Harvest
Natural Resources Announces 2012 Third Quarter Results
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.