Harvest
Natural Resources Announces 2011 Third Quarter Results
Harvest
Natural Resources, Inc. (NYSE: HNR) today announced 2011 third quarter
earnings and provided an operational update.
Harvest
reported third quarter earnings of approximately $5.1 million, or
$0.14
per diluted share, compared to a loss of $ 5.0 million,
or $0.15
per diluted share, for the same period last year. � The third quarter
results include exploration charges of $1.6 million, or
$0.04
per diluted share, and a loss from discontinued operations of $3.5
million, or $0.09 per
diluted share, relating to an additional tax charge on the gain from the second
quarter sale of the Utah assets.
� Adjusted for exploration charges and the loss related to discontinued
operations, third quarter 2011 earnings would have been $10.2 million,
or $0.27
per diluted share. �
Petrodelta
reported earnings during the third quarter of $57.0 million, $18.2
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 $15.7 million. �
Highlights
for the third quarter of 2011 include:
Venezuela
- Oil
production from Petrodelta averaged 32,824 barrels of oil per day (BOPD),
an increase of 36 percent over the same period in 2010. � The current
production rate from Petrodelta is approximately 32,500 BOPD;
- During
the three months ended September 30, 2011, Petrodelta
drilled and completed two development wells and one water injection well;
�
- Currently,
Petrodelta is operating three drilling rigs in the El Salto, Temblador and
Uracoa fields and two workover rigs;
Indonesia
- Drilled
second exploration well, Karama-1 (KD-1), to approximately 11,800 feet and
logged.
- Logging
across Lower Miocene oil shows indicate poor reservoir quality sands. �
- After
setting a liner at the present depth, the well will be deepened and logged
as a Harvest exclusive operation to a total depth of 14,400 feet;
Gabon
- Completed
activities on the DRM-1 well resulting in Gamba and Dentale pre-salt oil
discovery;
- Initiated
reservoir characterization and conceptual engineering studies to determine
the forward plan for the Dussafu block;
- Commenced
3-D seismic acquisition in a joint program with a third party on
October� 23, 2011. � Up to 540 square kilometers of seismic could
be acquired if environmental conditions permit;
Oman
- Spud
the Mafraq South-A (MFS-A) exploration well on October� 29, 2011, the
first of a two-well exploratory drilling program utilizing the MB
Petroleum Services LLC Rig #113 drilling unit;
- MFS-A
well will test the Mafraq South structure, which is a large salt-supported
high with stacked reservoir targets in the Barik, Miqrat and Amin
reservoirs;
- Mean
prospective resources for the targeted south segment total 1.25 trillion
cubic feet (TCF) of gas with 46 million barrels (MMBBLS) of condensate;
- The
second exploration well, the Al Ghubar North (AGN-A), is expected to spud
during the first quarter of 2012.
Harvest
President and Chief Executive Officer, James A. Edmiston,
said: � "In the third quarter, Harvest continued to make progress
across all fronts. � Petrodelta again recorded a sequential increase in
production in spite of the late commencement of the third drilling rig which
impacted volumes in the quarter. � Further near-term production growth
will depend not only on the rig count, but on further progress being made on
the infrastructure side."
"We
continue our geoscience and engineering studies related to our Ruche discovery
in Gabon.
� Further, we are participating in a joint 3-D seismic shoot with an
adjoining operator which will provide valuable data inboard of the existing
discoveries on the block. � Finally, we expect to finalize the 2012
capital program before year end and look to commence further drilling activity
in the first half of the year depending on rig availability."
"In
Indonesia, the KD-1 well in the Karama sub-basin has thus far failed to find
commercial hydrocarbons in the secondary Miocene section. � However, it is
important to note that the well did find oil in poor reservoir quality sands in
the early Miocene. � Harvest is commencing deepening of the well to
approximately 14,400 feet at its sole risk to further explore the KD structure
in hopes of encountering Eocene age sediments."
"Finally,
our MFS-A well in Oman spud ahead
of schedule and continues to progress ahead of the drilling curve. � We
expect to announce results of this well, as well as the results of the KD-1
deepening, before year-end."
Venezuela
During
the three months ended September 30, 2011, Petrodelta produced
approximately 3.0 MMBBLS of oil and sold 0.6 billion cubic feet (BCF) of
natural gas; the average daily oil production was 32,824 BOPD, an increase of
36 percent over the same period in 2010 and an increase of 7 percent over the
previous quarter. � Cash from Operations for the quarter was $56 million,
or $26.80
per barrel of oil equivalent, an increase of 37 percent in Cash from Operations
over the same period one year ago. � Average price for the quarter was $100.62
per barrel, an increase of 35 percent over the same period one year ago.
During
the third quarter of 2011, Petrodelta operated two drilling rigs and drilled
and completed three wells, two of which were development wells drilled in the
Uracoa and El Salto fields and one water injection well drilled in the El Salto
field. � Currently, Petrodelta is operating three drilling rigs and two
workover rigs.
Petrodelta
is continuing additional infrastructure enhancement projects in El Salto and
Temblador. �
EXPLORATION
DRILLING ACTIVITIES
Indonesia � Budong-Budong PSC
The
second exploratory well on the Budong PSC, the KD-1, spud on June 20,
2011. � The KD-1 is located approximately 50 miles
south of the Lariang-1 (LG-1). � The KD-1 well is being drilled to test a
thrusted anticline with stacked Miocene and Eocene targets. � The well was
initially drilled to a depth of 9,633 feet. � Upon running in the hole
after changing drill bits, the drill string became stuck at a depth of 8,390
feet. � After multiple attempts to break free, the operator severed the
drill string, set a cement plug at 7,347 feet and sidetracked the well.
� The well was sidetracked and has been drilled to a total depth of 11,800
feet and logged. � The evaluation of cuttings, logs and sidewall cores
demonstrate the presence of oil over a 200 feet low permeability and low
porosity clastic section. �
Plans are
to drill ahead, as a Harvest exclusive operation, to a final total depth of
approximately 14,400 feet to explore for the main Eocene objective, which has
not yet been encountered in the well. � These Eocene sands are considered
more prospective as the depositional environment differs from the
aforementioned Miocene sands.
The
remaining work commitment for the current exploration phase on the Budong PSC
is for geological and geophysical work to be completed in 2012 at a minimum of $0.5
million ($0.3 million net
to our 64.4 percent interest).
Harvest
owns a 64.4 percent non-operated working interest in the Budong-Budong Block
PSC.
Gabon West Africa
Dussafu
Project - Gabon (Dussafu
PSC)
Operation
activities during the three months ended September 30, 2011,
included completion of drilling and appraisal activities of the Dussafu Ruche
Marin-1 (DRM-1). � The DRM-1 has been suspended pending further
exploration and development activities. � Reservoir and concept
engineering studies have started with the aim of evaluating the commerciality
of the discovered oil in Ruche and the optimum development options for the
block. � The DRM-1 information is also being used to refine the 3-D seismic
depth model and improve our understanding for predicting the Gamba structure
under the salt and defining potential resources in the nearby satellite
structures for future drilling in 2012. �
The
partners in the Dussafu PSC began a 3-D seismic acquisition in a joint program.
� The program is operated by a third party, commenced on October
23, 2011, and is expected to be completed by mid-November
2011. � If environmental conditions permit, up to
540 square kilometers of 3-D seismic could be acquired within the Dussafu PSC.
� The data is being acquired in an area between the existing 3-D surveys,
where Harvest shot 2-D seismic in 2008, to define exploration targets within
the pre-salt section. A seismic test line using the latest acquisition technology
will be acquired over the Ruche discovery to see if the sub-salt image can be
improved over the current data acquired in 1994.
Harvest
operates the Dussafu PSC, holding a 66.667 percent interest.
Oman
Block 64 EPSA
On October
29, 2011, Harvest spud the Mafraq South-A (MFS-A)
exploration well on the Qarn Alam Block 64 onshore Oman.
� This is the first of a two-well exploratory program utilizing the MB
Petroleum Services LLC Rig #113 drilling unit to explore for non-associated
gas.
Mafraq 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). � The MFS-A well
will test the Mafraq South fault block, which has mean prospective resources of
1.25 TCF of gas with 46 MMBBLS of condensate. � In the event of success
the additional fault bounded segments contain further potential. � 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. � The geological chance of success for a
discovery in the Barik at Mafraq South is estimated to be 28 percent.
� The MFS-A well will be drilled to a total vertical depth of
approximately 12,000 feet to test coincident fault bounded dip closure at all
three reservoirs. � The dry hole cost for the well is estimated to be $8.45
million.
The
second exploratory well, the Al Ghubar North (AGN-A), is projected to spud
during the first quarter of 2012. � 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. � The well
will be drilled to approximately 10,300 feet 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.
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.
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 September 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. CST
on Wednesday,
November 9, 2011, during which management will discuss
Harvest's 2011 third quarter results. � The conference leader will be James A.
Edmiston, President and Chief Executive Officer.
� To access the conference call, dial 719-325-2118 or 888-378-4380, five
to ten minutes prior to the start time. � At that time you will be asked
to provide the conference number, which is 8693604. � A recording of the
conference call will also be available for replay at 719-457-0820, passcode
8693604, through November
14, 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 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