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Harvest Natural Resources Announces 2012 Second Quarter Results

August 9, 2012

HOUSTON, Aug. 9, 2012 /PRNewswire/ — Harvest Natural Resources, Inc. (NYSE: HNR) today announced 2012 second quarter net income and provided an operational update.

Harvest reported second quarter net income of approximately $8.2 million, or $0.20 per diluted share, compared to earnings of $89.8 million, or $2.23 per diluted share, for the same period last year. The second quarter 2012 results included exploration charges of $1.3 million, or $0.03 per diluted share, and $1.5 million, or $0.04 per diluted share, for transaction costs incurred related to the pending sale of our 32 percent interest in Petrodelta. Additionally during the second quarter, Harvest incurred $1.6 million, or $0.04 per diluted share, in discontinued operations related to the settlement of all outstanding claims with a private third-party related to the Antelope project. Excluding the exploration charges, transaction costs and settlement charges in discontinued operations, and net of the related tax benefits of $0.8 million, or $0.02 per diluted share, second quarter 2012 earnings would have been $11.8 million, or $0.29 per diluted share.

The second quarter 2011 results included the sale of our Utah properties for a net gain of $98.7 million.

Petrodelta reported net income during the second quarter of $72.0 million, as reported under International Financial Report Standards (IFRS), compared to $47.3 million for the same period in 2011. Harvest’s 32 percent share of Petrodelta’s net income for the second quarter as reported under U.S. GAAP was $18.1 million, compared to $14.6 million, for the same period one year ago.

Highlights for the second quarter of 2012 include:

Venezuela

  • During the second quarter of 2012, Petrodelta drilled and completed two wells and sold approximately 3.31 million barrels of oil (MMBO) for a daily average of approximately 36,418 barrels of oil per day (BOPD), an increase of 19 percent over the same period in 2011;
  • The two new wells were successfully drilled in the El Salto field with current total production from this field of approximately 16,000 BOPD;
  • The ELS-45 was completed in the Lower Morichal formation producing 3,500 BOPD of 9.5 API oil, representing the highest well producing rate to date in El Salto;
  • Petrodelta’s current production rate is approximately 39,000 BOPD;
  • Facility expansion work at the El Salto and Temblador fields is underway;
  • A third drilling rig, the new modular rig PDV-48, was assigned by PDVSA to Petrodelta and is on location in the Isleno field with the start of operations expected in September 2012;
  • 2012 projected average production rate of 40,300 BOPD with capital expenditures projected at $300 million;
  • On June 21, 2012, signed a Share Purchase Agreement (SPA) with PT Pertamina (Persero), the national oil company of Indonesia, to sell all of Harvest’s interests in Venezuela for $725.0 million in an all-cash transaction.

Gabon

  • The Gabon government has agreed to extend the third exploration phase to four years until May 27, 2016;
  • Preparing for October 2012 spud of the Tortue prospect targeting stacked pre-salt reservoirs with the Scarabeo 3 semi-submersible drilling unit;
  • The Central 3-D Pre-Stack Time Migration (PSTM) was completed in July 2012.

Indonesia

  • License commitments fulfilled through January 16, 2013, and planning to request a four year extension;
  • Prospects and leads being matured in the Lariang and Karama Basins.

Oman

  • Work commitment fulfilled through March 2013;
  • Prospects and leads being matured for possible 2013 exploration well.

VENEZUELA

During the three months ended June 30, 2012, Petrodelta sold approximately 3.31 MMBO for a daily average of 36,418 BOPD, an increase of 19 percent over the same period in 2011 and 11 percent higher than the previous quarter. Petrodelta sold 0.49 billion cubic feet (BCF) of natural gas for a daily average of 5.4 million cubic feet per day (MMCFD), an increase of 12 percent over the same period in 2011, and a decrease of 22 percent from the previous quarter. Petrodelta’s current production rate is approximately 39,000 BOPD.

During the second quarter of 2012, Petrodelta drilled and completed two development wells in the El Salto field. The ELS-45 is a horizontal producer in the Lower Morichal formation, which contains the bulk of the oil in place in the El Salto field. It is currently producing 3,500 BOPD of 9.5 API oil and no water, representing the highest producing well rate to date in El Salto. Currently, Petrodelta is operating three drilling rigs and one workover rig and is continuing with infrastructure enhancement projects in the El Salto and Temblador fields.

A third drilling rig, the new modular rig PDV-48 is rigging up in the Isleno field and is expected to begin drilling operations in September 2012. The current production from the Isleno field is approximately 1,900 BOPD and is being trucked to the Uracoa field. Plans are underway to build a pipeline connection between the Isleno field and the main production facility at the Uracoa field.

Petrodelta’s production for 2012 is projected to average approximately 40,300 BOPD. The 2012 Petrodelta capital budget is expected to be approximately $300 million with a significant portion of that total related to infrastructure costs to support the further development of the Temblador and El Salto fields. Petrodelta expects to drill 22 oil wells and two water injector wells, and is anticipating finishing this year with five rigs operating with three more new rigs arriving at the end of the third quarter. The current plan is to retire one of the older rigs upon the arrival of the three new rigs so that four of the anticipated five drilling rigs will be new modular rigs that are fit-for-purpose for Petrodelta’s operations.

The average sales price for crude oil produced during the quarter was approximately $96.10 per barrel compared to $101.72 per barrel during the second quarter of 2011.

On June 21, 2012, Harvest announced that its wholly-owned subsidiary, HNR Energia B.V., had signed a definitive SPA with PT Pertamina (Persero), the national oil company of Indonesia, to sell all of Harvest’s interests in Venezuela for $725.0 million in an all-cash transaction. Net proceeds from the sale are estimated to be approximately $525.0 million after deductions for transaction related costs and taxes.

The Buyer will purchase Harvest’s 32 percent interest in Petrodelta, S.A. by purchasing HNR Energia B.V.’s 80 percent interest in Harvest-Vinccler Dutch Holding B.V. The effective date of the transaction is January 1, 2012.

The closing of the transaction is subject to, among other things, approval by the Government of the Bolivarian Republic of Venezuela, the Government of Indonesia in its capacity as the Buyer’s sole shareholder and a majority of Harvest’s stockholders. If all of the conditions to closing are not satisfied or not waived on or before March 21, 2013, either the Buyer or Harvest may terminate the SPA. The Boards of Directors of Harvest and Pertamina have each approved the transaction.

EXPLORATION AND OTHER ACTIVITIES

Dussafu Project – Gabon (“Dussafu PSC”)

On April 27, 2012, Harvest submitted notification to the Direction Generale Des Hydrocarbures (DGH) of our intent to enter the third exploration phase of the Dussafu PSC with an effective date of May 28, 2012. As stated in the Dussafu PSC, the third exploration phase of the Dussafu PSC has a $7.0 million ($4.7 million net to our 66.667 percent interest) work commitment over a two year period. The DGH has agreed to extend the third exploration phase to four years until May 27, 2016. Harvest paid a $1.0 million bonus ($0.7 million net to Harvest’s 66.667 percent interest) to enter the third exploration phase.

Operational activities during the six months ended June 30, 2012, included processing of the 545 square kilometers of seismic which was acquired in the fourth quarter of 2011. The 3-D Pre-Stack Time Migration (PSTM) was completed in July 2012. Depth processing and reprocessing of the inboard 3D commenced and is scheduled to be completed in the second quarter of 2013. Well planning is in progress to drill an exploration well in the fourth quarter of 2012 on the Tortue prospect to target stacked pre-salt Gamba and Dentale reservoirs as well as a secondary post-salt Madiela clastic reservoir. The prospect has mean unrisked prospective resources of 62 MMBO.

Harvest Dussafu B.V. has secured the use of a semi-submersible drilling unit to drill the Tortue exploration well offshore Gabon. The drilling unit, the Scarabeo 3, is owned and operated by Saipem S.p.A. and will be mobilized on location to spud the well in mid-October 2012.

Budong-Budong PSC – Indonesia

The license commitments have been fulfilled and the partners are planning to request a four year extension at the end of the initial six year term which expires on January 16, 2013. Prospects and leads are being matured for both the Lariang and Karama Basins. An exploration well is being planned for 2013.

Tately Budong-Budong N.V. is the operator of the Budong-Budong Block. Harvest owns a 64.4 percent working interest in the Budong-Budong PSC.

Oman Block 64 EPSA

All work commitments have been completed and post well studies are being conducted. A one year extension for the license has been granted until May 2013, at which time Harvest must decide whether to commit to the second phase of the license, which has a three year term and a one well commitment.

The remaining prospects and leads are being reviewed in light of the recent drilling results to mature possible drilling options in 2013.

Harvest has an 80 percent interest in Block 64 onshore Oman. Block 64 has an area of 3,874 square kilometers and was extracted from a pre-existing block (PDO’s Block 6) to accelerate exploration for gas and gas condensate by the Omani Ministry of Oil and Gas. Harvest is evaluating other opportunities in the region.

Non-GAAP Financial Measures

These measures are included due to the significant nature of Petrodelta’s earnings to Harvest. In this press release, Petrodelta’s adjusted EBITDA disclosure is not presented in accordance with accounting principles generally accepted in the United States (GAAP) and Petrodelta’s financials are not intended to be used in lieu of GAAP presentations of net income or cash flows from operating activities. Adjusted EBITDA is presented because we believe it provides additional information with respect to both the performance of our fundamental business activities as well as our ability to internally fund our future capital expenditures and working capital requirements. We also believe that financial analysts commonly use adjusted EBITDA to analyze Petrodelta’s performance.

The Company defines Adjusted EBITDA as net income (loss) before interest expense, investment earnings, current income taxes, and certain non-cash items in the Company’s statements of operations, including depreciation, depletion and amortization, accretion of asset retirement obligations, deferred income taxes, certain employee compensation charges and gains or losses from foreign exchange. Although we present selected items that we consider in evaluating our performance, you should also be aware that the items presented do not represent all items that affect comparability between the periods presented. Variations in our operating results are also caused by changes in volumes, prices, exchange rates and numerous other factors. These types of variations are not separately identified in this release, but will be discussed, as applicable, in management’s discussion and analysis of operating results in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.

A reconciliation of adjusted EBITDA to net income and cash flows from operating activities for the periods presented is included in the tables attached to this release.

Conference Call

Harvest will hold a conference call at 10:00 a.m. Central Daylight Time on Thursday, August 9, 2012, during which management will discuss Harvest’s 2012 second quarter results. The conference leader will be James A. Edmiston, President and Chief Executive Officer. To access the conference call, dial 888-256-9128 or 913-312-1472, five to ten minutes prior to the start time. The conference identification number is 4576497. A recording of the conference call will also be available for replay at 719-457-0820, passcode 4576497, through August 13, 2012.

The conference call will also be transmitted over the internet through the Company’s website at www.harvestnr.com. To listen to the live webcast, enter the web site fifteen minutes before the call to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay of the webcast will be available beginning shortly after the call and will remain on the web site for approximately 90 days.

The Company intends to file its second quarter 2012 Form 10-Q with the Securities and Exchange Commission on Thursday, August 9, 2012. A copy of the Form 10-Q will be available on the Company’s website at www.harvestnr.com.

About Harvest Natural Resources:

Harvest Natural Resources, Inc., headquartered in Houston, Texas, is an independent energy company with principal operations in Venezuela, exploration assets in Indonesia, West Africa, China and Oman and business development offices in Singapore and the United Kingdom. For more information visit the Company’s website at www.harvestnr.com.

CONTACT:
Stephen C. Haynes
Vice President, Chief Financial Officer
(281) 899-5716

This press release may contain projections and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. They include estimates and timing of expected oil and gas production, oil and gas reserve projections of future oil pricing, future expenses, planned capital expenditures, anticipated cash flow, timing and certainty of future transactions and our business strategy. All statements other than statements of historical facts may constitute forward-looking statements. Although Harvest believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Actual results may differ materially from Harvest’s expectations as a result of factors discussed in Harvest’s 2011 Annual Report on Form 10-K and other public filings.

Harvest may use certain terms such as resource base, contingent resources, prospective resources, probable reserves, possible reserves, non-proved reserves or other descriptions of volumes of reserves. These estimates are by their nature more speculative than estimates of proved reserves and accordingly, are subject to substantially greater risk of being actually realized by the Company.

                                               HARVEST NATURAL RESOURCES, INC.
                                                 CONSOLIDATED BALANCE SHEETS
                                                  (in thousands, unaudited)

                                                                              June 30,                  December 31,
                                                                              --------                  ------------
                                                                                          2012                         2011
                                                                                          ----                         ----

    ASSETS:
    -------

    CURRENT ASSETS:
                         Cash and cash
                         equivalents                         $28,746                   $58,946
                        Restricted cash                            -                     1,200
                         Accounts and
                         notes
                         receivable, net
                         Dividend
                         receivable -
                         equity
                         affiliate                            12,200                    12,200
                         Joint
                         interest and
                         other                                 6,315                    14,342
                         Notes
                         receivable                                -                     3,335
                         Advances to
                         equity affiliate                      2,538                     2,388
                         Deferred income
                         taxes                                 2,628                     2,628
                         Prepaid expenses
                         and other                             1,692                       728
                         Total current
                         assets                               54,119                    95,767

    OTHER ASSETS                                                                         5,555                        5,427

    INVESTMENT IN EQUITY AFFILIATES                                                    384,473                      345,054

    PROPERTY AND EQUIPMENT, net                                                         71,226                       66,799
                                                                                        ------                       ------

                                            TOTAL ASSETS                              $515,373                     $513,047
                                                                                      ========                     ========

    LIABILITIES AND EQUITY:
    -----------------------

    CURRENT LIABILITIES:
                         Accounts payable,
                         trade and other                      $1,044                    $7,381
                         Accounts payable
                         - carry
                         obligation                                -                     3,596
                        Accrued expenses                       8,896                    15,247
                        Accrued Interest                       1,008                     1,372
                         Deferred tax
                         liability                             4,835                     4,835
                         Income taxes
                         payable                               1,251                       718
                         Current portion -
                         long term debt                       15,551                         -
                         Total current
                         liabilities                          32,585                    33,149

    OTHER LONG-TERM LIABILITIES                                                            956                          908

    LONG-TERM DEBT                                                                           -                       31,535

    COMMITMENTS AND CONTINGENCIES                                                            -                            -

    EQUITY:
    STOCKHOLDERS' EQUITY:
                         Common stock and
                         paid-in capital                     256,447                   236,598
                        Retained earnings                    200,051                   193,283
                        Treasury stock                       (66,145)                  (66,104)
                         Total Harvest
                         stockholders'
                         equity                              390,353                   363,777
                                                             -------                   -------
    Noncontrolling Interest                                                             91,479                       83,678
                        Total Equity                         481,832                   447,455
                        ---------                            -------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                        $515,373                     $513,047
    ------------------------------------------                                        ========                     ========

                                    HARVEST NATURAL RESOURCES, INC.
                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                          (in thousands except per share amounts, unaudited)

                                                 Three months Ended
                                                      June 30,
                                                -------------------
                                                                 2012                       2011
                                                                 ----                       ----

    EXPENSES:
      Depreciation and
       amortization                                              $105                       $119
      Exploration expense                                       1,282                      4,650
      Dry hole costs                                               71                          -
      General and
       administrative                                           6,524                      7,049
                                                                7,982                     11,818
                                                                -----                     ------
    LOSS FROM OPERATIONS                                       (7,982)                   (11,818)
                                                               ------                    -------

    OTHER NON-OPERATING
     INCOME (EXPENSE)
      Investment earnings and
       other                                                       80                        240
      Interest expense                                            (34)                    (1,704)
      Debt conversion expense                                      20                          -
      Loss on extinguishment of
       debt                                                         -                     (9,682)
      Other non-operating
       expenses                                                (1,467)                      (244)
      Loss on exchange rates                                      (48)                       (32)
                                                               (1,449)                   (11,422)
                                                               ------                    -------
    LOSS FROM CONSOLIDATED
     COMPANIES CONTINUING
     OPERATIONS BEFORE INCOME
     TAXES
                                                               (9,431)                   (23,240)
     Income tax expense
      (benefit)                                                  (426)                       260
     ------------------                                          ----                        ---
    LOSS FROM CONSOLIDATED
     COMPANIES CONTINUING
     OPERATIONS                                                (9,005)                   (23,500)
    Net income from
     unconsolidated equity
     affiliates                                                22,661                     18,246
    NET INCOME (LOSS) FROM
     CONTINUING OPERATIONS                                     13,656                     (5,254)
    DISCONTINUED OPERATIONS
      Income (loss) from
       discontinued operations                                 (1,584)                        65
      Gain on sale of assets                                        -                    104,348
      Income tax (expense)
       benefit                                                    595                     (5,748)
          Income (loss) from
           discontinued operations                               (989)                    98,665
                                                                 ----                     ------
    NET INCOME                                                 12,667                     93,411
    Less:  Net Income
     Attributable to
     Noncontrolling Interest                                    4,507                      3,631
    ------------------------
    NET INCOME ATTRIBUTABLE
     TO HARVEST                                                $8,160                    $89,780
    -----------------------                                    ======                    =======

                                                 Three months Ended
                                                 ------------------
                                                   June 30, 2012             June 30, 2011
                                                   -------------             -------------
    NET INCOME (LOSS)
     ATTRIBUTABLE TO HARVEST
     PER COMMON SHARE:                                  Basic                   Dilutive          Basic         Dilutive
       Income (loss) from
        continuing operations                                   9,149                      9,149        (8,885)          (8,885)
       Discontinued operations                                   (989)                      (989)       98,665           98,665
                                                                 ----                       ----        ------           ------
            Net income attributable
             to Harvest                                         8,160                      8,160        89,780           89,780
       Weighted average common
        shares outstanding                                     37,375                     37,375        34,039           34,039
       Effect of dilutive shares                                                           3,424             -            6,221
                                                                                           -----           ---            -----
            Weighted average common
             shares including
             dilutive effect                                   37,375                     40,799        34,039           40,260

    Per Share:
       Income (loss) from
        continuing operations                                   $0.25                      $0.22        $(0.26)          $(0.22)
       Discontinued operations                                 $(0.03)                    $(0.02)        $2.90            $2.45
                                                               ------                     ------         -----            -----
            Net income attributable
             to Harvest                                         $0.22                      $0.20         $2.64            $2.23
                                                                =====                      =====         =====            =====

                 HARVEST NATURAL
                 RESOURCES, INC.
             CONSOLIDATED STATEMENTS
                  OF OPERATIONS
            (in thousands except per
                  share amounts,
                    unaudited)

                                      Six months Ended
                                          June 30,
                                     -----------------
                                                     2012                 2011
                                                     ----                 ----

    EXPENSES:
      Depreciation and
       amortization                                  $210                 $243
      Exploration expense                           2,725                5,839
      Dry hole costs                                5,617                    -
      General and
       administrative                              12,366               13,724
                                                   20,918               19,806
                                                   ------               ------
    LOSS FROM OPERATIONS                          (20,918)             (19,806)
                                                  -------              -------

    OTHER NON-OPERATING
     INCOME (EXPENSE)
      Investment earnings and
       other                                          149                  385
      Interest expense                               (428)              (3,916)
      Debt conversion expense                      (2,402)                   -
      Loss on extinguishment of
       debt                                             -               (9,682)
      Other non-operating
       expenses                                    (1,723)                (675)
      Loss on exchange rates                          (70)                 (43)
                                                   (4,474)             (13,931)
                                                   ------              -------
    LOSS FROM CONSOLIDATED
     COMPANIES CONTINUING
     OPERATIONS BEFORE INCOME
     TAXES
                                                  (25,392)             (33,737)
     Income tax  expense
      (benefit)                                    (1,646)                 482
     -------------------                           ------                  ---
    LOSS FROM CONSOLIDATED
     COMPANIES CONTINUING
     OPERATIONS                                   (23,746)             (34,219)
    Net income from
     unconsolidated equity
     affiliates                                    39,419               36,740
    NET INCOME  FROM
     CONTINUING OPERATIONS                         15,673                2,521
    DISCONTINUED OPERATIONS
      Loss from discontinued
       operations                                  (1,699)              (3,201)
      Gain (Loss) on sale of
       assets                                           -              104,348
      Income tax (expense)
       benefit                                        595               (5,748)
                                                      ---               ------
          Income (loss) from
           discontinued operations                 (1,104)              95,399
                                                   ------               ------
    NET INCOME                                     14,569               97,920
    Less:  Net Income
     Attributable to
     Noncontrolling Interest                        7,801                7,058
    ------------------------                        -----
    NET INCOME  ATTRIBUTABLE
     TO HARVEST                                    $6,768              $90,862
    ------------------------                       ======              =======

                                     Six Months Ended
                                     ----------------
                                       June 30, 2012       June 30, 2011
                                       -------------       -------------
    NET INCOME ATTRIBUTABLE
     TO HARVEST PER COMMON
     SHARE:                                Basic              Dilutive          Basic         Dilutive
       Income (loss) from
        continuing operations                       7,872                7,872        (4,537)          (4,537)
       Discontinued operations                     (1,104)              (1,104)       95,399           95,399
                                                   ------               ------        ------           ------
            Net income  attributable
             to Harvest                             6,768                6,768        90,862           90,862
       Weighted average common
        shares outstanding                         36,130               36,130        33,992           33,992
       Effect of dilutive shares                        -                1,469             -            6,035
                                                      ---                -----           ---            -----
            Weighted average common
             shares including
             dilutive effect                       36,130               37,599        33,992           40,027

    Per Share:
       Income (loss) from
        continuing operations                       $0.22                $0.21        $(0.13)          $(0.11)
       Discontinued operations                     $(0.03)              $(0.03)        $2.80            $2.38
                                                   ------               ------         -----            -----
            Net income attributable
             to Harvest                             $0.19                $0.18         $2.67            $2.27
                                                    =====                =====         =====            =====

                                             HARVEST NATURAL RESOURCES, INC.
                                             -------------------------------
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          -------------------------------------
                                                (in thousands, unaudited)
                                                 ------------------------

                                                                     Six months Ended
                                                                         June 30,
                                                                    -----------------
                                                                                    2012                        2011
                                                                                    ----                        ----
    Cash Flows From Operating Activities:
                        Net income                                               $14,569                     $97,920
                         Adjustments to
                         reconcile net
                         income  to net
                         cash
                          used in operating
                           activities:
                         Depletion, depreciation and
                         amortization                                                210                       1,053
                        Dry hole costs                                             5,617                           -
                        Impairment of long-lived assets                                -                       4,707
                        Amortization of debt financing costs                         726                         530
                        Amortization of discount on debt                               -                         816
                        Gain on sale of assets                                         -                    (103,933)
                        Debt conversion expense                                    1,939                           -
                         Allowance for account and note
                         receivable                                                5,180                           -
                         Writeoff of accounts payable, carry
                         obligation                                               (3,596)                          -
                        Loss on early extinguishment of debt                           -                       7,533
                         Net income from unconsolidated equity
                         affiliate                                               (39,419)                    (36,740)
                         Share-based compensation-related
                         charges                                                   2,124                       2,673
                         Changes in
                         operating assets
                         and liabilities:
                        Accounts and notes receivable                              6,182                      (2,887)
                        Advances to equity affiliate                                (150)                       (296)
                        Prepaid expenses and other                                  (950)                      3,061
                        Accounts payable                                          (6,337)                      8,168
                        Accrued expenses                                          (2,177)                     (2,469)
                        Accrued Interest                                            (971)                       (418)
                        Other liabilities                                             48                        (701)
                        Income taxes payable                                         533                       6,061
                        --------------------
                        Net Cash Used In Operating Activities                    (16,472)                    (14,922)
                        -------------------------------------                    -------                     -------
    Cash Flows From Investing Activities:
                         Proceeds from sale
                         of assets                                                     -                     217,833
                         Additions of
                         property and
                         equipment                                               (14,205)                    (28,067)
                         Additions to
                         assets held for
                         sale                                                          -                     (31,742)
                         Proceeds from sale
                         of equity
                         affiliate                                                     -                       1,385
                        Restricted cash                                            1,200                      (7,323)
                        Investment costs                                            (829)                        (62)
                         Net Cash Provided by (Used In)
                         Investing Activities                                    (13,834)                    152,024
                        -------------------------------                          -------                     -------
    Cash Flows From Financing Activities:
                         Net proceeds from
                         issuances of
                         common stock                                                273                         416
                         Payments on long
                         term debt                                                     -                     (60,000)
                        Financing costs                                             (167)                       (189)
                         Net Cash Provided by (Used In)
                         Financing Activities                                        106                     (59,773)
                        -------------------------------                              ---                     -------
                        Net Increase (Decrease) in Cash                          (30,200)                     77,329
    Cash and Cash Equivalents at Beginning of Period                              58,946                      58,703
    ------------------------------------------------                              ------                      ------
    Cash and Cash Equivalents at End of Period                                   $28,746                    $136,032
    ------------------------------------------                                   =======                    ========

                                                        PETRODELTA, S. A.
                                                     STATEMENTS OF OPERATIONS
                                  (in thousands except per BOE and per share amounts, unaudited)

                                     Three months Ended          Three months Ended
                                        June 30, 2012              June 30, 2011
                                        -------------              -------------

    Barrels of oil sold                                 3,314                                      2,782
    MCF of gas sold                                       494                                        440
          Total BOE                                     3,396                                      2,855
          Total BOE -Net of 33%
           Royalty                                      2,264                                      1,904

    Average price/barrel                               $96.10                                    $101.72
    Average price/mcf                                   $1.54                                      $1.54

                                                            $            $/BOE - net                   $  $/BOE - net
                                                          ---            -----------                 ---  -----------
    REVENUES:
      Oil sales                                      $318,474                                    282,975
      Gas sales                                           762                                        679
      Royalties                                      (106,097)                                   (96,214)
                                                      213,139                  94.14             187,440        98.45
                                                      -------                  -----             -------        -----
    EXPENSES:
      Operating expenses                               20,063                   8.86              18,684         9.81
      Workovers                                         3,149                   1.39               7,021         3.69
      Depletion,
       depreciation,
       amortization                                    21,718                   9.59              13,231         6.95
      General and
       administrative                                   4,944                   2.19               3,782         1.99
      Windfall profits tax                             74,687                  32.99              65,345        34.32
                                                      124,561                  55.02             108,063        56.76
                                                      -------                  -----             -------        -----
    INCOME FROM OPERATIONS                             88,578                  39.12              79,377        41.69
                                                       ------                  -----              ------        -----

    Gain on exchange rate                                   -                      -                   -
    Interest earnings and
     other                                                  1                      -                 185         0.09
    Interest expense                                   (2,690)                 (1.18)             (3,146)       (1.65)
                                                       ------                  -----              ------        -----

    Income before income
     tax                                               85,889                  37.94              76,416        40.13

      Current income tax
       expense                                         31,268                  13.81              31,618        16.60
      Deferred income tax
       expense (benefit)                              (17,394)                 (7.68)             (2,513)       (1.32)
                                                                               -----                            -----
    NET INCOME                                         72,015                  31.81              47,311        24.85
    Adjustment to reconcile
     to reported Net Income
     (loss) from                                            -
        Unconsolidated Equity
         Affiliate:
              Deferred income tax
               (benefit) expense                       16,258                                         26
                                                       ------                                        ---
              Net income equity
               affiliate                               55,757                                     47,285
    Equity interest in
     unconsolidated equity
     affiliate                                             40%                                        40%
    ----------------------                                ---                                        ---
    Income before
     amortization of excess
     basis in equity
     affiliate                                         22,303                                     18,914
        Conform depletion
         expense to GAAP                                  896                                       (216)
        Amortization of excess
         basis in equity
         affiliate                                       (538)                                      (452)
    Net income from
     unconsolidated equity
     affiliate                                        $22,661                                    $18,246
    ----------------------                            -------                                    -------

    Non-GAAP Financial
     Measures:

    Reconcile NET INCOME as
     reported under IFRS to
     adjusted EBITDA:
       NET INCOME                                     $72,015                  31.81             $47,311        24.85
       Add back non-cash
        items:
          Depletion, depreciation
           and amortization                            21,718                   9.59              13,231         6.95
          Deferred income tax
           expense (benefit)                          (17,394)                 (7.68)             (2,513)       (1.32)

     CASH FROM OPERATIONS                              76,339                  33.72              58,029        30.48

          Investment earnings and
           other                                           (1)                     -                (185)       (0.09)
          Interest expense                              2,690                   1.18               3,146         1.65
          Current income tax
           expense                                     31,268                  13.81              31,618        16.60

       Adjusted EBITDA                               $110,296                  48.71             $92,608        48.64
                                                     ========                  =====             =======        =====

       Harvest 32% of Adjusted
        EBITDA                                        $35,295                  15.59             $29,635        15.56
                                                      =======                  =====             =======        =====

                                                         PETRODELTA, S. A.
                                                     STATEMENTS OF OPERATIONS
                                  (in thousands except per BOE and per share amounts, unaudited)

                                     Six months Ended            Six months Ended
                                       June 30, 2012              June 30, 2011
                                       -------------              -------------

    Barrels of oil sold                                6,298                                        5,365
    MCF of gas sold                                    1,124                                          910
          Total BOE                                    6,485                                        5,517
          Total BOE -Net of 33%
           Royalty                                     4,324                                        3,678

    Average price/barrel                             $102.09                                       $94.98
    Average price/mcf                                  $1.54                                        $1.54

                                                           $            $/BOE - net                     $  $/BOE - net
                                                         ---            -----------                   ---  -----------
    REVENUES:
      Oil sales                                     $642,971                                     $509,588
      Gas sales                                        1,734                                        1,405
      Royalty                                       (213,436)                                    (173,529)
                                                     431,269                  99.74               337,464        91.75
                                                     -------                  -----               -------        -----
    EXPENSES:
      Operating expenses                              41,644                   9.63                32,966         8.96
      Workovers                                        9,057                   2.09                13,496         3.67
      Depletion, depreciation
       and amortization                               39,640                   9.17                25,718         6.99
      General and
       administrative                                  9,927                   2.30                 2,852         0.78
      Windfall profits tax                           159,425                  36.87                92,471        25.14
                                                     259,693                  60.06               167,503        45.54
                                                     -------                  -----               -------        -----
    INCOME FROM OPERATIONS                           171,576                  39.68               169,961        46.21
                                                     -------                  -----               -------        -----

    Investment earnings and
     other                                                 2                      -                   352         0.09
    Interest expense                                  (4,603)                 (1.06)               (4,418)       (1.20)
                                                      ------                  -----                ------        -----

    Income before income
     tax                                             166,975                  38.62               165,895        45.10

      Current income tax
       expense                                        73,338                  16.96                84,961        23.10
      Deferred income tax
       benefit                                       (30,884)                 (7.14)              (28,275)       (7.69)
                                                                              -----                              -----
    NET INCOME                                       124,521                  28.80               109,209        29.69
    Adjustment to reconcile
     to reported Net Income
     from
        Unconsolidated Equity
         Affiliate:
              Deferred income tax
               expense                                28,299                                       17,897
                                                      ------                                       ------
              Net income equity
               affiliate                              96,222                                       91,312
    Equity interest in
     unconsolidated equity
     affiliate                                            40%                                          40%
    ----------------------                               ---                                          ---
    Income before
     amortization of excess
     basis in equity
     affiliate                                        38,489                                       36,525
        Conform depletion
         expense to GAAP                               1,957                                         (297)
        Amortization of excess
         basis in equity
         affiliate                                    (1,027)                                        (873)
    Net income from
     unconsolidated equity
     affiliate                                       $39,419                                      $35,355
    ----------------------                           -------                                      -------

    Non-GAAP Financial
     Measures:

    Reconcile NET INCOME as
     reported under IFRS to
     adjusted EBITDA:
       NET INCOME                                   $124,521                  28.80              $109,209        29.69
       Add back non-cash
        items:
          Depletion, depreciation
           and amortization                           39,640                   9.17                25,718         6.99
          Deferred income tax
           expense (benefit)                         (30,884)                 (7.14)              (28,275)       (7.69)

     CASH FROM OPERATIONS                            133,277                  30.83               106,652        28.99

          Investment earnings and
           other                                          (2)                     -                  (352)       (0.09)
          Interest expense                             4,603                   1.06                 4,418         1.20
         Current income tax
          expense                                     73,338                  16.96                84,961        23.10

       Adjusted EBITDA                              $211,216                  48.85              $195,679        53.20
                                                    ========                  =====              ========        =====

       Harvest 32% of Adjusted
        EBITDA                                       $67,589                  15.63               $62,617        17.02
                                                     =======                  =====               =======        =====

SOURCE Harvest Natural Resources


Source: PR Newswire