<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   Form 10-Q

(MARK ONE)
(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
     OF THE SECURITIES EXCHANGE ACT OF 1934

     For the quarterly period ended June 30, 1997
                                    -------------

                                      OR

( )  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                            (I.R.S. Employer
   incorporation or organization)                         Identification Number)

    1331 Lamar, Suite 1650, Houston, Texas                             77010
--------------------------------------------------------------------------------
   (Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code  713/652-0706
                                                   -----------------------------

                                Not Applicable
 -------------------------------------------------------------------------------
              Former name, former address and former fiscal year,
                         if changed since last report

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    X           No
                               -------           ----    

As of August 5, the number of outstanding shares of the Registrant's common
stock was 19,664,546.
<PAGE>
 
                              NUEVO ENERGY COMPANY
                              --------------------

                                     INDEX
                                     -----

                                                                PAGE
                                                               NUMBER
                                                               ------

PART I.   FINANCIAL INFORMATION
 
 
ITEM 1.  Financial Statements
 
Condensed Consolidated Balance Sheets:
 June 30, 1997 (Unaudited) and December 31, 1996..............    3
Condensed Consolidated Statements of Operations (Unaudited):
 Three and six months ended June 30, 1997 and
  June 30, 1996...............................................    5
Condensed Consolidated Statements of Cash Flows (Unaudited):
 Six months ended June 30, 1997 and
  June 30, 1996...............................................    7
Notes to Condensed Consolidated Financial Statements
 (Unaudited)..................................................    9
 
ITEM 2.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations.................   15

PART II.  OTHER INFORMATION...................................   27

                                       2
<PAGE>
 
                         PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                              NUEVO ENERGY COMPANY
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Amounts in Thousands)

                                     ASSETS
                                     ------
<TABLE>
<CAPTION>
                                              June 30, 1997   December 31, 1996
                                              --------------  ------------------
                                               (Unaudited)
<S>                                           <C>             <C>
CURRENT ASSETS:
 
 Cash and cash equivalents..................     $    4,874          $   13,636
 Accounts receivable........................         40,660              43,204
 Product inventory..........................          2,824               2,731
 Prepaid expenses and other.................          2,837               4,067
                                                 ----------          ----------
   Total current assets.....................         51,195              63,638
                                                 ----------          ----------
 
PROPERTY AND EQUIPMENT, AT COST:
 
 Land.......................................         49,696              49,696
 Buildings and improvements.................          5,435               5,304
 Oil and gas properties (full cost method)..      1,133,540           1,031,057
 Pipeline and other facilities..............         47,653              46,887
 Gas plant facilities.......................         15,000              41,694
                                                 ----------          ----------
                                                  1,251,324           1,174,638
 Accumulated depreciation, depletion and
   amortization.............................       (434,620)           (392,977)
                                                 ----------          ----------
                                                    816,704             781,661
                                                 ----------          ----------

OTHER ASSETS................................         16,121              18,504
                                                 ----------          ----------

                                                 $  884,020          $  863,803
                                                 ==========          ==========
</TABLE> 
     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
                              NUEVO ENERGY COMPANY
               CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
                             (Amounts in Thousands)


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
<TABLE>
<CAPTION> 
                                                                June 30, 1997  December 31, 1996
                                                                -------------- -----------------
                                                                 (Unaudited)
<S>                                                             <C>             <C>
CURRENT LIABILITIES:                                        
  Accounts payable............................................      $ 10,184         $ 18,720
  Accrued interest............................................         3,943            4,736
  Accrued liabilities.........................................        18,647           11,236
  Current maturities of long-term debt........................         3,716            5,408
                                                                    --------         --------
     Total current liabilities................................        36,490           40,100
                                                                    --------         --------
                                                                                  
OTHER LONG-TERM LIABILITIES...................................         2,969            3,864

DEFERRED REVENUE..............................................         3,136            4,828

LONG-TERM DEBT, NET OF CURRENT MATURITIES.....................       294,292          287,038
                                                                                  
DEFERRED TAXES................................................        48,066           35,153
                                                                                  
MINORITY INTEREST.............................................           699              704
                                                                                  
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S 
 CONVERTIBLE DEBENTURES (TECONS)..............................       115,000          115,000
                                                                                  
STOCKHOLDERS' EQUITY:                                                             
Common stock, $.01 par value, 50,000,000 shares authorized,                       
 19,664,046 and 19,852,478 shares issued and outstanding                          
 at June 30, 1997 and December 31, 1996, respectively.........           202              199
  Additional paid-in capital..................................       347,807          340,126
  Treasury stock, at cost, 542,491 shares.....................       (21,173)             ---
  Retained earnings...........................................        56,532           36,791
                                                                    --------         --------
      Total stockholders' equity..............................       383,368          377,116
                                                                    --------         --------
                                                                    $884,020         $863,803
                                                                    ========         ========

</TABLE>
    See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                              NUEVO ENERGY COMPANY
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                 (Amounts in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
 
                                                   Three Months Ended June 30,
                                                   ---------------------------
                                                      1997              1996
                                                    --------          --------
<S>                                                 <C>               <C>
REVENUES:                                                        
  Oil and gas revenues............................  $79,206           $83,484
  Gas plant revenues..............................    2,773             7,776
  Pipeline and other revenues.....................    1,240             1,643
  Gain on sale of asset...........................    3,039               ---
  Interest and other income.......................      351               612
                                                    -------           -------
                                                     86,609            93,515
                                                    -------           -------
COSTS AND EXPENSES:                                              
  Lease operating expenses........................   28,602            29,849
  Gas plant operating expenses....................    2,349             6,863
  Pipeline and other operating expenses...........      975             1,557
  Depreciation, depletion and amortization........   22,628            23,473
  General and administrative expenses.............    3,816             3,017
  Management fees.................................    4,200             3,811
  Interest expense................................    7,263            12,445
  Dividends on Guaranteed Preferred                              
    Beneficial Interests in Company's                            
    Convertible Debentures (TECONS)...............    1,655               ---
Other expense.....................................       10                31
                                                    -------           -------
                                                     71,498            81,046
                                                    -------           -------
Income before income taxes, minority interest,                   
 and extraordinary item...........................   15,111            12,469
                                                                 
Provision for income taxes........................    6,083             5,308
Minority interest.................................        9               (27)
                                                    -------           -------
                                                                 
Income before extraordinary item..................  $ 9,019           $ 7,188
                                                    =======           =======
                                                                 
Extraordinary loss on early extinguishment                       
  of debt, net of income tax benefit..............    3,024               ---
                                                    -------           -------
                                                                 
NET INCOME........................................  $ 5,995           $ 7,188
                                                    =======           =======
                                                                 
Dividends on Preferred Stock......................      ---               264
                                                    -------           -------
                                                                 
EARNINGS AVAILABLE TO COMMON STOCKHOLDERS.........  $ 5,995           $ 6,924
                                                    =======           =======
                                                                 
Earnings per common and common equivalent share:                 
  Earnings before extraordinary item..............  $   .45           $   .38
  Extraordinary item (net of tax benefit).........     (.15)              ---
                                                    -------           -------
                                                                 
   Net earnings...................................  $   .30           $   .38
                                                    =======           =======
                                                                 
Earnings per common and common equivalent                        
 share assuming full dilution.....................  $   .30           $   .37
                                                    =======           =======
                                                                 
Average common and common equivalent shares                      
 outstanding......................................   20,298            18,292
                                                    =======           =======
                                                                 
Average common and common equivalent shares                      
  outstanding assuming full dilution..............   20,298            19,579
                                                    =======           =======
</TABLE>
     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>
 
                              NUEVO ENERGY COMPANY
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                 (Amounts in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
 
                                                     Six Months Ended June 30,
                                                    ---------------------------
                                                        1997           1996
                                                    -------------  ------------
<S>                                                 <C>            <C>
REVENUES:
 Oil and gas revenues.............................      $170,319      $109,071
 Gas plant revenues...............................        11,597        14,798
 Pipeline and other revenues......................         2,737         3,345
 Gain on sale of asset............................         3,039           ---
 Interest and other income........................           942           726
                                                        --------      --------
                                                         188,634       127,940
                                                        --------      --------
COSTS AND EXPENSES:
 Lease operating expenses.........................        59,361        35,982
 Gas plant operating expenses.....................        10,220        12,454
 Pipeline and other operating expenses............         2,301         2,781
 Depreciation, depletion and amortization.........        44,872        31,533
 General and administrative expenses..............         7,956         4,316
 Management fees..................................         8,295         5,569
 Interest expense.................................        14,008        16,183
 Dividends on Guaranteed Preferred Beneficial
   Interests in Company's convertible
   debentures (TECONS)............................         3,270           ---
 Other expense....................................           259            49
                                                        --------      --------
                                                         150,542       108,867
                                                        --------      --------
Income before income taxes, minority
 interest, and extraordinary item.................        38,092        19,073
 
Provision for income taxes........................        15,332         7,725
Minority interest.................................            (5)          (41)
                                                        --------      --------
 
Income before extraordinary item..................      $ 22,765      $ 11,389
                                                        ========      ========
 
Extraordinary loss on early extinguishment
  of debt, net of income tax benefit..............         3,024           ---
                                                        --------      --------
 
NET INCOME........................................      $ 19,741      $ 11,389
                                                        ========      ========
 
Dividends on Preferred Stock......................           ---           529
                                                        --------      --------
 
EARNINGS AVAILABLE TO COMMON STOCKHOLDERS.........      $ 19,741      $ 10,860
                                                        ========      ========
 
Earnings per common and common equivalent share:
 Earnings before extraordinary item...............      $   1.11      $    .71
 Extraordinary item (net of tax benefit)..........          (.15)          ---
                                                        --------      --------
 
   Net earnings...................................      $    .96      $    .71
                                                        ========      ========
 
Earnings per common and common equivalent
  share assuming full dilution....................      $    .96      $    .68
                                                        ========      ========
 
Average common and common equivalent
  shares outstanding..............................        20,572        15,260
                                                        ========      ========
 
Average common and common equivalent shares
  outstanding assuming full dilution..............        20,572        16,647
                                                        ========      ========
</TABLE>
     See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>
 
                             NUEVO ENERGY COMPANY
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                 (Amounts in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
 
                                                     Six Months Ended June 30,
                                                    ---------------------------
                                                        1997           1996
                                                    -------------  ------------
<S>                                                 <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 
  Net income......................................     $  19,741     $  11,389
  Adjustments to reconcile net income to
    net cash provided by operating activities:
      Depreciation, depletion and amortization....        44,872        31,533
      Amortization of other costs.................           821           187
      Gain on sale of asset.......................        (3,039)          ---
      Extraordinary loss on early extinguishment
       of debt, net of income tax benefit.........         3,024           ---
      Deferred revenues...........................        (1,692)       (2,189)
      Deferred taxes..............................        14,982         7,725
      Minority interest...........................            (5)          (41)
      Stock bonus awards..........................           646           ---
                                                       ---------     ---------
                                                          79,350        48,604
  Change in assets and liabilities:
    Accounts receivable...........................           654       (43,625)
    Accounts payable and accrued liabilities......           594        42,146
    Minority interest distributions...............           ---          (160)
    Other.........................................           307        (8,592)
                                                       ---------     ---------
 
NET CASH PROVIDED BY OPERATING ACTIVITIES.........        80,905        38,373
                                                       ---------     ---------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to oil and gas properties.............      (102,482)     (481,958)
  Additions to gas plant facilities...............          (704)         (603)
  Additions to pipeline and other facilities......          (897)      (49,540)
  Proceeds from sale of gas plant.................        24,992           ---
  Proceeds from sales of properties...............         2,150        28,793
                                                       ---------     ---------
 
NET CASH USED IN INVESTING ACTIVITIES.............       (76,941)     (503,308)
                                                       ---------     ---------
 
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings........................       140,500       408,000
  Payments of long-term debt......................      (135,651)      (74,608)
  Premium to retire long-term debt................        (3,440)          ---
  Proceeds from sale of put options...............         1,630           ---
  Treasury stock purchase.........................       (21,173)          ---
  Preferred stock dividends.......................           ---          (529)
  Proceeds from issuance of common stock..........         5,408       136,988
                                                       ---------     ---------
 
NET CASH (USED IN)/PROVIDED BY FINANCING
  ACTIVITIES......................................       (12,726)      469,851
                                                       ---------     ---------
 
  Net (decrease)/increase in cash and cash
    equivalents...................................        (8,762)        4,916
  Cash and cash equivalents at beginning of
    period........................................        13,636         5,765
                                                       ---------     ---------
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD........     $   4,874     $  10,681
                                                       =========     =========
</TABLE>

                                       7
<PAGE>
 
                              NUEVO ENERGY COMPANY
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued (Unaudited)
                 (Amounts in Thousands, Except per Share Data)


                             (AMOUNTS IN THOUSANDS)


                                                      Six Months Ended June 30,
                                                      -------------------------
                                                        1997             1996
                                                      --------         --------


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 Cash paid during the period for:
      Interest (net of $1,661 capitalized
      during six months ended June 30, 1997).........  $15,366          $12,094

      Income taxes...................................  $   350          $   ---



    See accompanying notes to condensed consolidated financial statements.

                                       8
<PAGE>
 
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             ----------------------------------------------------
                                  (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   The accompanying unaudited condensed consolidated financial statements have
   been prepared in accordance with instructions to Form 10-Q and, therefore, do
   not include all disclosures required by generally accepted accounting
   principles.  However, in the opinion of management, these statements include
   all adjustments, which are of a normal recurring nature, necessary to present
   fairly the financial position at June 30, 1997 and December 31, 1996 and the
   results of operations and changes in cash flows for the periods ended June
   30, 1997 and 1996.  These financial statements should be read in conjunction
   with the financial statements and notes to the financial statements in the
   1996 Form 10-K of Nuevo Energy Company (the "Company") that was filed with
   the Securities and Exchange Commission.

   DERIVATIVE FINANCIAL INSTRUMENTS

   The Company utilizes derivative financial instruments to reduce its exposure
   to changes in the market price of natural gas and crude oil. Commodity
   derivatives utilized as hedges include futures and swap contracts, which are
   used to hedge natural gas, and option contracts, which are used to hedge oil.
   Natural gas basis swaps are sometimes used to hedge the basis differential
   between the derivative financial instrument index price and the natural gas
   field price.  In order to qualify as a hedge, price movements in the
   underlying commodity derivative must be highly correlated with the hedged
   commodity.  Settlement of gains and losses on price swap contracts are
   realized monthly, generally based upon the difference between the contract
   price and the average closing New York Mercantile Exchange ("NYMEX") price
   and are reported as a component of oil and gas revenues and operating cash
   flows in the period realized.

   Gains and losses on option and futures contracts that qualify as a hedge of
   firmly committed or anticipated purchases and sales of oil and gas
   commodities are deferred on the balance sheet and recognized in income and
   operating cash flows when the related hedged transaction occurs.  Premiums
   paid on option contracts are deferred and amortized over the terms of the
   respective option contracts.  Gains or losses attributable to the termination
   of a derivative financial instrument are deferred on the balance sheet and
   recognized in revenue when the hedged crude oil and natural gas is sold.
   There were no such deferred gains or losses at June 30, 1997 or December 31,
   1996.  Gains or losses on derivative financial instruments that do not
   qualify as a hedge are recognized in income currently.

   As a result of hedging transactions, oil and gas revenues were increased by
   $.1 million and decreased by $.9 million in the second quarter of 1997 and
   1996, respectively.  During the first six months of 1997 and 1996, oil and
   gas revenues were reduced by $1.7 million and $1.1 million, respectively, as
   a result of these transactions.

                                       9
<PAGE>
 
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             ----------------------------------------------------
                                  (Unaudited)

   USE OF ESTIMATES

   In order to prepare these financial statements in conformity with generally
   accepted accounting principles, management of the Company has made a number
   of estimates and assumptions relating to the reporting of assets and
   liabilities, the disclosure of contingent assets and liabilities and reserve
   information (which affects the depletion calculation as well as the
   computation of the full cost ceiling limitation).  Actual results could
   differ from those estimates.

   RECLASSIFICATIONS

   Certain reclassifications of prior year amounts have been made to conform
   with current reporting practices.

                                       10
<PAGE>
 
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
       ----------------------------------------------------------------
                                  (Unaudited)

2. INDUSTRY SEGMENT INFORMATION

   The Company's operations are concentrated primarily in two segments; the
   exploration and production of oil and natural gas and gas plant, pipeline and
   gas storage operations.

<TABLE>
<CAPTION>
                                                   For the Six Months Ended
                                                   ------------------------
                                                   June 30,        June 30,
                                                     1997            1996
                                                   --------        --------
<S>                                                <C>             <C>
      Sales to unaffiliated customers:                     
         Oil and gas/(1)/........................  $170,319        $109,071
         Gas plant, pipelines and other..........    14,334          18,143
                                                   --------        --------
      Total sales................................   184,653         127,214
         Gain on sale of asset...................     3,039             ---
         Other revenues..........................       942             726
                                                   --------        --------
      Total revenues.............................  $188,634        $127,940
                                                   ========        ========
                                                           
      Operating profit before income taxes:                
         Oil and gas/(1)/........................  $ 68,060        $ 43,571
         Gas plant, pipelines and other..........       180             959
                                                   --------        --------
                                                     68,240          44,530
                                                           
      Unallocated corporate expenses.............    12,870           9,274
      Interest expense...........................    14,008          16,183
      Dividends on Guaranteed Beneficial                   
        Interests in Company's Convertible                 
        Debentures (TECONS)......................     3,270             ---
                                                   --------        --------
      Income before income taxes, minority                 
         interest, and extraordinary item........  $ 38,092        $ 19,073
                                                   ========        ========
                                                           
      Depreciation, depletion and amortization:            
         Oil and gas.............................  $ 42,898        $ 29,518
         Gas plant, pipelines and other..........     1,633           1,949
                                                   --------        --------
                                                   $ 44,531        $ 31,467
                                                   ========        ========
</TABLE>

/(1)/ Oil and gas sales and operating profit before income taxes include
      revenues associated with gas plant facilities in California, which process
      immaterial amounts of third party gas.

                                       11
<PAGE>
 
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
       ----------------------------------------------------------------
                                  (Unaudited)

3. ACCOUNTING PRONOUNCEMENTS

   Statement of Financial Accounting Standard No. 128, "Earnings per Share," was
   issued by the Financial Accounting Standards Board ("FASB") in February 1997.
   This statement addresses the computation, presentation, and disclosure
   requirements for earnings per share ("EPS"). The Company is required to adopt
   the new standard in its year-end 1997 financial statements.  All prior period
   EPS information (including interim EPS) is required to be restated at that
   time.  Early adoption is not permitted. Proforma EPS, as if the Company
   adopted SFAS No. 128 on January 1, of each period presented, are as follows:

<TABLE>
<CAPTION>
               For the Three Months Ended          For the Six Months Ended
               --------------------------          ------------------------
               June 30,          June 30,          June 30,         June 30,
                1997              1996              1997             1996
               --------          --------          --------         --------
<S>            <C>               <C>               <C>              <C>
                                           
Basic EPS....   $ .30             $ .39             $ .99             $ .74
Diluted EPS..   $ .30             $ .37             $ .96             $ .68
 
</TABLE>

4. PROPERTIES AND EQUIPMENT

   In March 1997, Nuevo Ghana, Inc., a wholly-owned subsidiary of the Company,
   signed a petroleum agreement (the "Agreement") with the Republic of Ghana and
   the Ghana National Petroleum Corporation for petroleum rights covering
   approximately 1.7 million acres offshore of Ghana in the East Cape Three
   Points Prospect area.  The Company is the operator with a 75% working
   interest and a third party holds the remaining 25% working interest.  Plans
   for the remainder of 1997 include reprocessing existing seismic and shooting
   additional seismic in preparation for drilling the first exploration well in
   1998.  This Agreement was ratified by the Parliment in Ghana on August 1,
   1997.

5. FINANCING ACTIVITIES

   On June 16, 1997, the Company redeemed its 12 1/2% Senior Subordinated Notes
   at a total cost of $78.0 million, representing $75.0 million face value of
   the debt plus a 4% premium of $3.0 million.  The redemption resulted in an
   extraordinary loss on early extinguishment of debt, net of the related tax
   benefit, of $3.0 million.  The Company used proceeds from its bank facility
   to fund the redemption.

   In connection with the sale of its interest in NuStar Joint Venture, the
   Company used a portion of the proceeds from the sale, $5.9 million, to repay
   the project financing associated with the Benedum Gas Plant.

   The borrowing base on the Company's credit facility with a bank group led by
   NationsBank of Texas, N.A., was increased during the quarter, from $289.0
   million to $330.0 million.

                                       12
<PAGE>
 
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
       ----------------------------------------------------------------
                                  (Unaudited)

6. STOCKHOLDERS' EQUITY

   In March 1997, the Company adopted a Shareholder Rights Plan (the "Plan") to
   protect the Company's shareholders from coercive or unfair takeover tactics.
   Under the 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 the prior consent of the Company, or the Company is acquired in a
   merger or other business combination, or 50% or more of its assets or earning
   power is sold, each holder of a Right will have the right to receive, upon
   exercise at the exercise price 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.  The
   Company may redeem each 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 the Board of Directors of
   the Company.

   In March 1997, the Board of Directors of the Company authorized the open
   market repurchase of up to one million shares of outstanding Common Stock
   during 1997, at times and prices deemed attractive by management.  During
   April 1997, the Company repurchased 500,000 shares of Common Stock in open
   market transactions, at an average purchase price of $38.94 per share, plus
   42,491 shares acquired from the cancellation of warrants issued during 1996.

   In May 1997, the Company sold put options on its Common Stock to a third
   party.  The options give the purchaser the right to sell the Company 500,000
   shares of its Common Stock.  The contract gives the Company the choice of net
   cash, net share, or physical settlement.  Any repurchased shares will be
   treated as Treasury Stock. The Company generated $1.6 million in option 
   premium from these transactions which is reflected as additional paid-in
   capital on the balance sheet.

   During July 1997, the Board of Directors of the Company adopted a plan to
   encourage senior executives to personally invest in the shares of the
   Company, and to regularly review executives' ownership versus targeted
   ownership objectives.  These incentives include a deferred compensation plan
   (the "Plan") that gives executives the ability to defer all or a portion of
   their salaries and bonuses and invest in Common Stock of the Company at a
   discount to market prices.  Stock acquired at a discount will be restricted
   for a two-year period, and the Plan does not permit investment in a
   diversified equity portfolio until and unless targeted levels of Common Stock
   ownership in the Company are achieved and maintained.  Target levels of
   ownership will be based on multiples of base salary and will be administered
   by the Compensation Committee of the Board of Directors.  Initially, the Plan
   will apply to all executives at a level of Vice-President and above.

                                       13
<PAGE>
 
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
       ----------------------------------------------------------------
                                  (Unaudited)

7. CONTINGENCIES

   The Company has been named as a defendant in certain lawsuits incidental to
   its business.  Management does not believe that the outcome of such
   litigation will have a material adverse impact on the Company's operating
   results or financial condition.  However, these actions and claims in the
   aggregate seek substantial damages against the Company and are subject to the
   inherent uncertainties in any litigation.  The Company is defending itself
   vigorously in all such matters.

   The Company's international 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.
   In addition, if a dispute arises in its foreign operations, the Company 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.  The Company attempts to conduct its business and financial affairs
   so as to protect against political and economic risks applicable to
   operations in the various countries where it operates, but there can be no
   assurance the Company will be successful in so protecting itself.

   In connection with their respective acquisitions of two subsidiaries owning
   interests in the Yombo field offshore West Africa (each a "Congo
   subsidiary"), the Company and a wholly-owned subsidiary of CMS NOMECO Oil &
   Gas Co. ("CMS") agreed with the seller not to claim certain tax losses
   incurred by such subsidiaries prior to the acquisitions.  Pursuant to the
   agreement, the Company and CMS may be liable to the seller for the recapture
   of these tax losses utilized by the seller in years prior to the acquisitions
   if certain triggering events occur.  A triggering event will not occur,
   however, if a subsequent purchaser enters into certain agreements specified
   in the consolidated return regulations intended to insure that such losses
   will not be claimed.  The Company's potential direct liability could be as
   much as $54.0 million if a triggering event with respect to the Company
   occurs, and the Company believes that CMS's liability (for which the Company
   would be jointly liable with an indemnification right against CMS) could be
   as much as $72.0 million.  The Company does not expect a triggering event to
   occur with respect to it or CMS and does not believe the agreement will have
   a material adverse effect upon the Company.

8. PROPERTY SALES

   On May 2, 1997, Nuevo Liquids, a wholly-owned subsidiary of the Company, sold
   its 95% interest in NuStar Joint Venture, which held the Company's investment
   in the Benedum Plant System, for proceeds of $25.0 million. The effective
   date of the sale is January 1, 1997.  Proceeds from the sale were used to
   reduce outstanding debt under the Company's revolving credit facility, as
   well as project debt related to the Benedum Gas Plant in the amount of $5.9
   million.  The Company recorded a pre-tax gain of $3.0 million relating to the
   sale during the second quarter of 1997.

                                       14
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                      CONDITION AND RESULTS OF OPERATIONS
                      -----------------------------------

   FORWARD LOOKING STATEMENTS

   This document includes "forward looking statements" within the meaning of
   Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
   and Section 21E of the Securities Exchange Act of 1934 ("Exchange Act"). All
   statements other than statements of historical facts included in this
   document, including without limitation, statements under "Management's
   Discussion and Analysis of Financial Condition and Results of Operations"
   regarding the Company's financial position, estimated quantities and net
   present values of reserves, business strategy, plans and objectives of
   management of the Company for future operations and covenant compliance, are
   forward-looking statements. Although the Company believes that the
   assumptions upon which such forward-looking statements are based are
   reasonable, it can give no assurances that such assumptions will prove to
   have been correct. Important factors that could cause actual results to
   differ materially from the Company's expectations ("Cautionary Statements")
   are disclosed below and elsewhere in this document. All subsequent written
   and oral forward-looking statements attributable to the Company or persons
   acting on its behalf are expressly qualified by the Cautionary Statements.

   CAPITAL RESOURCES AND LIQUIDITY
 
   Since the formation of the Company, management's strategy has been to
   purchase and develop producing oil and gas properties, participate in gas
   processing, gas gathering and pipeline investments and to participate
   selectively in exploration activities.  The funding of these activities was
   provided by operating cash flows, debt and bank financing, private and public
   placements of equity, property divestitures and joint ventures with industry
   participants.  Net cash provided by operating activities was $80.9 million
   and $38.4 million for the six months ended June 30, 1997 and 1996,
   respectively. The Company invested $102.5 million and $482.0 million in oil
   and gas properties for the six months ended June 30, 1997 and 1996,
   respectively.  The Company also has $14.7 million of working capital and
   unused commitments under the revolving credit line of $201.5 million, subject
   to borrowing base determination. The Company believes its working capital,
   cash flow from operations, and available financing sources are sufficient to
   meet its obligations as they become due and to finance its exploration and
   development programs.

                                       15
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                      CONDITION AND RESULTS OF OPERATIONS
                      -----------------------------------


   CAPITAL EXPENDITURES

   The Company has identified substantial development and exploitation
   opportunities for 1997, which it believes offer meaningful opportunities to
   grow reserves and increase production.  The Company anticipates spending an
   additional $50.0 million on development activities during the remainder of
   1997, primarily in California and in the Congo.

   The Company also has an active and growing exploration program targeting
   high-potential reserve opportunities in California and the onshore Gulf Coast
   region.  The Company anticipates spending an additional $5.0 million during
   the remainder of 1997 on exploration projects.

   EXPLORATION AND DEVELOPMENT ACTIVITIES

   During the first six months of 1997, the Company drilled or participated in a
   total of 140 wells. Following is a description of significant exploration and
   development activity during the quarter.
   
   Domestic Exploration
   
   The Bardsdale Irwin Berylwood #8, located in Ventura County, California, was
   successfully completed in April 1997, and tested at a rate of 1,241 barrels
   of oil per day, and sustainable production is expected to average between 500
   and 600 barrels of oil per day. This oil is 33.8 gravity. The Company is the
   operator and owns a 98% net revenue interest in this well. Also completed as
   successful in California was the A-28 exploration well in the Tranquillon
   Ridge Unit in offshore California, a newly identified structure southeast of
   the existing Point Pedernales production and platform. The Company believes
   that this new unit may establish significant additional reserves. This well
   tested at a rate of 1,173 barrels of oil per day and 569 million cubic feet
   (mcf) of gas per day. The Company is the operator and owns an 80% working
   interest in the well.
   
   The No. 1 Maximus well, an exploratory well located in Fayette County, Texas,
   was horizontally drilled and completed as a dual-lateral in the Austin Chalk
   formation. The well tested at a rate of 1,207 barrels of oil per day and 2.0
   mcf of gas per day. The Company owns a 25% working interest in this well.
   
   International Exploration
   
   In the Republic of Congo, the Company completed the B-14 well in the Yombo
   field. The well initially tested at rates exceeding 3,600 gross barrels of
   oil per day. The Company owns a 43.75% working interest in the well. Also in
   the Republic of Congo, the Masseko #4 well has tested at rates exceeding
   3,000 gross barrels of oil per day from the Mid-Sendji formation. The Company
   is currently working with the operator and vendors on developing and sizing a
   platform for this new structure.

                                       16
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                      CONDITION AND RESULTS OF OPERATIONS
                      -----------------------------------

      Development Activity

      During the first six months of 1997, the Company participated in
      several oil and gas development projects.  These projects include
      workovers, recompletions, development drilling, secondary and tertiary
      recovery operations and other production enhancement techniques to
      maximize current production and the ultimate recovery of reserves.
      The Company has identified in excess of 1,000 exploitation projects on
      its existing properties which it believes offer meaningful
      opportunities to grow reserves and increase production, irrespective
      of acquisition or exploration successes.

      In California, the Company continued successful development drilling
      at Cymric East Wellport.  During the first six months of 1997, the
      Company drilled six additional wells and increased production from 300
      to 1,300 barrels of oil per day.  The Company also continued its
      successful workover program in the Belmont field with four additional
      workovers.  As a result of these workovers, field production has
      increased from 1,750 to 2,500 barrels of oil per day.  The Company
      also utilized frac-pac technology for the first time in offshore
      California at Santa Clara.  Two completions performed with this
      technology are each producing at a rate of 500 barrels of oil per day.

      The Company continued a two rig drilling program in the Oakhill field
      in East Texas that began in July 1996.  Initial rates from these wells
      have averaged 2.0 mmcf of gas per day per well.  Three significant
      Austin Chalk wells in the Giddings field were drilled and completed
      during the six months ended July 30, 1997.  The Que Pasa #4 tested at
      rates of 16.9 mmcf of gas per day, the Robinson #2-H tested at rates of
      21.8 mmcf of gas per day, and the Jolly #1-H tested at rates of 19.1
      mmcf of gas per day. The Company owns at 50% working interest in each
      of these Austin Chalk wells.

      FINANCING ACTIVITIES
 

      On June 16, 1997, the Company redeemed its 12 1/2% Senior Subordinated
      Notes, at a total cost of $78.0 million, representing $75.0 million face
      value of the debt, plus a 4% premium of $3.0 million. The redemption
      resulted in an extraordinary loss on early extinguishment of debt, net of
      the related tax benefit, of $3.0 million. The Company used proceeds from
      its bank facility to fund the redemption.

      In connection with the sale of its interest in NuStar Joint Venture, the
      Company used a portion of the proceeds from the sale, $5.9 million, to
      repay the project debt associated with the Benedum Gas Plant.

      The borrowing base on the Company's credit facility with a bank group led
      by NationsBank of Texas, N.A., was increased during the quarter, from
      $289.0 million to $330.0 million.

                                       17
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                -----------------------------------------------

   DERIVATIVE FINANCIAL INSTRUMENTS

   The Company utilizes derivative financial instruments to reduce its exposure
   to changes in the market price of natural gas and crude oil. Commodity
   derivatives utilized as hedges include futures and swap contracts, which are
   used to hedge natural gas, and option contracts, which are used to hedge oil.
   Natural gas basis swaps are sometimes used to hedge the basis differential
   between the derivative financial instrument index price and the natural gas
   field price.  In order to qualify as a hedge, price movements in the
   underlying commodity derivative must be highly correlated with the hedged
   commodity.  Settlement of gains and losses on price swap contracts are
   realized monthly, generally based upon the difference between the contract
   price and the average closing New York Mercantile Exchange ("NYMEX") price
   and are reported as a component of oil and gas revenues and operating cash
   flows in the period realized.

   Gains and losses on option and futures contracts that qualify as a hedge of
   firmly committed or anticipated purchases and sales of oil and gas
   commodities are deferred on the balance sheet and recognized in income and
   operating cash flows when the related hedged transaction occurs. Premiums
   paid on option contracts are deferred and amortized over the terms of the
   respective option contracts.  Gains or losses attributable to the termination
   of a derivative financial instrument are deferred on the balance sheet and
   recognized in revenue when the hedged crude oil and natural gas is sold.
   There were no such deferred gains or losses at June 30, 1997 or December 31,
   1996.  Gains or losses on derivative financial instruments that do not
   qualify as a hedge are recognized in income currently.

   As a result of hedging transactions, oil and gas revenues were increased by
   $.1 million and decreased by $.9 million in the second quarter of 1997 and
   1996, respectively.  During the first six months of 1997 and 1996, oil and
   gas revenues were reduced by $1.7 million and $1.1 million, respectively, as
   a result of these transactions.

   For the period July 1997 through December 1997, the Company has purchased put
   option contracts on 19,100 barrels per day of West Texas Intermediate Crude
   at a strike price of $19.00 per barrel.  The total cost of these options was
   $1.8 million, which will be amortized into revenue over the six month term
   beginning July 1997.  The effect of these put options is to establish a floor
   price on a large percentage of the Company's estimated oil production in the
   third and fourth quarters.

                                       18
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                -----------------------------------------------

   ACCOUNTING PRONOUNCEMENTS

   Statement of Financial Accounting Standard No. 128, "Earnings per Share," was
   issued by the Financial Accounting Standards Board ("FASB") in February 1997.
   This statement addresses the computation, presentation, and disclosure
   requirements for earnings per share ("EPS").  The Company is required to
   adopt the new standard in its year-end 1997 financial statements.  All prior
   period EPS information (including interim EPS) is required to be restated at
   that time.  Early adoption is not permitted. Proforma EPS, as if the Company
   adopted SFAS No. 128 on January 1, of each period presented, are as follows:

   <TABLE>
   <CAPTION>
 
                         For the Three Months Ended              For the Six Months Ended
                         --------------------------              ------------------------
                         June 30,          June 30,              June 30,        June 30,
                          1997              1996                  1997            1996
                         --------          --------              --------        ---------         
   <S>                    <C>                <C>                   <C>             <C>
   Basic EPS....          $ .30              $ .39                 $ .99           $ .74
   Diluted EPS..          $ .30              $ .37                 $ .96           $ .68
   </TABLE>

   CONTINGENCIES

   The Company has been named as a defendant in certain lawsuits incidental to
   its business.  Management does not believe that the outcome of such
   litigation will have a material adverse impact on the Company's operating
   results or financial condition.  However, these actions and claims in the
   aggregate seek substantial damages against the Company and are subject to the
   inherent uncertainties in any litigation.  The Company is defending itself
   vigorously in all such matters.

   The Company's international 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.
   In addition, if a dispute arises in its foreign operations, the Company 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.  The Company attempts to conduct its business and financial affairs
   so as to protect against political and economic risks applicable to
   operations in the various countries where it operates, but there can be no
   assurance the Company will be successful in so protecting itself.

   In connection with their respective acquisitions of two subsidiaries owning
   interests in the Yombo field offshore West Africa (each a "Congo
   subsidiary"), the Company and a wholly-owned subsidiary of CMS NOMECO Oil &
   Gas Co. ("CMS") agreed with the seller not to claim certain tax losses
   incurred by such subsidiaries prior to the acquisitions.  Pursuant to the
   agreement, the Company and CMS may be liable to the seller for the recapture
   of these tax losses utilized by the seller in years prior to the acquisitions
   if certain triggering events occur.  A triggering event will not occur,
   however, if a subsequent purchaser enters into certain agreements specified
   in the consolidated return regulations intended to insure that such losses
   will not be claimed.  The Company's potential

                                       19
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                -----------------------------------------------

   direct liability could be as much as $54.0 million if a triggering event with
   respect to the Company occurs, and the Company believes that CMS's liability
   (for which the Company would be jointly liable with an indemnification right
   against CMS) could be as much as $72.0 million. The Company does not expect a
   triggering event to occur with respect to it or CMS and does not believe the
   agreement will have a material adverse effect upon the Company.

                                       20
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                -----------------------------------------------

RESULTS OF OPERATIONS (THREE MONTHS ENDED JUNE 30, 1997, AND 1996)

The following table sets forth certain operating information of the Company
(inclusive of the effect of crude oil and natural gas price swaps) for the
periods presented:

<TABLE>
<CAPTION>
                                                 Three Months
                                                Ended June 30,        
                                                ---------------       %
                                                                  Increase/
                                                 1997    1996    (Decrease)
                                                ------  -------  -----------
<S>                                             <C>     <C>      <C>
Production:
     Oil and condensate (MBBLS)...............   4,309    4,096        5.2%
     Natural gas (MMCF).......................   8,806   10,457      (15.8%)
     Natural gas liquids (MBBLS)..............      67      ---        ---
 
Average Sales Price:
     Oil and condensate ($ per barrel)........  $14.49  $ 15.48       (6.4%)
     Natural gas ($ per mcf)..................  $ 1.80  $  1.90       (5.3%)
 
Average unit production cost/(1)/ per BOE.....  $ 4.89  $  5.11       (4.3%)
Average unit depletion rate per BOE-Domestic..  $ 3.95  $  4.02       (1.7%)
Average unit depletion rate per BOE-Congo.....  $  .75  $   .75        ---
 
</TABLE>
/(1)/ Costs incurred to operate and maintain wells and related equipment and
     facilities, including ad valorem and severance taxes.

                                       21
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                -----------------------------------------------

REVENUES

Oil and gas revenues for the three months ended June 30, 1997 were $79.2
million, or 5% lower than oil and gas revenues of $83.5 million for the same
period in 1996, primarily attributable to lower gas production due to the sale
of a significant portion of the Austin Chalk properties in the second quarter of
1996, as well as lower average oil and gas prices during the period, partially
offset by higher crude oil production.

Gas plant revenues of $2.8 million and $7.8 million are reflected in the three
months ended June 30, 1997 and 1996, respectively. The 64% decrease in gas plant
revenues is due to the sale of the Company's investment in the Benedum Plant
System during the second quarter.

Pipeline and other revenues for the three months ended June 30, 1997 were $1.2
million, or 25% lower than pipeline and other revenues of $1.6 million for the
same period in 1996, primarily due to the sale of the West Delta 152 pipeline
during July 1996, as well as decreased throughput volumes on the Illini and
Bright Star pipelines.

EXPENSES

Lease operating expenses for the three months ended June 30, 1997 totaled $28.6
million, or 4% lower than $29.8 million for the three months ended June 30,
1996, primarily due to production efficiencies gained in California. Lease
operating expenses per barrel of oil equivalent were $4.89 in the second quarter
of 1997, compared to $5.11 in the same period in 1996, also due to the
efficiencies gained in California.

Plant operating expenses totaled $2.3 million for the three months ended June
30, 1997 as compared to $6.9 million for the three months ended June 30, 1996.
The 67% decrease in gas plant expense is due to the sale of the Company's
investment in the Benedum Plant System during the second quarter of 1997.

Pipeline and other operating expenses for the three months ended June 30, 1997
were $1.0 million, or 38% lower than pipeline and other operating expenses of
$1.6 million for the same period in 1996, which is primarily attributable to
reduced costs on both the Illini and Bright Star pipelines associated with lower
throughput volumes.

Depreciation, depletion and amortization of $22.6 million for the three months
ended June 30, 1997 reflects a 4% decrease from $23.5 million in the same period
in 1996 due to a decreased depletion rate per barrel of oil equivalent caused by
an increase in estimated proved oil and gas reserves.

General and administrative expenses were $3.8 million for the three months ended
June 30, 1997, as compared to $3.0 million for the same period in 1996. This 27%
increase is due to increased compensation costs as well as a reduction in the
amount of capitalized administrative costs.

Management fees totaled $4.2 million for the three months ended June 30, 1997,
as compared to $3.8 million for the same period in 1996.  This 11% increase is

                                       22
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                -----------------------------------------------

primarily associated with the increase in assets under management during the
period.

Interest expense decreased to $7.3 million for the three months ended June 30,
1997 from $12.4 million in the same period of 1996.  The decrease in interest
expense is primarily the result of decreased borrowings under the credit
facility.

NET INCOME

Income before extraordinary items of $9.0 million was generated for the three
months ended June 30, 1997 as compared to $7.2 million in the same period of
1996. Earnings available to common stockholders after extraordinary items
totaled $6.0 million for the three months ended June 30, 1997 versus $6.9
million for the same period in 1996, after deductions for preferred stock
dividends.

                                       23
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                -----------------------------------------------

RESULTS OF OPERATIONS (SIX MONTHS ENDED JUNE 30, 1997 AND 1996)

The following table sets forth certain operating information of the Company
(inclusive of the effect of crude oil and natural gas price swaps) for the
periods presented:

<TABLE>
<CAPTION>
                                                    Six Months
                                                  Ended June 30,          
                                                -------------------       %
                                                                      Increase/
                                                   1997      1996    (Decrease)
                                                ----------  -------  -----------
<S>                                                <C>      <C>           <C>
Production:
     Oil and condensate (MBBLS)...............       8,457    4,987       69.6%
     Natural gas (MMCF).......................      17,760   16,292        9.0%
     Natural gas liquids (MBBLS)..............         130      ---        ---
 
Average Sales Price:
     Oil and condensate ($ per barrel)........     $ 15.51  $ 15.56        (.3%)
     Natural gas ($ per mcf)..................     $  2.02  $  1.90        6.3%
 
Average unit production cost/(1)/ per BOE.....     $  5.14  $  4.67       10.1%
Average unit depletion rate per BOE-Domestic..     $  3.94  $  4.12       (4.4%)
Average unit depletion rate per BOE-Congo.....     $   .75  $   .75        ---
</TABLE>

/(1)/ Costs incurred to operate and maintain wells and related equipment and
     facilities including ad valorem and severance taxes.

                                       24
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                -----------------------------------------------

REVENUES

Oil and gas revenues for the six months ended June 30, 1997 were $170.3 million,
or 56% higher than oil and gas revenues of $109.1 million for the same period in
1996.  The increase in oil and gas revenues was attributable primarily to
production from certain upstream oil and gas properties located onshore and
offshore California (the "California Properties") which were acquired during the
second quarter of 1996.

Gas plant revenues of $11.6 million and $14.8 million are reflected in the six
months ended June 30, 1997 and 1996, respectively.  The 22% decrease in revenues
is due to the sale of the Company's interest in the Benedum Plant System during
the second quarter of 1997.

Pipeline and other revenues for the six months ended June 30, 1997 were $2.7
million, or 18% less than pipeline and other revenues of $3.3 million for the
same period in 1996.  The decrease is primarily due to the sale of the West
Delta pipeline during the second quarter of 1996, as well as decreased
throughput on both the Illini and Bright Star pipelines.

EXPENSES

Lease operating expenses for the six months ended June 30, 1997 totaled $59.4
million, compared to $36.0 million for the same period in 1996.  This 65%
increase is a result of the acquisition of the California Properties in the
second quarter of 1996.  Lease operating expenses per BOE were $5.14 in the
first half of 1997 when compared to $4.67 in the same period in 1996 due
primarily to higher lifting costs associated with the California Properties.

Plant operating expenses of $10.2 million are reflected in the six months ended
June 30, 1997 as compared to $12.5 million for the six months ended June 30,
1996.  The 18% decrease in gas plant expenses is due to the sale of the
Company's interest in the Benedum Plant System during the second quarter of
1997.

Pipeline and other operating expenses for the six months ended June 30, 1997
were $2.3 million, or 18% lower than pipeline operating expenses of
approximately $2.8 million for the same period in 1996, due to decreased
operating expenses on both the Illini and Bright Star pipelines associated with
decreased throughput volumes.

Depreciation, depletion and amortization of  $44.9 million for the six months
ended June 30, 1997 reflects an increase of 43% from $31.5 million in the same
period in 1996 due to increased oil and gas production volumes as a result of
the acquisition of the California Properties partially offset by a decreased
depletion rate per barrel of oil equivalent as a result of increased estimated
proved oil and gas reserves.

General and administrative expenses were $8.0 million for the three months ended
June 30, 1997, as compared to $4.3 million for the same period in 1996. This 86%
increase is primarily due to an increase in administrative expenses  associated
with the California Properties acquired during the second quarter of 1996.

                                       25
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------        -------------------------------------------------
                CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                -----------------------------------------------

Management fees totaled $8.3 million for the three months ended June 30, 1997,
as compared to $5.6 million for the same period in 1996.  This 48% increase is
due to the increase in assets under management during the period, primarily
associated with the acquisition of the California Properties during the second
quarter of 1996.

Interest expense decreased to $14.0 million for the six months ended June 30,
1997 from $16.2 million in the same period of 1996.  The decrease in interest
expense is primarily the result of decreased borrowings under the credit
facility.

NET INCOME

Income before extraordinary items of $22.8 million was generated for the six
months ended June 30, 1997, as compared to $11.4 million in the same period of
1996.  Earnings available to common stockholders after extraordinary items
totaled $19.7 million for the six months ended June 30, 1997 versus $10.9
million for the same period in 1996, after deductions for preferred stock
dividends.

                                       26
<PAGE>
 
                              NUEVO ENERGY COMPANY
                              --------------------

                          PART II.  OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

               None.

ITEM 2.        CHANGES IN SECURITIES

               None.

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES

               None.

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

               At the annual meeting of the stockholders of the Company, held on
               May 14, 1997, the following matters were voted on with the
               following results:

               (1) Michael D. Watford, Thomas D. Barrow, Isaac Arnold, Jr.,
               Robert L. Gerry, III, Robert H. Allen, T. Michael Long, and James
               T. Hackett continue their terms as directors. J. P. Bryan, Gary
               R. Petersen, and John B. Connally, III, were elected as directors
               with a total of 12,261,283 voting in favor and 27,245 withheld
               authority.

               (2) The Stockholders approved a proposal to ratify the selection
               of KPMG Peat Marwick, L.L.P, as the Company's independent
               auditors for the year ending December 31, 1997, with a total of
               12,270,632 shares voting in favor, a total of 8,256 shares voting
               against and a total of 9,640 shares abstaining.

ITEM 5.        OTHER INFORMATION

               None.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

               a.   Exhibits

                    None.

               b.   Reports on Form 8-K.
 
                    None.

                                       27
<PAGE>
 
                             NUEVO ENERGY COMPANY
                             --------------------

                    PART II.  OTHER INFORMATION (CONTINUED)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                   NUEVO ENERGY COMPANY
                                   --------------------
                                              (Registrant)



Date:  August 13,  1997            By:    /s/  Michael D. Watford
       ---------------------------       -----------------------------
                                      Michael  D. Watford
                                      President, Chief Executive
                                      Officer and Chief Operating
                                      Officer


Date:  August 13, 1997             By:    /s/  Robert M. King
       ---------------------------       ------------------------------
                                      Robert M. King
                                      Chief Financial Officer

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