When Nuevo purchased Unocal's California crude oil and natural gas assets in 1996, we entered into a net proceeds sharing agreement with Unocal which terminates on December 31, 2004. Pursuant to terms of this agreement, Unocal received one half of the net proceeds from the sale of crude oil production from the purchased fields if the sales price fell within a specified price-sharing band. The price-sharing band has a current minimum of approximately $22.00 per barrel and a maximum of approximately $29.00 per barrel (NYMEX) and covers approximately 25 thousand barrels per day, or about 55% of our total crude oil production.
"We are more than satisfied with the financial outcome of this settlement and the elimination of litigation risk," commented Jim Payne, Chairman, President and CEO. "Given the current robust crude oil price environment, the contingent payment would likely have been in excess of $20 million for 2004. Disregarding the contested 2001 contingent payment and credits from purchasers of certain Nuevo oil properties in California, the 2003 contingent payment obligation was at least $16 million. As a result of this buyout, our contingent payments for 2004 and 2003 have been eliminated."
Nuevo Energy Company is a Houston, Texas-based company primarily engaged in the acquisition, exploitation, development, exploration and production of crude oil and natural gas. Nuevo's domestic producing properties are located onshore and offshore California and in West Texas. Nuevo is the largest independent producer of crude oil and natural gas in California.
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