Harvest Natural Resources Announces Second Quarter 2008 Results
HOUSTON, Aug 07, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Harvest Natural Resources, Inc. (NYSE: HNR) today announced 2008 second quarter earnings and an operations update. Highlights for the quarter include:
-- Receipt of a cash dividend from Petrodelta of $58 million net to Harvest relating to net income as reported under International Financial Accounting Standards for the period of April 2006 through December 2007;
-- Production growth resulting from Petrodelta's drilling program with June 2008 oil production averaging in excess of 15,000 barrels per day;
-- Continuing progress in our domestic and international exploration programs; and
-- Completion of the buyback of 4.6 million shares authorized under the $50 million 2007 Share Repurchase Program and Board authorization of the repurchase of an additional $20 million of common stock outstanding.
EARNINGS
Harvest reported 2008 second quarter earnings of $0.8 million, or $0.02 per diluted share, compared with a loss of $6.9 million, or $0.18 per share, for the same period last year. Harvest adopted the successful efforts method of accounting in 2007. The second quarter results include exploration charges of $2.9 million. Petrodelta reported second quarter earnings of $36.3 million, $11.6 million net to Harvest's 32 percent interest, under International Financial Accounting 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 $9.1 million. Further, Harvest received a net $58 million cash dividend from Petrodelta in the second quarter.
Harvest President and Chief Executive Officer, James A. Edmiston, said, "During the second quarter we received our first cash dividend payment from Petrodelta. Petrodelta's drilling program commenced in April of 2008 and the production results to date have been outstanding. We expect continued increases in production as the Petrodelta development program progresses and expands to the new fields. Elsewhere our exploration programs are advancing steadily and we are eagerly anticipating the spud of our first exploratory well in our US Gulf Coast program in the coming weeks. We completed our $50 million share buyback at what we continue to believe are prices which fail to recognize the value of our Venezuelan assets and the substantial potential of our exploration portfolio. Further, there is adequate cash flow in Petrodelta to fulfill our planned development program in Venezuela and
sufficient cash on hand to proceed with our exploration programs elsewhere. As a result, the Board has extended the stock repurchase program for an additional $20 million of common shares. With Petrodelta's results beginning to confirm the potential of our Venezuelan business, and the continued momentum in our exploration programs, Harvest is well positioned to execute its growth and diversification strategy."
VENEZUELA
Petrodelta delivered 1.2 million barrels of oil or 13,600 barrels of oil per day, and 3.1 billion cubic feet of natural gas to PDVSA Petroleo, S.A. for the three months ending June 30, 2008, compared to 1.3 million barrels of oil or 14,700 barrels of oil per day, and 3.4 billion cubic feet of natural gas to PDVSA Petroleo, S.A for the same period in 2007.
The average price received for oil deliveries was $83.12. The average price is determined by market prices for the quality of oil produced by Petrodelta and the impact of the Law of Special Contribution to Extraordinary Prices at the Hydrocarbons International Market ("Windfall Profits Tax") implemented by the Venezuelan government.
For the second quarter of 2008, the world market price for the quality of oil produced by Petrodelta averaged approximately $100.20 per barrel, or 81% of WTI. The Windfall Profits Tax, which is applied as a further reduction to the price per barrel received above certain thresholds, reduced the actual price for Petrodelta's crude deliveries by $17.08 per barrel to $83.12 per barrel. The application of the tax from its effective date of April 15, 2008 reduced Petrodelta's gross quarterly earnings by $11.1 million, or $3.5 million net to Harvest's 32 percent interest. The natural gas price is contractually fixed at $1.54 per thousand cubic feet.
Petrodelta Development Activities
Petrodelta commenced drilling operations in the Uracoa field on April 21st of this year with the first well coming on line May 29, 2008. As of June 30, 2008, Petrodelta has drilled and completed two successful wells, each with initial production rates of 1,600 barrels of oil per day, average drilling time of 33 days and average cost of $3.2 million. A third well has been successfully completed and began production on August 2, 2008, and is currently being tested. Going forward, Petrodelta expects to improve drilling time performance to an average of less than 25 days to drill and complete with costs below $2.5 million per well.
The drilling program, and ongoing workover and field improvement activities resulted in average production rates exceeding 15,000 barrels of oil per day in June and 16,500 barrels of oil per day currently. We are projecting Petrodelta's production to reach 23,000 to 25,000 barrels of oil per day by the end of 2008. Petrodelta's average daily production rate for 2008 is projected to be between 16,500 and 17,500 barrels of oil per day, having started the year with a production rate of 13,000 barrels of oil per day.
Petrodelta has contracted a second drilling rig which is now in Venezuela being assembled, and is expected to begin drilling early in the fourth quarter of 2008 in the Temblador field. Petrodelta is planning to add at least one more rig prior to the end of the year.
EXPLORATION PROGRAMS
Dussafu Marin, Gabon
Harvest has received final government approvals and closed the purchase in April for the 50-percent operated interest in the offshore production sharing contract (PSC). The PSC work commitment includes the acquisition and processing of 500 kilometers of 2-D seismic, completion of engineering studies and the drilling of a conditional well. Depending on permitting and vessel availability, Harvest plans to shoot the 2-D seismic during the second half of this year and the Company recently began contracting for the reprocessing of 1,076 square kilometers of existing 3-D data covering the pre-existing, undeveloped Gamba discoveries on the block. Remaining 2008 net expenditures on the Dussafu block are expected to be $2.3 million.
Budong-Budong, Indonesia
In April, the final Indonesian governmental approval was received for the farm-in of the Budong-Budong Exploration Production Sharing Contract to earn a 47 percent working interest. The work program includes the acquisition and processing of 550 kilometers of 2-D seismic and the drilling of two exploration wells. Harvest will fund 100 percent of the first $17.2 million of expenditures to earn its 47 percent interest. The 2-D seismic acquisition program commenced in February and should be complete prior to year-end. Remaining 2008 net expenditures on the Budong-Budong block are expected to be $6.4 million.
United States Operations
During the second quarter 2008, Harvest made significant progress on two projects within its Gulf Coast Area of Mutual Interest (AMI) which was announced in April of this year.
The first project is an exploration prospect in Calcasieu Parish, Louisiana. The AMI participants have secured a 6,800 acre leasehold on the prospect. The initial exploratory well on the prospect, the Harvest Hunter No. 1, has been permitted and we are expecting the rig to be mobilized before the end of August 2008. The projected dry hole cost of the well is $5.5 million. Harvest incurred costs of approximately $1.2 million during the second quarter of 2008 for the purchase of tubulars and other preparatory expenses for drilling of the well. The well will be drilled to approximately 12,000 feet and will test the overpressured Vicksburg formation.
The second project in the Gulf Coast AMI is Harvest's Bay Exploration project located near Galveston, Texas. On July 1, 2008, the AMI participants acquired 6,510 acres of offshore leases representing all or part of 12 separate tracts at the Texas General Land Office lease sale. This newly acquired acreage is generally contiguous to and complements the 5,418 acres previously held by the participants in the area. The AMI participants are now re-processing a proprietary 3-D seismic survey which covers a significant portion of the project area where Harvest and its partners have identified thirteen leads in the regionally prolific Frio and Vicksburg intervals.
Remaining 2008 net expenditures on our currently identified US exploration programs are expected to be $11 million, inclusive of the costs associated with the drilling of the Harvest Hunter No. 1 well.
Conference call
Harvest will hold an earnings conference call today at 10:00 a.m. CDT (11:00 a.m. EDT) to discuss 2008 second quarter results. To access the call, dial 785-424-1052, conference ID: Harvest, five to ten minutes prior to the start time. A recording of the conference call will also be available for replay at 402-220-2661 until August 15, 2008. The conference call will also be transmitted over the internet through the Harvest website at http://www.harvestnr.com.
About Harvest Natural Resources
Harvest Natural Resources, Inc. headquartered in Houston, Texas, is an independent energy company with principal operations in Venezuela, exploration assets in the United States, Indonesia, West Africa and China and business development offices in Singapore and the United Kingdom. For more information visit the Company's website at http://www.harvestnr.com.
This press release may contain projections and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. They include estimates and timing of expected oil and gas production, oil and gas reserve projections of future oil pricing, future expenses, planned capital expenditures, anticipated cash flow and our business strategy. All statements other than statements of historical facts may constitute forward-looking statements. Although Harvest believes that the expectations reflected in such forward- looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Actual results may differ materially from Harvest's expectations as a result of factors discussed in Harvest's 2007 Annual Report on Form 10-K and other public filings.
HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
($ thousands, unaudited)
June 30, December 31,
2008 2007
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $157,204 $120,841
Restricted cash 3,525 6,769
Accounts receivable, net 7,964 9,418
Advances to equity affiliate 2,577 16,352
Prepaid expenses and other 4,205 1,032
Total current assets 175,475 154,412
OTHER ASSETS 1,632 4,301
INVESTMENT IN EQUITY AFFILIATES 197,444 251,173
PROPERTY AND EQUIPMENT, net 18,530 3,583
TOTAL ASSETS $393,081 $413,469
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable, trade and other $740 $5,949
Accounts payable, related party 10,278 10,093
Accrued expenses 10,430 11,895
Accrued Interest 5,083 5,136
Income taxes payable 245 503
Short-term debt 4,651 9,302
Total current liabilities 31,427 42,878
MINORITY INTEREST 60,306 56,825
STOCKHOLDERS' EQUITY:
Common stock and paid-in capital 205,521 202,323
Retained earnings 148,972 147,934
Treasury stock (53,145) (36,491)
Total stockholders' equity 301,348 313,766
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $393,081 $413,469
HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts, unaudited)
Three months Ended Six months Ended
June June
2008 2007 2008 2007
EXPENSES:
Depreciation 47 17 92 298
Exploration expense 2,866 434 4,215 434
General and administrative 6,422 7,162 12,634 13,595
Taxes other than on income 195 185 458 422
9,530 7,798 17,399 14,749
LOSS FROM OPERATIONS (9,530) (7,798) (17,399) (14,749)
OTHER NON-OPERATING INCOME (EXPENSE)
Gain on financing transactions 2,091 - 3,421 -
Investment earnings and other 751 2,819 1,882 5,262
Interest expense (1,260) (2,466) (1,719) (4,947)
1,582 353 3,584 315
LOSS BEFORE INCOME TAXES AND
MINORITY INTERESTS (7,948) (7,445) (13,815) (14,434)
Income tax expense 37 52 101 166
LOSS BEFORE MINORITY INTERESTS (7,985) (7,497) (13,916) (14,600)
Minority interest in
consolidated subsidiary
companies 2,424 (736) 3,847 (1,373)
LOSS FROM CONSOLIDATED COMPANIES (10,409) (6,761) (17,763) (13,227)
Net income (loss) from
unconsolidated equity
affiliates 11,243 (137) 18,801 (176)
NET INCOME (LOSS) $834 ($6,898) $1,038 ($13,403)
NET INCOME (LOSS) PER COMMON SHARE:
Basic $0.02 ($0.18) $0.03 ($0.36)
Diluted $0.02 ($0.18) $0.03 ($0.36)
Weighted average shares outstanding:
Basic 34.7 37.6 34.9 37.5
Diluted 35.9 37.6 36.1 37.5
HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Cash Flows From Operating
Activities:
Net Income (loss) $834 ($6,898) $1,038 ($13,403)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depletion, depreciation and
amortization 47 17 92 298
Gain on financing
transactions (2,091) - (3,421)
Net (income) loss from
unconsolidated equity
affiliate (11,243) 137 (18,801) 176
Non-cash compensation related
charges 1,580 1,436 2,578 2,898
Minority interest in
consolidated subsidiary
companies 2,424 (736) 3,847 (1,373)
Dividends received from
unconsolidated equity
affiliate 72,530 - 72,530 -
Changes in operating assets and
liabilities:
Accounts and notes receivable (246) 327 (278) 329
Advances to provisional
equity affiliate 1,142 1,857 13,775 3,780
Prepaid expenses and other (3,121) (32) (3,173) 162
Accounts payable (1,274) 1,353 (3,879) (354)
Accounts payable, related
party 60 116 185 230
Accrued expenses 3,836 423 122 (4,504)
Accrued Interest (512) 602 (53) (313)
Income taxes payable 17 13 (258) 39
Net Cash Provided By (Used
In) Operating Activities 63,983 (1,385) 64,304 (12,035)
Cash Flows From Investing
Activities:
Additions of property and
equipment (7,933) (16) (11,217) (287)
Investment in provisional
equity affiliate - - - (4,591)
Decrease (Increase) in
restricted cash 3,316 453 3,244 13,595
Investment costs (790) 21 (1,153) (5)
Net Cash Provided By (Used
In) Investing Activities (5,407) 458 (9,126) 8,712
Cash Flows From Financing
Activities:
Net proceeds from issuances of
common stock 975 251 1,310 251
Purchase of treasury stock (17,199) - (17,207)
Payments on long-term debt (2,560) (2,325) (2,560) (9,302)
Dividends paid to minority
interest - - (358) -
Net Cash Provided by (Used
In) Financing Activities (18,784) (2,074) (18,815) (9,051)
Net Increase (Decrease) in
Cash 39,792 (3,001) 36,363 (12,374)
Cash and Cash Equivalents at
Beginning of Period 117,412 138,706 120,841 148,079
Cash and Cash Equivalents at End
of Period 157,204 135,705 157,204 135,705
PETRODELTA, S. A.
STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
Three Months Ended Six Months Ended
6/30/2008 6/30/2008
Barrels of oil sold 1,238 2,447
MCF of gas sold 3,049 6,221
Total BOE 1,746 3,484
Total BOE - Net of
30% Royalty 1,375 2,750
Average price/barrel $83.12 $81.09
Average price/mcf $1.54 $1.54
$ $/BOE - net $ $/BOE - net
REVENUES:
Oil sales 102,897 198,432
Gas sales 4,695 9,580
Royalty (43,130) (77,089)
64,462 130,923
EXPENSES:
Operating expenses 18,851 13.71 33,194 12.07
Depletion,
depreciation and
amortization 7,754 5.64 12,052 4.38
General and
administrative 2,056 1.50 3,734 1.36
Taxes other than on
income 3,602 2.47 7,088 2.50
32,263 23.32 56,068 20.31
INCOME FROM OPERATIONS 32,199 23.56 74,855 27.29
Investment earnings and
other 4,955 3.60 5,008 1.82
Income before income tax 37,154 27.16 79,863 29.11
Current income tax
expense 9,115 18.20 30,611 16.92
Deferred income tax
benefit (8,293) (3.08) (14,976) (3.97)
NET INCOME 36,332 12.04 64,228 16.16
Adjustment to reconcile
to reported Net Income
from Unconsolidated
Equity Affiliate:
Deferred
income tax
benefit 8,293 3.08 14,976 3.97
Net income
equity
affiliate 28,039 8.96 49,252 12.19
Equity interest in
unconsolidated equity
affiliate 40% 40%
Income before
amortization of excess
basis in equity
affiliate 11,216 19,701
Amortization of excess
basis in equity
affiliate (277) (552)
Conform depletion
expense to GAAP 408 (258)
Net income from
unconsolidated equity
affiliate $11,347 $18,891
SOURCE Harvest Natural Resources, Inc.
http://www.harvestnr.com
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