<PAGE>
 
                                                                     EXHIBIT 4.4



================================================================================

                               NUEVO FINANCING I



                                ________________


                    PREFERRED SECURITIES GUARANTEE AGREEMENT

                                ________________



                         Dated as of December 23, 1996


================================================================================

                                       1
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                            <C>
ARTICLE 1.  DEFINITIONS AND INTERPRETATION...................................................   3
 Section 1.01.  Definitions and Interpretation...............................................   3
ARTICLE 2.  TRUST INDENTURE ACT..............................................................   6
 Section 2.01.  Trust Indenture Act; Application.............................................   6
 Section 2.02.  Lists of Holders of Securities...............................................   6
 Section 2.03.  Reports by the Preferred Guarantee Trustee...................................   6
 Section 2.04.  Periodic Reports to Preferred Guarantee Trustee..............................   6
 Section 2.05.  Evidence of Compliance with Conditions Precedent.............................   7
 Section 2.06.  Events of Default; Waiver....................................................   7
 Section 2.07.  Event of Default; Notice.....................................................   7
 Section 2.08.  Conflicting Interests........................................................   7
ARTICLE 3.  POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE
TRUSTEE......................................................................................   8
 Section 3.01.  Powers and Duties of the Preferred Guarantee Trustee.........................   8
 Section 3.02.  Certain Rights of Preferred Guarantee Trustee................................   9
 Section 3.03.  Not Responsible for Recitals or Issuance of Preferred Securities Guarantee...  11
ARTICLE 4.  PREFERRED GUARANTEE TRUSTEE......................................................  11
 Section 4.01.  Preferred Guarantee Trustee; Eligibility.....................................  11
 Section 4.02.  Appointment, Removal and Resignation of Preferred
Guarantee Trustee............................................................................  12
ARTICLE 5.  GUARANTEE........................................................................  12
 Section 5.01.  Guarantee....................................................................  12
 Section 5.02.  Waiver of Notice and Demand..................................................  13
 Section 5.03.  Obligations Not Affected.....................................................  13
 Section 5.04.  Rights of Holders............................................................  14
 Section 5.05.  Guarantee of Payment.........................................................  14
 Section 5.06.  Subrogation..................................................................  14
 Section 5.07.  Independent Obligations......................................................  14
ARTICLE 6.  LIMITATION OF TRANSACTIONS; SUBORDINATION........................................  15
 Section 6.01.  Limitation of Transactions...................................................  15
 Section 6.02.  Ranking......................................................................  15
ARTICLE 7.  TERMINATION......................................................................  15
 Section 7.01.  Termination..................................................................  15
ARTICLE 8.  INDEMNIFICATION..................................................................  16
 Section 8.01.  Exculpation..................................................................  16
 Section 8.02.  Indemnification..............................................................  16
ARTICLE 9   MISCELLANEOUS....................................................................  16
 Section 9.01.  Successors and Assigns.......................................................  16
 Section 9.02.  Amendments...................................................................  17
 Section 9.03.  Notices......................................................................  17
 Section 9.04.  Benefit......................................................................  17
 Section 9.05.  Governing Law................................................................  18
</TABLE>
                                       2
<PAGE>
 
                   PREFERRED SECURITIES GUARANTEE AGREEMENT

     This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as
of December 23, 1996, is executed and delivered by Nuevo Energy Company, a
Delaware corporation (the "Guarantor"), and Wilmington Trust Company, as trustee
(the "Preferred Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the TECONS (as defined herein) of Nuevo Financing
I, a Delaware statutory business trust (the "Issuer").

     WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of December 23, 1996, among the trustees of the Issuer
named therein, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof  preferred securities, having an aggregate
liquidation amount of $100,000,000 ($115,000,000 if the Underwriters' over-
allotment option is exercised in full) designated the $2.875 Term Convertible
Securities, Series A (the "TECONS").

     WHEREAS, as incentive for the Holders to purchase the TECONS, the Guarantor
desires irrevocably and unconditionally to agree, to the extent set forth in
this Preferred Securities Guarantee, to pay to the Holders of the TECONS the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein.

     WHEREAS, as of the date hereof, the Guarantor is also executing and
delivering a guarantee agreement (the "Common Securities Guarantee") in
substantially identical terms to this Preferred Securities Guarantee for the
benefit of the holders of the Common Securities (as defined herein), except that
if an Event of Default (as defined in the Indenture), has occurred and is
continuing, the rights of holders of the Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subordinated to the rights of
Holders of TECONS to receive Guarantee Payments under this Preferred Securities
Guarantee.

     NOW, THEREFORE, in consideration of the purchase by each Holder of TECONS,
which purchase the Guarantor hereby agrees shall benefit the Guarantor, the
Guarantor executes and delivers this Preferred Securities Guarantee for the
benefit of the Holders.

                  ARTICLE 1.  DEFINITIONS AND INTERPRETATION

     SECTION 1.01.  DEFINITIONS AND INTERPRETATION.

     In this Preferred Securities Guarantee, unless the context otherwise
requires:

     (a)  Capitalized terms used in this Preferred Securities Guarantee but not
defined in the preamble above have the respective meanings as signed to them in
this Section 1.01;

     (b)  terms defined in the Declaration as at the date of execution of this
Preferred Securities Guarantee have the same meaning when used in this Preferred
Securities Guarantee unless otherwise defined in this Preferred Securities
Guarantee;

     (c)  a term defined anywhere in this Preferred Securities Guarantee has the
same meaning throughout;
                                 
                                       3
<PAGE>
 
     (d)  all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;

     (e)  all references in this Preferred Securities Guarantee to Articles and
Sections are to Articles and Sections of this Preferred Securities Guarantee,
unless otherwise specified;

     (f)  a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and

     (g)  a reference to the singular includes the plural and vice versa.

     "Authorized Officer" of a Person means any Person that is authorized to
bind such Person; provided, however, that the Authorized Officer signing an
Officers' Certificate given pursuant to Section 314(a)(4) of the Trust Indenture
Act shall be the principal executive, financial or accounting officer of such
Person.

     "Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at Rodney Square North, 1100
North Market Street, Wilmington, New Castle County, Delaware 19890-0001.

     "Covered Person" means any Holder or beneficial owner of TECONS.

     "Event of Default" means (i) the failure of the Guarantor to perform any of
its payment or other obligations under this Preferred Securities Guarantee or
(ii) the failure of the Guarantor to deliver Common Stock upon an appropriate
election by any Holder of TECONS to convert such TECONS into shares of Common
Stock.

     "Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the TECONS, to the extent not paid or made by the
Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration)
that are required to be paid on such TECONS to the extent the Issuer shall have
funds available therefor, (ii) the redemption price (the "Redemption Price"),
and all accrued and unpaid Distributions to the date of redemption to the extent
the Issuer has funds available therefor, with respect to any TECONS called for
redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Issuer (other than in connection with the
conversion of all of the Trust Securities into the Guarantor's common stock or
the distribution of Debentures to the Holders in exchange for TECONS as provided
in the Declaration), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid Distributions on the TECONS to the date of payment,
to the extent the Issuer shall have funds available therefor, and (b) the amount
of assets of the Issuer remaining available for distribution to Holders in
liquidation of the Issuer (in either case, the "Liquidation Distribution"). If
an event of default under the Indenture has occurred and is continuing, the
rights of holders of the Common Securities to receive payments under the Common
Securities Guarantee Agreement are subordinated to the rights of Holders of
TECONS to receive Guarantee Payments.

                                       4
<PAGE>
 
     "Holder" shall mean any holder, as registered on the books and records of
the Issuer of any TECONS; provided, however, that, in determining whether the
holders of the requisite percentage of TECONS have given any request, notice,
consent or waiver hereunder, "Holder" shall not include the Guarantor or any
Affiliate of the Guarantor.

     "Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate
of the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Preferred Guarantee Trustee.

     "Indenture" means the Subordinated Indenture dated as of November 25, 1996,
between the Guarantor (the "Debenture Issuer") and Wilmington Trust Company, as
trustee, as supplemented by the First Supplemental Indenture dated as of
December 23, 1996, between the Debenture Issuer and Wilmington Trust Company, as
trustee.

     "Majority in liquidation amount of the Securities" means, except as
provided in the terms of the TECONS or, except as provided by the Trust
Indenture Act, a vote by Holder(s) of TECONS, voting separately as a class, of
more than 50% of the liquidation amount (including the stated amount that would
be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all TECONS.

     "Preferred Guarantee Trustee" means Wilmington Trust Company, until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.

     "Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice president, any assistant vice president,
any assistant secretary, the treasurer, any assistant treasurer or other officer
of the Corporate Trust Office of the Preferred Guarantee Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.

     "Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.01.

     "Trust Securities" means the Common Securities and the TECONS.

                                       5
<PAGE>
 
                        ARTICLE 2.  TRUST INDENTURE ACT

     SECTION 2.01.  TRUST INDENTURE ACT; APPLICATION.

     (a)  This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions; and

     (b)  if and to the extent that any provision of this Preferred Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.

     SECTION 2.02.  LISTS OF HOLDERS OF SECURITIES.

     (a)  The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the TECONS ("List of Holders") as of
such date, (i) within 1 Business Day after January 1 and June 30 of each year,
and (ii) at any other time within 30 days of receipt by the Guarantor of a
written request for a List of Holders as of a date no more than 14 days before
such List of Holders is given to the Preferred Guarantee Trustee provided, that
the Guarantor shall not be obligated to provide such List of Holders at any time
the List of Holders does not differ from the most recent List of Holders given
to the Preferred Guarantee Trustee by the Guarantor. The Preferred Guarantee
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.

     (b)  The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.

     SECTION 2.03.  REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.

     Within 60 days after May 15 of each year, the Preferred Guarantee Trustee
shall provide to the Holders of the TECONS such reports as are required by
Section 313 of the Trust Indenture Act if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.

     SECTION 2.04.  PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.

     The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 of the Trust
Indenture Act (if any) and the compliance certificate required by Section 314 of
the Trust Indenture Act in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act.

     Delivery of such reports, information and documents to the Preferred
Guarantee Trustee is for informational purposes only and the Preferred Guarantee
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein, including the Guarantor's compliance with any of
its covenants hereunder (as to which the Preferred Guarantee Trustee is entitled
to rely exclusively on Officers' Certificates).

                                       6
<PAGE>
 
     SECTION 2.05.  EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

     The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.

     SECTION 2.06.  EVENTS OF DEFAULT; WAIVER.

     The Holders of a Majority in liquidation amount of TECONS may, by vote, on
behalf of the Holders of all of the TECONS, waive any past Event of Default and
its consequences. Upon such waiver, any such Event of Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Preferred Securities Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.

     SECTION 2.07.  EVENT OF DEFAULT; NOTICE.

     (a)  The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the TECONS, notices of all Events of Default actually
known to a Responsible Officer of the Preferred Guarantee Trustee, unless such
defaults have been cured before the giving of such notice, provided, that, the
Preferred Guarantee Trustee shall be protected in withholding such notice if and
so long as a Responsible Officer of the Preferred Guarantee Trustee in good
faith determines that the withholding of such notice is in the interests of the
Holders of the TECONS.

     (b)  The Preferred Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Preferred Guarantee Trustee shall have
received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Declaration shall have
obtained actual knowledge.
 
     SECTION 2.08.  CONFLICTING INTERESTS.

     The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.

                                       7
<PAGE>
 
                   ARTICLE 3.  POWERS, DUTIES AND RIGHTS OF
                          PREFERRED GUARANTEE TRUSTEE

     SECTION 3.01.  POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.

     (a)  This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the TECONS, and the
Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder of TECONS exercising his or her rights
pursuant to Section 5.04(b) or to a Successor Preferred Guarantee Trustee on
acceptance by such Successor Preferred Guarantee Trustee of its appointment to
act as Successor Preferred Guarantee Trustee. The right, title and interest of
the Preferred Guarantee Trustee shall automatically vest in any Successor
Preferred Guarantee Trustee, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and delivered
pursuant to the appointment of such Successor Preferred Guarantee Trustee.

     (b)  If an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the TECONS.

     (c)  The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.06) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.

     (d)  No provision of this Preferred Securities Guarantee shall be construed
to relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:

          (i)  prior to the occurrence of any Event of Default and after the
     curing or waiving of all such Events of Default that may have occurred:

          (A)  the duties and obligations of the Preferred Guarantee Trustee
     shall be determined solely by the express provisions of this Preferred
     Securities Guarantee, and the Preferred Guarantee Trustee shall not be
     liable except for the performance of such  duties and obligations as are
     specifically set forth in this Preferred Securities Guarantee, and no
     implied covenants or obligations shall be read into this Preferred
     Securities Guarantee against the Preferred Guarantee Trustee; and

          (B)  in the absence of bad faith on the part of the Preferred
     Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely,
     as to the truth of the statements and the correctness of the opinions
     expressed therein, upon any certificates or opinions furnished to the
     Preferred Guarantee Trustee and conforming to the requirements of this
     Preferred Securities Guarantee; but in the case of any such certificates or
     opinions that by any provision hereof are 

                                       8
<PAGE>
 
     specifically required to be furnished to the Preferred Guarantee Trustee,
     the Preferred Guarantee Trustee shall be under a duty to examine the same
     to determine whether or not they conform to the requirements of this
     Preferred Securities Guarantee;

     (ii)  the Preferred Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Preferred Guarantee
Trustee, unless it shall be proved that the Preferred Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment was made;

     (iii)  the Preferred Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in liquidation amount
of the TECONS relating to the time, method and place of conducting any
proceeding for any remedy available to the Preferred Guarantee Trustee, or
exercising any trust or power conferred upon the Preferred Guarantee Trustee
under this Preferred Securities Guarantee; and

     (iv)  no provision of this Preferred Securities Guarantee shall require the
Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if the Preferred Guarantee Trustee
shall have reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this Preferred
Securities Guarantee or indemnity, reasonably satisfactory to the Preferred
Guarantee Trustee, against such risk or liability is not reasonably assured to
it.

     SECTION 3.02.  CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.

     (a)  Subject to the provisions of Section 3.01:

     (i)  The Preferred Guarantee Trustee may conclusively rely, and shall be
fully protected in acting or refraining from acting upon, any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.

     (ii)  Any direction or act of the Guarantor contemplated by this Preferred
Securities Guarantee shall be sufficiently evidenced by an Officers'
Certificate.

     (iii)  Whenever, in the administration of this Preferred Securities
Guarantee, the Preferred Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting any action
hereunder, the Preferred Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part, request
and conclusively rely upon an Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Guarantor.

     (iv)  The Preferred Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any rerecording,
refiling or registration thereof).

     (v)  The Preferred Guarantee Trustee may consult with counsel of its
selection, and the advice or opinion of such counsel with respect to legal
matters shall be full and 

                                       9
<PAGE>
 
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such advice or
opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates
and may include any of its employees. The Preferred Guarantee Trustee shall have
the right at any time to seek instructions concerning the administration of this
Preferred Securities Guarantee from any court of competent jurisdiction.

     (vi)  The Preferred Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Preferred Securities
Guarantee at the request or direction of any Holder, unless such Holder shall
have provided to the Preferred Guarantee Trustee such security and indemnity,
reasonably satisfactory to the Preferred Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of the
Preferred Guarantee Trustee's agents, nominees or custodians) and liabilities
that might be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the Preferred
Guarantee Trustee.

     (vii)  The Preferred Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Preferred Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit.

     (viii)  The Preferred Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents, nominees, custodians or attorneys, and the Preferred Guarantee
Trustee shall not be responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder.

     (ix)  Any action taken by the Preferred Guarantee Trustee or its agents
hereunder shall bind the Holders of the TECONS, and the signature of the
Preferred Guarantee Trustee or its agents alone shall be sufficient and
effective to perform any such action. No third party shall be required to
inquire as to the authority of the Preferred Guarantee Trustee to so act or as
to its compliance with any of the terms and provisions of this Preferred
Securities Guarantee, both of which shall be conclusively evidenced by the
Preferred Guarantee Trustee's or its agent's taking such action.

     (x)  Whenever in the administration of this Preferred Securities Guarantee
the Preferred Guarantee Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other action
hereunder, the Preferred Guarantee Trustee (i) may request instructions from the
Holders of a Majority in liquidation amount of the TECONS, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in conclusively relying
on or acting in accordance with such instructions.

     (xi)  The Preferred Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with due
care by it hereunder.

                                      10
<PAGE>
 
     (xii)  The Preferred Securities Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Preferred Securities Guarantee.

     (b)  No provision of this Preferred Securities Guarantee shall be deemed to
impose any duty or obligation on the Preferred Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Preferred Guarantee Trustee shall be construed to be a duty.

     SECTION 3.03.  NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF PREFERRED
SECURITIES GUARANTEE.

     The recitals contained in this Preferred Securities Guarantee shall be
taken as the statements of the Guarantor, and the Preferred Guarantee Trustee
does not assume any responsibility for their correctness. The Preferred
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Preferred Securities Guarantee.

                    ARTICLE 4.  PREFERRED GUARANTEE TRUSTEE

     SECTION 4.01.  PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.

     (a)  There shall at all times be a Preferred Guarantee Trustee which shall:

     (i)  not be an Affiliate of the Guarantor; and

     (ii)  be a corporation organized and doing business under the laws of the
United States of America or any State or Territory thereof or of the District of
Columbia, or a corporation or other Person permitted by the Securities and
Exchange Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least 50 million U.S. dollars ($50,000,000),
and subject to supervision or examination by federal, state, territorial or
District of Columbia authority. If such Person publishes reports of condition at
least annually, pursuant to law or to the requirements of the supervising or
examining authority referred to above, then, for the purposes of this Section
4.01(a)(ii), the combined capital and surplus of such Person shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published.

     (b)  If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.01(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02(c).

     (c)  If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.

                                      11
<PAGE>
 
     SECTION 4.02.  APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
TRUSTEE.

     (a)  Subject to Section 4.02(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.

     (b)  The Preferred Guarantee Trustee shall not be removed in accordance
with Section 4.02(a) until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Preferred Guarantee Trustee and delivered to the Guarantor.

     (c)  The Preferred Guarantee Trustee appointed to office shall hold office
until a Successor Preferred Guarantee Trustee shall have been appointed or until
its removal or resignation. The Preferred Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.

     (d)  If no Successor Preferred Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.02 within 60 days after
delivery of an instrument of resignation or removal, the Preferred Guarantee
Trustee resigning or being removed may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Preferred Guarantee Trustee.

     (e)  No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.

     (f)  Upon termination of this Preferred Securities Guarantee or removal or
resignation of the Preferred Guarantee Trustee pursuant to this Section 4.02,
the Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued
to the date of such termination, removal or resignation.

                             ARTICLE 5.  GUARANTEE

     SECTION 5.01.  GUARANTEE.

     The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Issuer), as and when due, regardless of any defense, right of set-off or
counterclaim that the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.

     SECTION 5.02.  WAIVER OF NOTICE AND DEMAND.

     The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person 

                                      12
<PAGE>
 
before proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.

     SECTION 5.03.  OBLIGATIONS NOT AFFECTED.

     The obligations, covenants, agreements and duties of the Guarantor under
this Preferred Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:

     (a)  the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the TECONS to be performed or observed
by the Issuer;

     (b)  the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the TECONS or the extension of time for
the performance of any other obligation under, arising out of, or in connection
with, the TECONS (other than an extension of time for payment of Distributions,
Redemption Price, Liquidation Distribution or other sum payable that results
from the extension of any interest payment period on the Debentures or any
extension of the maturity date of the Debentures permitted by the Indenture);

     (c)  any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the TECONS, or any action on
the part of the Issuer granting indulgence or extension of any kind;

     (d)  the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;

     (e)  any invalidity of, or defect or deficiency in, the TECONS;

     (f)  the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or

     (g)  any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.03 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.

     There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.

     SECTION 5.04.  RIGHTS OF HOLDERS.

     (a)  The Holders of a Majority in liquidation amount of the TECONS have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Preferred Guarantee Trustee in respect of this Preferred
Securities

                                      13
<PAGE>
 
Guarantee or exercising any trust or power conferred upon the Preferred
Guarantee Trustee under this Preferred Securities Guarantee.

     (b)  If the Preferred Guarantee Trustee fails to enforce such Preferred
Securities Guarantee, any Holder of TECONS may institute a legal proceeding
directly against the Guarantor to enforce the Preferred Guarantee Trustee's
rights under this Preferred Securities Guarantee, without first instituting a
legal proceeding against the Issuer, the Preferred Guarantee Trustee or any
other person or entity. The Guarantor waives any right or remedy to require that
any action be brought first against the Issuer or any other person or entity
before proceeding directly against the Guarantor.

     SECTION 5.05.  GUARANTEE OF PAYMENT.

     This Preferred Securities Guarantee creates a guarantee of payment and not
of collection.

     SECTION 5.06.  SUBROGATION.

     The Guarantor shall be subrogated to all (if any) rights of the Holders of
TECONS against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Preferred Securities Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Preferred Securities Guarantee, if, at the time
of any such payment, any amounts are due and unpaid under this Preferred
Securities Guarantee. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.

     SECTION 5.07.  INDEPENDENT OBLIGATIONS.

     The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the TECONS, and that the
Guarantor shall be liable as principal and as debtor hereunder to make Guarantee
Payments pursuant to the terms of this Preferred Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.03 hereof.

             ARTICLE 6.  LIMITATION OF TRANSACTIONS; SUBORDINATION

     SECTION 6.01.  LIMITATION OF TRANSACTIONS.

     So long as any TECONS remain outstanding, if there shall have occurred an
Event of Default or an event of default under the Declaration, then (a) the
Guarantor shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or acquisitions
of shares of Common Stock in connection with the satisfaction by the Guarantor
of its obligations under any employee benefit plans, (ii) as a result of a
reclassification of the Guarantor's capital stock or the exchange or conversion
of one class or series of the Guarantor's capital stock for another class or
series of the Guarantor's capital stock, or  (iii) the purchase of fractional
interests in shares of the Guarantor's capital stock pursuant to the conversion
or exchange provisions of such 

                                      14
<PAGE>
 
capital stock of the Guarantor or the security being converted or exchanged) or
make any guarantee payments with respect to the foregoing, (b) the Guarantor
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including guarantees) issued by
the Guarantor which rank pari passu with or junior to the Debentures and (c) the
Guarantor shall not make any guarantee payments with respect to the foregoing
(other than pursuant to this guarantee).

     SECTION 6.02.  RANKING.

     This Preferred Securities Guarantee will constitute an unsecured obligation
of the Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor, (ii) pari passu with the most senior
Preferred or preference stock now or hereafter issued by the Guarantor and with
any guarantee now or hereafter entered into by the Guarantor in respect of any
Preferred or preference stock of any Affiliate of the Guarantor, and (iii)
senior to the Guarantor's common stock.

                            ARTICLE 7.  TERMINATION

     SECTION 7.01.  TERMINATION.

     This Preferred Securities Guarantee shall terminate (i) upon full payment
of the Redemption Price of all TECONS, (ii) upon the distribution of the
Guarantor's common stock to all of the Holders in respect of the conversion of
the TECONS into the Guarantor's common stock or upon the distribution of the
Debentures to the Holders of all of the TECONS or (iii) upon full payment of the
amounts payable in accordance with the Declaration upon liquidation of the
Issuer. Notwithstanding the foregoing, this Preferred Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any Holder of TECONS must restore payment of any sums paid under the TECONS
or under this Preferred Securities Guarantee.

                          ARTICLE 8.  INDEMNIFICATION

     SECTION 8.01.  EXCULPATION.

     (a)  No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss,
damage, liability, expense or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith in accordance with
this Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Preferred Securities Guarantee or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.

     (b)  An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets,

                                      15
<PAGE>
 
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of TECONS might properly be
paid.

     SECTION 8.02.  INDEMNIFICATION.
 
     The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.02 shall
survive the termination of this Preferred Securities Guarantee.

     When the Preferred Guarantee Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(6) or Section
5.01(7) of the Indenture, the expenses (including the reasonable charges and
expenses of its counsel) and the compensation for services are intended to
constitute expenses of administration under any applicable federal or state
bankruptcy, insolvency or other similar law.

                           ARTICLE 9.  MISCELLANEOUS

     SECTION 9.01.  SUCCESSORS AND ASSIGNS.

     All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the TECONS then outstanding.

     SECTION 9.02.  AMENDMENTS.

     Except with respect to any changes that do not materially adversely affect
the rights of Holders (in which case no consent of Holders will be required),
this Preferred Securities Guarantee may be amended only with the prior approval
of the Holders of at least a Majority in liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) of all the outstanding TECONS. The provisions of Section 12.02
of the Declaration with respect to meetings of Holders of the Securities apply
to the giving of such approval.

     SECTION 9.03.  NOTICES.

     All notices provided for in this Preferred Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:

     (a)  If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
TECONS):

                                      16
<PAGE>
 
     Wilmington Trust Company
     Rodney Square North
     1100 North Market Street
     Wilmington, Delaware 19890-0001
     Attn:  Corporate Trust Administration

     (b)  If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the TECONS):

     Nuevo Energy Company
     1331 Lamar, Suite 1650
     Houston, Texas 77010
     Attn: Chief Financial Officer

     (c)  If given to any Holder of TECONS, at the address set forth on the
books and records of the Issuer.

     All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

     SECTION 9.04.  BENEFIT.

     This Preferred Securities Guarantee is solely for the benefit of the
Holders of the TECONS and, subject to Section 3.01(a), is not separately
transferable from the TECONS.

     SECTION 9.05.  GOVERNING LAW.

     THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
 
                                      17
<PAGE>
 
     THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.

                                    NUEVO ENERGY COMPANY,
                                    as Guarantor


                                    By:___________________________________
                                    Robert M. King
                                    Senior Vice President and Chief
                                    Financial Officer

                                    WILMINGTON TRUST COMPANY,
                                    as Preferred Guarantee Trustee

                                    By:___________________________________
                                    Name:_________________________________
                                    Title:________________________________


                                      18