of
the clean up and the cost to repair the pipeline were covered by
our insurance, less a deductible of $0.1 million. As of
December 31, 2003 all significant outstanding claims have
been settled. We expect that the final insurance settlements
related to these claims will be insignificant. We are awaiting
final disposition of certain insurance claims that have been
submitted to our carriers.

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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Our acquisition agreement to purchase the two
subsidiaries owning interests in the Yombo field offshore Congo
contains a provision for contingent royalty to be paid by us to
the seller if certain conditions are met. Under this provision
we will pay to the seller an amount equal to $2.8 million,
increased by 7% per year from 1995, if we recover from our
Yombo field production an amount greater than the sum of our
capital costs, our operating costs, and $27.0 million,
which entire amount increases 27% annually. We currently
estimate that we could reach payout as early as 2005.

Our foreign investments involve risks typically
associated with investments in emerging markets such as an
uncertain political, economic, legal and tax environment and
expropriation and nationalization of assets. In addition, if a
dispute arises in our foreign operations, we may be subject to
the exclusive jurisdiction of foreign courts or may not be
successful in subjecting foreign persons to the jurisdiction of
the United States. We attempt to conduct our business and
financial affairs so as to protect against political and
economic risks applicable to operations in the various countries
where we operate, but there can be no assurance that we will be
successful in so protecting ourselves. A portion of our
investment in the Congo is insured through political risk
insurance provided by Overseas Private Investment Company
(OPIC). The political risk insurance through OPIC
covers up to $25.0 million relating to expropriation, which
is the maximum coverage available through OPIC. During 1997, a
new government was established in the Congo. Although the
political situation in the Congo has not to date had a material
adverse effect on our operations in the Congo, no assurances can
be made that continued political unrest in West Africa will not
have a material adverse effect on us or our operations in the
Congo in the future.

In connection with our February 1995 acquisitions
of two subsidiaries owning interests in the Yombo field offshore
Congo, we and a wholly-owned subsidiary of CMS NOMECO
Oil & Gas Co. (CMS) agreed with the seller
of the subsidiaries not to claim certain tax losses (dual
consolidated losses) incurred by such subsidiaries prior
to the acquisitions. Under the tax law in the Congo, as it
existed when this acquisition took place, if an entity is
acquired in its entirety and that entity has certain tax
attributes, for example tax loss carryforwards from operations
in the Republic of Congo, the subsequent owners of that entity
can continue to utilize those losses without restriction.
Pursuant to the agreement, we and CMS may be liable to the
seller for the recapture of dual consolidated losses (net
operating losses of any domestic corporation that are subject to
an income tax of a foreign country without regard to the source
of its income or on a residence basis) utilized by the seller in
years prior to the acquisitions if certain triggering events
occur, including: (i) a disposition by either us or CMS of
its respective Congo subsidiary, (ii) either Congo
subsidiarys sale of its interest in the Yombo field,
(iii) the acquisition of us or CMS by another consolidated
group or (iv) the failure of CMSs Congo subsidiary or
us to continue as a member of its respective consolidated group.

A triggering event will not occur, however, if a
subsequent purchaser enters into certain agreements specified in
the consolidated return regulations intended to ensure that such
dual consolidated losses will not be claimed. The only time
limit associated with the occurrence of a triggering event
relates to the utilization of a dual consolidated loss in a
foreign jurisdiction. A dual consolidated loss that is utilized
to offset income in a foreign jurisdiction is only subject to
recapture for 15 years following the year in which the dual
consolidated loss was incurred for U.S. income tax
purposes. We and CMS have agreed among ourselves that the party
responsible for the triggering event shall indemnify the other
for any liability to the seller as a result of such triggering
event. Our potential direct liability could be as much as
$25.1 million if a triggering event with respect to us
occurs. Additionally, we believe that CMSs liability (for
which we would be jointly liable with an indemnification right
against CMS) could be as much as $42.8 million. CMS sold
their interest in the Yombo field in 2002, to a
U.S. subsidiary of Perenco, S.A. (Perenco). The sale was
not a triggering event as both CMS and Perenco filed a request
for a Closing Agreement with the Internal Revenue Service in
accordance with the U.S. consolidated tax return
regulations prior to the sale. Further, we do not expect a
triggering event to occur with respect to Nuevo, CMS or Perenco,
and do not believe the agreement will have a material adverse
effect upon us. We do not expect that the proposed merger with
Plains will be a triggering event.

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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In 1996, the Congo government requested that the
convention governing the Marine I Exploitation Permit be
converted to a Production Sharing Agreement (PSA).
We are under no obligation to convert to a PSA, and our existing
convention is valid and protected by law. Our position is that
any conversion to a PSA should have no detrimental impact to us,
otherwise, we will not agree to any such conversion. Discussions
with the government have been ongoing intermittently since early
1997. To date, no final agreement has been reached concerning
conversion to a PSA.

We have been named as a defendant in certain
other lawsuits incidental to our business. These actions and
claims in the aggregate seek damages against us and are subject
to the inherent uncertainties in any litigation. We are
defending ourselves vigorously in all such matters. We have
reserved an amount that we deem adequate to cover any potential
losses related to these matters to the extent the losses are
deemed probable and estimable. This amount is reviewed
periodically and changes may be made, as appropriate. Any
additional costs related to these potential losses are not
expected to be material to our operating results, financial
condition or liquidity.



| |                                                                  
| | -----------------------------------------------------------------
| | Guarantees Related to Assets or Obligations
    of Third Parties.

We have indemnified certain third parties for
future environmental remediation costs that may be incurred for
properties that we purchased or properties that we sold to a
third party. The properties may or may not require environmental
remediation and if we are determined to be responsible, our
indemnities may require us, among other matters, to pay for the
remediation costs. We are not able to determine the maximum
potential amount, if any, of future payments that we could be
required to make under these indemnifications primarily due to
the following: the indefinite term of the majority of these
indemnities; the unknown extent of possible contamination; the
conditional nature of our responsibility under certain
indemnities; uncertainties related to the timing of the
remediation work; possible changes in laws governing the
remediation process; the unknown number of claims that may be
made and changes in remediation technology.

We have performance obligations in the ordinary
course of business that are secured by surety bonds or letters
of credit. These surety bonds and letters of credit are issued
by financial institutions and are required to be reimbursed if
drawn upon. At December 31, 2003, we had surety bonds of
$39.7 million and letters of credit of $1.6 million.

We have guaranteed the payment of the Nuevo
Financing I TECONS issued December 1996. The TECONS are
supported by our 5 3/4% Convertible Debentures, which are
included on our balance sheet as long-term liabilities to
unconsolidated affiliate.

In the ordinary course of business, we have
provided indemnifications and guarantees that are not explicitly
defined whose terms range in duration. We do not believe that
these will have a material effect on our results of operation,
financial condition or liquidity.



| |                 
| | ----------------
| | Operating Leases

We have operating leases in the normal course of
business, which include those for office space, operating
facilities and office equipment, with varying terms from 2004 to
2009. Total rental expense under the agreements was
$1.5 million in 2003, $1.3 million in 2002 and
$1.1 million in 2001. The rental expense is recorded in
general and administrative expense. At December 31, 2003,
our total commitments under operating leases were approximately
$6.1 million.

66



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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Minimum annual rental commitments at
December 31, 2003, were as follows:

|           |       |            |       |       | 
|---------- | ----- | ---------- | ----- | ----- | 
|           |       | Operating 
|           |       | Leases    
|           |       |           
|           |       | (In       
|           |       | thousands)
|2004       |       | $          | 1,492 |      
|2005       |       |            | 1,487 |      
|2006       |       |            | 1,214 |      
|2007       |       |            | 808   |      
|2008       |       |            | 808   |      
|Thereafter |       |            | 270   |      
|           |       |            |       |      
|           | Total |            | $     | 6,079 | 
|           |       |            |       |      



|    |                      
|--- | ---------------------
|14. | Financial Instruments

We have entered into commodity swaps, collars,
put options and interest rate swaps. The commodity swaps,
collars and put options are designated as cash flow hedges and
the interest rate swaps are designated as fair value hedges in
accordance with SFAS 133. Quantities covered by crude
hedges are based on West Texas Intermediate (WTI)
barrels. Our production is expected to average 82% of WTI,
therefore, each WTI barrel hedges 1.22 barrels of our
production.



| |                                                          
| | ---------------------------------------------------------
| | Derivative Instruments Designated as Cash
    Flow Hedges

At December 31, 2003, we had entered into
the following cash flow hedges:

|                    |      |           |  |             |        |       |  |           |       |         |  |       |     |  |  |  |        |  |  |  |      |  |  |  |              | 
|------------------- | ---- | --------- |  | ----------- | ------ | ----- |  | --------- | ----- | ------- |  | ----- | --- |  |  |  | ------ |  |  |  | ---- |  |  |  | ------------ | 
|                    |      |           |  |            
|                    |      | Crude Oil |  | Natural Gas
|                    |      |           |  |            
|                    |      | Bbls/ day |  | $/Bbl       |        | Index |  | MMbtu/day |       | $/MMbtu |  | Index
|                    |      |           |  |             |        |       |  |           |       |         |  |      
|Swaps for Sales     |      |           |  |             |        |       |  |           |       |         |  |       |     |  |  |  |        |  |  |  |      |  |  | 
|                    | 2004 |           |  |             |        |       |  |           |       |         |  |       |     |  |  |  |        |  |  |  |      |  |  |  |             
|                    |      | 1st Qtr   |  |             | 19,800 |       |  |           | 25.71 |         |  |       | WTI |  |  |  | 16,500 |  |  |  | 4.93 |  |  |  | Waha & Socal | 
|                    |      | 2nd Qtr   |  |             | 19,500 |       |  |           | 25.71 |         |  |       | WTI |  |  |  | 14,500 |  |  |  | 4.65 |  |  |  | Waha & Socal | 
|                    |      | 3rd Qtr   |  |             | 19,800 |       |  |           | 25.71 |         |  |       | WTI |  |  |  | 10,500 |  |  |  | 4.50 |  |  |  | Waha & Socal | 
|                    |      | 4th Qtr   |  |             | 21,000 |       |  |           | 25.98 |         |  |       | WTI |  |  |  | 14,500 |  |  |  | 4.64 |  |  |  | Waha & Socal | 
|                    | 2005 |           |  |             |        |       |  |           |       |         |  |       |     |  |  |  |        |  |  |  |      |  |  |  |             
|                    |      | 1st Qtr   |  |             | 17,500 |       |  |           | 24.88 |         |  |       | WTI |  |  |  | 13,000 |  |  |  | 4.75 |  |  |  | Waha & Socal | 
|                    |      | 2nd Qtr   |  |             | 14,500 |       |  |           | 24.67 |         |  |       | WTI |  |  |  | 9,500  |  |  |  | 4.66 |  |  |  | Waha         | 
|                    |      | 3rd Qtr   |  |             | 4,500  |       |  |           | 22.14 |         |  |       | WTI |  |  |  | 9,500  |  |  |  | 4.40 |  |  |  | Waha         | 
|                    |      | 4th Qtr   |  |             | 4,500  |       |  |           | 22.14 |         |  |       | WTI |  |  |  | 9,500  |  |  |  | 4.40 |  |  |  | Waha         | 
|Swaps for Purchases |      |           |  |             |        |       |  |           |       |         |  |       |     |  |  |  |        |  |  |  |      |  |  | 
|                    |      | 2004      |  |             |        |       |  |           |       |         |  |       |     |  |  |  | 8,000  |  |  |  | 3.91 |  |  |  | Socal        | 
|                    |      | 2005      |  |             |        |       |  |           |       |         |  |       |     |  |  |  | 8,000  |  |  |  | 3.85 |  |  |  | Socal        | 

At December 31, 2003, the fair market value
of these hedge positions is a loss of $40.5 million. All of
these agreements expose us to counterparty credit risk to the
extent that the counterparty is unable to meet its settlement
commitments.

67



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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                           
| | ----------------------------------------------------------
| | Derivative Instruments Designated as Fair
    Value Hedges

In late December 2001 and early 2002, we entered
into three interest rate swap agreements with notional amounts
totaling $200 million to hedge the fair value of our
9 1/2% Notes due 2008 and our 9 3/8% Notes
due 2010. These swaps were designated as fair value hedges and
as interest rates fluctuated, the change in value of these
instruments was reflected as an increase or decrease of
long-term debt with a corresponding increase in long-term assets
or liabilities.

In late August and early September 2002, we
terminated our swap transactions relating to these Notes. As a
result of these terminations, we received accrued interest of
$2.2 million and the present value of the swap option of
$9.6 million on our 9 3/8% Notes and
$0.5 million in accrued interest and the present value of
the swap option of $2.5 million on our
9 1/2% Notes. The gain of $9.6 million on our
9 3/8% Notes and $2.5 million on our
9 1/2% Notes is reflected as an increase of long-term
debt and will be amortized as a reduction to interest expense
over the life of the Notes. During the twelve months ended
December 31, 2003, we amortized $1.3 million as a
reduction of interest expense.

Following the termination of the three interest
rate swaps referenced above, in late August and early November
2002, we entered into two new interest rate swap agreements with
notional amounts totaling $100.0 million, to hedge a
portion of the fair value of our 9 3/8% Notes due
2010. These swaps were also designated and accounted for as fair
value hedges.

In May 2003, we terminated our swap transactions
relating to these Notes. As a result of these terminations, we
received accrued interest of $0.4 million and the present
value of the swap option of $4.1 million. The remaining
gain of $4.1 million continues to be reflected as an
increase of long-term debt and is being amortized as a reduction
to interest expense over the life of the Notes. Through
December 31,2003, we had amortized $0.2 million.

In late October 2003, we entered into an interest
rate swap agreement with a notional amount of $100 million,
to hedge a portion of the fair value of our
9 3/8% Notes due 2010. This swap is designated as a
fair value hedge and is reflected as a decrease in long-term
debt of $0.2 million as of December 31,2003, with a
corresponding increase in long-term liabilities. Under the terms
of the agreement, the counterparty pays us a weighted average
fixed annual rate of 9 3/8% on total notional amount of
$100 million, and we pay the counterparty a variable annual
rate equal to the six-month LIBOR rate plus a weighted average
rate of 5.02%.



| |                                                    
| | ---------------------------------------------------
| | Derivative Instruments Not Designated as
    Hedges

In December 2001, Enron Corp. (Enron)
and certain of its affiliates filed voluntary petitions for
reorganization under Chapter 11 of the United States
Bankruptcy Code. As a result, we recorded a $7.6 million
charge in the fourth quarter of 2001: $1.2 million related
to the November and December 2001 crude oil price swaps,
$0.9 million related to the Enron call spread (see below),
and $5.5 million related to the fair value of open hedges
of second, third and fourth quarter 2002 crude oil production.
Once a deterioration in creditworthiness creates uncertainty as
to whether the future cash flows from the hedging instrument
will be highly effective in offsetting the hedged risk, the
derivative instrument is no longer considered highly effective
and no longer qualifies for hedge accounting treatment. At such
time, the fair value of the derivative asset or liability is
adjusted to its new fair value, with the change in value being
charged to current earnings. The net gain or loss of the
derivative instruments previously reported in other
comprehensive income remains in accumulated other comprehensive
income and is reclassified into earnings during the period in
which the originally designated hedge items affect earnings. The
$2.2 million deferred gain in Other Comprehensive Income at
December 31, 2001 was reclassified into earnings in 2002.

In 2001 and 2000, we entered into call spreads
with the anticipation of using the proceeds to offset the Unocal
Contingent payment. (See Note 13.) Subsequent to entering
into the call spreads, the market fell and as a result,
offsetting call spreads were purchased to economically nullify
the trade. All of our existing call

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NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

spreads had been offset through the purchase of a
mirror spread, however, the call spread with Enron was
cancelled. (See above discussion). The remaining mirror call
spread is not designated as a hedging instrument and is
marked-to-market with changes in fair value recognized currently
as derivative gain/loss. For the twelve months ended
December 31, 2003, we recognized $1.8 million as a
derivative loss. At December 31, 2003, the call spread
matured for $4.6 million.

In August 2003, we entered into three-way collars
that are not designated as hedging instruments and are
marked-to-market with changes in fair value recognized currently
as a derivative gain/loss. During the twelve months ended
December 31, 2003, we recorded a $4.1 million
derivative loss and recorded the fair value of the derivative
loss at December 31, 2003, totaling $4.1 million as a
liability.

|                     |      |             |  |       |       |                        |  |  |     |  |  |   |                       | 
|-------------------- | ---- | ----------- |  | ----- | ----- | ---------------------- |  |  | --- |  |  | - | --------------------- | 
|                     |      | Bbls/ day   |  | Index |       | Weighted Average Price
|                     |      |             |  |       |       |                       
|Three-Way Collars(1) |      |             |  |       |       |                        |  |  |     |  |  |  
|                     | 2004 |             |  |       |       |                        |  |  |     |  |  |   |                      
|                     |      | (Jan  Dec) |  |       | 8,000 |                        |  |  | WTI |  |  | $ | 19.28  24.00  31.00 | 



---



|    |                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | A Three-Way Collar combines a sold
    put, a purchased put and a sold call. The purchased put and sold
    put establish a floating minimum price and the sold call
    establishes a maximum price we will receive for the volumes
    under contract.



| |                                         
| | ----------------------------------------
| | Fair Values of Financial
    Instruments

Fair value for cash, short-term investments,
receivables and payables approximates carrying value. The
following table details the carrying values and approximate fair
values of our other investments, derivative financial
instruments and long-term debt at December 31, 2003 and
2002.

|                               |                       |                   |         |                   |   |          |         |            |   |  |         |         |   |  |         |         |  
|------------------------------ | --------------------- | ----------------- | ------- | ----------------- | - | -------- | ------- | ---------- | - |  | ------- | ------- | - |  | ------- | ------- | -
|                               |                       |                   |         |                  
|                               |                       | December 31, 2003 |         | December 31, 2002
|                               |                       |                   |         |                  
|                               |                       | Carrying          |         |                   |   | Carrying |         |           
|                               |                       | Amount            |         | Fair Value        |   | Amount   |         | Fair Value
|                               |                       |                   |         |                   |   |          |         |           
|                               |                       |                  
|                               |                       | (In thousands)   
|Derivative Instruments         |                       |                   |         |                   |   |          |         |            |   |  |         |         |   |  |         |        
|                               | Commodity price swaps |                   | $       | (40,484           | ) |          | $       | (40,484    | ) |  | $       | (22,311 | ) |  | $       | (22,311 | )
|                               | Interest rate swaps   |                   |         | (153              | ) |          |         | (153       | ) |  |         | 2,161   |   |  |         | 2,161   |  
|Long-term debt (see Note 9)(1) |                       |                   | 340,000 |                   |   |          | 338,894 |            |   |  | 409,577 |         |   |  | 415,833 |        
|TECONS                         |                       |                   |        |                   |   |          |        |            |   |  | 115,000 |         |   |  | 64,400  |        



---



|    |                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As a result of adopting FIN46R, Consolidation
    of Variable Interest Entities, at December 31, 2003, we
    are required to deconsolidate our wholly owned Nuevo
    Financing I business trust which issued our TECONS. We are
    including the long-term liability to unconsolidated affiliate in
    long-term debt.

The fair value of our long-term debt and TECONS
were determined based upon interest rates currently available to
us for borrowing with similar terms at December 31, 2003
and 2002.



|    |                                     
|--- | ------------------------------------
|15. | Supplemental Information (Unaudited)



| |                                     
| | ------------------------------------
| | Oil and Gas Producing
    Activities

Included herein is information with respect to
oil and gas acquisition, exploration, development and production
activities, which is based on estimates of year-end oil and gas
reserve quantities and estimates of future development costs and
production schedules. Reserve quantities and future production
as of December 31, 2003, and for previous years, are based
primarily on reserve reports prepared by the independent

69



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

petroleum engineering firm of Ryder Scott Company
L.P. These estimates are inherently imprecise and subject to
substantial revision.

Estimates of future net cash flows from proved
reserves of gas, oil, condensate and natural gas liquids
(NGL) were made in accordance with
SFAS No. 69, Disclosures about Oil and Gas
Producing Activities. The estimates are based on the NYMEX
cash price at year-end 2003, of $32.55 per Bbl and
$5.97 per MMbtu adjusted for basis differences, and are
adjusted for the effects of contractual agreements with Unocal
and Amoco in connection with the California and Congo property
acquisitions (see Note 13).

Estimated future cash inflows are reduced by
estimated future development and production costs based on
year-end cost levels, assuming continuation of existing economic
conditions, and by estimated future income tax expense. Tax
expense is calculated by applying the existing statutory tax
rates, including any known future changes, to the pre-tax net
cash flows, less depreciation of the tax basis of the properties
and depletion allowances applicable to the gas, oil, condensate
and NGL production. Because the disclosure requirements are
standardized, significant changes can occur in these estimates
based upon oil and gas prices currently in effect. The results
of these disclosures should not be construed to represent the
fair market value of our oil and gas properties. A market value
determination would include many additional factors including:
(i) anticipated future increases or decreases in oil and
gas prices and production and development costs; (ii) an
allowance for return on investment; (iii) the value of
additional reserves, not considered proved at the present, which
may be recovered as a result of further exploration and
development activities; and (iv) other business risks.



| |               
| | --------------
| | Costs Incurred

The following table sets forth the costs incurred
in property acquisition and development activities:

|     |                             |                |         |         |  |       |        |        |  |   |         |         | 
|---- | --------------------------- | -------------- | ------- | ------- |  | ----- | ------ | ------ |  | - | ------- | ------- | 
|     |                             | Domestic       |         | Foreign |  | Total
|     |                             |                |         |         |  |      
|     |                             |               
|     |                             | (In thousands)
|2003 |                             |                |         |         |  |       |        |        |  |   |         |        
|     | Property acquisition        |                | $       | 830     |  |       | $      |       |  |   | $       | 830     | 
|     | Exploration                 |                |         | 100     |  |       |        | 926    |  |   |         | 1,026   | 
|     | Development                 |                |         | 55,788  |  |       |        | 1,206  |  |   |         | 56,994  | 
|     | Asset retirement obligation |                |         | 3,374   |  |       |        |       |  |   |         | 3,374   | 
|     |                             |                |         |         |  |       |        |        |  |   |         |        
|     |                             | $              | 60,092  |         |  | $     | 2,132  |        |  | $ | 62,224  |        
|     |                             |                |         |         |  |       |        |        |  |   |         |        
|2002 |                             |                |         |         |  |       |        |        |  |   |         |        
|     | Property acquisition        |                | $       | 107,064 |  |       | $      |       |  |   | $       | 107,064 | 
|     | Exploration                 |                |         | 357     |  |       |        | 1,244  |  |   |         | 1,601   | 
|     | Development                 |                |         | 52,531  |  |       |        | 1,527  |  |   |         | 54,058  | 
|     |                             |                |         |         |  |       |        |        |  |   |         |        
|     |                             | $              | 159,952 |         |  | $     | 2,771  |        |  | $ | 162,723 |        
|     |                             |                |         |         |  |       |        |        |  |   |         |        
|2001 |                             |                |         |         |  |       |        |        |  |   |         |        
|     | Property acquisition        |                | $       | 47,266  |  |       | $      | 47     |  |   | $       | 47,313  | 
|     | Exploration                 |                |         | 16,004  |  |       |        | 4,703  |  |   |         | 20,707  | 
|     | Development                 |                |         | 100,721 |  |       |        | 20,222 |  |   |         | 120,943 | 
|     |                             |                |         |         |  |       |        |        |  |   |         |        
|     |                             | $              | 163,991 |         |  | $     | 24,972 |        |  | $ | 188,963 |        
|     |                             |                |         |         |  |       |        |        |  |   |         |        

70



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Pro forma costs incurred for the years ended
December 31, 2002 and 2001, for the change in accounting
had SFAS No. 143 been implemented during these periods
would have been $0.4 million and $0.9 million
respectively, associated with property acquisitions and new
domestic wells drilled.



---



|    |                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes capitalized interest directly related to
    development activities of $1.6 million, $1.9 million
    and $2.5 million in 2003, 2002 and 2001, respectively.



| |                  
| | -----------------
| | Capitalized Costs

The following table sets forth the capitalized
costs relating to oil and gas activities and the associated
accumulated depreciation, depletion and amortization:

|     |                     |                                                          |                       |         |          |         |   |        |         |        |   |           |           |         | 
|---- | ------------------- | -------------------------------------------------------- | --------------------- | ------- | -------- | ------- | - | ------ | ------- | ------ | - | --------- | --------- | ------- | 
|     |                     | Domestic                                                 |                       | Foreign |          | Total  
|     |                     |                                                          |                       |         |          |        
|     |                     |                                                         
|     |                     | (In thousands)                                          
|2003 |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|     | Proved properties   |                                                          | $                     | 911,722 |          |         | $ | 93,166 |         |        | $ | 1,004,888 |          
|     | Unproved properties |                                                          |                       | 26,314  |          |         |   |       |         |        |   | 26,314    |          
|     |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|     |                     | Total capitalized costs                                  |                       |         | 938,036  |         |   |        | 93,166  |        |   |           | 1,031,202 |        
|     |                     | Accumulated depreciation, depletion and
    amortization |                       |         | (294,833 | )       |   |        | (50,258 | )      |   |           | (345,091  | )      
|     |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|     |                     |                                                          | Net capitalized costs |         | $        | 643,203 |   |        | $       | 42,908 |   |           | $         | 686,111 | 
|     |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|2002 |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|     | Proved properties   |                                                          | $                     | 829,839 |          |         | $ | 92,964 |         |        | $ | 922,803   |          
|     | Unproved properties |                                                          |                       | 28,369  |          |         |   | 86     |         |        |   | 28,455    |          
|     |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|     |                     | Total capitalized costs                                  |                       |         | 858,208  |         |   |        | 93,050  |        |   |           | 951,258   |        
|     |                     | Accumulated depreciation, depletion and
    amortization |                       |         | (304,740 | )       |   |        | (44,155 | )      |   |           | (348,895  | )      
|     |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|     |                     |                                                          | Net capitalized costs |         | $        | 553,468 |   |        | $       | 48,895 |   |           | $         | 602,363 | 
|     |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|2001 |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|     | Proved properties   |                                                          | $                     | 893,215 |          |         | $ | 91,437 |         |        | $ | 984,652   |          
|     | Unproved properties |                                                          |                       | 27,117  |          |         |   | 2,660  |         |        |   | 29,777    |          
|     |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|     |                     | Total capitalized costs                                  |                       |         | 920,332  |         |   |        | 94,097  |        |   |           | 1,014,429 |        
|     |                     | Accumulated depreciation, depletion and
    amortization |                       |         | (378,644 | )       |   |        | (37,693 | )      |   |           | (416,337  | )      
|     |                     |                                                          |                       |         |          |         |   |        |         |        |   |          
|     |                     |                                                          | Net capitalized costs |         | $        | 541,688 |   |        | $       | 56,404 |   |           | $         | 598,092 | 
|     |                     |                                                          |                       |         |          |         |   |        |         |        |   |          

We have included asset retirement costs in total
capitalized costs and the related accumulated allocation of the
asset retirement costs in accumulated depreciation, depletion
and amortization for the year ended December 31, 2003. Pro
forma basis as required by SFAS No. 143, had we
adopted the provisions of SFAS No. 143 prior to
January 1, 2003, net capitalized costs would have been as
follows:

|                  |  |                       |        | 
|----------------- |  | --------------------- | ------ | 
|                  |  | Pro forma Asset      
|Adoption Date     |  | Retirement Obligation
|                  |  |                      
|                  |  | (In thousands)       
|December 31, 2002 |  | $                     | 92,680 | 
|December 31, 2001 |  |                       | 84,182 | 
|January 1, 2001   |  |                       | 76,461 | 

71



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                   
| | --------------------------------------------------
| | Results of operations for producing
    activities

|     |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |          |         |  
|---- | ------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | - | -------- | ------- | ----- | - | ------- | ------ | - | - | -------- | ------- | -
|     |                                                         | Domestic                                                                                              |   | Foreign  |         | Total
|     |                                                         |                                                                                                       |   |          |         |      
|     |                                                         |                                                                                                      
|     |                                                         | (In thousands)                                                                                       
|2003 |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|     | Revenues from oil and gas producing activities          |                                                                                                       | $ | 327,009  |         |       | $ | 42,966  |        |   | $ | 369,975  |        
|     | Production costs                                        |                                                                                                       |   | (149,261 | )       |       |   | (10,571 | )      |   |   | (159,832 | )      
|     | Exploration costs                                       |                                                                                                       |   | (689     | )       |       |   | (1,426  | )      |   |   | (2,115   | )      
|     | Depreciation, depletion, amortization and
    accretion |                                                                                                       |   | (62,919  | )       |       |   | (5,847  | )      |   |   | (68,766  | )      
|     |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|     | Income (loss) before income tax                         |                                                                                                       |   | 114,140  |         |       |   | 25,122  |        |   |   | 139,262  |        
|     | Income tax (provision) benefit                          |                                                                                                       |   | (43,830  | )       |       |   | (9,647  | )      |   |   | (53,477  | )      
|     |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|     |                                                         | Results of operations from producing activities
    (excluding corporate overhead and interest costs) |   | $        | 70,310  |       |   | $       | 15,475 |   |   | $        | 85,785  |  
|     |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|2002 |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|     | Revenues from oil and gas producing activities          |                                                                                                       | $ | 275,853  |         |       | $ | 31,978  |        |   | $ | 307,831  |        
|     | Production costs                                        |                                                                                                       |   | (122,207 | )       |       |   | (10,747 | )      |   |   | (132,954 | )      
|     | Exploration costs                                       |                                                                                                       |   | (1,024   | )       |       |   | (3,517  | )      |   |   | (4,541   | )      
|     | Depreciation, depletion and amortization                |                                                                                                       |   | (64,562  | )       |       |   | (6,198  | )      |   |   | (70,760  | )      
|     |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|     | Income (loss) before income tax                         |                                                                                                       |   | 88,060   |         |       |   | 11,516  |        |   |   | 99,576   |        
|     | Income tax (provision) benefit                          |                                                                                                       |   | (36,721  | )       |       |   | (4,802  | )      |   |   | (41,523  | )      
|     |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|     |                                                         | Results of operations from producing activities
    (excluding corporate overhead and interest costs) |   | $        | 51,339  |       |   | $       | 6,714  |   |   | $        | 58,053  |  
|     |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|2001 |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|     | Revenues from oil and gas producing activities          |                                                                                                       | $ | 274,786  |         |       | $ | 36,020  |        |   | $ | 310,806  |        
|     | Production costs                                        |                                                                                                       |   | (146,058 | )       |       |   | (14,028 | )      |   |   | (160,086 | )      
|     | Exploration costs                                       |                                                                                                       |   | (16,170  | )       |       |   | (5,888  | )      |   |   | (22,058  | )      
|     | Depreciation, depletion and amortization                |                                                                                                       |   | (58,347  | )       |       |   | (10,381 | )      |   |   | (68,728  | )      
|     | Provision for impairment of oil and gas properties      |                                                                                                       |   | (89,466  | )       |       |   | (14,024 | )      |   |   | (103,490 | )      
|     |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|     | Income (loss) before income tax                         |                                                                                                       |   | (35,255  | )       |       |   | (8,301  | )      |   |   | (43,556  | )      
|     | Income tax (provision) benefit                          |                                                                                                       |   | 14,148   |         |       |   | 3,318   |        |   |   | 17,466   |        
|     |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         
|     |                                                         | Results of operations from producing activities
    (excluding corporate overhead and interest costs) |   | $        | (21,107 | )     |   | $       | (4,983 | ) |   | $        | (26,090 | )
|     |                                                         |                                                                                                       |   |          |         |       |   |         |        |   |   |         

Pro forma results of operations from producing
activities for 2002 and 2001 for the change in accounting had
SFAS No. 143 been implemented during these periods
would have been $60,577 and $(22,526), respectively.



---



|  |                                                                        
|- | -----------------------------------------------------------------------
|* | Results of operations represent results from
    continuing operations.

72



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Our estimated total proved and proved developed
reserves of oil and gas are as follows:

|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |         |         |         | 
|---- | ------------------------------------ | ------------------------------------ | ----------------- | --------------------- | ------- | ------- |  | -------- | ------ | ------- |  | ------- | ------- | ------- |  | ------- | ------- | ------- |  | --- | ----- | ----- |  | ------- | ------- | ------- | 
|     |                                      |                                      |                   |                      
|     |                                      | Crude Oil and Liquids (MBbl)(1)      |                   | Natural Gas (MMcf)(1)
|     |                                      |                                      |                   |                      
|     |                                      | Domestic                             |                   | Foreign               |         | Total   |  | Domestic |        | Foreign |  | Total  
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |        
|2003 |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     | Proved reserves at beginning of year |                                      |                   | 206,237               |         |         |  | 14,100   |        |         |  | 220,337 |         |         |  | 173,844 |         |         |  | 841 |       |       |  | 174,685 |        
|     |                                      | Revisions of previous estimates      |                   |                       | 1,336   |         |  |          | 1,983  |         |  |         | 3,319   |         |  |         | 21,028  |         |  |     | 16    |       |  |         | 21,044  |        
|     |                                      | Extensions and discoveries           |                   |                       | 3,977   |         |  |          |       |         |  |         | 3,977   |         |  |         | 10,746  |         |  |     |      |       |  |         | 10,746  |        
|     |                                      | Production                           |                   |                       | (14,111 | )       |  |          | (1,764 | )       |  |         | (15,875 | )       |  |         | (14,394 | )       |  |     | (52   | )     |  |         | (14,446 | )      
|     |                                      | Sales of reserves in-place           |                   |                       | (35,636 | )       |  |          |       |         |  |         | (35,636 | )       |  |         | (25,531 | )       |  |     |      |       |  |         | (25,531 | )      
|     |                                      | Purchase of reserves in-place        |                   |                       | 3,949   |         |  |          |       |         |  |         | 3,949   |         |  |         | 673     |         |  |     |      |       |  |         | 673     |        
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      | Proved reserves at end of year       |                   |                       | 165,752 |         |  |          | 14,319 |         |  |         | 180,071 |         |  |         | 166,366 |         |  |     | 805   |       |  |         | 167,171 |        
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      | Proved developed reserves            |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |         |         |        
|     |                                      |                                      | Beginning of year |                       |         | 187,735 |  |          |        | 14,100  |  |         |         | 201,835 |  |         |         | 139,609 |  |     |       | 841   |  |         |         | 140,450 | 
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      |                                      | End of year       |                       |         | 150,098 |  |          |        | 14,319  |  |         |         | 164,417 |  |         |         | 124,916 |  |     |       | 805   |  |         |         | 125,721 | 
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|2002 |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      | Proved reserves at beginning of year |                   |                       | 199,014 |         |  |          | 15,844 |         |  |         | 214,858 |         |  |         | 111,363 |         |  |     | 1,129 |       |  |         | 112,492 |        
|     |                                      | Revisions of previous estimates      |                   |                       | 18,015  |         |  |          | 131    |         |  |         | 18,146  |         |  |         | 16,213  |         |  |     | (236  | )     |  |         | 15,977  |        
|     |                                      | Extensions and discoveries           |                   |                       |        |         |  |          |       |         |  |         |        |         |  |         | 2,564   |         |  |     |      |       |  |         | 2,564   |        
|     |                                      | Production                           |                   |                       | (14,640 | )       |  |          | (1,875 | )       |  |         | (16,515 | )       |  |         | (13,460 | )       |  |     | (52   | )     |  |         | (13,512 | )      
|     |                                      | Sales of reserves in-place           |                   |                       | (168    | )       |  |          |       |         |  |         | (168    | )       |  |         | (4,829  | )       |  |     |      |       |  |         | (4,829  | )      
|     |                                      | Purchase of reserves in-place        |                   |                       | 4,016   |         |  |          |       |         |  |         | 4,016   |         |  |         | 61,993  |         |  |     |      |       |  |         | 61,993  |        
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      | Proved reserves at end of year       |                   |                       | 206,237 |         |  |          | 14,100 |         |  |         | 220,337 |         |  |         | 173,844 |         |  |     | 841   |       |  |         | 174,685 |        
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      | Proved developed reserves            |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |         |         |        
|     |                                      |                                      | Beginning of year |                       |         | 169,507 |  |          |        | 15,844  |  |         |         | 185,351 |  |         |         | 92,890  |  |     |       | 1,129 |  |         |         | 94,019  | 
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      |                                      | End of year       |                       |         | 187,735 |  |          |        | 14,100  |  |         |         | 201,835 |  |         |         | 139,609 |  |     |       | 841   |  |         |         | 140,450 | 
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|2001 |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      | Proved reserves at beginning of year |                   |                       | 196,692 |         |  |          | 23,202 |         |  |         | 219,894 |         |  |         | 165,977 |         |  |     |      |       |  |         | 165,977 |        
|     |                                      | Revisions of previous estimates      |                   |                       | 15,164  |         |  |          | (5,478 | )       |  |         | 9,686   |         |  |         | (55,422 | )       |  |     |      |       |  |         | (55,422 | )      
|     |                                      | Extensions and discoveries           |                   |                       | 311     |         |  |          |       |         |  |         | 311     |         |  |         | 578     |         |  |     | 1,129 |       |  |         | 1,707   |        
|     |                                      | Production                           |                   |                       | (14,536 | )       |  |          | (1,880 | )       |  |         | (16,416 | )       |  |         | (12,750 | )       |  |     |      |       |  |         | (12,750 | )      
|     |                                      | Sales of reserves in-place           |                   |                       |        |         |  |          |       |         |  |         |        |         |  |         |        |         |  |     |      |       |  |         |        |        
|     |                                      | Purchase of reserves in-place        |                   |                       | 1,383   |         |  |          |       |         |  |         | 1,383   |         |  |         | 12,980  |         |  |     |      |       |  |         | 12,980  |        
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      | Proved reserves at end of year       |                   |                       | 199,014 |         |  |          | 15,844 |         |  |         | 214,858 |         |  |         | 111,363 |         |  |     | 1,129 |       |  |         | 112,492 |        
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      | Proved developed reserves            |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |         |         |        
|     |                                      |                                      | Beginning of year |                       |         | 160,039 |  |          |        | 11,013  |  |         |         | 171,052 |  |         |         | 122,500 |  |     |       |      |  |         |         | 122,500 | 
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        
|     |                                      |                                      | End of year       |                       |         | 169,507 |  |          |        | 15,844  |  |         |         | 185,351 |  |         |         | 92,890  |  |     |       | 1,129 |  |         |         | 94,019  | 
|     |                                      |                                      |                   |                       |         |         |  |          |        |         |  |         |         |         |  |         |         |         |  |     |       |       |  |        



---



|    |                                                                                    
|--- | -----------------------------------------------------------------------------------
|(1) | Reserves and production from discontinued
    operations are included in this table

73



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                     
| | ------------------------------------
| | Discounted future net cash
    flows

The standardized measure of discounted future net
cash flows and changes therein are shown below:

|     |                                                              |                |   |            |   |       |   |          |   |  |   |            |  
|---- | ------------------------------------------------------------ | -------------- | - | ---------- | - | ----- | - | -------- | - |  | - | ---------- | -
|     |                                                              | Domestic       |   | Foreign    |   | Total
|     |                                                              |                |   |            |   |      
|     |                                                              |               
|     |                                                              | (In thousands)
|2003 |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Future cash inflows                                          |                | $ | 5,104,116  |   |       | $ | 347,147  |   |  | $ | 5,451,263  |  
|     | Future production costs                                      |                |   | (2,274,483 | ) |       |   | (210,207 | ) |  |   | (2,484,690 | )
|     | Future development costs(1)                                  |                |   | (415,090   | ) |       |   | (1,730   | ) |  |   | (416,820   | )
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Future net inflows before income tax                         |                |   | 2,414,543  |   |       |   | 135,210  |   |  |   | 2,549,753  |  
|     | Future income taxes                                          |                |   | (733,350   | ) |       |   | (35,750  | ) |  |   | (769,100   | )
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Future net cash flows                                        |                |   | 1,681,193  |   |       |   | 99,460   |   |  |   | 1,780,653  |  
|     | 10% discount factor                                          |                |   | (632,055   | ) |       |   | (27,250  | ) |  |   | (659,305   | )
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Standardized measure of discounted future net
    cash flows |                | $ | 1,049,138  |   |       | $ | 72,210   |   |  | $ | 1,121,348  |  
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|2002 |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Future cash inflows                                          |                | $ | 5,290,440  |   |       | $ | 343,406  |   |  | $ | 5,633,846  |  
|     | Future production costs                                      |                |   | (2,435,730 | ) |       |   | (169,832 | ) |  |   | (2,605,562 | )
|     | Future development costs                                     |                |   | (392,746   | ) |       |   | (4,406   | ) |  |   | (397,152   | )
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Future net inflows before income tax                         |                |   | 2,461,964  |   |       |   | 169,168  |   |  |   | 2,631,132  |  
|     | Future income taxes                                          |                |   | (690,501   | ) |       |   | (48,777  | ) |  |   | (739,278   | )
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Future net cash flows                                        |                |   | 1,771,463  |   |       |   | 120,391  |   |  |   | 1,891,854  |  
|     | 10% discount factor                                          |                |   | (693,830   | ) |       |   | (28,738  | ) |  |   | (722,568   | )
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Standardized measure of discounted future net
    cash flows |                | $ | 1,077,633  |   |       | $ | 91,653   |   |  | $ | 1,169,286  |  
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|2001 |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Future cash inflows                                          |                | $ | 3,182,420  |   |       | $ | 248,569  |   |  | $ | 3,430,989  |  
|     | Future production costs                                      |                |   | (1,773,397 | ) |       |   | (123,628 | ) |  |   | (1,897,025 | )
|     | Future development costs                                     |                |   | (382,412   | ) |       |   | (6,863   | ) |  |   | (389,275   | )
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Future net inflows before income tax                         |                |   | 1,026,611  |   |       |   | 118,078  |   |  |   | 1,144,689  |  
|     | Future income taxes                                          |                |   | (149,564   | ) |       |   | (25,237  | ) |  |   | (174,801   | )
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Future net cash flows                                        |                |   | 877,047    |   |       |   | 92,841   |   |  |   | 969,888    |  
|     | 10% discount factor                                          |                |   | (366,050   | ) |       |   | (24,152  | ) |  |   | (390,202   | )
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           
|     | Standardized measure of discounted future net
    cash flows |                | $ | 510,997    |   |       | $ | 68,689   |   |  | $ | 579,686    |  
|     |                                                              |                |   |            |   |       |   |          |   |  |   |           



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes $162.8 million of undiscounted
    future asset retirement expenditures estimated as of
    December 31, 2003, using current estimates of future
    abandonment costs. At December 31, 2002 and at
    December 31, 2001 $168.9 million and
    $108.5 million, respectively, is included in undiscounted
    future development costs for future abandonment costs. See
    Note 3 for corresponding information regarding discounted
    asset retirement obligations.

74



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##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following are the principal sources of change
in the standardized measure of discounted future net cash flows:

|     |                                                                                                   |                |   |           |   |       |   |         |   |  |   |           |  
|---- | ------------------------------------------------------------------------------------------------- | -------------- | - | --------- | - | ----- | - | ------- | - |  | - | --------- | -
|     |                                                                                                   | Domestic       |   | Foreign   |   | Total
|     |                                                                                                   |                |   |           |   |      
|     |                                                                                                   |               
|     |                                                                                                   | (In thousands)
|2003 |                                                                                                   |                |   |           |   |       |   |         |   |  |   |          
|     | Standardized measure  beginning of year                                                          |                | $ | 1,077,633 |   |       | $ | 91,653  |   |  | $ | 1,169,286 |  
|     | Sales, net of production costs                                                                    |                |   | (177,748  | ) |       |   | (32,395 | ) |  |   | (210,143  | )
|     | Purchases of reserves in-place                                                                    |                |   | 18,855    |   |       |   |        |   |  |   | 18,855    |  
|     | Net change in prices and production costs                                                         |                |   | 261,120   |   |       |   | (17,894 | ) |  |   | 243,226   |  
|     | Extensions, discoveries and improved recovery,
    net of future production and development costs |                |   | 31,001    |   |       |   |        |   |  |   | 31,001    |  
|     | Changes in estimated future development costs                                                     |                |   | (30,096   | ) |       |   | 1,428   |   |  |   | (28,668   | )
|     | Development costs incurred                                                                        |                |   | 37,499    |   |       |   | 1,206   |   |  |   | 38,705    |  
|     | Revisions of quantity estimates                                                                   |                |   | 37,186    |   |       |   | 13,486  |   |  |   | 50,672    |  
|     | Accretion of discount                                                                             |                |   | 130,558   |   |       |   | 12,127  |   |  |   | 142,685   |  
|     | Net change in income taxes                                                                        |                |   | (84,031   | ) |       |   | 12,036  |   |  |   | (71,995   | )
|     | Sales of reserves in-place                                                                        |                |   | (160,577  | ) |       |   |        |   |  |   | (160,577  | )
|     | Changes in production rates and other                                                             |                |   | (92,262   | ) |       |   | (9,437  | ) |  |   | (101,699  | )
|     |                                                                                                   |                |   |           |   |       |   |         |   |  |   |          
|     | Standardized measure  end of year                                                                |                | $ | 1,049,138 |   |       | $ | 72,210  |   |  | $ | 1,121,348 |  
|     |                                                                                                   |                |   |           |   |       |   |         |   |  |   |          
|2002 |                                                                                                   |                |   |           |   |       |   |         |   |  |   |          
|     | Standardized measure  beginning of year                                                          |                | $ | 510,997   |   |       | $ | 68,689  |   |  | $ | 579,686   |  
|     | Sales, net of production costs                                                                    |                |   | (170,357  | ) |       |   | (21,368 | ) |  |   | (191,725  | )
|     | Purchases of reserves in-place                                                                    |                |   | 119,143   |   |       |   |        |   |  |   | 119,143   |  
|     | Net change in prices and production costs                                                         |                |   | 560,784   |   |       |   | 45,408  |   |  |   | 606,192   |  
|     | Extensions, discoveries and improved recovery,
    net of future production and development costs |                |   | 9,149     |   |       |   |        |   |  |   | 9,149     |  
|     | Changes in estimated future development costs                                                     |                |   | 29,946    |   |       |   | 449     |   |  |   | 30,395    |  
|     | Development costs incurred                                                                        |                |   | 31,123    |   |       |   | 1,527   |   |  |   | 32,650    |  
|     | Revisions of quantity estimates                                                                   |                |   | 120,287   |   |       |   | 736     |   |  |   | 121,023   |  
|     | Accretion of discount                                                                             |                |   | 51,100    |   |       |   | 7,782   |   |  |   | 58,882    |  
|     | Net change in income taxes                                                                        |                |   | (227,948  | ) |       |   | (20,484 | ) |  |   | (248,432  | )
|     | Sales reserves in-place                                                                           |                |   | (5,245    | ) |       |   |        |   |  |   | (5,245    | )
|     | Changes in production rates and other                                                             |                |   | 48,654    |   |       |   | 8,914   |   |  |   | 57,568    |  
|     |                                                                                                   |                |   |           |   |       |   |         |   |  |   |          
|     | Standardized measure  end of year                                                                |                | $ | 1,077,633 |   |       | $ | 91,653  |   |  | $ | 1,169,286 |  
|     |                                                                                                   |                |   |           |   |       |   |         |   |  |   |          
|2001 |                                                                                                   |                |   |           |   |       |   |         |   |  |   |          
|     | Standardized measure  beginning of year                                                          |                | $ | 1,149,562 |   |       | $ | 105,327 |   |  | $ | 1,254,889 |  
|     | Sales, net of production costs                                                                    |                |   | (154,785  | ) |       |   | (21,899 | ) |  |   | (176,684  | )
|     | Purchases of reserves in-place                                                                    |                |   | 13,759    |   |       |   |        |   |  |   | 13,759    |  
|     | Net change in prices and production costs                                                         |                |   | (904,288  | ) |       |   | (56,360 | ) |  |   | (960,648  | )
|     | Extensions, discoveries and improved recovery,
    net of future production and development costs |                |   | 2,750     |   |       |   | 114     |   |  |   | 2,864     |  
|     | Changes in estimated future development costs                                                     |                |   | (61,735   | ) |       |   | 16,455  |   |  |   | (45,280   | )
|     | Development costs incurred                                                                        |                |   | 62,817    |   |       |   | 16,100  |   |  |   | 78,917    |  
|     | Revisions of quantity estimates                                                                   |                |   | 20,906    |   |       |   | (25,804 | ) |  |   | (4,898    | )
|     | Accretion of discount                                                                             |                |   | 151,060   |   |       |   | 13,861  |   |  |   | 164,921   |  
|     | Net change in income taxes                                                                        |                |   | 361,041   |   |       |   | 24,150  |   |  |   | 385,191   |  
|     | Sales of reserves in-place                                                                        |                |   |          |   |       |   |        |   |  |   |          |  
|     | Changes in production rates and other                                                             |                |   | (130,090  | ) |       |   | (3,255  | ) |  |   | (133,345  | )
|     |                                                                                                   |                |   |           |   |       |   |         |   |  |   |          
|     | Standardized measure  end of year                                                                |                | $ | 510,997   |   |       | $ | 68,689  |   |  | $ | 579,686   |  
|     |                                                                                                   |                |   |           |   |       |   |         |   |  |   |          

75



---



##### Table of Contents



NUEVO ENERGY COMPANY


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                  
|--- | -------------------------------------------------
|16. | Selected Quarterly Financial Data
    (Unaudited)

|                                                           |                                                                           |                                       |        |         |  |         |        |         |  |      |        |      |  |   |        |      |  |   |         |      | 
|---------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------- | ------ | ------- |  | ------- | ------ | ------- |  | ---- | ------ | ---- |  | - | ------ | ---- |  | - | ------- | ---- | 
|                                                           |                                                                           |                                      
|                                                           |                                                                           | 2003                                 
|                                                           |                                                                           |                                      
|                                                           |                                                                           | 1st Qtr                               |        | 2nd Qtr |  | 3rd Qtr |        | 4th Qtr |  | Year
|                                                           |                                                                           |                                       |        |         |  |         |        |         |  |     
|                                                           |                                                                           |                                      
|                                                           |                                                                           | (In thousands, except per share data)
|Revenues                                                   |                                                                           | $                                     | 98,250 |         |  | $       | 94,521 |         |  | $    | 87,834 |      |  | $ | 90,732 |      |  | $ | 371,337 |     
|Income from operations                                     |                                                                           |                                       | 32,947 |         |  |         | 32,966 |         |  |      | 23,380 |      |  |   | 25,398 |      |  |   | 114,691 |     
|Income from continuing operations                          |                                                                           |                                       | 12,663 |         |  |         | 6,612  |         |  |      | 9,392  |      |  |   | 8,422  |      |  |   | 37,089  |     
|Income from discontinued operations, net of
    income tax |                                                                           |                                       | 4,554  |         |  |         | 770    |         |  |      | 640    |      |  |   | (70    | )    |  |   | 5,894   |     
|Cumulative effect of change in Accounting
    Principle    |                                                                           |                                       | 8,496  |         |  |         |       |         |  |      |       |      |  |   |       |      |  |   | 8,496   |     
|Net Income                                                 |                                                                           |                                       | 25,713 |         |  |         | 7,382  |         |  |      | 10,032 |      |  |   | 8,352  |      |  |   | 51,479  |     
|Basic earnings per share(1)                                |                                                                           |                                       |        |         |  |         |        |         |  |      |        |      |  |   |        |      |  |   |         |     
|                                                           | Continuing operations                                                     |                                       | $      | 0.66    |  |         | $      | 0.34    |  |      | $      | 0.49 |  |   | $      | 0.43 |  |   | $       | 1.92 | 
|                                                           | Discontinued operations                                                   |                                       |        | 0.24    |  |         |        | 0.04    |  |      |        | 0.03 |  |   |        |     |  |   |         | 0.30 | 
|                                                           | Cumulative effect of change in Accounting
    Principle net of income tax |                                       |        | 0.44    |  |         |        |        |  |      |        |     |  |   |        |     |  |   |         | 0.44 | 
|                                                           |                                                                           |                                       |        |         |  |         |        |         |  |      |        |      |  |   |        |      |  |   |         |     
|                                                           | Net income                                                                |                                       | $      | 1.34    |  |         | $      | 0.38    |  |      | $      | 0.52 |  |   | $      | 0.43 |  |   | $       | 2.66 | 
|                                                           |                                                                           |                                       |        |         |  |         |        |         |  |      |        |      |  |   |        |      |  |   |         |     
|Diluted earnings per share(1)                              |                                                                           |                                       |        |         |  |         |        |         |  |      |        |      |  |   |        |      |  |   |         |     
|                                                           | Continuing operations                                                     |                                       | $      | 0.65    |  |         | $      | 0.34    |  |      | $      | 0.48 |  |   | $      | 0.42 |  |   | $       | 1.89 | 
|                                                           | Discontinued operations                                                   |                                       |        | 0.24    |  |         |        | 0.04    |  |      |        | 0.03 |  |   |        |     |  |   |         | 0.30 | 
|                                                           | Cumulative effect of change in Accounting
    Principle net of income tax |                                       |        | 0.44    |  |         |        |        |  |      |        |     |  |   |        |     |  |   |         | 0.43 | 
|                                                           |                                                                           |                                       |        |         |  |         |        |         |  |      |        |      |  |   |        |      |  |   |         |     
|                                                           | Net income                                                                |                                       | $      | 1.33    |  |         | $      | 0.38    |  |      | $      | 0.51 |  |   | $      | 0.42 |  |   | $       | 2.62 | 
|                                                           |                                                                           |                                       |        |         |  |         |        |         |  |      |        |      |  |   |        |      |  |   |         |     

|                                                                  |                         |                                       |        |         |  |         |        |            |  |      |        |      |  |   |         |       |   |   |         |       |  
|----------------------------------------------------------------- | ----------------------- | ------------------------------------- | ------ | ------- |  | ------- | ------ | ---------- |  | ---- | ------ | ---- |  | - | ------- | ----- | - | - | ------- | ----- | -
|                                                                  |                         |                                      
|                                                                  |                         | 2002(2)                              
|                                                                  |                         |                                      
|                                                                  |                         | 1st Qtr                               |        | 2nd Qtr |  | 3rd Qtr |        | 4th Qtr(3) |  | Year
|                                                                  |                         |                                       |        |         |  |         |        |            |  |     
|                                                                  |                         |                                      
|                                                                  |                         | (In thousands, except per share data)
|Revenues                                                          |                         | $                                     | 70,968 |         |  | $       | 77,491 |            |  | $    | 84,250 |      |  | $ | 79,192  |       |   | $ | 311,901 |      
|Income from operations                                            |                         |                                       | 11,929 |         |  |         | 35,511 |            |  |      | 20,982 |      |  |   | 20,384  |       |   |   | 88,806  |      
|Income from continuing operations                                 |                         |                                       | 373    |         |  |         | 14,587 |            |  |      | 3,857  |      |  |   | 4,262   |       |   |   | 23,079  |      
|Income (loss) from discontinued operations, net
    of income tax |                         |                                       | 1,089  |         |  |         | 1,979  |            |  |      | 2,298  |      |  |   | (16,170 | )     |   |   | (10,804 | )    
|Net Income (loss)                                                 |                         |                                       | 1,462  |         |  |         | 16,566 |            |  |      | 6,155  |      |  |   | (11,908 | )     |   |   | 12,275  |      
|Basic earnings (loss) per share(1)                                |                         |                                       |        |         |  |         |        |            |  |      |        |      |  |   |         |       |   |   |         |      
|                                                                  | Continuing operations   |                                       | $      | 0.02    |  |         | $      | 0.85       |  |      | $      | 0.22 |  |   | $       | 0.22  |   |   | $       | 1.31  |  
|                                                                  | Discontinued operations |                                       |        | 0.07    |  |         |        | 0.12       |  |      |        | 0.13 |  |   |         | (0.84 | ) |   |         | (0.61 | )
|                                                                  |                         |                                       |        |         |  |         |        |            |  |      |        |      |  |   |         |       |   |   |         |      
|                                                                  | Net income (loss)       |                                       | $      | 0.09    |  |         | $      | 0.97       |  |      | $      | 0.35 |  |   | $       | (0.62 | ) |   | $       | 0.70  |  
|                                                                  |                         |                                       |        |         |  |         |        |            |  |      |        |      |  |   |         |       |   |   |         |      
|Diluted earnings (loss) per share(1)                              |                         |                                       |        |         |  |         |        |            |  |      |        |      |  |   |         |       |   |   |         |      
|                                                                  | Continuing operations   |                                       | $      | 0.01    |  |         | $      | 0.84       |  |      | $      | 0.22 |  |   | $       | 0.22  |   |   | $       | 1.30  |  
|                                                                  | Discontinued operations |                                       |        | 0.07    |  |         |        | 0.12       |  |      |        | 0.13 |  |   |         | (0.84 | ) |   |         | (0.61 | )
|                                                                  |                         |                                       |        |         |  |         |        |            |  |      |        |      |  |   |         |       |   |   |         |      
|                                                                  | Net income (loss)       |                                       | $      | 0.08    |  |         | $      | 0.96       |  |      | $      | 0.35 |  |   | $       | (0.62 | ) |   | $       | 0.69  |  
|                                                                  |                         |                                       |        |         |  |         |        |            |  |      |        |      |  |   |         |       |   |   |         |      






|    |                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The sum of the individual quarterly net income
    (loss) per common share may not agree with year-to-date net
    income (loss) per common share as each quarterly computation is
    based on the weighted average number of common shares
    outstanding during that period.
|   
|(2) | Components of the 2002 quarters were revised due
    to a reclassification of sold properties to discontinued
    operations.                                                                                                                                                   
|   
|(3) | Fourth quarter 2002 results include a
    $17.8 million after-tax write down of assets held for sale
    in discontinued operations.                                                                                                                                            

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INDEPENDENT AUDITORS REPORT ON

CONSOLIDATED FINANCIAL STATEMENT
SCHEDULE


To the Board of Directors and Stockholders

Nuevo Energy Company:


Under date of March 5, 2004, we reported on
the consolidated balance sheets of Nuevo Energy Company as of
December 31, 2003 and 2002, and the related consolidated
statements of income, stockholders equity, cash flows and
comprehensive income for each of the years in the three-year
period ended December 31, 2003. In connection with our
audits of the aforementioned consolidated financial statements,
we also audited the related consolidated financial statement
schedule. This consolidated financial statement schedule is the
responsibility of the Companys management. Our
responsibility is to express an opinion on the consolidated
financial statement schedule based on our audits.

In our opinion, the consolidated financial
statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth
therein.



| |         
| | --------
| | KPMG LLP

Houston, Texas

March 5, 2004


77



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SCHEDULE II

NUEVO ENERGY COMPANY

VALUATION AND QUALIFYING ACCOUNTS


Years Ended December 31, 2003, 2002 and
2001


(In thousands)


|     |                                       |            |   |            |  |            |   |            |  |            |   |   |  |  |   |     |  |  |   |       | 
|---- | ------------------------------------- | ---------- | - | ---------- |  | ---------- | - | ---------- |  | ---------- | - | - |  |  | - | --- |  |  | - | ----- | 
|     |                                       |            |   |            |  |           
|     |                                       | Additions  |   |            |  |           
|     |                                       |            |   |            |  |           
|     |                                       | Balance at |   | Charged to |  | Charged to |   |            |  | Balance at
|     |                                       | Beginning  |   | Costs and  |  | Other      |   |            |  | End of    
|     |                                       | of Period  |   | Expenses   |  | Accounts   |   | Deductions |  | Period    
|     |                                       |            |   |            |  |            |   |            |  |           
|2003 |                                       |            |   |            |  |            |   |            |  |            |   |   |  |  |   |     |  |  |   |      
|     | Allowance for doubtful accounts       |            | $ | 626        |  |            | $ | 18         |  |            | $ |  |  |  | $ | 428 |  |  | $ | 216   | 
|     | Valuation allowance on deferred taxes |            |   | 804        |  |            |   |           |  |            |   |  |  |  |   | 804 |  |  |   |      | 
|2002 |                                       |            |   |            |  |            |   |            |  |            |   |   |  |  |   |     |  |  |   |      
|     | Allowance for doubtful accounts       |            |   | 1,280      |  |            |   |           |  |            |   |  |  |  |   | 654 |  |  |   | 626   | 
|     | Valuation allowance on deferred taxes |            |   | 1,777      |  |            |   |           |  |            |   |  |  |  |   | 973 |  |  |   | 804   | 
|2001 |                                       |            |   |            |  |            |   |            |  |            |   |   |  |  |   |     |  |  |   |      
|     | Allowance for doubtful accounts       |            |   | 766        |  |            |   | 1,314      |  |            |   |  |  |  |   | 800 |  |  |   | 1,280 | 
|     | Valuation allowance on deferred taxes |            |   | 1,777      |  |            |   |           |  |            |   |  |  |  |   |    |  |  |   | 1,777 | 

78



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and
Procedures

The term disclosure controls and
procedures is defined in Rule 13a-14(c) of the
Securities Exchange Act of 1934, or the Exchange Act. This term
refers to the controls and procedures of a company that are
designed to ensure that information required to be disclosed by
a company in the reports that it files under the Exchange Act is
recorded, processed, summarized and reported within required
time periods. Our Chief Executive Officer and our Chief
Financial Officer have evaluated the effectiveness of our
disclosure controls and procedures as of a date within
90 days before the filing of the annual report, and they
have concluded that as of that date, our disclosure controls and
procedures were effective at ensuring that required information
will be disclosed on a timely basis in our reports filed under
the Exchange Act.

Change in Internal Controls

We maintain a system of internal controls that
are designed to provide reasonable assurance that our books and
records accurately reflect our transactions and that our
established policies and procedures are followed. There were no
significant changes to our internal controls or in other factors
that could significantly affect our internal controls subsequent
to the date of their evaluation by our Chief Executive Officer
and our Chief Financial Officer, including any corrective
actions with regard to significant deficiencies and material
weaknesses.




PART III

On February 12, 2004, we entered into a
definitive agreement to be merged with Plains in a stock for
stock transaction (the Merger). A special meeting of
the stockholders of the Company will be held to consider and
approve the Merger. The special meeting will be scheduled as
soon as practical after the registration statement filed in
connection with the transaction is effective and regulatory
review under the Hart-Scott-Rodino Antitrust Improvement Act of
1976 is completed. The annual meeting of stockholders of the
Company scheduled for May 12, 2004 will be postponed
pending the outcome of the special meeting and, if the Merger is
approved and completed will not be held, and no definitive proxy
statement will be distributed to stockholders or filed with the
SEC.



|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

The following is information about our directors
and executive officers. The Board of Directors has an
independent Audit Committee, and its members are noted below.
Mr. Haasbeek is an Audit Committee Financial Expert and is
independent pursuant to applicable rules and
regulations. The Company has also adopted a Code of Ethics for
its senior financial officers, a copy of which may be found on
the Companys website.

Directors:



| |                                                              
| | -------------------------------------------------------------
| | Isaac Arnold, Jr.                                            
| | 68 years old                                                 
| | Director since 1990                                          
| | Lead Director: Appointed 2003                                
| | Board committees: Nominating and Governance
    (Chairperson)
| | Relationship to Nuevo: None, other than as a
    director    

79



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##### Table of Contents



Biographical
Information



| |                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mr. Arnold has been a director of Legacy
    Holding Company since 1989 and Legacy Trust Company since 1997.
    He has been a director of Cullen Center Bank & Trust
    since its inception in 1969 and is a director of Cullen/ Frost
    Bankers, Inc. Mr. Arnold is a trustee of the Museum of Fine
    Arts and The Texas Heart Institute. Mr. Arnold received his
    B.B.A. from the University of Houston in 1959.



| |                                                                            
| | ---------------------------------------------------------------------------
| | Charles M. Elson                                                           
| | 44 years old                                                               
| | Director since 1998                                                        
| | Board committees: Compensation (chairperson),
    Nominating and Governance
| | Relationship to Nuevo: None, other than as a
    director                  

Biographical
Information



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mr. Elson has been the Edgar S. Woolard Jr.
    Professor of Corporate Governance and the Director of the Center
    for Corporate Governance at the University of Delaware since
    2000. He was a professor of law at Stetson University College of
    Law from 1990 until 2001 and serves of counsel to the national
    law firm of Holland & Knight LLP (since 1995). He is a
    member of the American Law Institute and the Advisory Council
    and Commissions on Director Compensation, Audit Committees, and
    Director Professionalism of the National Association of
    Corporate Directors. Mr. Elson is widely regarded as an
    expert on corporate governance and has served on panels and blue
    ribbon commissions on such issues as executive compensation,
    director compensation, director professionalism, chief executive
    officer succession and others. He was a trustee of Talledega
    College and is a Salvatori Fellow of the Heritage Foundation.
    Mr. Elson currently serves as a director of Auto Zone,
    Inc., an automobile parts retailer, a position he has held since
    2000 and Alderwoods Group, a health care services provider, a
    position he has held since 2002. He also served as a director of
    Circon Corporation, a medical products manufacturer, from 1997
    until its sale in 1999. Mr. Elson received his B.A. from
    Harvard College in 1981 and his J.D. from the University of
    Virginia in 1985.



| |                                                                
| | ---------------------------------------------------------------
| | Robert L. Gerry III                                            
| | 66 years old                                                   
| | Director since 1990                                            
| | Board committees: Audit, and Compensation                      
| | Relationship to Nuevo: Served as Nuevos
    vice chairman from
| | 1994 to 1997 and president and chief operating
    officer from
| | 1990 to 1994                                                   

Biographical
Information



| |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Since 1997, Mr. Gerry has been chairman and
    chief executive officer of Vaalco Energy, Inc., a publicly
    traded independent oil and gas company which does not compete
    with Nuevo. From 1994 to 1997, Mr. Gerry was vice chairman
    of Nuevo. Prior to that, he was president and chief operating
    officer of Nuevo since its formation in 1990. Mr. Gerry
    currently serves as a trustee of Texas Childrens Hospital.



| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | J. Frank Haasbeek                                                                              
| | 69 years old                                                                                   
| | Director since late 2002                                                                       
| | Board committees: Audit (Chairperson and Audit
    Committee Financial Expert) and Compensation
| | Relationship to Nuevo: None, other than as a
    director                                      

Biographical
Information



| |                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mr. Haasbeek served as president and chief
    executive officer of International Transquip Industries, Inc.
    from 1991 through 2002. He has held various executive positions
    including president and chief executive officer of Hurricane
    Industries, vice president, administration and finance with
    Reading and

80



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##### Table of Contents



| |                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Bates Construction Company and chief financial
    officer and director of Cope Allman International Ltd.
    Mr. Haasbeek began his career as an auditor at Deloitte,
    Haskins and Sells in Canada and France and is a graduate of the
    University of Manitoba, in Winnipeg, Canada with accreditation
    as a chartered accountant.



| |                                                          
| | ---------------------------------------------------------
| | James T. Jongebloed                                      
| | 62 years old                                             
| | Director since 2002                                      
| | Board committees: Audit                                  
| | Relationship to Nuevo: None, other than as a
    director

Biographical
Information



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mr. Jongebloed served as chairman, president
    and chief executive officer of Pool Energy Services Company, an
    oilfield services company, from 1994 through 1999.
    Mr. Jongebloed resigned his position after Pool Energy
    merged with Nabors Industries, Inc. in November 1999. From 1989
    to 1994, he served as Pool Energys president and chief
    executive officer and as president of international operations
    from 1981 to 1989. From 1978 to 1981, Mr. Jongebloed served
    as executive vice president of western hemisphere operations for
    Pool Energy. Mr. Jongebloed served as vice president for
    western operations from 1976 to 1978 and from 1973 to 1976 as
    vice president and general counsel for Atwood Oceanics, Inc., an
    offshore drilling contractor. In the late sixties and early
    seventies, Mr. Jongebloed served as senior project engineer
    and as a process engineer for Fluor Corporation, an engineering
    and construction contractor. Mr. Jongebloed currently
    serves on the board of directors of Lufkin Industries, Inc.,
    Studio of the Americas, Houston Athletic Foundation and is an
    advisory board member of Spindletop International, a charitable
    organization. Mr. Jongebloed received his B.S. degree from
    the University of Houston in 1966 and his J.D. from South Texas
    College of Law in 1971. He also attended the Management Program
    at Rice University.



| |                                                                   
| | ------------------------------------------------------------------
| | James L. Payne                                                    
| | 66 years old                                                      
| | Director since 2001                                               
| | Board committees: None                                            
| | Relationship to Nuevo: Chairman, president and
    chief executive
| | officer of Nuevo                                                  

Biographical
Information



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | James L. Payne joined Nuevo Energy Company as
    chairman, president and chief executive officer in October 2001.
    Prior to joining Nuevo, Mr. Payne was vice chairman of
    Devon Energy Corporation from September 2000 until his
    retirement in January 2001. Prior to the merger with Devon
    Energy in August 2000, he served as chairman and chief executive
    officer of Santa Fe Snyder Corporation. Prior to the May
    1999 merger of Santa Fe Energy Resources and Snyder Oil
    Corporation, Mr. Payne served as chairman and chief
    executive officer of Santa Fe Energy Resources. In 1982 he
    joined Santa Fe Energy Corporation, a wholly owned
    subsidiary of Santa Fe Pacific Corporation, as senior vice
    president  exploration and land and was named
    president in 1986 and chairman and chief executive officer in
    1990 when the company became publicly traded. Prior to
    Mr. Paynes career with Santa Fe, he spent
    twenty-three years with Chevron Oil in various domestic and
    international exploration and management positions.
|
| | Mr. Payne graduated from the Colorado School
    of Mines in 1959 with a degree in geophysical engineering and he
    received the Cecil H. Green Award in Geophysics upon graduation.
    In 1974 he received an M.B.A. from Golden Gate University and in
    1983 he completed the Stanford Executive Program. In 1993 he
    became a School of Mines Distinguished Achievement Medalist.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | Mr. Payne serves on the board of BJ Services
    Company, Global Industries, Ltd. and Nabors Industries, Inc. He
    also serves on the board of the Domestic Petroleum Council, the
    Independent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

81



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| |                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Petroleum Association of America (IPAA), the
    Palmer Drug Abuse Program and the Offshore Energy Center and
    serves as a member of the Presidents Council of the
    Colorado School of Mines. Mr. Payne is a member of the
    Society of Exploration Geophysicists and the American
    Association of Petroleum Geologists.



| |                                                              
| | -------------------------------------------------------------
| | Gary R. Petersen                                             
| | 56 years old                                                 
| | Director since 1990                                          
| | Board committees: Compensation, Nominating and
    Governance
| | Relationship to Nuevo: None, other than as a
    director    

Biographical
Information



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mr. Petersen is a co-founder and is a
    partner of EnCap Investments, L.L.C., a firm which provides
    private equity to the energy industry. From 1984 to 1988, he
    served as senior vice president and manager of the corporate
    finance division of the energy banking group for RepublicBanc
    Houston. From 1979 to 1984, he was executive vice president and
    a director of Nicklos Oil and Gas Company. He also served as a
    group vice president in the petroleum and minerals division of
    RepublicBanc Dallas. He is a member of the board of
    Equus II Incorporated and Plains All American Pipeline L.P.
    Mr. Petersen received his B.B.A. from Texas Tech University
    in 1968 and his M.B.A. from Texas Tech University in 1970.



| |                                                                     
| | --------------------------------------------------------------------
| | Sheryl K. Pressler                                                  
| | 53 years old                                                        
| | Director since 2002                                                 
| | Board committees: Audit, Compensation, Nominating
    and Governance
| | Relationship to Nuevo: None, other than as a
    director           

Biographical
Information



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Ms. Pressler has been a self-employed
    investment and strategy consultant in Atlanta, Georgia since
    2001. From 2000 to 2001, she was the chief executive officer for
    Lend Lease Real Estate Investments  United States, a
    subsidiary of Lend Lease Corporation, an Australian real estate
    services company. From 1994 to 2000, she was the chief
    investment officer for the California Public Employees
    Retirement System (CalPERS), the nations largest public
    pension fund. From 1981 to 1994, she was responsible for the
    management of the Retirement Funds for the McDonnell Douglas
    Corporation. Since 1999, Ms. Pressler has been a director
    of the California HealthCare Foundation. Ms. Pressler is
    currently a director of Stillwater Mining Company, a position
    she has held since 2002. Ms. Pressler received her B.A. in
    Philosophy from Webster University and her M.B.A. from
    Washington University.

Executive
Officers



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Phillip A. Gobe, 51, joined us as chief operating
    officer in February 2001. He is responsible for managing our
    domestic and international exploitation and exploration
    operations. Prior to coming to us, Mr. Gobe had been the
    senior vice president for production for Vastar Resources, Inc.
    since 1997. From 1976 to 1997, Mr. Gobe worked for Atlantic
    Richfield Company and its subsidiaries in positions of
    increasing responsibility, primarily in the Gulf of Mexico and
    Alaska. Among his positions were vice president for human
    resources and public affairs for ARCO International
    Oil & Gas from 1995 to 1997, vice president for human
    resources for ARCO Alaska, Inc. from 1993 to 1995 and operations
    manager for ARCO Alaska in Prudhoe Bay, Alaska from 1991 to
    1993. Mr. Gobe is a graduate of the University of Texas at
    Austin and holds an M.B.A. from the University of Southwestern
    Louisiana.
|
| | Bruce K. Murchison, 53, joined us as vice
    president and general counsel in June 1999. In December 2001, he
    became senior vice president. During 1998 and 1999, he had been
    a consultant to Plains Resources senior management on
    transactional matters. From 1994 to 1998, he served as president
    of Celeron Corporation, the energy subsidiary of the Goodyear
    Tire and Rubber Company and operator of the 1,200-mile All
    American Pipeline System. Prior to assuming duties as president
    of Celeron,                                                                                                                                                                                                                                                                                                                                                                                                                                             

82



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mr. Murchison was Celerons general
    counsel for six years. From 1991 to 1994, in addition to his
    general counsel responsibilities at Celeron, he was chief
    operating officer of All American Pipeline Company. He joined
    Goodyear as an attorney in 1985 and from 1981 to 1985,
    Mr. Murchison practiced corporate law and litigation at
    Texaco Inc. Mr. Murchison received a B.A. from Lafayette
    College and holds a J.D. from St. Johns School of Law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | George B. Nilsen, 48, joined us as senior vice
    president of planning and asset management in December 2001.
    Prior to joining us, Mr. Nilsen was an independent
    consultant for small independent exploration and production
    companies. From 1987 to 2000, Mr. Nilsen held various
    domestic and international management positions in engineering
    and operations, most recently as division manager 
    gulf division and corporate manager  exploration and
    production for Santa Fe Snyder Corporation and its
    predecessor, Santa Fe Energy Resources, Inc.
    Mr. Nilsen began his career with Santa Fe in
    California and then transferred to Midland, Texas as engineering
    manager. Subsequently, he worked in Argentina and Ecuador in
    various management positions helping Santa Fe to establish
    its international program. Prior to joining Santa Fe,
    Mr. Nilsen worked for over ten years in Bakersfield,
    California for Petro-Lewis Corporation and Gulf Oil Company in
    various engineering and operations positions. Mr. Nilsen is
    a graduate of Bucknell University with a B.S. in chemical
    engineering.
|
| | John P. McGinnis, 43, joined us as vice
    president  exploration in August 1999. Prior to
    joining us, Dr. McGinnis worked for Amerada Hess
    Corporation from 1995 to 1999, most recently as division
    explorationist, and for Tenneco Oil Company from 1984 to 1988 as
    an exploration geophysicist. In 1995 Dr. McGinnis received
    his Ph.D. in Marine Geology and Geophysics from Columbia
    University and holds a B.S. in geology and an M.S. in
    geophysics, both from Purdue University.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | Michael S. Wilkes, 53, joined us as vice
    president and controller in March 2003. Effective March 2004,
    Mr. Wilkes became Chief Financial Officer, a position he
    held on an interim basis since December 2003. Prior to joining
    us, Mr. Wilkes worked from 1981 to 2000 in various
    financial and management positions with increasing
    responsibility, most recently as vice president and controller,
    with Santa Fe Snyder Corporation, and its predecessor Santa Fe
    Energy Resources, Inc. Mr. Wilkes is a graduate of
    Midwestern State University, and is a Certified Public
    Accountant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

All of our executive officers and directors are
United States citizens.

Section 16(a) Beneficial Ownership
Reporting Compliance

Section 16(a) of the Exchange Act requires
certain of our executive officers and all directors and more
than ten percent stockholders of our equity securities
(collectively, Reporting Persons) to file an initial
report of ownership (Form 3) and reports of changes of
ownership (Forms 4 and 5) with the SEC. These reporting
persons are required to furnish us with copies of all
Section 16(a) reports that they file.

To our knowledge, based solely upon a review of
Section 16(a) reports furnished to us for the fiscal year
ended December 31, 2003 and written representations from
Reporting Persons that no other reports were required, we
believe that all Reporting Persons complied with all applicable
Section 16(a) filing requirements during the fiscal year
ended December 31, 2003, except that Form 4 was filed
late for Sheryl K. Pressler in connection with an original paper
filing which subsequently had to be filed electronically.

83



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|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

The following summary compensation table includes
cash compensation for the past three years for our chief
executive officer and our four other most highly compensated
executive officers in 2003.

NUEVO ENERGY COMPANY

Summary Compensation Table

|                            |                                 |      |      |        |  |          |         |            |     |              |         |              |  |   |           |         |  |  |         |         |     |   |        |        |    
|--------------------------- | ------------------------------- | ---- | ---- | ------ |  | -------- | ------- | ---------- | --- | ------------ | ------- | ------------ |  | - | --------- | ------- |  |  | ------- | ------- | --- | - | ------ | ------ | ---
|                            |                                 |      |      |        |  |          |         | Restricted |     | Long-Term    |         |             
|                            |                                 |      |      |        |  |          |         | Stock      |     | Compensation |         | All Other   
|Name and Principal Position |                                 | Year |      | Salary |  | Bonus(1) |         | Awards(2)  |     | Options      |         | Compensation
|                            |                                 |      |      |        |  |          |         |            |     |              |         |             
|James L. Payne              |                                 |      | 2003 |        |  | $        | 27,099  | (3)        |     | $            |        |              |  | $ | 1,450,200 |         |  |  |        |         |     | $ | 64,090 | (3)   
|                            | Chairman, President and Chief   |      |      | 2002   |  |          |         | 26,061     | (3) |              |         |             |  |   |           | 669,000 |  |  |         | 200,000 |     |   |        | 41,791 | (3)
|                            | Executive Officer               |      |      | 2001   |  |          |         |           |     |              |         |             |  |   |           |        |  |  |         |        |     |   |        | 9,073  | (3)
|Phillip A. Gobe             |                                 |      | 2003 |        |  |          | 275,000 |            |     |              | 222,750 |              |  |   | 604,250   |         |  |  |        |         |     |   |       |       
|                            | Chief Operating Officer         |      |      | 2002   |  |          |         | 275,000    |     |              |         | 137,500      |  |   |           | 111,500 |  |  |         | 50,000  |     |   |        |       |    
|                            |                                 |      | 2001 |        |  |          | 232,339 | (4)        |     |              | 116,404 |              |  |   |          |         |  |  | 170,000 | (5)     |     |   |       |       
|Bruce K. Murchison          |                                 |      | 2003 |        |  |          | 173,250 |            |     |              | 140,333 |              |  |   | 483,400   |         |  |  |        |         |     |   |       |       
|                            | Senior Vice President and       |      |      | 2002   |  |          |         | 173,250    |     |              |         | 87,625       |  |   |           | 111,500 |  |  |         | 50,000  |     |   |        |       |    
|                            | General Counsel                 |      |      | 2001   |  |          |         | 173,250    |     |              |         | 43,312       |  |   |           |        |  |  |         | 30,001  |     |   |        |       |    
|Janet F. Clark              |                                 |      | 2003 |        |  |          | 195,000 |            |     |              | 157,950 |              |  |   |          |         |  |  |         |         |     |   |        |       
|                            | Senior Vice President and Chief |      |      | 2002   |  |          |         | 195,000    |     |              |         | 97,500       |  |   |           | 167,250 |  |  |         | 25,000  |     |   |        |        |    
|                            | Financial Officer               |      |      | 2001   |  |          |         | 13,375     | (6) |              |         | 3,339        |  |   |           |        |  |  |         | 150,000 | (7) |   |        |       |    
|George B. Nilsen            |                                 |      | 2003 |        |  |          | 175,000 |            |     |              | 141,750 |              |  |   | 362,550   |         |  |  |        |         |     |   |        |       
|                            | Senior Vice President of        |      |      | 2002   |  |          |         | 175,000    |     |              |         | 87,500       |  |   |           | 167,250 |  |  |         | 15,000  |     |   |        |       |    
|                            | Planning and Asset Management   |      |      | 2001   |  |          |         | 12,003     | (8) |              |         | 2,996        |  |   |           |        |  |  |         | 75,000  | (9) |   |        |       |    



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incentive bonuses for the calendar year 2002 were
    paid in February 2003, and for the calendar year 2003 were paid
    in February 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(2) | The restricted stock included in this table
    represents the fair market value of the entire restricted stock
    award on the date of grants. All restricted stock grants for
    2003 were made on December 31, 2003. All restricted stock
    grants have restrictions that lapse in equal annual increments
    during the three year period following the grant date. However,
    the Company anticipates that the Merger will be completed and at
    the effective time of the Merger, all restrictions on restricted
    stock will lapse and the restricted stock will be treated in the
    manner provided under the terms of the Merger.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(3) | Mr. Payne was elected chairman, president
    and chief executive officer in October 2001. In 2003,
    Mr. Payne received his entire compensation in shares of our
    common stock, except for $18,000 constituting the amount that
    permitted a valid tax-deferred contribution to the
    Companys 401(k) Plan, and $9,099 of imputed income. In
    2002, Mr. Payne received his entire compensation in shares
    of our common stock except for $26,061 being the sum of an
    amount that permitted a valid tax-deferred contribution to the
    Companys 401(k) Plan of $12,000 in 2002, $12,000 in 2003
    and $2,061 of imputed income. In 2003, Mr. Payne earned
    64,090 shares of common stock based on a share equivalent
    of $400,000 annual salary and $324,000 bonus. He was awarded
    26,643 shares during the first three quarters of 2003, and
    8,258 and 29,189 on January 4 and February 11, 2004,
    respectively. In 2002 Mr. Payne earned 41,791 shares
    of stock based on a share equivalent of $400,000 annual salary
    and $200,000 bonus. He was awarded 20,403 shares during the
    first three quarters of 2002 and 6,017 and 15,371 on January 2
    and February 20, 2003, respectively. In 2001,
    Mr. Payne earned 9,073 shares prorated on the time
    actually worked.
|   
|(4) | Mr. Gobe was hired by us in February 2001.
    Information regarding Mr. Gobe for 2001 is for the period
    during which he was employed by us.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(5) | Mr. Gobe was granted 150,000 options in
    February 2001 as part of his employment agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(6) | Ms. Clark became an employee in December
    2001. Information regarding Ms. Clark for 2001 is for the
    period during which she was employed by Nuevo. Ms. Clark
    resigned from Nuevo effective January 5, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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|    |                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|(7) | Ms. Clark was granted 150,000 options in
    December 2001 as part of the compensation package offered to her
    to join Nuevo.                          
|   
|(8) | Mr. Nilsen was hired by Nuevo in December
    2001. Information regarding Mr. Nilsen for 2001 is for the
    period during which he was employed by Nuevo.
|   
|(9) | Mr. Nilsen was granted 75,000 options in
    December 2001 as part of the compensation package offered to him
    to join Nuevo.                          

The following table shows the number of options
owned by our executives named in the Summary Compensation Table
and key executives as of December 31, 2003. Options in the
column marked unexercisable are subject to vesting
and will be forfeited if the named executives employment
with us is terminated for certain reasons.

|                   |  |           |   |          |  |                       |   |                              |  |             |         |               |  |  |         |  |  |   |           |  |  |   |           | 
|------------------ |  | --------- | - | -------- |  | --------------------- | - | ---------------------------- |  | ----------- | ------- | ------------- |  |  | ------- |  |  | - | --------- |  |  | - | --------- | 
|                   |  |           |   |          |  |                       |   |                              |  |            
|                   |  | Number of |   |          |  |                       |   | Value of Unexercised in-the-
|                   |  | Shares    |   |          |  | Number of Unexercised |   | money Options at            
|                   |  | Acquired  |   |          |  | Options               |   | December 31, 2003(1)        
|                   |  | on        |   | Value    |  |                       |   |                             
|Name               |  | Exercise  |   | Realized |  | Exercisable           |   | Unexercisable                |  | Exercisable |         | Unexercisable
|                   |  |           |   |          |  |                       |   |                              |  |             |         |              
|James L. Payne     |  |           |  |          |  | $                     |  |                              |  |             | 66,667  |               |  |  | 133,333 |  |  | $ | 586,003   |  |  | $ | 1,171,997 | 
|Phillip A Gobe     |  |           |  |          |  |                       |  |                              |  |             | 130,000 |               |  |  | 90,000  |  |  |   | 997,834   |  |  |   | 718,666   | 
|Bruce K. Murchison |  |           |  |          |  |                       |  |                              |  |             | 129,793 |               |  |  | 33,333  |  |  |   | 1,102,829 |  |  |   | 292,997   | 
|Janet F. Clark     |  |           |  |          |  |                       |  |                              |  |             | 158,334 |               |  |  | 16,666  |  |  |   | 1,898,756 |  |  |   | 146,494   | 
|George B. Nilsen   |  |           |  |          |  |                       |  |                              |  |             | 80,000  |               |  |  | 10,000  |  |  |   | 956,700   |  |  |   | 87,900    | 
|John P. McGinnis   |  |           |  |          |  |                       |  |                              |  |             | 109,230 |               |  |  |        |  |  |   | 866,939   |  |  |   |          | 
|Michael S. Wilkes  |  |           |  |          |  |                       |  |                              |  |             |        |               |  |  |        |  |  |   |          |  |  |   |          | 



---



|    |                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Based on $24.17 per share which was the
    closing price per share of our common stock on the New York
    Stock Exchange Composite Tape on December 31, 2003.




EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information about
the Common Stock that may be issued under all of the
Companys existing equity compensation plans as of
December 31, 2003:

|                                                               |       |                      |           |                      |  |                      |       |       |  |  |         |         | 
|-------------------------------------------------------------- | ----- | -------------------- | --------- | -------------------- |  | -------------------- | ----- | ----- |  |  | ------- | ------- | 
|                                                               |       | Number of securities |           |                      |  |                     
|                                                               |       | to be issued upon    |           | Weighted average     |  |                     
|                                                               |       | exercise of          |           | exercise price of    |  | Number of securities
|                                                               |       | outstanding options, |           | outstanding options, |  | remaining available 
|Plan Category                                                  |       | warrants and rights  |           | warrants and rights  |  | for future issuance 
|                                                               |       |                      |           |                      |  |                     
|Equity compensation plans approved by security
    holders     |       |                      | 2,348,859 |                      |  | $                    | 17.68 |       |  |  | 202,219 |        
|                                                               |       |                      |           |                      |  |                      |       |       |  |  |         |        
|Equity compensation plans not approved by
    security holders |       |                      |          |                      |  |                      |      |       |  |  |        |        
|                                                               |       |                      |           |                      |  |                      |       |       |  |  |         |        
|                                                               | Total |                      |           | 2,348,859            |  |                      | $     | 17.68 |  |  |         | 202,219 | 
|                                                               |       |                      |           |                      |  |                      |       |       |  |  |         |        

All of our existing equity compensation plans
have been approved by our stockholders.

COMPENSATION COMMITTEE REPORT:




Our compensation committee consists of five
directors who are not employees or executive officers of the
company. The members of the compensation committee in 2003 were
Mr. Elson, who was chairperson and Messrs. Petersen,
Gerry, Haasbeek and Ms. Pressler.

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Our Executive Compensation Program

Our executive compensation program reflects a
policy of attracting and retaining highly qualified executives
who strive to achieve outstanding individual performance and who
collectively seek outstanding corporate and share price
performance compared to that of peer group companies. The
committee believes that Nuevo should seek executives who desire
a work environment characterized by a high level of
at-risk compensation, which rewards excellent
performance and aligns overall compensation with the objectives
of our stockholders. In 2001 and 2002, Towers Perrin was
retained to assist in the review of our existing compensation
design. In 2003, the Company retained Towers Perrin to assess
the competitive position of Nuevos executive compensation
program and to evaluate recommended modifications. The committee
retained Frederic W. Cook & Company to provide an
independent assessment of management recommendations.
Accordingly, the compensation program adopted by us for our
executives consists of the following elements:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Base salary.It is our position that base
    salaries should be competitive with the pay practices followed
    by our peer group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | Incentive bonus.Bonuses are awarded at the
    discretion of the compensation committee. It is our goal that
    base pay and annual incentive bonus should be at or near the
    50th percentile of our peer group. With respect to bonus
    compensation in 2003, the committee followed its historic policy
    of allocating a specific portion of the total compensation paid
    to executive officers as at-risk compensation in
    order to emphasize pay for performance. In 2003, the incentive
    bonus was based on four measures: stock price performance
    against the Companys peer group, sale of non-core assets,
    acquisitions and meeting or exceeding stated financial plan
    objectives including production. In order to promote team focus,
    all employee bonuses in 2004 are tied to share performance,
    attainment of production goals, reserve replacement and reserve
    replacement cost. In 2003, our executive management could earn a
    target bonus of 50% of base salary if all goals are attained.
    The 2003 plan provided for a maximum payout of 100% of base
    salary and a minimum payout of 0% of base salary. The 2004 plan
    increased the target bonus to 100% of base salary for
    Mr. Payne and 75% of base salary for all other executives.
    The 2004 plan provides for a maximum payout of 200% for
    Mr. Payne and 150% for all other senior executives.
|
| | Stock based compensation.We believe that the issuance of
    stock based compensation properly aligns the interests of
    employees with our stockholders. The number of incentive shares
    granted to an employee is based on the committees view of
    the employees ability to positively impact the value of
    our results.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | During 1997, the compensation committee
    established a stock ownership program for our senior executives
    that provides incentives for each executive to achieve and
    maintain targeted level of ownership of our common stock. Target
    levels of stock ownership are set by the compensation committee
    for each executive. Counted against this stock ownership are
    shares owned directly by the executive or owned beneficially
    through an immediate family member, shares acquired through the
    exercise of options and shares acquired through our deferred
    compensation and 401(k) plans. Shares that may be received upon
    exercise of options do not count toward the ownership
    objectives. Under the program, each executives progress
    toward meeting stated ownership objectives is an important
    element of each executives performance review. Upon
    meeting and maintaining the ownership target, the executive is
    eligible to receive an accelerated vesting schedule on all
    options granted on or before October 15, 2001.                                                                                                                                                                                                                                                                                                                                         

Overview

In 2003, the Company continued to generate cash
flow from operating activities significantly in excess of its
working capital requirements. In addition, the Company
successfully pursued its strategy of monetizing non-core assets.
As a result, available cash from operations and proceeds from
property sales were contributed to retirement of
$184.6 million of long term debt.

In determining compensation, the compensation
committee continues to review on an individual level each
executives leadership in his area of expertise, and also
evaluates years of service, experience level,

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position and general economic and industry
conditions. However, no specific weighting is assigned to these
factors. The committee also studies peer group compensation
levels for comparable positions. The committee did not approve
any executive salary increases for 2001, 2002 or 2003. Effective
January 2004, the compensation committee approved salary
adjustments for the senior executive management team other than
Mr. Payne. In addition, the committee approved a 2004 merit
increase for non-executive employees. The base salary paid to
each of our executives is as follows:


|                                                             |  |   |         | 
|------------------------------------------------------------ |  | - | ------- | 
|James L. Payne                                               |  | $ | 400,000 | 
|Chief Executive Officer and President                        |  |   |         | 
|Phillip A. Gobe                                              |  | $ | 300,000 | 
|Chief Operating Officer                                      |  |   |         | 
|Bruce K. Murchison                                           |  | $ | 220,000 | 
|Senior Vice President Administration and General
    Counsel |  |   |         | 
|George B. Nilsen                                             |  | $ | 200,000 | 
|Senior Vice President of Planning and Asset
    Management   |  |   |         | 
|Michael S. Wilkes                                            |  | $ | 180,000 | 
|Chief Financial Officer                                      |  |   |         | 

Mr. Payne receives both his salary and bonus
in shares of our common stock.

Stock Based Compensation

The compensation committee believes the stock
options that it has granted in the past, and the stock based
compensation granted in 2003, serve a valuable purpose by
attracting and retaining key executives, and encouraging
increased job performance by the recipients of such grants. The
committee does not base the number of awards granted to
executive officers on a predetermined formula, but rather on
each individuals accomplishments, level of responsibility,
and impact on our performance for the year.

Messrs. Payne, Gobe, Murchison, Nilsen and
Wilkes were granted a total of 60,000, 25,000, 20,000, 15,000
and 15,000 restricted shares in 2003 respectively, which shares
vest ratably over a three-year term.

Executive Employment Contracts

In October 2001, we entered into a compensation
agreement with Mr. Payne, our chairman, president and chief
executive officer. The agreement provides that Mr. Payne is
employed on an at will basis and that his
compensation will be paid in the form of our common stock in the
following manner:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Base Salary.In 2003, Mr. Payne received a
    base salary at the rate of $400,000 per year. In 2004, this base
    salary will be paid as 16,549 shares of our common stock. Such
    payment is made to Mr. Payne quarterly.                                                                                                                                                                                                  
|
| |  | Annual Bonus.In 2004, Mr. Payne can earn
    an annual bonus between $0 and $800,000, paid in the form of
    common stock. In 2001, Mr. Payne received 3,024 shares
    based on the portion of the year that he had worked. In 2003, he
    received 15,371 shares which is the bonus attributable to 2002.
    In 2004, Mr. Payne received 29,189 shares of our common
    stock which was attributable to 2003 performance.
|
| |  | Other.The
    agreement provided for reimbursement of certain temporary rental
    costs incurred by Mr. Payne in the initial three-month
    period.                                                                                                                                                                                                                                                                          

The employment contract that we entered into with
Mr. Gobe in February, 2001 expired in February, 2003.
Mr. Gobe and other key executives without employment
contracts are entitled to the benefit discussed below if the
executive is terminated without cause.

In 1999, we entered into an employment agreement
with Bruce K. Murchison. In the event that
Mr. Murchisons employment is terminated for reasons
other than just cause or his voluntary resignation,
Mr. Murchison is entitled to receive two times his annual
salary and average bonus. In addition, the

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outstanding stock options held by
Mr. Murchison would vest and he would have 365 days to
exercise the options.


In 1999, we also entered into an employment
agreement with John P. McGinnis. Mr. McGinniss
contract was identical to that of Mr. Murchison.

In May 2002, the compensation committee adopted
by resolution a benefit to designated key executives without
employment agreements if such executive is terminated without
cause. In the event of such termination, the executive is
entitled to receive two weeks of base salary for each year of
service and one week of base salary for each $10,000 of annual
income. In addition, such employees stock options vest
with 365 days to exercise. In 2003, the compensation
committee approved an amendment to this benefit by permitting
the vesting of any unvested restricted shares in the event of a
termination without cause.

Long-Term Incentive Plan Awards

We do not have a long-term incentive plan for our
employees, other than the 1990 stock option plan, the 1993 stock
incentive plan and the 1999 stock incentive plan. In addition,
we adopted a broadly based plan in August 2001 under which
200,000 shares could be issued. This plan was amended in October
2002 to provide issuance of up to 450,000 shares. Under the 1990
stock option plan and the 1993 stock incentive plan, our
executive officers, directors and employees are eligible to
receive awards of stock options or of shares of stock or other
awards which have a value which increases or decreases with the
price of our stock. In addition to the awards under the 1990
stock option plan and the 1993 stock incentive plan, the 1999
stock incentive plan and the 2001 broadly based stock incentive
plan permit the award of restricted stock, restricted stock
units, performance share awards and performance units. We
adopted individual stock incentive plans for Ms. Clark, our
former Chief Financial Officer, and Mr. Nilsen as
inducements for employment. Ms. Clarks plan provided
for the issuance of 150,000 stock options, while
Mr. Nilsens plan provided for the issuance of 75,000
stock options. All long-term incentive awards are designed to
generate an increased incentive to contribute to our future
success resulting in our enhanced value for the benefit of our
stockholders.

Change in Control Benefit

On December 6, 2000, the board of directors
adopted a resolution that would provide our key executive
officers certain benefits in the event of termination of
employment without cause within two years of a change of
control. We are obligated to pay a termination benefit of three
times the sum of base salary and average annual bonus, and
continue medical benefits for our key executives for a period of
18 months. In the event that any benefit received in a change of
control subjects the executive to the excise tax imposed by
Section 4999 of the Internal Revenue Code, the executive is
entitled to a tax gross up payment. The benefit also results in
the vesting of all unvested incentive stock grants. This benefit
is in lieu of any other severance or termination benefit that
might otherwise be owed under an employment contract or our
severance plan. The board authorized that this benefit be
formalized in separate Severance Protection Agreements with each
key executive officer.

Deferred Compensation Plan

During 1997, we adopted the Nuevo Energy Deferred
Compensation Plan to encourage senior executive officers to
personally invest in our shares. Executives at the level of vice
president and above are eligible to participate in the plan. The
plan allows those executives designated by the committee to
defer all or a portion of their annual salaries and bonuses. The
plan was amended in December 2001 to provide the executives the
alternative of investing in our common stock, a money market
account or other investment alternatives. The amended plan also
removed the 25% discount to market price that had previously
been contained in the deferred compensation plan for purchase of
our common stock. In 2003, we permitted executives to contribute
up to $30,000 to purchase of Nuevo common stock at a 15%
discount, effectively allowing executives to enjoy the 15%
discount extended to employees.

The compensation committee establishes stock
ownership targets for each of the companys executives
other than Mr. Payne who receives all of his compensation
in our common stock. The executive may satisfy

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the ownership requirement by directly investing
in our common or by indirectly investing in us through our
401(k) plan and deferred compensation plan. The actual
investment does not include shares, which may be issued pursuant
to stock options. The actual investment and target investment
for each executive as of February 27, 2004 is as follows:


|                   |  |                   |         |                   |  |   |         | 
|------------------ |  | ----------------- | ------- | ----------------- |  | - | ------- | 
|Name               |  | Actual Investment |         | Target Investment
|                   |  |                   |         |                  
|Phillip A. Gobe    |  | $                 | 639,653 |                   |  | $ | 825,000 | 
|George B. Nilsen   |  |                   | 278,414 |                   |  |   | 350,000 | 
|Bruce K. Murchison |  |                   | 538,726 |                   |  |   | 320,000 | 
|John P. McGinnis   |  |                   | 317,432 |                   |  |   | 280,000 | 

Revisions to Stock Based
Compensation

Director Compensation.In 1999, the compensation
committee adopted changes to the compensation paid to
non-employee directors in order to encourage greater stock
ownership by directors and to bring director compensation in
line with the compensation paid by peer group companies.

Each non-officer director is entitled to receive
an annual cash retainer of $30,000, but may elect to receive all
or a portion of the retainer in shares of restricted stock.
Elections are made in 25% increments and, to encourage director
ownership, the director receives a 33% increase in value for the
amount invested in restricted stock. For example, a director
will receive $9,975 in restricted stock for each $7,500 of
compensation invested. Four of our directors elected to receive
all restricted shares, two directors elected to receive a cash
retainer and one took a combination of cash and restricted
shares in 2003.

In addition to the retainer, from 1999 until
2002, non-officer directors received a semi-annual grant of
1,250 restricted shares of our common stock and 1,750 ten-year
options to purchase common stock. Beginning in 2003, non-officer
directors will receive a semi-annual grant of 2,215 restricted
shares of our common stock subject to a three-year restricted
period and directors will have the option to roll over this
period until their retirement from the board. Upon
recommendation of the compensation committee, the board
eliminated the semi-annual grant of 1,750 ten-year options to
purchase the companys stock. The board approved the
recommendation that directors receive $1,000 and committee
chairpersons receive $1,500 for each committee meeting attended.

CHARLES M. ELSON, CHAIRMAN

ISAAC ARNOLD, JR.


GARY R. PETERSEN


SHERYL K. PRESSLER




|         |                                                                                                       
|-------- | ------------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

The following tables set forth information
regarding the beneficial ownership of Nuevo common stock as of
February 27, 2004 (unless such date is indicated otherwise
in the footnotes below) by:



| |   |                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------
| |  | each current director and executive officer of
    the Company;                                                                   
|
| |  | all current executive officers and directors of
    the Company as a group; and                                                   
|
| |  | each person known by the Company to own
    beneficially more than 5% of the outstanding shares of the
    Companys common stock.

Beneficial ownership has been determined in
accordance with applicable SEC rules, under which a person is
deemed to be the beneficial owner of securities if he or she has
or shares voting power or investment power with respect to such
securities or has the right to acquire beneficial ownership
within 60 days.

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Unless otherwise indicated, to the knowledge of
Nuevo, the persons listed in the tables below have sole voting
and investment powers with respect to the shares indicated. The
address of the Companys directors and officers is 1021
Main Street, Suite 2100, Houston, Texas 77002.

The percentages are based on
20,318,979 shares of Nuevo Common Stock issued and
outstanding as of February 27, 2004.

Five Percent Stockholders:

|                                     |                                 |                  |           |            |  |  |      |     | 
|------------------------------------ | ------------------------------- | ---------------- | --------- | ---------- |  |  | ---- | --- | 
|                                     |                                 |                  |           | Ownership 
|                                     |                                 | Number of Shares |           | Percentage
|                                     |                                 |                  |           |           
|Franklin Resources, Inc.             |                                 |                  | 1,522,912 |            |  |  | 7.5  | (1)
|Franklin Advisers, Inc.              |                                 |                  |           |            |  |  |      |    
|                                     | Charles B. Johnson              |                  |           |            |  |  |      |     | 
|                                     | Rupert H. Johnson, Jr.          |                  |           |            |  |  |      |     | 
|                                     | One Franklin Parkway            |                  |           |            |  |  |      |     | 
|                                     | San Mateo, California 94403     |                  |           |            |  |  |      |     | 
|Artisan Partners Limited Partnership |                                 |                  | 1,468,701 |            |  |  | 7.2  | (2)
|Artisan Investment Corporation       |                                 |                  |           |            |  |  |      |    
|                                     | Andrew A. Ziegler               |                  |           |            |  |  |      |     | 
|                                     | Carlene M. Ziegler              |                  |           |            |  |  |      |     | 
|                                     | 1000 North Water Street, #1770  |                  |           |            |  |  |      |     | 
|                                     | Milwaukee, Wisconsin 53202      |                  |           |            |  |  |      |     | 
|Barclays Global Investors, NA        |                                 |                  | 2,400,590 |            |  |  | 11.8 | (3)
|Barclays Bank PLC                    |                                 |                  |           |            |  |  |      |    
|Barclays Global Fund Advisors        |                                 |                  |           |            |  |  |      |    
|                                     | 45 Fremont Street               |                  |           |            |  |  |      |     | 
|                                     | San Francisco, California 94105 |                  |           |            |  |  |      |     | 
|Wellington Management Company, LLP   |                                 |                  | 1,331,324 |            |  |  | 6.6  | (4)
|                                     | 75 State Street                 |                  |           |            |  |  |      |     | 
|                                     | Boston, Massachusetts 02109     |                  |           |            |  |  |      |     | 

Members of the Board of Directors who are not
employees:

|                    |  |                           |        |             |  |            |         |       |  |         |        |  |  |  |         |  |  |  |   | 
|------------------- |  | ------------------------- | ------ | ----------- |  | ---------- | ------- | ----- |  | ------- | ------ |  |  |  | ------- |  |  |  | - | 
|                    |  |                           |        |             |  |            |         |      
|                    |  | Shares Beneficially Owned |        |             |  |            |         |      
|                    |  |                           |        |             |  |            |         |      
|                    |  |                           |        | Under Stock |  | Restricted |         |       |  |        
|                    |  | Outstanding               |        | Options**   |  | Stock      |         | Total |  | Percent
|                    |  |                           |        |             |  |            |         |       |  |        
|Isaac Arnold, Jr.   |  |                           | 44,825 |             |  |            | 44,000  |       |  |         | 30,458 |  |  |  | 119,283 |  |  |  | * | 
|Charles M. Elson    |  |                           | 4,028  |             |  |            | 25,250  |       |  |         | 23,888 |  |  |  | 53,166  |  |  |  | * | 
|Robert L. Gerry III |  |                           | 937    |             |  |            | 131,500 |       |  |         | 9,250  |  |  |  | 141,687 |  |  |  | * | 
|J. Frank Haasbeek   |  |                           |       |             |  |            |        |       |  |         | 7,362  |  |  |  | 7,362   |  |  |  | * | 
|James T. Jongebloed |  |                           |       |             |  |            | 3,500   |       |  |         | 8,650  |  |  |  | 12,150  |  |  |  | * | 
|Gary R. Petersen    |  |                           | 8,003  |             |  |            | 15,000  |       |  |         | 12,065 |  |  |  | 35,068  |  |  |  | * | 
|Sheryl K. Pressler  |  |                           |       |             |  |            | 3,500   |       |  |         | 12,796 |  |  |  | 16,296  |  |  |  | * | 

90



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##### Table of Contents



Executive Officers:

|                   |  |                           |         |            |  |           |       |              |  |            |         |       |  |         |        |  |  |  |         |  |  |  |         |  |  |  |      | 
|------------------ |  | ------------------------- | ------- | ---------- |  | --------- | ----- | ------------ |  | ---------- | ------- | ----- |  | ------- | ------ |  |  |  | ------- |  |  |  | ------- |  |  |  | ---- | 
|                   |  |                           |         |            |  |           |       |             
|                   |  | Shares Beneficially Owned |         |            |  |           |       |             
|                   |  |                           |         |            |  |           |       |             
|                   |  |                           |         | Under      |  | Under     |       | Under        |  |            |         |       |  |        
|                   |  |                           |         | 401(k)/ESP |  | Stock     |       | Deferred     |  | Restricted |         |       |  |        
|                   |  | Outstanding               |         | Plans      |  | Options** |       | Compensation |  | Stock      |         | Total |  | Percent
|                   |  |                           |         |            |  |           |       |              |  |            |         |       |  |        
|James L. Payne     |  |                           | 144,954 |            |  |           | 5,526 |              |  |            | 66,667  |       |  |         | 3,952  |  |  |  | 100,000 |  |  |  | 321,099 |  |  |  | 1.58 | 
|Phillip A. Gobe    |  |                           |        |            |  |           | 6,727 |              |  |            | 130,000 |       |  |         | 32,687 |  |  |  | 31,666  |  |  |  | 201,080 |  |  |  | *    | 
|Bruce K. Murchison |  |                           | 300     |            |  |           | 3,788 |              |  |            | 99,792  |       |  |         | 30,541 |  |  |  | 26,666  |  |  |  | 161,087 |  |  |  | *    | 
|George B. Nilsen   |  |                           | 2,500   |            |  |           | 4,341 |              |  |            | 55,000  |       |  |         | 10,793 |  |  |  | 25,000  |  |  |  | 97,634  |  |  |  | *    | 
|John P. McGinnis   |  |                           |        |            |  |           | 3,332 |              |  |            | 91,230  |       |  |         | 19,317 |  |  |  | 9,000   |  |  |  | 122,879 |  |  |  | *    | 
|Michael S. Wilkes  |  |                           |        |            |  |           | 447   |              |  |            |        |       |  |         |       |  |  |  | 20,000  |  |  |  | 20,447  |  |  |  | *    | 

All Directors and Executive Officers as a
Group:

| |  |       |           |         |  |  |     | 
| |  | ----- | --------- | ------- |  |  | --- | 
| |  | Total |           | Percent
| |  |       |           |        
| |  |       | 1,309,238 |         |  |  | 6.4 | 



---

Footnotes:



|  |          
|- | ---------
|* | Under 1%.



|   |                                                                              
|-- | -----------------------------------------------------------------------------
|** | Stock options include only options which may be
    exercised within 60 days.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Based on the Schedule 13G filed by Franklin
    Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and
    Franklin Advisers, Inc. with the SEC on February 10, 2004,
    Franklin Advisers, Inc. is reported to have sole voting and
    dispositive power over 1,434,012 shares and Franklin
    Advisory Services, LLC has sole voting and dispositive power
    over 88,900 shares. Franklin Advisers, Inc. and Franklin
    Advisory Services, LLC are both wholly owned investment advisory
    subsidiaries of Franklin Resources, Inc. Each of
    Messrs. Charles B. Johnson and Rupert H. Johnson, Jr. own
    in excess of 10% of the outstanding common stock of Franklin
    Resources, Inc. As the principal shareholders of Franklin
    Resources, Inc., each of Messrs. Charles B. Johnson and
    Rupert H. Johnson, Jr. may be deemed for certain purposes to be
    beneficial owners of the shares beneficially owned by Franklin
    Resources, Inc. Shares beneficially owned by Franklin Resources,
    Inc. include 1,434,012 shares which may be received upon
    conversion of our outstanding term convertible securities
|   
|(2) | Based on the Schedule 13G filed by Artisan
    Partners Limited Partnership (Artisan Partners) with
    the SEC on January 23, 2004, Artisan Partners is an
    investment adviser registered under section 203 of the
    Investment Advisers Act of 1940. Artisan Investment Corporation
    (Artisan Corp.) is the General Partner of Artisan
    Partners and Mr. Ziegler and Ms. Ziegler are the
    principal stockholders of Artisan Corp. Artisan Corp. reported
    shared dispositive and shared voting power with respect to all
    1,468,701 shares. The shares reported herein have been
    acquired on behalf of discretionary clients of Artisan Partners.
    Persons other than Artisan Partners are entitled to receive all
    dividends from, and proceeds from the sale of, those shares. To
    the knowledge of Artisan Partners, Artisan Corp.,
    Mr. Ziegler or Ms. Ziegler, none of such persons has
    an economic interest in more than five percent of the class of
    stock.                                                                                                                                           
|   
|(3) | Based on the Schedule 13G filed by Barclays
    Global Investors, NA. (Barclays Global Investors)
    et al with the SEC on February 13, 2004, Barclays
    Global Investors and Barclays Bank PLC are banks as defined in
    section 3(a)(6) of the Securities Exchange Act of 1934.
    Barclays Global Investors has sole voting and dispositive power
    of 1,793,918 shares, and shares voting and dispositive over
    268,928 shares, and Barclays Bank PLC has sole voting and
    dispositive power of 9,700 shares. Barclays Global Fund
    Advisors, an investment adviser under section 240.13d
    (b)(1)(ii)(E) has sole vesting and dispositive power of
    328,044 shares. The shares reported are held in trust
    accounts for the economic benefit of the beneficiaries of those
    accounts.                                                                                                                                                                                                                                                                                                                                       
|   
|(4) | Based on the Schedule 13G filed by the
    Wellington Management Company, LLP (WMC) with the
    SEC on February 13, 2004, WMC is reported to share voting
    power with respect to 703,430 shares and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

91



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##### Table of Contents



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | dispositive power with respect to
    1,331,324 shares. These securities are beneficially owned
    by WMC in its capacity as investment adviser and are owned of
    record by the clients of WMC. Those clients have the right to
    receive, or the power to direct the receipt of, dividends from,
    or the proceeds from the sale of, such securities. No such
    client is known to have such right or power with respect to more
    than five percent of this class of securities.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

None.






|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services

Fees Paid to Independent Public
Accountants

The Audit Committee has reviewed the audit and
non-audit fees that Nuevo Energy Company has paid to the
independent public accountants for purposes of considering
whether such fees are compatible with maintaining the
auditors independence.

Audit Fees.Fees for
services rendered by KPMG LLP for the reviews of Forms 10-Q and
for the audits of the financial statements of Nuevo Energy
Company were $439 thousand for 2002 and $383 thousand for 2003.

Audit-Related Fees.The aggregate fees billed for all audit-related services
rendered by KPMG LLP to Nuevo Energy Company consisted of $58
thousand of fees for 2003. Specific services for Nuevo Energy
Company in both years include consultations, financial
accounting and reporting standards.

Tax Related Fees.Aggregate fees billed for all tax related services rendered by
KPMG LLP to Nuevo Energy Company consisted of $231 thousand
in 2002 and $12 thousand in 2003.

The Audit Committee has adopted a pre-approval
policy regarding audit and non-audit fees. The policy provides
that the Audit Committee is to pre-approve the audit and
non-audit services performed by the independent auditor to
assure that the provision of such services does not impair the
auditors independence. The services to be pre-approved
under the policy include annual audit services provided by the
independent auditor, services which are reasonably related to
the performance of the review or audit of our financial
statements by the independent auditor, tax services and all
other related services. The Audit Committee periodically
establishes pre-approval levels for all services to be provided
by the independent auditor under the policy. Any proposed
services which exceed these pre-approval levels require specific
pre-approval by the Audit Committee.

92



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##### Table of Contents






PART IV






|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K

(a) The following documents are filed as
part of this report:

|   |  |                                                                                           |  |   
|-- |  | ----------------------------------------------------------------------------------------- |  | --
|1. |  | Financial Statements                                                                      |  |   
|   |  | Our consolidated financial statements are
    included in Part II, Item 8 of this report: |  |   
|   |  | Independent Auditors Report                                                              |  | 37
|   |  | Consolidated Statements of Income                                                         |  | 38
|   |  | Consolidated Balance Sheets                                                               |  | 39
|   |  | Consolidated Statements of Cash Flows                                                     |  | 41
|   |  | Consolidated Statements of Stockholders
    Equity                                       |  | 42
|   |  | Consolidated Statements of Comprehensive Income                                           |  | 43
|   |  | Notes to the Consolidated Financial Statements                                            |  | 44
|2. |  | Financial statement schedules and supplementary
    information required to be submitted  |  |   
|   |  | Schedule II  Valuation and
    qualifying accounts                                       |  | 80
|   |  | Schedules other than that listed above are
    omitted because they are not applicable    |  |   
|3. |  | Exhibit List                                                                              |  | 96

(b) Reports on Form 8-K:

|                  |  |                                                                                                                             
|----------------- |  | ----------------------------------------------------------------------------------------------------------------------------
|Date              |  | Event Reported                                                                                                              
|                  |  |                                                                                                                             
|March 5, 2004     |  | Press release announcing appointment of Chief
    Financial Officer                                                         
|March 4, 2004     |  | Press release announcing fourth quarter 2003
    earnings                                                                   
|February 12, 2004 |  | Agreement and Plan of Merger with Plains
    Exploration & Production Company and press release
    announcing the agreement
|January 28, 2004  |  | Press release announcing the final redemption of
    9 1/2% Senior Subordinated Notes                                       
|January 5, 2004   |  | Press release announcing the significant increase
    in realized pricing for California crude oil production               
|January 5, 2004   |  | Press release announcing the sale of California
    real estate properties                                                  
|December 3, 2003  |  | Press release announcing appointment of Interim
    Chief Financial Officer                                                 
|November 12, 2003 |  | Press release announcing third quarter 2003
    earnings                                                                    

93



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##### Table of Contents






NUEVO ENERGY COMPANY

EXHIBIT LIST

December 31, 2003


Each exhibit identified below is filed as a part
of this report. Exhibits not incorporated by reference to a
prior filing are designated by an asterisk; all exhibits not so
designated are incorporated herein by reference to a prior
filing as indicated. Exhibits designated with a +
constitute a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this report
pursuant to Item 14 (c) of Form 10-K.

(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.1 Agreement and Plan of Merger dated
    September 18, 2002 by and among Athanor Resources, Inc.,
    Athanor B.V., Nuevo Energy Company, Nuevo Texas Inc., Yorktown
    Energy Partners III, L.P., Yorktown Energy IV, L.P.,
    Yorktown Partners LLC, SAFIC S.A., Charles de Mestral, J. Ross
    Craft, Montana Oil and Gas, Ltd., David A. Badley, James S.
    Scott, Glenn Reed, Doug Allison and Mohamed Yaich
    (Exhibit 2.1 to our Form 8-K dated September 19,
    2002).
|
| | 2.2 Agreement and Plan of Merger dated
    February 12, 2004, by and among Plains
    Exploration & Production Company, PXP California, Inc.
    and Nuevo Energy Company (Exhibit 2.1 to our Form 8-K
    filed on February 12, 2004).                                                                                                                                                                                                                                                 

(3) Articles of Incorporation and bylaws.



| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.1 Certificate of Incorporation of Nuevo
    Energy Company (Exhibit 3.1 to our 1999 Second Quarter
    Form 10-Q).                                
|
| | 3.2 Certificate of Amendment to the
    Certificate of Incorporation of Nuevo Energy Company
    (Exhibit 3.2 to our 1999 Second Quarter Form 10-Q).
|
| | 3.3 Bylaws of Nuevo Energy Company
    (Exhibit 3.3 to our 1999 Second Quarter Form 10-Q).                                                          
|
| | 3.4 Amendment to section 3.1 of the
    Bylaws of Nuevo Energy Company (Exhibit 3.4 to our 1999
    Second Quarter Form 10-Q).                      

(4) Instruments defining the rights of
security holders, including indentures.



| |                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.1 Specimen Stock Certificate
    (Exhibit 4.1 to our Form S-4 (No. 33-33873) filed
    under the Securities Act of 1933).                                                                                                                                                                                                                                   
|
| | 4.2 Indenture dated April 1, 1996 among
    Nuevo Energy Company as Issuer, various Subsidiaries as the
    Guarantors, and State Street Bank and Trust Company as the
    Trustee  9 1/2% Senior Subordinated Notes
    due 2006. (Incorporated by reference from Form S-3
    (No. 333-1504).                                                              
|
| | 4.3 Form of Amended and Restated Declaration
    of Trust dated December 23, 1996, among the Company, as
    Sponsor, Wilmington Trust Company, as Institutional Trustee and
    Delaware Trustee, and Michael D. Watford, Robert L.
    Gerry, III and Robert M. King, as Regular Trustees.
    (Exhibit 4.1 to our Form 8-K filed on
    December 23, 1996).
|
| | 4.4 Form of Subordinated Indenture dated as
    of November 25, 1996, between the Company and Wilmington
    Trust Company, as Indenture Trustee. (Exhibit 4.2 to
    Form 8-K filed on December 23, 1996).                                                                                                                                                   
|
| | 4.5 Form of First Supplemental Indenture
    dated December 23, 1996, between the Company and Wilmington
    Trust Company, as Indenture Trustee. (Exhibit 4.3 to
    Form 8-K filed on December 23, 1996).                                                                                                                                                   
|
| | 4.6 Form of Preferred Securities Guarantee
    Agreement dated as of December 23, 1996, between the
    Company and Wilmington Trust Company, as Guarantee Trustee.
    (Exhibit 4.4 to Form 8-K filed on December 23,
    1996).                                                                                                                             

94



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##### Table of Contents





| |                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.7 Form of Certificate representing TECONS.
    (Exhibit 4.5 to Form 8-K filed on December 23,
    1996).                                                                                                                                                                                                  
|
| | 4.8 Shareholder Rights Plan, dated
    March 5, 1997, between Nuevo Energy Company and American
    Stock Transfer & Trust Company, as Rights Agent
    (Exhibit 1 to our Form 8-A filed on April 1,
    1997).                                                                                             
|
| | *4.9 First Amendment to the Shareholder
    Rights Plan, dated January 10, 2000, between Nuevo Energy
    Company and American Stock Transfer & Trust Company.                                                                                                                                              
|
| | 4.10 Second Amendment to the Shareholder
    Rights Plan, dated February 12, 2004, between Nuevo Energy
    Company and American Stock Transfer & Trust Company
    (Exhibit 99.1 to our Form 8-A/A filed on
    February 27, 2004).                                                                        
|
| | 4.11 Release and Termination of Subsidiary
    Guarantees with respect to the 9 1/2% Senior
    Subordinated Notes due 2006. (Exhibit 4.11 to our 1997
    Form 10-K)                                                                                                                                       
|
| | 4.12 Second Supplemental Indenture to the
    Indenture dated April 1, 1996, dated August 9, 1999
    between Nuevo Energy Company and State Street Bank and Trust
    Company  9 1/2% Senior Subordinated Notes
    due 2006 (Exhibit 4.10 to our Form S-4 (No. 333-90235)
    filed on November 3, 1999).
|
| | 4.13 Indenture dated as of August 20,
    1999, between Nuevo Energy Company and State Street Bank Trust
    Company, as Trustee (Exhibit 4.11 to our Form S-4
    (No. 333-90235) filed on November 3, 1999).                                                                                              
|
| | 4.14 Registration Agreement dated
    August 20, 1999, between Nuevo Energy Company, Banc of
    America Securities LLC and Salomon Smith Barney Inc.
    (Exhibit 4.12 to our Form S-4 (No. 333-90235)
    filed on November 3, 1999).                                                                     
|
| | 4.15 Indenture dated September 26,
    2000, between Nuevo Energy Company and State Street Bank and
    Trust Company as the Trustee  9 3/8% Senior
    subordinated Notes due 2010 (Exhibit 4.12 to our 2000 Third
    Quarter Form 10-Q).                                                                
|
| | 4.16 Registration Agreement dated
    September 26, 2000, between Nuevo Energy Company and Banc
    of America Securities LLC, Banc One Capital Markets, Inc. and
    J.P. Morgan & Co. (Exhibit 4.13 to our 2000
    Third Quarter Form 10-Q).                                                             

(10) Material Contracts.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.1 Third Restated Credit Agreement dated
    June 7, 2000, between Nuevo Energy Company (Borrower) and
    Bank of America N.A. (Administrative Agent), Bank One, NA
    (Syndication Agent), Bank of Montreal (Documentation Agent) and
    certain lenders (Exhibit 10.1 to our 2000 Second Quarter
    Form 10-Q).                                                                                                                                                                                               
|
| | 10.2 1990 Stock Option Plan, as amended
    (Exhibit 10.8 to our Form S-1 dated July 13,
    1992).                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | 10.3 1993 Stock Incentive Plan, as amended
    (Exhibit 4.2 to our Form S-8 (No. 333-21063)
    filed on February 4, 1997.)                                                                                                                                                                                                                                                                                                                                                                                           
|
| | 10.4 1999 Stock Incentive Plan
    (Exhibit 99.1 to our Form S-8 (No. 333-87899)
    filed on September 28, 1999).                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | 10.5 Nuevo Energy Company Deferred
    Compensation Plan (Exhibit 99 to our Form S-8
    (No. 333-51217) filed on April 28, 1998).                                                                                                                                                                                                                                                                                                                                                                                    
|
| | 10.6 Stock Purchase Agreement, dated as of
    June 30, 1994, among Amoco Production Company
    (APC), Walter International Inc.
    (Walter), Walter Congo Holdings, Inc. (Walter
    Holdings), Walter International Congo, Inc. (before the
    merger Walter Congo and after the merger Old
    Walter Congo), Nuevo, Nuevo Holding and The Nuevo Congo
    Company (before the merger, Nuevo Congo and after
    the merger, Old Nuevo Congo). (Exhibit 2.1 to
    Form 8-K dated March 10, 1995).

95



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##### Table of Contents





| |                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.7 Amendment to Stock Purchase Agreement
    dated as of September 19, 1994, among APC, Walter Congo,
    Nuevo Congo, Walter Holdings, Nuevo Holding, Walter and Nuevo.
    (Exhibit 2.2 to Form 8-K dated March 10, 1995).                                                                         
|
| | 10.8 Second Amendment to Stock Purchase
    Agreement dated as of October 15, 1994, among APC, Walter
    Congo, Nuevo Congo, Walter Holdings, Nuevo Holding, Walter and
    Nuevo. (Exhibit 2.3 to Form 8-K dated March 10,
    1995).                                                                
|
| | 10.9 Third Amendment to Stock Purchase
    Agreement dated as of December 2, 1994, among APC, Walter
    Congo, Nuevo Congo, Walter Holdings, Nuevo Holding, Walter and
    Nuevo. (Exhibit 2.4 to Form 8-K dated March 10,
    1995.)                                                                 
|
| | 10.10 Fourth Amendment to Stock Purchase
    Agreement dated as of February 23, 1995, among APC, Walter
    Congo, Nuevo Congo, Walter Holdings, Nuevo Holding, Walter and
    Nuevo. (Exhibit 2.5 to Form 8-K dated March 10,
    1995).                                                              
|
| | 10.11 Tax Agreement dated as of
    February 23, 1995, executed by APC, Amoco Congo Exploration
    Company (ACEC), Amoco Congo Production Company
    (ACPC), Walter, Walter Holdings, Walter Congo,
    Nuevo, Nuevo Holding and Nuevo Congo. (Exhibit 2.6 to
    Form 8-K dated March 10, 1995).
|
| | 10.12 Agreement and Plan of Merger executed
    by Nuevo Congo, Nuevo Holding and APC dated February 24,
    1995. (Exhibit 2.7 to Form 8-K dated March 10,
    1995).                                                                                                                                 
|
| | 10.13 Finance Agreement dated as of
    December 28, 1994, among Nuevo Holding, Nuevo Congo and The
    Overseas Private Investment Corporation (OPIC).
    (Exhibit 2.8 to Form 8-K dated March 10, 1995).                                                                                          
|
| | 10.14 Subordination Agreement dated
    December 28, 1994, among Nuevo Congo, Nuevo Holding, Walter
    Congo, Walter Holdings and APC. (Exhibit 2.9 to
    Form 8-K dated March 10, 1995).                                                                                                            
|
| | 10.15 Guaranty covering the obligations of
    Nuevo Congo and Walter Congo under the Stock Purchase Agreement
    dated February 24, 1995, executed by Walter and Nuevo.
    (Exhibit 2.10 to Form 8-K dated March 10, 1995).                                                                         
|
| | 10.16 Inter-Purchaser Agreement dated as of
    December 28, 1994, among Walter, Old Walter Congo, Walter
    Holdings, Nuevo, Old Nuevo Congo and Nuevo Holding.
    (Exhibit 2.11 to Form 8-K dated March 10, 1995).                                                                                 
|
| | 10.17 Latent ORRI Contract dated
    February 25, 1995, among Walter, Walter Holdings, Walter
    Congo, Nuevo, Nuevo Holding and Nuevo Congo. (Exhibit 2.12
    to Form 8-K dated March 10, 1995).                                                                                                    
|
| | 10.18 Latent Working Interest Contract dated
    February 25, 1995, among Walter, Walter Holdings, Walter
    Congo, Nuevo, Nuevo Holding and Nuevo Congo. (Exhibit 2.13
    to Form 8-K dated March 10, 1995).                                                                                        
|
| | 10.19 Asset Purchase Agreement dated as of
    February 16, 1996 between Nuevo Energy Company, the
    Purchaser, and Union Oil Company of California as Seller.
    (Exhibit 2.1 to Form S-3 (No. 333-1504).                                                                                          
|
| | 10.20 Asset Purchase Agreement dated as of
    April 4, 1997, by and among Torch California Company and
    Express Acquisition Company, as Sellers, and Nuevo Energy
    Company, as Purchaser. (Exhibit 2.2 to Form S-3
    (No. 333-1504)).                                                         
|
| | 10.21 Purchase and Sale Agreement dated
    October 16, 1998 between Nuevo Energy Company (Seller) and
    Samson Lone Star Limited Partnership (Buyer).
    (Exhibit 10.28 to our 1998 Form 10-K).                                                                                                    
|
| | 10.22 Master Services Agreement among the
    Company and Torch Energy Advisors Incorporated, Torch Operating
    Company, Torch Energy Marketing, Inc., and Novistar, Inc. dated
    January 1, 1999. (Exhibit 10.29 to our 1998
    Form 10-K).                                                      

96



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.23 Employment Agreement with Bruce
    Murchison dated June 1, 1999. (Exhibit 10.27 to our
    1999 Third Quarter Form 10-Q).                                                                                                                                                                                                                                                                                               
|
| | 10.24 Employment Agreement with John P.
    McGinnis dated July 15, 1999. (Exhibit 10.28 to our
    1999 Third Quarter Form 10-Q).                                                                                                                                                                                                                                                                                             
|
| | 10.25 Crude Oil Purchase Agreement dated
    February 4, 2000 between Nuevo Energy Company and Tosco
    Corporation. (Exhibit 10.1 to Form 8-K dated
    March 23, 2000).                                                                                                                                                                                                                                                     
|
| | 10.26 Severance Protection Agreement dated
    March 25, 2001. (Exhibit 10.31 to our 2000
    Form 10-K).                                                                                                                                                                                                                                                                                                                      
|
| | 10.27 Amendment to 1999 Stock Incentive Plan
    (Exhibit 99.1 to our Form S-8, filed on
    October 21, 2001).                                                                                                                                                                                                                                                                                                                
|
| | 10.28 2001 Stock Incentive Plan
    (Exhibit 99.1 to our Form S-8, filed on
    October 21, 2001).                                                                                                                                                                                                                                                                                                                             
|
| | 10.29 Employment Agreement with James L.
    Payne dated October 15, 2001. (Exhibit 10.1 to our
    2001 Third Quarter Form 10-Q).                                                                                                                                                                                                                                                                                             
|
| | 10.30 Janet F. Clark Stock Option Plan
    (Exhibit 10.35 to our 2001 Form 10-K).                                                                                                                                                                                                                                                                                                                                              
|
| | 10.31 George B. Nilsen Stock Option Plan
    (Exhibit 10.36 to our 2001 Form 10-K).                                                                                                                                                                                                                                                                                                                                            
|
| | 10.32 Registration Rights Agreement dated
    September 18, 2002 by and among Nuevo Energy Company,
    Yorktown Energy Partners III, L.P., Yorktown Energy IV,
    L.P., Yorktown Partners LLC, SAFIC S.A., Charles de Mestral, J.
    Ross Craft, Montana Oil and Gas, Ltd., David A. Badley, James S.
    Scott, Glenn Reed, Doug Allison and Mohamed Yaich
    (Exhibit 10.1 to our Form 8-K dated September 19,
    2002).
|
| | 10.33 Amendment to the 2001 Stock Incentive
    Plan (Exhibit 99.1 to our Form S-8 dated
    November 1, 2002).                                                                                                                                                                                                                                                                                                                
|
| | 10.34 First Amendment to Employment
    Agreement with James L. Payne dated September 11, 2002.                                                                                                                                                                                                                                                                                                                                
|
| | 10.35 Key Executive Terminated Without Cause
    Agreement.                                                                                                                                                                                                                                                                                                                                                                    
|
| | *10.36 Purchase and Sale Agreement, dated
    February 28, 2003, between Nuevo Energy Company and
    BlackSand Partners, L.P.                                                                                                                                                                                                                                                                                                 
|
| | *10.37 Purchase and Sale Agreement, dated
    December 30, 2003, between Nuevo Energy Company and Tonner
    Hills SSP, LLC and Tonner Hills 680 LLC.                                                                                                                                                                                                                                                                          
|
| | *12.1 Computation of Earnings to Fixed
    Charges and Ratio of Earnings to Combined Fixed Charges and
    Preferred Stock Dividends                                                                                                                                                                                                                                                                                           
|
| | *21 Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                                                                                             

(23) Consents of experts and counsel



| |                                          
| | -----------------------------------------
| | *23.1 Consent of KPMG LLP                
|
| | *23.2 Consent of Ryder Scott Company L.P.

(31) Certifications pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | *31.1 Certification of Chief Executive
    Officer of Nuevo Energy Company pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002
|
| | *31.2 Certification of Chief Financial
    Officer of Nuevo Energy Company pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002

(32) Certifications pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | *32.1 Certification of Chief Executive
    Officer of Nuevo Energy Company pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002
|
| | *32.2 Certification of Chief Financial
    Officer of Nuevo Energy Company pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002

97



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GLOSSARY OF OIL AND GAS TERMS

Terms used to describe quantities of oil and
natural gas



| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | Bbl One
    stock tank barrel, or 42 US gallons liquid volume, of crude oil
    or other liquid hydrocarbons.
|
| |  | Bcf One
    billion cubic feet of natural gas.                                                               
|
| |  | Bcfe One
    billion cubic feet of natural gas equivalent.                                                   
|
| |  | BOE One
    barrel of oil equivalent, converting gas to oil at the ratio of
    6 Mcf of gas to 1 Bbl of oil.
|
| |  | BOPD One
    barrel of oil per day.                                                                          
|
| |  | MBbl One
    thousand Bbls.                                                                                  
|
| |  | Mcf One
    thousand cubic feet of natural gas.                                                              
|
| |  | MMBbl
    One million Bbls of oil or other liquid hydrocarbons.                                              
|
| |  | MMcf One
    million cubic feet of natural gas.                                                              
|
| |  | MBOE One
    thousand BOE.                                                                                   
|
| |  | MMBOE
    One million BOE.                                                                                   

Terms used to describe the Companys
interests in wells and acreage



| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Gross oil and gas wells or
    acres The Companys
    gross wells or gross acres represent the total number of wells
    or acres in which the Company owns a working interest.                                                  
|
| |  | Net oil and gas wells or
    acres Determined by
    multiplying gross oil and natural gas wells or acres
    by the working interest that the Company owns in such wells or
    acres represented by the underlying properties.

Terms used to assign a present value to the
Companys reserves



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Standard measure of proved
    reserves The present
    value, discounted at 10%, of the pre-tax future net cash flows
    attributable to estimated net proved reserves. The Company
    calculates this amount by assuming that it will sell the oil and
    gas production attributable to the proved reserves estimated in
    its independent engineers reserve report for the prices it
    received for the production on the date of the report, unless it
    had a contractual arrangement specific to a property to sell the
    production for a different price. The Company also assumes that
    the cost to produce the reserves will remain constant at the
    costs prevailing on the date of the report. The assumed costs
    are subtracted from the assumed revenues resulting in a stream
    of future net cash flows. Estimated future income taxes using
    rates in effect on the date of the report are deducted from the
    net cash flow stream. The after- tax cash flows are discounted
    at 10% to result in the standardized measure of the
    Companys proved reserves. The standardized measure of the
    Companys proved reserves is disclosed in the
    Companys audited financial statements in Note 18.
|
| |  | Pre-tax discounted present
    value The discounted
    present value of proved reserves is identical to the
    standardized measure, except that estimated future income taxes
    are not deducted in calculating future net cash flows. The
    Company discloses the discounted present value without deducting
    estimated income taxes to provide what it believes is a better
    basis for comparison of its reserves to the producers who may
    have different tax rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Terms used to classify our reserve
quantities



| |   |                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Proved
    reserves The estimated
    quantities of crude oil, natural gas and natural gas liquids
    which, upon analysis of geological and engineering data, appear
    with reasonable certainty to be recoverable in the future from
    known oil and natural gas reservoirs under existing economic and
    operating conditions.

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The SEC definition of proved oil and gas
reserves, per Article 4-10(a)(2) of Regulation S-X, is
as follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Proved oil and gas reserves. Proved oil and gas
    reserves are the estimated quantities of crude oil, natural gas,
    and natural gas liquids which geological and engineering data
    demonstrate with reasonable certainty to be recoverable in
    future years from known reservoirs under existing economic and
    operating conditions, i.e., prices and costs as of the date the
    estimate is made. Prices include consideration of changes in
    existing prices provided only by contractual arrangements, but
    not on escalations based upon future conditions.                                                                                            
|
| | (a) Reservoirs are considered proved if
    economic producibility is supported by either actual production
    or conclusive formation test. The area of a reservoir considered
    proved includes (A) that portion delineated by drilling and
    defined by gas-oil and/or oil-water contacts, if any; and (B)
    the immediately adjoining portions not yet drilled, but which
    can be reasonably judged as economically productive on the basis
    of available geological and engineering data. In the absence of
    information on fluid contacts, the lowest known structural
    occurrence of hydrocarbons controls the lower proved limit of
    the reservoir.
|
| | (b) Reserves which can be produced
    economically through application of improved recovery,
    techniques (such as fluid injection) are included in the
    proved classification when successful testing by a
    pilot project, or the operation of an installed program in the
    reservoir, provides support for the engineering analysis on
    which the project or program was based.                                                                                                                                                                                                                                                                               
|
| | (c) Estimates of proved reserves do not
    include the following: (1) oil that may become available
    from known reservoirs, but is classified separately as
    indicated additional reserves; (2) crude oil,
    natural gas, and natural gas liquids, the recovery of which is
    subject to reasonable doubt because of uncertainty as to
    geology, reservoir characteristics, or economic factors;
    (3) crude oil, natural gas, and natural gas liquids, that
    may occur in undrilled prospects; and (4) crude oil,
    natural gas, and natural gas liquids, that may be recovered from
    oil shales, coal, gilsonite and other such sources.             



| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Proved developed
    reserves Proved reserves
    that can be expected to be recovered through existing wells with
    existing equipment and operating methods.                                           
|
| |  | Proved undeveloped
    reserves Proved reserves
    that are expected to be recovered from new wells on undrilled
    acreage, or from existing wells where a relatively major
    expenditure is required.

Terms which describe the cost to acquire the
Companys reserves



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Finding
    costs The Companys
    finding costs compare the amount the Company spent to acquire,
    explore and develop its oil and gas properties, explore for oil
    and gas and to drill and complete wells during a period, with
    the increases in reserves during the period. This amount is
    calculated by dividing the net change in the Companys
    evaluated oil and property costs during a period by the change
    in proved reserves plus production over the same period. The
    Companys finding costs as of December 31 of any year
    represent the average finding costs over the three-year period
    ending December 31 of that year.

Terms which describe the productive life of a
property or group of properties



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Reserve life
    index A measure of the
    productive life of an oil and gas property or a group of oil and
    gas properties, expressed in years. Reserve life index for the
    years ended December 31, 2003, 2002 or 2001 equal the
    estimated net proved reserves attributable to a property or
    group of properties divided by production from the property or
    group of properties for the four fiscal quarters preceding the
    date as of which the proved reserves were estimated.

Terms used to describe the legal ownership of
the Companys oil and gas properties



| |   |                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Royalty
    interest A real property
    interest entitling the owner to receive a specified portion of
    the gross proceeds of the sale of oil and natural gas production
    or, if the conveyance creating the interest

99



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | provides, a specific portion of oil and natural
    gas produced, without any deduction for the costs to explore
    for, develop or produce the oil and natural gas. A royalty
    interest owner has no right to consent to or approve the
    operation and development of the property, while the owners of
    the working interests have the exclusive right to exploit the
    mineral on the land.                                                                                                                                                                                                                                                                              
|
| |  | Working
    interest A real property
    interest entitling the owner to receive a specified percentage
    of the proceeds of the sale of oil and natural gas production or
    a percentage of the production, but requiring the owner of the
    working interest to bear the cost to explore for, develop and
    produce such oil and natural gas. A working interest owner who
    owns a portion of the working interest may participate either as
    operator or by voting his percentage interest to approve or
    disapprove the appointment of an operator and drilling and other
    major activities in connection with the development and
    operation of a property.
|
| |  | Net revenue
    interest A real property
    interest entitling the owner to receive a specified percentage
    of the proceeds of the sale of oil and natural gas production or
    a percentage of the production, net of royalty interests and
    costs to explore for, develop and produce such oil and natural
    gas.                                                                                                                                                                                                                                                                                                                                                          

Terms used to describe seismic
operations



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Seismic
    data Oil and gas companies
    use seismic data as their principal source of information to
    locate oil and gas deposits, both to aid in exploration for new
    deposits and to manage or enhance production from known
    reservoirs. To gather seismic data, an energy source is used to
    send sound waves into the subsurface strata. These waves are
    reflected back to the surface by underground formations, where
    they are detected by geophones which digitize and record the
    reflected waves. Computers are then used to process the raw data
    to develop an image of underground formations.
|
| |  | 2-D seismic
    data 2-D seismic survey
    data has been the standard acquisition technique used to image
    geologic formations over a broad area. 2-D seismic data is
    collected by a single line of energy sources which reflect
    seismic waves to a single line of geophones. When processed, 2-D
    seismic data produces an image of a single vertical plane of
    sub-surface data.                                                                                                                                                                                                                                    
|
| |  | 3-D
    seismic 3-D seismic data
    is collected using a grid of energy sources, which are generally
    spread over several miles. A 3-D survey produces a three
    dimensional image of the subsurface geology by collecting
    seismic data along parallel lines and creating a cube of
    information that can be divided into various planes, thus
    improving visualization. Consequently, 3-D seismic data is a
    more reliable indicator of potential oil and natural gas
    reservoirs in the area evaluated than 2-D seismic data.                                                                                   

The Companys miscellaneous
definitions



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Infill
    drilling Infill drilling
    is the drilling of an additional well or additional wells in
    excess of those provided for by a spacing order in order to more
    adequately drain a reservoir.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | No. 6 fuel oil
    (Bunker) No. 6 fuel
    oil is a heavy residual fuel oil used by ships, industry, and
    for large-scale heating installations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Upstream oil and gas
    properties Upstream is a
    term used in describing operations performed before those at a
    point of reference. Production is an upstream operation and
    marketing is a downstream operation when the refinery is used as
    a point of reference. On a gas pipeline, gathering activities
    are considered to have ended when gas reaches a central point
    for delivery into a single line, and facilities used before this
    point of reference are upstream facilities used in gathering,
    whereas facilities employed after commingling at the central
    point and employed to make ultimate delivery of the gas are
    downstream facilities.

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SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |  |                     
| |  | --------------------
| |  | NUEVO ENERGY COMPANY

| |             
| | ------------
| | (Registrant)



| |     |                   
| | --- | ------------------
| | By: | /s/ JAMES L. PAYNE

| |                                                    
| | ---------------------------------------------------
| |                                                    
| | James L. Payne                                     
| | Chairman, President and Chief Executive
    Officer

Date: March 10, 2004

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report is signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.

|          |  |                                            |  |                                                                                   |  |               
|--------- |  | ------------------------------------------ |  | --------------------------------------------------------------------------------- |  | --------------
|          |  |                                            |  |                                                                                  
|Signature |  | Title                                      |  | Date                                                                             
|          |  |                                            |  |                                                                                  
|         
|By:       |  | /s/ JAMES L. PAYNEJames L. Payne           |  | Chairman, President and Chief Executive Officer
    (Principal Executive Officer) |  | March 10, 2004
|         
|By:       |  | /s/ MICHAEL S. WILKESMichael S. Wilkes     |  | Chief Financial Officer (Principal Financial and
    Accounting Officer)          |  | March 10, 2004
|         
|By:       |  | /s/ ISAAC ARNOLD, JR.Isaac Arnold, Jr.     |  | Director                                                                          |  | March 10, 2004
|         
|By:       |  | /s/ CHARLES M. ELSONCharles M. Elson       |  | Director                                                                          |  | March 10, 2004
|         
|By:       |  | /s/ ROBERT L GERRY IIIRobert L Gerry III   |  | Director                                                                          |  | March 10, 2004
|         
|By:       |  | /s/ J. FRANK HAASBEEKJ. Frank Haasbeek     |  | Director                                                                          |  | March 10, 2004
|         
|By:       |  | /s/ JAMES T. JONGEBLOEDJames T. Jongebloed |  | Director                                                                          |  | March 10, 2004
|         
|By:       |  | /s/ GARY R. PETERSENGary R. Petersen       |  | Director                                                                          |  | March 10, 2004
|         
|By:       |  | /s/ SHERYL K. PRESSLERSheryl K. Pressler   |  | Director                                                                          |  | March 10, 2004

101



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EXHIBIT INDEX

Each exhibit identified below is filed as a part
of this report. Exhibits not incorporated by reference to a
prior filing are designated by an asterisk; all exhibits not so
designated are incorporated herein by reference to a prior
filing as indicated. Exhibits designated with a +
constitute a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this report
pursuant to Item 14 (c) of Form 10-K.

(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.1 Agreement and Plan of Merger dated
    September 18, 2002 by and among Athanor Resources, Inc.,
    Athanor B.V., Nuevo Energy Company, Nuevo Texas Inc., Yorktown
    Energy Partners III, L.P., Yorktown Energy IV, L.P.,
    Yorktown Partners LLC, SAFIC S.A., Charles de Mestral, J. Ross
    Craft, Montana Oil and Gas, Ltd., David A. Badley, James S.
    Scott, Glenn Reed, Doug Allison and Mohamed Yaich
    (Exhibit 2.1 to our Form 8-K dated September 19,
    2002).
|
| | 2.2 Agreement and Plan of Merger dated
    February 12, 2004, by and among Plains
    Exploration & Production Company, PXP California, Inc.
    and Nuevo Energy Company (Exhibit 2.1 to our Form 8-K
    filed on February 12, 2004).                                                                                                                                                                                                                                                 

(3) Articles of Incorporation and bylaws.



| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.1 Certificate of Incorporation of Nuevo
    Energy Company (Exhibit 3.1 to our 1999 Second Quarter
    Form 10-Q).                                
|
| | 3.2 Certificate of Amendment to the
    Certificate of Incorporation of Nuevo Energy Company
    (Exhibit 3.2 to our 1999 Second Quarter Form 10-Q).
|
| | 3.3 Bylaws of Nuevo Energy Company
    (Exhibit 3.3 to our 1999 Second Quarter Form 10-Q).                                                          
|
| | 3.4 Amendment to section 3.1 of the
    Bylaws of Nuevo Energy Company (Exhibit 3.4 to our 1999
    Second Quarter Form 10-Q).                      

(4) Instruments defining the rights of
security holders, including indentures.



| |                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.1 Specimen Stock Certificate
    (Exhibit 4.1 to our Form S-4 (No. 33-33873) filed
    under the Securities Act of 1933).                                                                                                                                                                                                                                   
|
| | 4.2 Indenture dated April 1, 1996 among
    Nuevo Energy Company as Issuer, various Subsidiaries as the
    Guarantors, and State Street Bank and Trust Company as the
    Trustee  9 1/2% Senior Subordinated Notes
    due 2006. (Incorporated by reference from Form S-3
    (No. 333-1504).                                                              
|
| | 4.3 Form of Amended and Restated Declaration
    of Trust dated December 23, 1996, among the Company, as
    Sponsor, Wilmington Trust Company, as Institutional Trustee and
    Delaware Trustee, and Michael D. Watford, Robert L.
    Gerry, III and Robert M. King, as Regular Trustees.
    (Exhibit 4.1 to our Form 8-K filed on
    December 23, 1996).
|
| | 4.4 Form of Subordinated Indenture dated as
    of November 25, 1996, between the Company and Wilmington
    Trust Company, as Indenture Trustee. (Exhibit 4.2 to
    Form 8-K filed on December 23, 1996).                                                                                                                                                   
|
| | 4.5 Form of First Supplemental Indenture
    dated December 23, 1996, between the Company and Wilmington
    Trust Company, as Indenture Trustee. (Exhibit 4.3 to
    Form 8-K filed on December 23, 1996).                                                                                                                                                   
|
| | 4.6 Form of Preferred Securities Guarantee
    Agreement dated as of December 23, 1996, between the
    Company and Wilmington Trust Company, as Guarantee Trustee.
    (Exhibit 4.4 to Form 8-K filed on December 23,
    1996).                                                                                                                             
|
| | 4.7 Form of Certificate representing TECONS.
    (Exhibit 4.5 to Form 8-K filed on December 23,
    1996).                                                                                                                                                                                                                                                    
|
| | 4.8 Shareholder Rights Plan, dated
    March 5, 1997, between Nuevo Energy Company and American
    Stock Transfer & Trust Company, as Rights Agent
    (Exhibit 1 to our Form 8-A filed on April 1,
    1997).                                                                                                                                               



---



##### Table of Contents





| |                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | *4.9 First Amendment to the Shareholder
    Rights Plan, dated January 10, 2000, between Nuevo Energy
    Company and American Stock Transfer & Trust Company.                                                                                                                                              
|
| | 4.10 Second Amendment to the Shareholder
    Rights Plan, dated February 12, 2004, between Nuevo Energy
    Company and American Stock Transfer & Trust Company
    (Exhibit 99.1 to our Form 8-A/A filed on
    February 27, 2004).                                                                        
|
| | 4.11 Release and Termination of Subsidiary
    Guarantees with respect to the 9 1/2% Senior
    Subordinated Notes due 2006. (Exhibit 4.11 to our 1997
    Form 10-K)                                                                                                                                       
|
| | 4.12 Second Supplemental Indenture to the
    Indenture dated April 1, 1996, dated August 9, 1999
    between Nuevo Energy Company and State Street Bank and Trust
    Company  9 1/2% Senior Subordinated Notes
    due 2006 (Exhibit 4.10 to our Form S-4 (No. 333-90235)
    filed on November 3, 1999).
|
| | 4.13 Indenture dated as of August 20,
    1999, between Nuevo Energy Company and State Street Bank Trust
    Company, as Trustee (Exhibit 4.11 to our Form S-4
    (No. 333-90235) filed on November 3, 1999).                                                                                              
|
| | 4.14 Registration Agreement dated
    August 20, 1999, between Nuevo Energy Company, Banc of
    America Securities LLC and Salomon Smith Barney Inc.
    (Exhibit 4.12 to our Form S-4 (No. 333-90235)
    filed on November 3, 1999).                                                                     
|
| | 4.15 Indenture dated September 26,
    2000, between Nuevo Energy Company and State Street Bank and
    Trust Company as the Trustee  9 3/8% Senior
    subordinated Notes due 2010 (Exhibit 4.12 to our 2000 Third
    Quarter Form 10-Q).                                                                
|
| | 4.16 Registration Agreement dated
    September 26, 2000, between Nuevo Energy Company and Banc
    of America Securities LLC, Banc One Capital Markets, Inc. and
    J.P. Morgan & Co. (Exhibit 4.13 to our 2000
    Third Quarter Form 10-Q).                                                             

(10) Material Contracts.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.1 Third Restated Credit Agreement dated
    June 7, 2000, between Nuevo Energy Company (Borrower) and
    Bank of America N.A. (Administrative Agent), Bank One, NA
    (Syndication Agent), Bank of Montreal (Documentation Agent) and
    certain lenders (Exhibit 10.1 to our 2000 Second Quarter
    Form 10-Q).                                                                                                                                                                                               
|
| | 10.2 1990 Stock Option Plan, as amended
    (Exhibit 10.8 to our Form S-1 dated July 13,
    1992).                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | 10.3 1993 Stock Incentive Plan, as amended
    (Exhibit 4.2 to our Form S-8 (No. 333-21063)
    filed on February 4, 1997.)                                                                                                                                                                                                                                                                                                                                                                                           
|
| | 10.4 1999 Stock Incentive Plan
    (Exhibit 99.1 to our Form S-8 (No. 333-87899)
    filed on September 28, 1999).                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | 10.5 Nuevo Energy Company Deferred
    Compensation Plan (Exhibit 99 to our Form S-8
    (No. 333-51217) filed on April 28, 1998).                                                                                                                                                                                                                                                                                                                                                                                    
|
| | 10.6 Stock Purchase Agreement, dated as of
    June 30, 1994, among Amoco Production Company
    (APC), Walter International Inc.
    (Walter), Walter Congo Holdings, Inc. (Walter
    Holdings), Walter International Congo, Inc. (before the
    merger Walter Congo and after the merger Old
    Walter Congo), Nuevo, Nuevo Holding and The Nuevo Congo
    Company (before the merger, Nuevo Congo and after
    the merger, Old Nuevo Congo). (Exhibit 2.1 to
    Form 8-K dated March 10, 1995).
|
| | 10.7 Amendment to Stock Purchase Agreement
    dated as of September 19, 1994, among APC, Walter Congo,
    Nuevo Congo, Walter Holdings, Nuevo Holding, Walter and Nuevo.
    (Exhibit 2.2 to Form 8-K dated March 10, 1995).                                                                                                                                                                                                                                                                                        
|
| | 10.8 Second Amendment to Stock Purchase
    Agreement dated as of October 15, 1994, among APC, Walter
    Congo, Nuevo Congo, Walter Holdings, Nuevo Holding, Walter and
    Nuevo. (Exhibit 2.3 to Form 8-K dated March 10,
    1995).                                                                                                                                                                                                                                                                               



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| |                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.9 Third Amendment to Stock Purchase
    Agreement dated as of December 2, 1994, among APC, Walter
    Congo, Nuevo Congo, Walter Holdings, Nuevo Holding, Walter and
    Nuevo. (Exhibit 2.4 to Form 8-K dated March 10,
    1995.)                                                                 
|
| | 10.10 Fourth Amendment to Stock Purchase
    Agreement dated as of February 23, 1995, among APC, Walter
    Congo, Nuevo Congo, Walter Holdings, Nuevo Holding, Walter and
    Nuevo. (Exhibit 2.5 to Form 8-K dated March 10,
    1995).                                                              
|
| | 10.11 Tax Agreement dated as of
    February 23, 1995, executed by APC, Amoco Congo Exploration
    Company (ACEC), Amoco Congo Production Company
    (ACPC), Walter, Walter Holdings, Walter Congo,
    Nuevo, Nuevo Holding and Nuevo Congo. (Exhibit 2.6 to
    Form 8-K dated March 10, 1995).
|
| | 10.12 Agreement and Plan of Merger executed
    by Nuevo Congo, Nuevo Holding and APC dated February 24,
    1995. (Exhibit 2.7 to Form 8-K dated March 10,
    1995).                                                                                                                                 
|
| | 10.13 Finance Agreement dated as of
    December 28, 1994, among Nuevo Holding, Nuevo Congo and The
    Overseas Private Investment Corporation (OPIC).
    (Exhibit 2.8 to Form 8-K dated March 10, 1995).                                                                                          
|
| | 10.14 Subordination Agreement dated
    December 28, 1994, among Nuevo Congo, Nuevo Holding, Walter
    Congo, Walter Holdings and APC. (Exhibit 2.9 to
    Form 8-K dated March 10, 1995).                                                                                                            
|
| | 10.15 Guaranty covering the obligations of
    Nuevo Congo and Walter Congo under the Stock Purchase Agreement
    dated February 24, 1995, executed by Walter and Nuevo.
    (Exhibit 2.10 to Form 8-K dated March 10, 1995).                                                                         
|
| | 10.16 Inter-Purchaser Agreement dated as of
    December 28, 1994, among Walter, Old Walter Congo, Walter
    Holdings, Nuevo, Old Nuevo Congo and Nuevo Holding.
    (Exhibit 2.11 to Form 8-K dated March 10, 1995).                                                                                 
|
| | 10.17 Latent ORRI Contract dated
    February 25, 1995, among Walter, Walter Holdings, Walter
    Congo, Nuevo, Nuevo Holding and Nuevo Congo. (Exhibit 2.12
    to Form 8-K dated March 10, 1995).                                                                                                    
|
| | 10.18 Latent Working Interest Contract dated
    February 25, 1995, among Walter, Walter Holdings, Walter
    Congo, Nuevo, Nuevo Holding and Nuevo Congo. (Exhibit 2.13
    to Form 8-K dated March 10, 1995).                                                                                        
|
| | 10.19 Asset Purchase Agreement dated as of
    February 16, 1996 between Nuevo Energy Company, the
    Purchaser, and Union Oil Company of California as Seller.
    (Exhibit 2.1 to Form S-3 (No. 333-1504).                                                                                          
|
| | 10.20 Asset Purchase Agreement dated as of
    April 4, 1997, by and among Torch California Company and
    Express Acquisition Company, as Sellers, and Nuevo Energy
    Company, as Purchaser. (Exhibit 2.2 to Form S-3
    (No. 333-1504)).                                                         
|
| | 10.21 Purchase and Sale Agreement dated
    October 16, 1998 between Nuevo Energy Company (Seller) and
    Samson Lone Star Limited Partnership (Buyer).
    (Exhibit 10.28 to our 1998 Form 10-K).                                                                                                    
|
| | 10.22 Master Services Agreement among the
    Company and Torch Energy Advisors Incorporated, Torch Operating
    Company, Torch Energy Marketing, Inc., and Novistar, Inc. dated
    January 1, 1999. (Exhibit 10.29 to our 1998
    Form 10-K).                                                      
|
| | 10.23 Employment Agreement with Bruce
    Murchison dated June 1, 1999. (Exhibit 10.27 to our
    1999 Third Quarter Form 10-Q).                                                                                                                                                                       
|
| | 10.24 Employment Agreement with John P.
    McGinnis dated July 15, 1999. (Exhibit 10.28 to our
    1999 Third Quarter Form 10-Q).                                                                                                                                                                     
|
| | 10.25 Crude Oil Purchase Agreement dated
    February 4, 2000 between Nuevo Energy Company and Tosco
    Corporation. (Exhibit 10.1 to Form 8-K dated
    March 23, 2000).                                                                                                                             
|
| | 10.26 Severance Protection Agreement dated
    March 25, 2001. (Exhibit 10.31 to our 2000
    Form 10-K).                                                                                                                                                                                              



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##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.27 Amendment to 1999 Stock Incentive Plan
    (Exhibit 99.1 to our Form S-8, filed on
    October 21, 2001).                                                                                                                                                                                                                                                                                                                
|
| | 10.28 2001 Stock Incentive Plan
    (Exhibit 99.1 to our Form S-8, filed on
    October 21, 2001).                                                                                                                                                                                                                                                                                                                             
|
| | 10.29 Employment Agreement with James L.
    Payne dated October 15, 2001. (Exhibit 10.1 to our
    2001 Third Quarter Form 10-Q).                                                                                                                                                                                                                                                                                             
|
| | 10.30 Janet F. Clark Stock Option Plan
    (Exhibit 10.35 to our 2001 Form 10-K).                                                                                                                                                                                                                                                                                                                                              
|
| | 10.31 George B. Nilsen Stock Option Plan
    (Exhibit 10.36 to our 2001 Form 10-K).                                                                                                                                                                                                                                                                                                                                            
|
| | 10.32 Registration Rights Agreement dated
    September 18, 2002 by and among Nuevo Energy Company,
    Yorktown Energy Partners III, L.P., Yorktown Energy IV,
    L.P., Yorktown Partners LLC, SAFIC S.A., Charles de Mestral, J.
    Ross Craft, Montana Oil and Gas, Ltd., David A. Badley, James S.
    Scott, Glenn Reed, Doug Allison and Mohamed Yaich
    (Exhibit 10.1 to our Form 8-K dated September 19,
    2002).
|
| | 10.33 Amendment to the 2001 Stock Incentive
    Plan (Exhibit 99.1 to our Form S-8 dated
    November 1, 2002).                                                                                                                                                                                                                                                                                                                
|
| | 10.34 First Amendment to Employment
    Agreement with James L. Payne dated September 11, 2002.                                                                                                                                                                                                                                                                                                                                
|
| | 10.35 Key Executive Terminated Without Cause
    Agreement.                                                                                                                                                                                                                                                                                                                                                                    
|
| | *10.36 Purchase and Sale Agreement, dated
    February 28, 2003, between Nuevo Energy Company and
    BlackSand Partners, L.P.                                                                                                                                                                                                                                                                                                 
|
| | *10.37 Purchase and Sale Agreement, dated
    December 30, 2003, between Nuevo Energy Company and Tonner
    Hills SSP, LLC and Tonner Hills 680 LLC.                                                                                                                                                                                                                                                                          
|
| | *12.1 Computation of Earnings to Fixed
    Charges and Ratio of Earnings to Combined Fixed Charges and
    Preferred Stock Dividends                                                                                                                                                                                                                                                                                           
|
| | *21 Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                                                                                             

(23) Consents of experts and counsel



| |                                          
| | -----------------------------------------
| | *23.1 Consent of KPMG LLP                
|
| | *23.2 Consent of Ryder Scott Company L.P.

(31) Certifications pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | *31.1 Certification of Chief Executive
    Officer of Nuevo Energy Company pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002
|
| | *31.2 Certification of Chief Financial
    Officer of Nuevo Energy Company pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002

(32) Certifications pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | *32.1 Certification of Chief Executive
    Officer of Nuevo Energy Company pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002
|
| | *32.2 Certification of Chief Financial
    Officer of Nuevo Energy Company pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002