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Harvest Natural Resources Announces 2011 Second Quarter Results

August 9, 2011

HOUSTON, Aug. 9, 2011 /PRNewswire/ — Harvest Natural Resources, Inc. (NYSE: HNR) today announced 2011 second quarter earnings and provided an operational update.

Harvest reported second quarter earnings of approximately $90.1 million, or $2.24 per diluted share, compared to a loss of $296,000, or $0.01 per diluted share, for the same period last year. The second quarter results include exploration charges of $4.7 million, or $0.12 per diluted share, and a loss on the extinguishment of debt of $9.7 million, or $0.24 per diluted share. Also during the second quarter, the Company reported income from discontinued operations of $99.2 million, or $2.47 per diluted share, for revenue, expenses and gain recognized related to the sale of the Utah assets. Adjusted for exploration charges, loss on extinguishment of debt, gain from the sale of the Utah assets and the income related to the discontinued operations, second quarter 2011 earnings would have been $5.3 million, or $0.13 per diluted share.

Petrodelta reported earnings during the second quarter of $47.3 million, $15.1 million net to Harvest’s 32 percent interest, under International Financial Reporting Standards (IFRS). After adjustments to Petrodelta’s IFRS earnings, primarily to conform to U.S. GAAP, Harvest’s 32 percent share of Petrodelta’s earnings was $14.2 million.

Highlights for the second quarter of 2011 include:

Venezuela

  • Oil production from Petrodelta averaged 30,680 barrels of oil per day (BOPD), an increase of 42 percent over the same period in 2010. The current production rate from Petrodelta is approximately 35,000 BOPD;
  • During the three months ended June 30, 2011, Petrodelta drilled and completed four development wells and one water injection well;
  • Initial production (IP) rates for the Temblador (TT-80) and El Salto (ELS-36) wells were approximately 3,200 BOPD each; the highest IP rates recorded since the beginning of the drilling campaign in 2008;
  • Currently, Petrodelta is operating two drilling rigs and one workover rig. Petrodelta expects to take possession of a third drilling rig in late August 2011;

United States

  • Completed sale of Utah assets on May 17, 2011 and received $217.8 million, $205 million net of transaction related costs and estimated taxes; achieving a return on investment of 138% with a project cycle time of 3 years;

Indonesia

  • The Karama-1 (KD-1) well spud on June 20, 2011, and is the second of two planned exploration wells located in the Budong-Budong Block, onshore West Sulawesi;
  • The KD-1 well will be drilled to test a thrusted surface anticline with stacked Miocene and Eocene targets to a planned total measured depth of approximately 10,800 feet;
  • After setting 13 3/8″ casing at 3,227 feet on July 21, 2011, the rig substructure and derrick were temporarily moved to remediate settling on the drilling pad. Drilling is expected to recommence on August 11, 2011;
  • Geological and geophysical studies continue on the Lariang basin to mature an LG appraisal well and further exploration prospects;

Gabon

  • Harvest announced that it has encountered oil in the Dussafu Ruche Marin-1 (DRM-1) exploration well drilled in the Dussafu Marin PSC, in the offshore waters of Gabon, West Africa;
  • DRM-1 well reached a vertical depth of 9,953 feet within the Upper Dentale Formation. Log evaluation, pressure data and samples indicate that Harvest has discovered approximately 60 feet of pay in a 90 foot oil column within its primary objective, the Gamba Formation;
  • Subsequently the DRM-1 well has been deepened to reach a true vertical depth subsea (TVDSS) of 11,355 feet to test the prospectivity of the Middle and Lower Dentale Formations. Log evaluation, pressure data and a fluid sample indicate that Harvest has discovered a second oil accumulation with approximately 35 feet of oil pay within the secondary objective of the Middle Dentale Formation;
  • The Gamba discovery has been appraised by drilling two sidetracks to test the lateral extent and structural elevation of the Gamba reservoir under a salt ridge;
  • The first sidetrack (DRM-1ST1) 0.75 miles to the southwest was drilled to a total depth (TD) in the Upper Dentale of 11,562 feet (9,428 feet TVDSS) and found 19 feet of oil pay in the Gamba reservoir;
  • The second sidetrack (DRM-1 ST2) 0.5 miles to the northwest of the original DRM-1 was drilled to a TD in the Upper Dentale of 10,615 feet (9,429 feet TVDSS) and found 40 feet of oil pay in the Gamba reservoir;
  • The well will be suspended pending further exploration and development activities;

Oman

  • Exploration drilling is scheduled to commence late in the fourth quarter of 2011 with two wells planned on two large structures with combined mean prospective resources of 2.45 trillion cubic feet (TCF) of gas with 100 million barrels (MMBBLS) condensate. In the upside case this could rise to 4.4 TCF of gas with 185 MMBBLS of condensate;
  • Tendering process initiated to contract a drilling rig and oil field services and materials;
  • Thirteen prospects and leads have been evaluated for the Barik Miqrat and Amin reservoirs with total mean prospective resources of 8.9 TCF of gas with 350 MMBBLS of condensate and upside (P10) of 17.7 TCF of gas with 730 MMBBLS of condensate;

Corporate

  • Paid off $60.0 million bridge loan on May 17, 2011. Reduced outstanding debt to $32.0 million.

Harvest President and Chief Executive Officer, James A. Edmiston, said: “In the second quarter, the company saw significant progress across all its assets. Petrodelta set production records with production up 40 percent year on year and 7 percent above the previous quarter. Further, cash from operations at Petrodelta was up 18 percent over the prior quarter in spite of the effects of the new Windfall Profits Tax. With the arrival of the third drilling rig in late August, we expect this impressive production growth to continue.”

“In Gabon, we announced the Gamba oil discovery in our Ruche Marin 1 well and subsequently drilled two sidetracks to delineate the structure, both of which found oil as well. The significance of this discovery and the appraisal sidetracks is that it sets the company on a course toward a future development of the Ruche discovery, the two pre-existing discoveries, Moubenga and Walt Whitman, and further nearby structures which have been substantially de-risked as a result of the information gained in drilling the Ruche well.”

“In Indonesia, we are progressing, after remedial work to the drilling pad, toward the primary targets in the KD-1 well on the Budong-Budong block. And finally, in Oman, we have begun procurement activities for the end of year drilling of two wells to test two large gas-condensate structures on our Qarn Alam block.”

Venezuela

During the three months ended June 30, 2011, Petrodelta produced approximately 2.8 MMBBLS of oil and sold 0.4 billion cubic feet (BCF) of natural gas; the average daily oil production was 30,680 barrels of oil per day (BOPD), an increase of 42 percent over the same period in 2010 and an increase of 7 percent over the previous quarter. Cash from Operations for the quarter was $58.0 million, or $30.48 per barrel of oil equivalent, with average prices for the quarter of $101.72 per barrel.

During the second quarter of 2011, Petrodelta drilled and completed five wells, four of which were development wells drilled in the Uracoa, El Salto and Temblador Fields and one water injection well drilled in the Uracoa Field. Currently, Petrodelta is operating two drilling rigs and one workover rig. Petrodelta expects to take possession of a third drilling rig in late August 2011.

Petrodelta completed facilities at PDVSA’s EPM transfer point for the El Salto field. Completion of the facilities has enabled Petrodelta to increase production from the El Salto field and deliver oil production via pipeline. Petrodelta is continuing additional infrastructure enhancement projects in El Salto and Temblador.

On April 18, 2011, the Venezuelan government published in the Official Gazette, the Law Creating a Special Contribution on Extraordinary Prices and Exorbitant Prices in the International Hydrocarbons Market (amended Windfall Profits Tax). The amended Windfall Profits Tax establishes a special contribution for extraordinary prices to the Venezuelan government of 20 percent to be applied to the difference between the price fixed by the Venezuela budget for the relevant fiscal year (set at $40 per barrel for 2011) and $70 per barrel. The amended Windfall Profits Tax also establishes a special contribution for exorbitant prices to the Venezuelan government of (1) 80 percent when the average price of the Venezuelan Export Basket (VEB) exceeds $70 per barrel but is less than $90 per barrel; (2) 90 percent when the average price of the VEB exceeds $90 per barrel but is less that $100 per barrel; and (3) 95 percent when the average price of the VEB exceeds $100 per barrel. The amended Windfall Profits Tax caps the royalty paid on production at $70 per barrel. It is not clear from the drafting of the amended Windfall Profits Tax how the $70 cap on royalty barrels will be applied to royalties paid in-kind. Petrodelta pays royalties in-kind and has not applied the $70 cap to its royalty barrels as doing so may overstate earnings. Until further guidance is issued, Petrodelta will continue applying the current sales price to its royalty barrels. Also, the amended Windfall Profits Tax considers that an exemption of this tax could be granted by MENPET for the incremental production of projects and grass root developments until the specific investments are recovered. This exemption has to be considered and approved in a case by case basis by MENPET. We believe several of the fields operated by Petrodelta may qualify for the exemption from the amended Windfall Profits Tax. We are waiting for clarification from MENPET on the definitions of incremental production and grass roots developments, as well as guidance on the process for applying for the exemption. There is still a lack of clarity on several issues.

UNITED STATES – Antelope Project – Utah

On May 17, 2011, the Company completed the sale of its oil and gas assets in Utah’s Uinta Basin to an affiliate of Newfield Exploration Company (Newfield). We received cash proceeds of approximately $217.8 million which reflects increases to the purchase price for customary adjustments and deductions for transaction related costs. The sale has an effective date of March 1, 2011. The net proceeds from the sale are estimated to be $205.0 million after deductions for transaction related costs and estimated taxes.

Bank of America Merrill Lynch served as the Company’s financial advisor in connection with the transaction. This transaction is part of the Company’s ongoing process of exploring strategic alternatives announced in September of 2010.

EXPLORATION DRILLING ACTIVITIES

Indonesia

Budong-Budong PSC – Indonesia

The Lariang-1 (LG-1) well spud on January 6, 2011, and was the first of two planned exploration wells located in the Budong-Budong Block, onshore West Sulawesi. The well was drilled to a depth of 5,311 feet and encountered multiple oil and gas shows within the secondary Miocene objective. Wireline logs and samples of reservoir fluids confirmed the presence of hydrocarbons, trap and seal thus greatly de-risking the exploration potential of the license. The high formation pressures and control difficulties required the use of more casing strings at shallower depths than were originally planned. At a depth of 5,300 feet, losses of heavy drilling mud into the formation were encountered which, when coupled with the very high formation pressures, led to the decision to discontinue operations and plug and abandon the well for safety reasons on April 8, 2011. The primary Eocene targets had not yet been reached, as the well was planned for a total measured depth of approximately 7,200 feet.

The KD-1 well spud on June 20, 2011 and is the second of two planned exploration wells located in the Budong-Budong Block, onshore West Sulawesi. The KD-1 well will be drilled to test a thrusted surface anticline with stacked Miocene and Eocene targets to a planned total measured depth of approximately 10,800 feet.

After setting 13 3/8″ casing at 3,227 feet on July 21, 2011, the rig substructure and derrick were temporarily moved to remediate settling on the drilling pad. Drilling is expected to recommence on August 11, 2011.

Harvest owns a 64.4 percent non-operated working interest in the Budong-Budong Block PSC.

Gabon West Africa

Dussafu Project – Gabon (Dussafu PSC)

On June 13, 2011, the Company announced that it has encountered oil in the wildcat well DRM-1 drilled in the Dussafu Marin PSC, in the offshore waters of Gabon, West Africa. The well spud on April 28, 2011 and was drilled to test the potential of the pre-salt Gamba and Dentale Formations.

Drilled with the Transocean Sedneth 701 semi-submersible drilling unit in 380 feet of water, the DRM-1 well reached a vertical depth of 9,953 feet within the Upper Dentale Formation. Log evaluation, pressure data and samples indicate that Harvest has discovered approximately 60 feet of pay in a 90 foot oil column within its primary objective, the Gamba Formation.

Subsequently the DRM-1 well was deepened to reach a TVDSS of 11,355 feet to test the prospectivity of the Middle and Lower Dentale Formations. Log evaluation, pressure data and a fluid sample indicate that Harvest discovered a second oil accumulation with approximately 35 feet of oil pay within the secondary objective of the Middle Dentale Formation.

The Gamba discovery has been appraised by drilling two appraisal sidetracks to test the lateral extent and structural elevation of the Gamba reservoir underneath the thick salt ridge. The first sidetrack (DRM-1ST1) 0.75 miles to the southwest was drilled to a TD in the Upper Dentale of 11,562 feet, (9,428 feet TVDSS) and found 19 feet of oil pay in the Gamba reservoir.

The second sidetrack (DRM-1ST2) 0.5 miles to the northwest of the original DRM-1 wellbore was drilled to a TD in the Upper Dentale of 11,562 feet, (9,428 feet TVDSS) and found 40 feet of oil pay in the Gamba reservoir. Following completion of the drilling operations in the second sidetrack, the well will be suspended for possible future use and the rig demobilized.

Initial oil in place volume for the Gamba reservoir is estimated to be in the order of 30 – 40 MMBBLS.

The well will be suspended pending further exploration and development activities. The Ruche well information will be used to refine the 3-D seismic depth model and improve our understanding for predicting Gamba structure under the salt and defining potential resources in the nearby satellite structures for future drilling targets. Reservoir and concept engineering studies will now start with the aim of evaluating the commerciality of the discovered oil at Ruche, as well as the two previous oil discoveries in the Walt Whitman and Moubenga wells.

Harvest operates the Dussafu PSC, holding a 66.667 percent interest.

Oman

Block 64 EPSA

A comprehensive work program aimed at evaluating the prospectivity and maturing drillable prospects has been completed and included 1,185 square kilometers of PSDM 3D seismic reprocessing and technical studies. The resulting PreSDM seismic data has improved the understanding of highly prospective salt-supported structures. The culmination of this work has been the recognition of considerable prospectivity, and high-grading of prospects with stacked Paleozoic reservoirs in large tilted fault blocks. Thirteen prospects and leads have been identified in the license with combined mean prospective resources of 8.9 TCF of gas and 350 MMBBLS of condensate.

The first two prospects to be drilled are Mafraq South, with mean prospective resources of 255 million barrels of oil equivalent (MMBOE), and the Al Ghubar North with mean prospective resources of 254 MMBOE.

Mafraq South (MFS-A): The Mafraq structure is a large salt-supported high with stacked reservoir targets in the Barik, Miqrat and Amin reservoirs in both the footwall and hanging wall fault blocks comprising four segments (north, west, south and east). Mean prospective resources of the entire Greater Mafraq fault blocks is approximately 2.5 TCF of gas and 93 MMBBLS of condensate with an upside of 4.3 TCF of gas and 169 MMBBLS of condensate. Mean prospective resources in the South segment total 1.25 TCF of gas with 46 MMBBLS of condensate. The MFS-A well will be drilled to 3,300 meters TVDSS to test coincident fault bounded dip closure at all three reservoir levels. The geological chance of success for a discovery in the Barik is estimated to be 28 percent. The dry hole cost for the well is estimated to be $8.45 million.

Al Ghubar North (AGN-A): This structure is a northeast-southwest trending fault block with stacked reservoir targets in the Barik, Miqrat and Amin Formations. Mean prospective resources of 960 BCF of gas and 54 MMBBLS of condensate in the Barik and 241 BCF of gas in the Miqrat have been calculated for the Al Ghubar North segment. In the (P10) upside case, the prospect could contain prospective resources of 2.23 TCF of gas and 102 MMBBLS of condensate. The well will be drilled to 3,140 meters TVDSS to test coincident fault bounded dip closure at the three reservoir levels. The geological chance of success for a discovery in the Barik is estimated to be 23 percent. The dry hole cost for the well is estimated to be $8.11 million.

Well planning and procurement of long lead items began in April 2011 in anticipation of spudding the first of the two exploratory wells in late 2011. The tendering process has been initiated to contract a drilling rig and other drilling services and materials.

Stellar Energy Advisors Limited have been retained to market and seek a partner to fund the drilling of these wells in exchange for equity in the license, via a farmout.

Harvest operates the Block 64 EPSA, holding an 80 percent interest.

Non-GAAP Financial Measures

In this press release, Petrodelta’s EBITDA disclosure is not presented in accordance with accounting principals 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. 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 meet our future capital expenditures and working capital requirements. We also believe that financial analysts commonly use EBITDA to analyze Petrodelta’s performance. 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, 2011.

A reconciliation of 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 Tuesday, August 9, 2011, during which management will discuss Harvest’s 2011 second quarter results. The conference leader will be James A. Edmiston, President and Chief Executive Officer. To access the conference call, dial 800-723-6575 or 785-830-1997, five to ten minutes prior to the start time. At that time you will be asked to provide the conference number, which is 9236641. A recording of the conference call will also be available for replay at 719-457-0820, passcode 9236641, through August 13, 2011.

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 website for approximately 90 days.

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 the United States, 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 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 2010 Annual Report on Form 10-K and other public filings.

        HARVEST NATURAL RESOURCES, INC.
        CONSOLIDATED BALANCE SHEETS
        (in thousands, unaudited)
                                                    December
                                                              June 30, 31,
                                         --------  ---------
                                              2011       2010
                                              ----       ----

     ASSETS:
     -------

     CURRENT ASSETS:
       Cash and cash equivalents          $136,032    $58,703
       Restricted cash                     7,323          -
       Accounts and notes receivable,
        net
         Oil and gas revenue receivable        -      1,907
         Dividend receivable -equity
          affiliate                       12,200          -
         Joint interest and other          7,203      2,325
         Notes receivable                  3,335      3,420
       Advances to equity affiliate        2,002      1,706
       Assets held for sale                    -     88,774
       Prepaid expenses and other          1,732      4,793
                                           -----      -----
         Total current assets            169,827    161,628

     OTHER ASSETS                          2,499      2,477

     INVESTMENT IN EQUITY AFFILIATES     310,351    287,933

     PROPERTY AND EQUIPMENT, net          61,094     36,206
                                          ------     ------

                TOTAL ASSETS            $543,771   $488,244
                                        ========   ========

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

     CURRENT LIABILITIES:
       Accounts payable, trade and
        other                            $11,373     $3,205
       Accounts payable - carry
        obligation                         3,617      8,395
       Accrued expenses                   14,622     15,087
       Liabilities held for sale               -        663
       Accrued Interest                      880        896
       Income taxes payable                5,585         72
                                           -----        ---
         Total current liabilities        36,077     28,318

     OTHER LONG-TERM LIABILITIES           1,133      1,834

     LONG-TERM DEBT                       32,000     81,237

     COMMITMENTS AND CONTINGENCIES             -          -

     EQUITY:
     STOCKHOLDERS' EQUITY:
       Common stock and paid-in
        capital                          231,120    230,763
       Retained earnings                 232,404    141,584
       Treasury stock                    (65,925)   (65,543)
                                         -------    -------
         Total Harvest stockholders'
          equity                         397,599    306,804
                                         -------    -------
     Noncontrolling Interest              76,962     70,051
                                          ------     ------
       Total Equity                      474,561    376,855
                                         -------    -------
     TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY              $543,771   $488,244
     ---------------------              ========   ========

        HARVEST NATURAL RESOURCES, INC.
        CONSOLIDATED STATEMENTS OF OPERATIONS
        (in thousands except per share amounts, unaudited)
                                 Three months Ended
                                      June 30,
                                 ------------------
                                    2011      2010
                                    ----      ----

     EXPENSES:
       Depreciation and
        amortization                $119      $142
       Exploration expense         4,650     1,491
       General and
        administrative             6,742     5,829
       Taxes other than on
        income                       307       198
                                  11,818     7,660
                                  ------     -----
     LOSS FROM OPERATIONS        (11,818)   (7,660)
                                 -------    ------

     OTHER NON-OPERATING
      INCOME (EXPENSE)
       Investment earnings
        and other                    240       140
       Interest expense           (1,704)     (688)
       Loss on extinguishment
        of debt                   (9,682)        -
       Other non-operating
        expenses                    (244)        -
       Loss on exchange rates        (32)      (24)
                                 (11,422)     (572)
                                 -------      ----
     LOSS FROM CONSOLIDATED
      COMPANIES CONTINUING
      OPERATIONS
             BEFORE INCOME TAXES (23,240)   (8,232)
      Income tax expense
       (benefit)                     260       152
      ------------------             ---       ---
     LOSS FROM CONSOLIDATED
      COMPANIES CONTINUING
      OPERATIONS                 (23,500)   (8,384)
     Net income from
      unconsolidated equity
      affiliates                  17,899     8,915
     NET INCOME (LOSS) FROM
      CONTINUING OPERATIONS       (5,601)      531
     DISCONTINUE OPERATIONS
       Income from
        discontinued
        operations                   480       803
       Gain on sale of assets    103,933         -
       Income tax expense on
        gain                      (5,200)        -
           Income from
            discontinued
            operations            99,213       803
                                  ------       ---
     NET INCOME                   93,612     1,334
     Less:  Net Income
      Attributable to
      Noncontrolling
      Interest                     3,562     1,630
     -----------------
     NET INCOME (LOSS)
      ATTRIBUTABLE TO
      HARVEST                    $90,050     $(296)
     -----------------           =======     =====

                                          Three months Ended
                                          ------------------
                                 June 30, 2011         June 30, 2010
                                 -------------         -------------
     NET INCOME (LOSS)
      ATTRIBUTABLE TO
      HARVEST PER COMMON
      SHARE:                     Basic    Dilutive     Basic      Dilutive
        Income from continuing
         operations               (9,163)   (9,163)      (1,099)    (1,099)
        Discontinued
         operations               99,213    99,213          803        803
                                  ------    ------          ---        ---
             Net income
              attributable to
              Harvest             90,050    90,050         (296)      (296)
        Weighted average
         common shares
         outstanding              34,039    34,039       33,399     33,399
        Effect of dilutive
         shares                              6,162            -          -
                                             -----          ---        ---
             Weighted average
              common shares
              including dilutive
              effect              34,039    40,201       33,399     33,399

     Per Share:
        Loss from continuing
         operations               $(0.27)   $(0.23)      $(0.03)    $(0.03)
        Discontinued
         operations                $2.92     $2.47        $0.02      $0.02
                                   -----     -----        -----      -----
             Net income (loss)
              attributable to
              Harvest              $2.65     $2.24       $(0.01)    $(0.01)
             -----------------     =====     =====       ======     ======

        HARVEST NATURAL RESOURCES, INC.
        CONSOLIDATED STATEMENTS OF OPERATIONS
        (in thousands except per share amounts, unaudited)
                                     Six months Ended
                                         June 30,
                                     ----------------
                                     2011        2010
                                     ----        ----

     EXPENSES:
       Depreciation and
        amortization                 $243        $243
       Exploration expense          5,839       2,737
       General and
        administrative             13,068      10,846
       Taxes other than on
        income                        656         498
                                   19,806      14,324
                                   ------      ------
     LOSS FROM
      OPERATIONS                 (19,806)     (14,324)
                                  -------     -------

     OTHER NON-
      OPERATING INCOME
      (EXPENSE)
       Investment earnings
        and other                     385         271
       Interest expense            (3,916)     (1,104)
       Loss on
        extinguishment of
        debt                       (9,682)          -
       Other non-
        operating expenses           (675)          -
       Loss on exchange
        rates                         (43)     (1,551)
                                 (13,931)      (2,384)
                                  -------      ------
     LOSS FROM
      CONSOLIDATED
      COMPANIES
      CONTINUING
      OPERATIONS
             BEFORE INCOME TAXES (33,737)     (16,708)
      Income tax expense
       (benefit)                      482         133
      ------------------              ---         ---
     LOSS FROM
      CONSOLIDATED
      COMPANIES
      CONTINUING
      OPERATIONS                 (34,219)     (16,841)
     Net income from
      unconsolidated
      equity affiliates            36,003      47,282
     NET INCOME FROM
      CONTINUING
      OPERATIONS                    1,784      30,441
     DISCONTINUED
      OPERATIONS
       Income (loss) from
        discontinued
        operations                 (2,786)      2,818
       Gain on sale of
        assets                    103,933           -
       Income tax expense
        on gain                    (5,200)          -
                                   ------         ---
           Income from
            discontinued
            operations             95,947       2,818
                                                -----
     NET INCOME                    97,731      33,259
     Less:  Net Income
      Attributable to
      Noncontrolling
      Interest                      6,911       8,965
     -----------------              -----
     NET INCOME
      ATTRIBUTABLE TO
      HARVEST                     $90,820     $24,294
     ----------------             =======     =======

                                           Six Months Ended
                                           ----------------
                                                           June 30,
                                    June 30, 2011                        2010
                                    -------------          ---------
     NET INCOME
      ATTRIBUTABLE TO
      HARVEST PER COMMON
      SHARE:                       Basic    Dilutive   Basic    Dilutive
        Income (loss) from
         continuing
         operations                (5,127)     (5,127) 21,476     21,476
        Discontinued
         operations                95,947      95,947   2,818      2,818
                                   ------      ------   -----      -----
             Net income
              attributable to
              Harvest              90,820      90,820  24,294     24,294
        Weighted average
         common shares
         outstanding               33,992      33,992  33,337     33,337
        Effect of dilutive
         shares                         -       5,841       -      4,038
                                      ---       -----     ---      -----
             Weighted average
              common shares
              including dilutive
              effect               33,992      39,833  33,337     37,375

     Per Share:
        Income (loss) from
         continuing
         operations                $(0.15)     $(0.13)  $0.64      $0.57
        Discontinued
         operations                 $2.82       $2.41   $0.09      $0.08
                                    -----       -----   -----      -----
             Net income
              attributable to
              Harvest               $2.67       $2.28   $0.73      $0.65
             ----------------       =====       =====   =====      =====

      HARVEST NATURAL RESOURCES, INC.
      CONSOLIDATED STATEMENTS OF CASH FLOWS
      (in thousands, unaudited)
                                                   Six months Ended
                                                       June 30,
                                                    ----------------
                                                       2011      2010
                                                        ---       ---
      Cash Flows From Operating
       Activities:
        Net income                                  $97,731   $33,259
        Adjustments to reconcile net income
         (loss) to net cash
          used in operating activities:
          Depletion, depreciation and
           amortization                               1,053     1,825
          Impairment of long-lived assets             4,707         -
          Amortization of debt financing
           costs                                        530       329
          Amortization of discount on debt              816         -
          Gain on sale of property and
           equipment                               (103,933)
          Loss on early extinguishment of
           debt                                       7,533
          Net income from unconsolidated
           equity affiliate                         (36,003) (47,282)
          Share-based compensation-related
           charges                                    2,673     1,844
        Changes in operating assets and
         liabilities:
          Accounts and notes receivable              (2,887)    3,115
          Advances to equity affiliate                 (296)    2,730
          Prepaid expenses and other                  3,061       263
          Accounts payable                            8,168     2,474
          Accrued expenses                           (2,469)       (7)
          Accrued Interest                             (418)   (3,723)
          Other liabilities                            (701)      370
          Income taxes payable                        5,513      (353)
          Net Cash Used In Operating
           Activities                               (14,922)   (5,156)
          --------------------------                -------    ------
      Cash Flows From Investing
       Activities:
        Proceeds from sale of property and
         equipment                                  217,833         -
        Additions of property and equipment         (28,067) (23,913)
        Additions to assets held for sale           (31,742)        -
        Proceeds from sale of equity
         affiliate                                    1,385         -
        Increase in restricted cash                  (7,323)   (1,000)
        Investment costs                                (62)      (36)
        ----------------                                ---       ---
          Net Cash Provided by (Used In)
           Investing Activities                     152,024  (24,949)
          ------------------------------            -------   -------
      Cash Flows From Financing
       Activities:
        Net proceeds from issuances of
         common stock                                   416       115
        Proceeds from issuance of long-
         term debt                                        -    32,000
        Payments of long-term debt                  (60,000)        -
        Financing costs                                (189)   (2,818)
        ---------------                                ----    ------
          Net Cash Provided by (Used In)
           Financing Activities                     (59,773)   29,297
          ------------------------------            -------    ------
          Net Increase (Decrease) in Cash            77,329      (808)
      Cash and Cash Equivalents at
       Beginning of Period                           58,703    32,317
      ----------------------------                   ------    ------
      Cash and Cash Equivalents at End of
       Period                                      $136,032   $31,509
      -----------------------------------          --------   -------

      PETRODELTA, S. A.
      STATEMENTS OF OPERATIONS
      (in thousands except per BOE and per share amounts, unaudited)
                                                   Three months
                                                      Ended
                                                     ------------
                                                  June 30, 2011
                                                  -------------

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

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

                                                     $   $/BOE - net
                                                   ---   -----------
      REVENUES:
        Oil sales                             $282,975
        Gas sales                                  679
        Royalties                              (96,214)
                                               187,440         98.45
                                               -------         -----
      EXPENSES:
        Operating expenses                      18,684          9.81
        Workovers                                7,021          3.69
        Depletion, depreciation,
         amortization                           13,231          6.95
        General and administrative               3,782          1.99
        Windfall profits tax                    65,345         34.32
                                               108,063         56.76
                                               -------         -----
      INCOME FROM OPERATIONS                    79,377         41.69
                                                ------         -----

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

      Income before income tax                  76,416         40.13

        Current income tax expense
         (benefit)                              31,618         16.60
        Deferred income tax expense
         (benefit)                              (2,513)        (1.32)
                                                               -----
      NET INCOME                                47,311         24.85
      Adjustment to reconcile to
       reported Net Income from                      -
          Unconsolidated Equity Affiliate:
                Deferred income tax expense
                 (benefit)                       1,176
                                                 -----
                Net income equity affiliate     46,135
      Equity interest in unconsolidated
       equity affiliate                             40%
      ---------------------------------            ---
      Income before amortization of
       excess basis in equity affiliate         18,454
          Amortization of excess basis in
           equity affiliate                       (452)
          Conform depletion expense to GAAP       (216)
      Net income from unconsolidated
       equity affiliate                        $17,786
      ------------------------------           -------

      Non-GAAP Financial Measures:

      Reconcile NET INCOME as reported
       under IFRS to adjusted EBITDA:
         NET INCOME                            $47,311         24.85
         Add back non-cash items:
            Depletion, depreciation and
             amortization                       13,231          6.95
            Pension liability, net of tax            -             -
            Deferred income tax expense
             (benefit)                          (2,513)        (1.32)
      Special Charges, net of tax                    -             -

       CASH FROM OPERATIONS                     58,029         30.48

         Investment earnings and other            (185)        (0.09)
         Interest expense                        3,146          1.65
         Current income tax expense             31,618         16.60
         Adjusted EBITDA (IFRS)
                                               $92,608         48.64
                                               =======         =====


                                                   Three months
                                                       Ended
                                                    ------------
                                                  June 30, 2010
                                                  -------------

      Barrels of oil sold                        1,955
      MCF of gas sold                              663
            Total BOE                            2,066
            Total BOE -Net of 33% Royalty        1,377

      Average price/barrel                      $69.55
      Average price/mcf                          $1.54

                                                     $   $/BOE - net
                                                   ---   -----------
      REVENUES:
        Oil sales                              135,964
        Gas sales                                1,022
        Royalties                              (46,391)
                                                90,595         65.79
                                                ------         -----
      EXPENSES:
        Operating expenses                      10,632          7.72
        Workovers                                    -             -
        Depletion, depreciation,
         amortization                            9,770          7.09
        General and administrative               2,641          1.92
        Windfall profits tax                     1,664          1.21
                                                24,707         17.94
                                                ------         -----
      INCOME FROM OPERATIONS                    65,888         47.85
                                                ------         -----

      Gain on exchange rate                      1,938          1.40
      Interest earnings and other                  (13)            -
      Interest expense                          (1,328)        (0.97)
                                                ------         -----

      Income before income tax                  66,485         48.28

        Current income tax expense
         (benefit)                              52,656         38.24
        Deferred income tax expense
         (benefit)                               5,118          3.71
                                                                ----
      NET INCOME                                 8,711          6.33
      Adjustment to reconcile to
       reported Net Income from
          Unconsolidated Equity Affiliate:
                Deferred income tax expense
                 (benefit)                     (14,499)
                                               -------
                Net income equity affiliate     23,210
      Equity interest in unconsolidated
       equity affiliate                             40%
      ---------------------------------            ---
      Income before amortization of
       excess basis in equity affiliate          9,284
          Amortization of excess basis in
           equity affiliate                       (322)
          Conform depletion expense to GAAP        (47)
      Net income from unconsolidated
       equity affiliate                         $8,915
      ------------------------------            ------

      Non-GAAP Financial Measures:

      Reconcile NET INCOME as reported
       under IFRS to adjusted EBITDA:
         NET INCOME                             $8,711          6.33
         Add back non-cash items:
            Depletion, depreciation and
             amortization                        9,770          7.09
            Pension liability, net of tax            -             -
            Deferred income tax expense
             (benefit)                          41,118         29.86
      Special Charges, net of tax                 (969)        (0.70)

       CASH FROM OPERATIONS                     58,630         42.58

         Investment earnings and other              13             -
         Interest expense                        1,328          0.97
         Current income tax expense             16,656         12.10
         Adjusted EBITDA (IFRS)
                                               $76,627         55.65
                                               =======         =====

      PETRODELTA, S. A.
      STATEMENTS OF OPERATIONS
      (in thousands except per BOE and per share amounts, unaudited)
                                                           Six months
                                                             Ended
                                                             ----------
                                                         June 30, 2011
                                                         -------------

     Barrels of oil sold                                5,365
     MCF of gas sold                                      910
           Total BOE                                    5,517
           Total BOE - Net of 33% Royalty               3,678

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

                                                            $   $/BOE - net
                                                          ---   -----------
     REVENUES:
       Oil sales                                     $509,588
       Gas sales                                        1,405
       Royalty                                       (173,529)
                                                      337,464         91.75
                                                      -------         -----
     EXPENSES:
       Operating expenses                              32,966          8.96
       Workovers                                       13,496          3.67
       Depletion, depreciation and amortization        25,718          6.99
       General and administrative                       2,852          0.78
       Windfall profits tax                            92,471         25.14
                                                      167,503         45.54
                                                      -------         -----
     INCOME FROM OPERATIONS                           169,961         46.21
                                                      -------         -----

     Gain on exchange rate                                  -             -
     Investment earnings and other                        352          0.09
     Interest expense                                  (4,418)        (1.20)
                                                       ------         -----

     Income before income tax                         165,895         45.10

       Current income tax expense                      84,961         23.10
       Deferred income tax expense (benefit)          (28,275)        (7.69)
       -------------------------------------                          -----
     NET INCOME                                       109,209         29.69
     Adjustment to reconcile to reported Net Income
      from
         Unconsolidated Equity Affiliate:
               Deferred income tax expense (benefit)   19,739
                                                       ------
               Net income equity affiliate             89,470
     Equity interest in unconsolidated equity
      affiliate                                            40%
     ----------------------------------------             ---
     Income before amortization of excess basis in
      equity affiliate                                 35,788
         Amortization of excess basis in equity
          affiliate                                      (873)
         Conform depletion expense to GAAP               (297)
         ---------------------------------
     Net income from unconsolidated equity
      affiliate                                       $34,618
     -------------------------------------            -------

     Non-GAAP Financial Measures:

     Reconcile NET INCOME as reported under IFRS to
      adjusted EBITDA:
        NET INCOME                                   $109,209         29.69
        Add back non-cash items:
           Depletion, depreciation and amortization    25,718          6.99
           Deferred income tax expense (benefit)      (28,275)        (7.69)
     Special Charges, net of tax                            -             -

      CASH FROM OPERATIONS                            106,652         28.99

        Investment earnings and other                    (352)        (0.09)
        Interest expense                                4,418          1.20
        Current income tax expense                     84,961         23.10

        Adjusted EBITDA (IFRS)                       $195,679         53.20
                                                     ========         =====


                                                           Six months
                                                             Ended
                                                             ----------
                                                         June 30, 2010
                                                         -------------

     Barrels of oil sold                                3,923
     MCF of gas sold                                    1,323
           Total BOE                                    4,144
           Total BOE - Net of 33% Royalty               2,762

     Average price/barrel                              $70.73
     Average price/mcf                                  $1.54

                                                            $   $/BOE - net
                                                          ---   -----------
     REVENUES:
       Oil sales                                     $277,466
       Gas sales                                        2,040
       Royalty                                        (94,377)
                                                      185,129         67.03
                                                      -------         -----
     EXPENSES:
       Operating expenses                              20,675          7.49
       Workovers                                            -             -
       Depletion, depreciation and amortization        18,377          6.65
       General and administrative                       6,058          2.19
       Windfall profits tax                             2,915          1.06
                                                       48,025         17.39
                                                       ------         -----
     INCOME FROM OPERATIONS                           137,104         49.64
                                                      -------         -----

     Gain on exchange rate                            120,654         43.68
     Investment earnings and other                      2,881          1.04
     Interest expense                                  (2,223)        (0.80)
                                                       ------         -----

     Income before income tax                         258,416         93.56

       Current income tax expense                     138,076         49.99
       Deferred income tax expense (benefit)           47,582         17.23
       -------------------------------------                          -----
     NET INCOME                                        72,758         26.34
     Adjustment to reconcile to reported Net Income
      from
         Unconsolidated Equity Affiliate:
               Deferred income tax expense (benefit)  (47,488)
                                                      -------
               Net income equity affiliate            120,246
     Equity interest in unconsolidated equity
      affiliate                                            40%
     ----------------------------------------             ---
     Income before amortization of excess basis in
      equity affiliate                                 48,098
         Amortization of excess basis in equity
          affiliate                                      (656)
         Conform depletion expense to GAAP               (160)
         ---------------------------------
     Net income from unconsolidated equity
      affiliate                                       $47,282
     -------------------------------------            -------

     Non-GAAP Financial Measures:

     Reconcile NET INCOME as reported under IFRS to
      adjusted EBITDA:
        NET INCOME                                    $72,758         26.34
        Add back non-cash items:
           Depletion, depreciation and amortization    18,377          6.65
           Deferred income tax expense (benefit)       83,582         30.26
     Special Charges, net of tax                      (66,243)       (23.98)

      CASH FROM OPERATIONS                            108,474         39.27

        Investment earnings and other                  (2,881)        (1.04)
        Interest expense                                2,223          0.80
        Current income tax expense                     48,634         17.61

        Adjusted EBITDA (IFRS)                       $156,450         56.64
                                                     ========         =====

SOURCE Harvest Natural Resources, Inc.


Source: newswire



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