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Last updated on April 18, 2014 at 9:47 EDT

Harvest Natural Resources Announces 2012 Third Quarter Results

November 9, 2012

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

Harvest reported third quarter net income of approximately $5.8 million, or $0.15 per diluted share, compared to earnings of $7.7 million, or $0.20 per diluted share, for the same period last year. The third quarter 2012 results included exploration charges of $1.5 million, or $0.04 per diluted share, and $1.1 million, or $0.03 per diluted share, for transaction costs incurred related to the pending sale of our 32 percent interest in Petrodelta. Additionally, during the third quarter, Harvest incurred $1.0 million, or $0.02 per diluted share, in debt conversion expense and $0.6 million, or $0.02 per diluted share, in discontinued operations related to income taxes. Excluding the exploration charges, transaction costs, debt conversion expense, and discontinued operations charges, third quarter 2012 earnings would have been $10.0 million, or $0.26 per diluted share.

Petrodelta reported net income during the third quarter of $45.7 million, as reported under International Financial Report Standards (IFRS), compared to $57.0 million for the same period in 2011. Petrodelta’s decrease in net income for the quarter was primarily due to higher operational costs of $14.2 million resulting from a 30 percent increase in salaries and related benefits retroactive to October 2011. Harvest’s 32 percent share of Petrodelta’s net income for the third quarter as reported under U.S. GAAP was $16.2 million, compared to $14.8 million, for the same period one year ago.

Highlights for the third quarter of 2012 include:

Venezuela

  • During the third quarter of 2012, Petrodelta drilled and completed four wells and sold approximately 3.5 million barrels of oil (MMBO) for a daily average of approximately 38,173 barrels of oil per day (BOPD), an increase of 16 percent over the same period in 2011;
  • Of the four new wells successfully drilled, three were in the El Salto field with current total production from this field of approximately 16,500 BOPD; the fourth well was drilled in the Temblador field;
  • Petrodelta’s current production rate is approximately 39,000 BOPD;
  • Two new drilling rigs, the modular rig PDV-48 and the PDV-86 are expected to start operations by the end of November 2012;
  • The 2012 projected average production rate is 37,000 BOPD, with capital expenditures projected at $200 million;
  • Harvest and PT Pertamina (Persero) met in September 2012 to evaluate the progress toward the closing of the sale by Harvest of its interests in Venezuela. Both parties agreed to continue pursuing the various approvals required to close the transaction.

Gabon

  • The semi-submersible drilling unit, the Scarabeo 3, is expected to spud the next exploration well in mid-November 2012. This well will be drilled on the Tortue prospect targeting stacked pre-salt reservoirs.

Corporate

  • On October 12, 2012, Harvest sold $79.8 million aggregate principal amount of 11% senior unsecured notes due October 11, 2014;
  • Harvest has extinguished all of the senior unsecured convertible notes issued on February 17, 2010.

VENEZUELA

During the three months ended September 30, 2012, Petrodelta sold approximately 3.5 MMBO for a daily average of 38,173 BOPD, an increase of 16 percent over the same period in 2011 and 5 percent higher than the previous quarter. Petrodelta sold 0.41 billion cubic feet (BCF) of natural gas for a daily average of 4.5 million cubic feet per day (MMCFD), decreasing 31 percent over the same period in 2011, and a decrease of 17 percent from the previous quarter. Petrodelta’s current production rate is approximately 39,000 BOPD.

During the third quarter of 2012, Petrodelta drilled and completed four development wells, three in the El Salto field and one in the Temblador field. Currently, Petrodelta is operating two drilling rigs and one workover rig and is continuing with infrastructure enhancement projects in the El Salto and Temblador fields.

Two new drilling rigs are rigging up, the PDV-48 in the Isleno field and the PDV-86 in El Salto field; they are expected to begin drilling operations by the end of November 2012. The current production from the Isleno field is approximately 1,960 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 37,000 BOPD. The 2012 Petrodelta capital budget is expected to be approximately $200.0 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 12 oil wells, and is anticipating finishing this year with five rigs on site with four new rigs, two already rigging up and two more arriving at the end of the fourth quarter. The current plan is to retire one of the older rigs upon the arrival of the 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 $92.43 per barrel, compared to $100.62 per barrel during the third quarter of 2011.

As previously announced, Harvest and PT Pertamina (Persero) met in September 2012 to evaluate the progress toward the closing of the sale by Harvest of its interests in Venezuela and agreed to continue pursuing the various approvals required to close the transaction.

EXPLORATION AND OTHER ACTIVITIES

Dussafu Project – Gabon (Dussafu PSC)

Operational activities during the three months ended September 30, 2012, included completion of the processing of 545 square kilometers of seismic which was acquired in the fourth quarter of 2011 and well planning for the drilling of an exploration well in the fourth quarter. The 3-D Pre-Stack Time Migration (PSTM) was completed in July 2012. A depth imaging project commenced in the third quarter with 3-D Pre-Stack Depth Migration (PSDM) of this Central 2011 survey and the 2005 M’Bya inboard survey, the project is expected to be completed in the second quarter of 2013. Well planning progressed to drill an exploration well in November of 2012 on the Tortue prospect targeting stacked pre-salt reservoirs with mean unrisked prospective resource of 62 MMBO.

The semi-submersible drilling unit, the Scarabeo 3, owned and operated by Saipem S.p.A, will be mobilized on location and is projected to spud in mid-November 2012.

Budong-Budong PSC – Indonesia

Operational activities during the three months ended September 30, 2012, included a review of geological and geophysical data obtained from the drilling of Lariang-1 (LG-1) and Karama-1 (KD-1) wells to upgrade the prospectivity of the block and to define a prospect for potential drilling in 2013. Based on the multiple oil and gas shows encountered in both LG-1 and KD-1, an exploration program targeting the Pliocene and Miocene sands encountered in the previous two wells is being matured. Operations completed remapping of both the Lariang and Karama Basins with eight prospects in the Lariang Basin and five prospects in the Karama Basin having been identified in the Pliocene, Middle-Late Miocene and Eocene sands. The Joint Venture has high graded the Madjene prospect in the Lariang Basin as the preferred prospect for 2013 drilling with stacked Pliocene and Miocene mean unrisked prospective resource of 96 MMBO.

The initial exploration term of the Budong PSC expires on January 15, 2013. In September 2012, the operator of the Budong PSC, on behalf of Harvest and the other co-venturer, submitted a request to BPMIGAS, Indonesia’s oil and gas regulatory authority, under the terms of the Budong PSC for a four year extension of the initial six year exploration term of the Budong PSC. The request for extension of the initial exploration term includes a firm exploration well in late 2013. The extension of the initial exploration term will enable the joint venture to continue exploration activities on the Budong PSC. The granting of such request for an extension of the initial exploration term may not be unreasonably withheld.

Oman Block 64 EPSA

Operational activities during the three months ended September 30, 2012, included post-well evaluation and review of geological and geophysical data obtained from the drilling of the Mafraq South-1 (“MFS-1″) and Al Ghubar North-1 (“AGN-1″) wells. Work continues on Block 64 EPSA to mature other drilling opportunities for a possible exploration well in the Second Phase of the license.

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.

CORPORATE

On October 12, 2012, subsequent to the third quarter financial statements, Harvest sold $79.8 million aggregate principal amount of 11% senior unsecured notes due October 11, 2014, and warrants to purchase up to 686,761 shares of its common stock with an exercise price of $10.00 per share. The warrants can be exercised at any time up until the three-year anniversary of the closing. If all of the warrants were exercised, the impact on dilution of the common shares outstanding would be approximately 1.8 percent.

The notes were issued at a price of 96 percent of principal amount. The purchase price of the notes was paid in cash, except for approximately $10.5 million in principal amount, which was exchanged by a single purchaser for a combination of approximately $6.0 million in face value of that purchaser’s existing 8.25% senior convertible notes issued by the Company in 2010 and the value agreed to by the Company and the noteholder, that otherwise would have been attained by the noteholder had the noteholder converted the note into 1,059,751 shares of common stock; the remaining $3.0 million in face value of that convertible note was converted into shares of common stock under the terms of the indenture governing that convertible note.

The net cash proceeds of the offering to Harvest were approximately $63.5 million after deducting the issuance discount from the face value of the notes, placement fees, and other transaction costs. Harvest intends to use the net proceeds of the offering to fund capital expenditures planned for Gabon and other potential projects, for working capital needs and general corporate purposes.

Also, as of October 12, 2012, the Company has extinguished all the senior convertible notes and accrued interest due, which was originally issued on February 17, 2012.

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 September 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. CST on Friday, November 9, 2012, during which management will discuss Harvest’s 2012 third quarter results. The conference leader will be James A. Edmiston, President and Chief Executive Officer. To access the conference call, dial 800-309-1245 or 719-325-2302, five to ten minutes prior to the start time. The conference identification number is 6817420. A recording of the conference call will also be available for replay at 719-457-0820, passcode 6817420, through November 16, 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 website 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 third quarter 2012 Form 10-Q with the Securities and Exchange Commission on Friday, November 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)
                                                      ------------------------

                                                                               September 30,                  December 31,
                                                                               -------------                  ------------
                                                                                                2012                          2011
                                                                                                ----                          ----

    ASSETS:
    -------

    CURRENT ASSETS:
                          Cash and cash
                          equivalents                         $20,419                        $58,946
                         Restricted cash                            -                          1,200
                          Accounts and
                          notes
                          receivable, net
                          Dividend
                          receivable -
                          equity
                          affiliate                                 -                         12,200
                          Joint
                          interest and
                          other                                 3,411                         14,342
                          Notes
                          receivable                                -                          3,335
                          Advances to
                          equity affiliate                      2,690                          2,388
                          Deferred income
                          taxes                                 2,628                          2,628
                          Prepaid expenses
                          and other                             2,435                            728
                          Total current
                          assets                               31,583                         95,767

    OTHER ASSETS                                                                               5,730                         5,427

    LONG-TERM RECEIVABLE - DIVIDEND, EQUITY AFFILIATE                                         12,200                             -

    INVESTMENT IN EQUITY AFFILIATES                                                          404,705                       345,054

    PROPERTY AND EQUIPMENT, net                                                               73,064                        66,799
                                                                                              ------                        ------

                                             TOTAL ASSETS                                   $527,282                      $513,047
                                                                                            ========                      ========

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

    CURRENT LIABILITIES:
                          Accounts payable,
                          trade and other                        $952                         $7,381
                          Accounts payable
                          - carry
                          obligation                                -                          3,596
                         Accrued expenses                       9,164                         15,247
                         Accrued Interest                         679                          1,372
                          Deferred tax
                          liability                             4,835                          4,835
                          Income taxes
                          payable                               1,579                            718
                          Current portion -
                          long term debt                        9,000                              -
                          Total current
                          liabilities                          26,209                         33,149

    OTHER LONG-TERM LIABILITIES                                                                1,054                           908

    LONG-TERM DEBT                                                                                 -                        31,535

    COMMITMENTS AND CONTINGENCIES                                                                  -                             -

    EQUITY:
    STOCKHOLDERS' EQUITY:
                          Common stock and
                          paid-in capital                     264,781                        236,598
                         Retained earnings                    205,868                        193,283
                         Treasury stock                       (66,145)                       (66,104)
                          Total Harvest
                          stockholders'
                          equity                              404,504                        363,777
                                                              -------                        -------
    Noncontrolling Interest                                                                   95,515                        83,678
                         Total Equity                         500,019                        447,455
                         -----------                          -------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                              $527,282                      $513,047
    ------------------------------------------                                              ========                      ========

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

                                       Three Months Ended September
                                                   30,
                                      -----------------------------
                                                                   2012        2011
                                                                   ----        ----

    EXPENSES:
      Depreciation and
       amortization                                                $106        $111
      Exploration
       expense                                                    1,475       1,575
      General and
       administrative                                             5,080       4,291
                                                                  6,661       5,977
                                                                  -----       -----
    LOSS FROM
     OPERATIONS                                                  (6,661)     (5,977)
                                                                 ------      ------

    OTHER NON-
     OPERATING
     INCOME
     (EXPENSE)
      Investment
       earnings and
       other                                                         82         159
      Interest expense                                              (19)       (806)
      Debt conversion
       expense                                                     (958)          -
      Loss on
       extinguishment
       of debt                                                        -           -
      Other non-
       operating
       expenses                                                  (1,078)       (316)
      Loss on exchange
       rates                                                        (24)        (43)
                                                                 (1,997)     (1,006)
                                                                 ------      ------
    LOSS FROM
     CONSOLIDATED
     COMPANIES
     CONTINUING
     OPERATIONS
            BEFORE INCOME
             TAXES                                               (8,658)     (6,983)
     Income tax
      expense                                                     1,126         226
     ----------                                                   -----         ---
    LOSS FROM
     CONSOLIDATED
     COMPANIES
     CONTINUING
     OPERATIONS                                                  (9,784)     (7,209)
    Net income from
     unconsolidated
     equity
     affiliates                                                  20,232      18,476
    NET INCOME FROM
     CONTINUING
     OPERATIONS                                                  10,448      11,267
    DISCONTINUED
     OPERATIONS
      Gain on sale of
       assets                                                         -          36
      Income tax
       (expense)
       benefit                                                     (595)          -
          Income from
           discontinued
           operations                                              (595)         36
                                                                   ----         ---
    NET INCOME                                                    9,853      11,303
    Less:  Net
     Income
     Attributable to
     Noncontrolling
     Interest                                                     4,036       3,592
    ----------------
    NET INCOME
     ATTRIBUTABLE TO
     HARVEST                                                     $5,817      $7,711
    ----------------                                             ======      ======

                                    Three Months Ended
                                    ------------------
                                    September 30, 2012         September 30, 2011
                                    ------------------         ------------------
    NET INCOME ATTRIBUTABLE
     TO HARVEST PER COMMON
     SHARE:                                Basic                     Dilutive             Basic                    Dilutive
                                          -----                     --------              -----                   --------
       Income from continuing
        operations                                      6,412                      6,412                    7,675                     7,675
       Discontinued operations                           (595)                      (595)                      36                        36
                                                         ----                       ----                      ---                       ---
            Net income attributable
             to Harvest                                 5,817                      5,817                    7,711                     7,711
       Weighted average common
        shares outstanding                             38,067                     38,067                   34,174                    34,174
       Effect of dilutive shares                                                     713                        -                     4,381
                                                                                     ---                      ---                     -----
            Weighted average common
             shares including
             dilutive effect                           38,067                     38,780                   34,174                    38,555

    Per Share:
       Income from continuing
        operations                                      $0.17                      $0.17                    $0.23                     $0.20
       Discontinued operations                         $(0.02)                    $(0.02)  $                    -    $                    -
                                                       ------                     ------   ----------------------    ----------------------
            Net income attributable
             to Harvest                                 $0.15                      $0.15                    $0.23                     $0.20
                                                        -----                      -----                    -----                     =====
                  HARVEST NATURAL
                   RESOURCES, INC.
                    CONSOLIDATED
                    STATEMENTS OF
                     OPERATIONS
                   (in thousands
                  except per share
                      amounts,
                     unaudited)

                                   Nine Months Ended September 30,
                                   -------------------------------
                                                                 2012     2011
                                                                 ----     ----

    EXPENSES:
      Depreciation and
       amortization                                              $316     $354
      Exploration expense                                       4,200    7,414
      Dry hole costs                                            5,617        -
      General and
       administrative                                          17,446   18,015
                                                               27,579   25,783
                                                               ------   ------
    LOSS FROM
     OPERATIONS                                               (27,579) (25,783)
                                                              -------  -------

    OTHER NON-
     OPERATING INCOME
     (EXPENSE)
      Investment earnings
       and other                                                  231      544
      Interest expense                                           (447)  (4,722)
      Debt conversion
       expense                                                 (3,360)       -
      Loss on
       extinguishment of
       debt                                                         -   (9,682)
      Other non-
       operating expenses                                      (2,801)    (991)
      Loss on exchange
       rates                                                      (94)     (86)
                                                               (6,471) (14,937)
                                                               ------  -------
    LOSS FROM
     CONSOLIDATED
     COMPANIES
     CONTINUING
     OPERATIONS
            BEFORE INCOME TAXES                               (34,050) (40,720)
     Income tax expense
      (benefit)                                                  (520)     708
     ------------------                                          ----      ---
    LOSS FROM
     CONSOLIDATED
     COMPANIES
     CONTINUING
     OPERATIONS                                               (33,530) (41,428)
    Net income from
     unconsolidated
     equity affiliates                                         59,651   55,216
    NET INCOME  FROM
     CONTINUING
     OPERATIONS                                                26,121   13,788
    DISCONTINUED
     OPERATIONS
      Loss from
       discontinued
       operations                                              (1,699)  (3,201)
      Gain (loss) on sale
       of assets                                                    -  104,384
      Income tax
       (expense) benefit                                            -   (5,748)
                                                                  ---   ------
          Income (loss) from
           discontinued
           operations                                          (1,699)  95,435
                                                               ------   ------
    NET INCOME                                                 24,422  109,223
    Less:  Net Income
     Attributable to
     Noncontrolling
     Interest                                                  11,837   10,650
    -----------------                                          ------
    NET INCOME
     ATTRIBUTABLE TO
     HARVEST                                                  $12,585  $98,573
    ----------------                                          =======  =======

                                    Nine Months Ended
                                    -----------------
                                    September 30, 2012         September 30, 2011
                                    ------------------         ------------------
    NET INCOME ATTRIBUTABLE
     TO HARVEST PER COMMON
     SHARE:                                Basic                     Dilutive             Basic         Dilutive
                                          -----                     --------              -----        --------
       Income from continuing
        operations                                     14,284                     14,284         3,138            3,138
       Discontinued operations                         (1,699)                    (1,699)       95,435           95,435
                                                       ------                     ------        ------           ------
            Net income attributable
             to Harvest                                12,585                     12,585        98,573           98,573
       Weighted average common
        shares outstanding                             36,780                     36,780        34,053           34,053
       Effect of dilutive shares                            -                        234             -            5,694
                                                          ---                        ---           ---            -----
            Weighted average common
             shares including
             dilutive effect                           36,780                     37,014        34,053           39,747

    Per Share:
       Income from continuing
        operations                                      $0.39                      $0.39         $0.09            $0.08
       Discontinued operations                         $(0.05)                    $(0.05)        $2.80            $2.40
                                                       ------                     ------         -----            -----
            Net income attributable
             to Harvest                                 $0.34                      $0.34         $2.89            $2.48
                                                        -----                      -----         -----            =====
                                                                                         HARVEST NATURAL RESOURCES, INC.
                                                                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                            (in thousands, unaudited)

                                                                                                           Nine Months Ended September 30,
                                                                                                           -------------------------------
                                                                                                                                                2012                                                     2011
                                                                                                                                                ----                                                     ----
    Cash Flows From Operating Activities:
                         Net income                                                                                                          $24,422                                                 $109,223
                          Adjustments to reconcile
                          net income to net cash
                           used in operating
                            activities:
                          Depletion,
                          depreciation and
                          amortization                                                      316                                                1,164
                         Dry hole costs                                                                                                        5,617                                                        -
                          Impairment of
                          long-lived
                          assets                                                             -                                                4,707
                          Amortization of
                          debt financing
                          costs                                                             898                                                  753
                          Amortization of
                          discount on debt                                                   -                                                  816
                          Gain on sale
                          of assets                                                           -                                             (103,969)
                          Debt
                          conversion
                          expense                                                         2,502                                                    -
                          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                                   (59,651)   (55,216)
                          Share-based
                          compensation-
                          related charges                                      2,809      3,659
                          Changes in operating
                          assets and
                          liabilities:
                          Accounts and
                          notes receivable                                                9,086                                               (5,971)
                          Advances to
                          equity
                          affiliate                                                        (302)                                                (582)
                          Prepaid
                          expenses and
                          other                                                          (1,693)                                               2,330
                          Accounts
                          payable                                                        (6,429)                                               6,558
                          Accrued
                          expenses                                                       (1,562)                                              (1,533)
                         Accrued Interest                                                                                                     (1,329)                                                  (1,269)
                         Other liabilities                                                                                                       146                                                     (877)
                          Income taxes
                          payable                                                           861                                                2,834
                         -------------
                          Net Cash Used In
                          Operating
                          Activities                                                    (22,725)                                             (29,840)
                         -----------------                                              -------                                              -------
    Cash Flows From Investing Activities:
                          Proceeds from
                          sale of assets                                                      -                                              217,833
                          Additions of property
                          and equipment                                                 (16,252)                                             (58,474)
                          Additions to
                          assets held for
                          sale                                                                -                                              (31,422)
                          Proceeds from sale of
                          equity affiliate                                                   -                                                1,385
                          Restricted
                          cash                                                                                                                 1,200                                                        -
                          Investment
                          costs                                                                                                                 (984)                                                    (876)
                          Net Cash Provided by
                          (Used In) Investing
                          Activities                                         (16,036)   128,446
                         --------------------                                -------    -------
    Cash Flows From Financing Activities:
                          Net proceeds from
                          issuances of common
                          stock                                                  700        924
                          Payments on long
                          term debt                                                           -                                              (60,000)
                          Financing
                          costs                                                                                                                 (466)                                                    (189)
                          Net Cash Provided by
                          (Used In) Financing
                          Activities                                             234    (59,265)
                         --------------------                                    ---    -------
                          Net Increase
                          (Decrease) in
                          Cash                                                          (38,527)                                              39,341
    Cash and Cash Equivalents at Beginning of Period                                                                                          58,946                                                   58,703
    ------------------------------------------------                                                                                          ------                                                   ------
    Cash and Cash Equivalents at End of Period                                                                                               $20,419                                                  $98,044
    ------------------------------------------                                                                                               =======                                                  =======

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

                                   Three Months Ended                   Three Months Ended

                                          September 30, 2012                    September 30, 2011
                                  -------------------                  -------------------

    Barrels of oil sold                                3,512                                           3,031
    MCF of gas sold                                      412                                             594
          Total BOE                                    3,581                                           3,130
          Total BOE -Net of 33%
           Royalty                                     2,387                                           2,087

    Average price/barrel                              $92.43                                         $100.62
    Average price/mcf                                  $1.54                                           $1.54

                                                           $                           $/BOE - net         $  $/BOE - net
                                                         ---                           -----------       ---  -----------
    REVENUES:
      Oil sales                                     $324,608                                         304,969
      Gas sales                                          635                                             917
      Royalties                                     (108,371)                                        (98,013)
                                                     216,872                                 90.85   207,873        99.61
                                                     -------                                 -----   -------        -----
    EXPENSES:
      Operating expenses                              34,246                                 14.35    20,027         9.60
      Workovers                                        2,855                                  1.20     4,856         2.33
      Depletion, depreciation,
       amortization                                   22,238                                  9.32    15,687         7.52
      General and
       administrative                                  5,418                                  2.26     3,310         1.59
      Windfall profits tax                            71,982                                 30.15    69,424        33.26
                                                     136,739                                 57.28   113,304        54.30
                                                     -------                                 -----   -------        -----
    INCOME FROM OPERATIONS                            80,133                                 33.57    94,569        45.31
                                                      ------                                 -----    ------        -----

    Gain on exchange rate                                  -                                     -         -
    Interest earnings and
     other                                                 2                                     -       161         0.08
    Interest expense                                  (2,975)                                (1.25)   (2,107)       (1.01)
                                                      ------                                 -----    ------        -----

    Income before income tax                          77,160                                 32.32    92,623        44.38

      Current income tax
       expense                                        32,678                                 13.69    52,319        25.07
      Deferred income tax
       benefit                                        (1,237)                                (0.52)  (16,709)       (8.01)
                                                                                             -----                  -----
    NET INCOME                                        45,719                                 19.15    57,013        27.32
    Adjustment to reconcile
     to reported Net Income
     (loss) from                                           -
        Unconsolidated Equity
         Affiliate:
              Deferred income tax
               (benefit) expense                      (2,501)                                          9,939
                                                      ------                                           -----
              Net income equity
               affiliate                              48,220                                          47,074
    Equity interest in
     unconsolidated equity
     affiliate                                            40%                                             40%
    ----------------------                               ---                                             ---
    Income before
     amortization of excess
     basis in equity
     affiliate                                        19,288                                          18,830
        Conform depletion
         expense to GAAP                               1,511                                             142
        Amortization of excess
         basis in equity
         affiliate                                      (567)                                           (496)
    Net income from
     unconsolidated equity
     affiliate                                       $20,232                                         $18,476
    ----------------------                           -------                                         -------

    Non-GAAP Financial
     Measures:

    Reconcile NET INCOME as
     reported under IFRS to
     adjusted EBITDA:
       NET INCOME                                    $45,719                                 19.15   $57,013        27.32
       Add back non-cash
        items:
          Depletion, depreciation
           and amortization                           22,238                                  9.32    15,687         7.52
          Deferred income tax
           benefit                                    (1,237)                                (0.52)  (16,709)       (8.01)

     CASH FROM OPERATIONS                             66,720                                 27.95    55,991        26.83

          Investment earnings and
           other                                          (2)                                    -      (161)       (0.08)
          Interest expense                             2,975                                  1.25     2,107         1.01
          Current income tax
           expense                                    32,678                                 13.69    52,319        25.07

       Adjusted EBITDA                              $102,371                                 42.89  $110,256        52.83
                                                    ========                                 =====  ========        =====

       Harvest 32% of Adjusted
        EBITDA                                       $32,759                                 13.72   $35,282        16.91
                                                     =======                                 =====   =======        =====

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

                                   Nine Months Ended                    Nine Months Ended

                                          September 30, 2012                  September 30, 2011
                                  ------------------                   ------------------

    Barrels of oil sold                                9,810                                         8,396
    MCF of gas sold                                    1,536                                         1,504
          Total BOE                                   10,066                                         8,647
          Total BOE -Net of 33%
           Royalty                                     6,711                                         5,765

    Average price/barrel                              $98.63                                        $97.02
    Average price/mcf                                  $1.54                                         $1.54

                                                           $                         $/BOE - net         $  $/BOE - net
                                                         ---                         -----------       ---  -----------
    REVENUES:
      Oil sales                                     $967,579                                      $814,557
      Gas sales                                        2,369                                         2,322
      Royalty                                       (321,807)                                     (271,542)
                                                     648,141                               96.58   545,337        94.59
                                                     -------                               -----   -------        -----
    EXPENSES:
      Operating expenses                              75,890                               11.31    52,993         9.19
      Workovers                                       11,912                                1.77    18,352         3.18
      Depletion, depreciation
       and amortization                               61,878                                9.22    41,405         7.18
      General and
       administrative                                 15,345                                2.29     6,162         1.07
      Windfall profits tax                           231,407                               34.48   161,895        28.08
                                                     396,432                               59.07   280,807        48.70
                                                     -------                               -----   -------        -----
    INCOME FROM OPERATIONS                           251,709                               37.51   264,530        45.89
                                                     -------                               -----   -------        -----

    Investment earnings and
     other                                                 4                                   -       513         0.09
    Interest expense                                  (7,578)                              (1.13)   (6,525)       (1.14)
                                                      ------                               -----    ------        -----

    Income before income tax                         244,135                               36.38   258,518        44.84

      Current income tax
       expense                                       106,016                               15.80   137,280        23.81
      Deferred income tax
       benefit                                       (32,121)                              (4.79)  (44,984)       (7.80)
                                                                                           -----                  -----
    NET INCOME                                       170,240                               25.37   166,222        28.83
    Adjustment to reconcile
     to reported Net Income
     from
        Unconsolidated Equity
         Affiliate:
              Deferred income tax
               expense                                25,798                                        27,836
                                                      ------                                        ------
              Net income equity
               affiliate                             144,442                                       138,386
    Equity interest in
     unconsolidated equity
     affiliate                                            40%                                           40%
    ----------------------                               ---                                           ---
    Income before
     amortization of excess
     basis in equity
     affiliate                                        57,777                                        55,354
        Conform depletion
         expense to GAAP                               3,468                                          (155)
        Amortization of excess
         basis in equity
         affiliate                                    (1,594)                                       (1,369)
    Net income from
     unconsolidated equity
     affiliate                                       $59,651                                       $53,830
    ----------------------                           -------                                       -------

    Non-GAAP Financial
     Measures:

    Reconcile NET INCOME as
     reported under IFRS to
     adjusted EBITDA:
       NET INCOME                                   $170,240                               25.37  $166,222        28.83
       Add back non-cash
        items:
          Depletion, depreciation
           and amortization                           61,878                                9.22    41,405         7.18
          Deferred income tax
           benefit                                   (32,121)                              (4.79)  (44,984)       (7.80)

     CASH FROM OPERATIONS                            199,997                               29.80   162,643        28.21

          Investment earnings and
           other                                          (4)                                  -      (513)       (0.09)
          Interest expense                             7,578                                1.13     6,525         1.14
         Current income tax
          expense                                    106,016                               15.80   137,280        23.81

       Adjusted EBITDA                              $313,587                               46.73  $305,935        53.07
                                                    ========                               =====  ========        =====

       Harvest 32% of Adjusted
        EBITDA                                      $100,348                               14.95   $97,899        16.98
                                                    ========                               =====   =======        =====

SOURCE Harvest Natural Resources


Source: PR Newswire