Harvest Natural Resources Announces Third Quarter 2008 Results
HOUSTON, Nov 04, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Harvest Natural Resources, Inc. (NYSE: HNR) today announced 2008 third quarter earnings and an operations update. Highlights for the quarter include:
-- Receipt of an advance of cash dividend of $16.6 million net to
Harvest, from Petrodelta on October 29, 2008 relating to net income as
reported under International Financial Accounting Standards through
the period ending June 30, 2008;
-- Third quarter oil production averaging 16,300 barrels per day; an
increase of 20 percent over the second quarter with only one rig
running;
-- Continuing progress in US, Gabon and Indonesian exploration programs;
-- Purchase of 1.1 million shares authorized by the Board under the $20
million 2008 Share Repurchase Program and
-- Completed drilling operations on the Harvest Hunter # 1 well in
Calcasieu Parish, Louisiana.
EARNINGS
Harvest reported 2008 third quarter loss of $5.9 million, or $0.17 per share, compared with earnings of $5.4 million, or $0.14 per share, for the same period last year. Harvest adopted the successful efforts method of accounting in 2007. The third quarter results include exploration charges of $4.8 million. Petrodelta reported third quarter earnings of $32.7 million, $10.5 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 $3.7 million. Further, Harvest received a net $16.6 million advance of cash dividend from Petrodelta on October 29, 2008.
Harvest President and Chief Executive Officer, James A. Edmiston, said, "During the third quarter an advance of a cash dividend was declared by the Board of Directors of Petrodelta in the amount of $51.9 million ($16.6 million net to HNR's 32 percent interest). The payment for the advance of cash dividend was received by Harvest on October 29, 2008. Petrodelta's drilling program commenced in April of 2008 and production continues to increase in spite of delays to rig mobilization. A second rig spudded its first well on October 24, 2008 and the third rig is now expected to spud later this month. These delays in rig mobilization and the excessive drilling days per well in the third quarter will likely lead to 2008 year-end productions rates toward the low end of prior guidance. Moving to our exploration program, we continued to progress the seismic acquisition programs on our exploration
blocks in Indonesia and Gabon, and we completed the drilling operations on the Harvest Hunter # 1 well in Calcasieu Parish, Louisiana and expect to begin testing operations in November." Edmiston continued, "In spite of the recent upheaval in the credit and oil and gas markets, our strong cash position and debt-free balance sheet coupled with our maturing exploration program and production increases from our low-cost Venezuelan assets position the company well to be able to continue to execute our growth plan without interruption."
VENEZUELA
Petrodelta delivered 1.5 million barrels of oil or 16,300 barrels of oil per day, and 2.8 billion cubic feet of natural gas to PDVSA Petroleo, S.A. for the three months ending September 30, 2008, compared to 1.3 million barrels of oil or 14,400 barrels of oil per day, and 3.5 billion cubic feet of natural gas to PDVSA Petroleo, S.A for the same period in 2007.
Sequentially, Petrodelta oil production increased 20% over the second quarter average of 13,600 BOPD.
For the third quarter of 2008, the world market price for the quality of oil produced by Petrodelta averaged approximately $107.97 per barrel, or 92 percent of West Texas Intermediate. 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 $22.76 per barrel to $85.21 per barrel. The total impact of the Windfall Profits Tax on third quarter net income to Petrodelta was $17.0 million, or $5.5 million net to Harvest's 32 percent interest. In September 2008 Petrodelta received communication from the PDVSA affiliate, CVP that the amended Windfall Profits Tax should be applied to gross production and third quarter statements reflect this change. We have expressed our disagreement with the appropriate representatives of Petrodelta, CVP and PDVSA. The natural gas
price received by Petrodelta 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 September 30, 2008, Petrodelta had drilled and completed four successful oil wells, with initial production rates ranging from 900 to 2,000 barrels of oil per day. On average these wells required 36 days to drill and cost $3.4 million. A fifth well has been successfully completed and began production on October 16, 2008. This last well was drilled in 18 days for a cost of $2.0 million, and has been tested at 1,075 barrels of oil per day. This improved performance was driven by modifications to the mud and bit designs based on experience from the first several wells. Petrodelta's target is to average less than 25 days to drill and complete at costs below $2.5 million per well.
The drilling program and ongoing workover and field improvement activities resulted in average production rates exceeding 16,500 barrels of oil per day in September and 17,500 barrels of oil per day presently.
Petrodelta currently has two drilling rigs running in the Uracoa field, the second of which spud its first well October 24, 2008. A third rig is expected to spud its first well later this month.
EXPLORATION PROGRAMS
Dussafu Marin, Gabon
On September 11, 2008, Harvest Natural Resources, Inc., through its subsidiary Harvest Dussafu, B.V., closed on its acquisition to acquire an additional 16.667 percent working interest in the Dussafu Marin Exploration Production Sharing Contract. Harvest now has a 66.667 percent operated working interest in the Dussafu Marin Permit offshore Gabon in West Africa. We are committed to shoot 500 kilometers of 2-D seismic, perform geological, geophysical and engineering studies, and the drilling of a conditional well. In line with our commitments, we completed the acquisition of 675 kilometers of 2-D seismic which is currently being processed. We have also commenced the re-processing of 1,076 square kilometers of existing 3-D seismic which we expect to be completed in the first half of 2009. Remaining 2008 net expenditures on the Dussafu block are expected to be $2.8 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 commenced in February 2008, is over 70 percent complete and we expect its completion in the fourth quarter 2008. Processing of the seismic data already acquired has commenced and is on schedule to enable us to begin drilling on Budong-Budong in 2009. Remaining 2008 net expenditures on the Budong-Budong block are expected to be $2.3 million.
United States Operations
During the third 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 being tested by the Harvest Hunter # 1 well in Calcasieu Parish, Louisiana. The AMI participants have secured a 6,800 acre leasehold on the prospect. We completed the drilling of the Harvest Hunter # 1 well and have set casing at a total depth of 12,292 feet. The drilling rig is being demobilized and Harvest will be testing the geopressured Vicksburg objective sands in the 4th quarter to determine commerciality.
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 AMI participants in the area. Harvest is re-processing its proprietary 3-D seismic data set to finalize target bottomhole drilling locations for two wells. In addition, Harvest has also recently conducted a site survey and preliminary engineering work that will be incorporated into a US Army Corps of Engineers permit application for the project which is expected to be filed in fourth quarter 2008. Target date for drilling of the first Bay well is late 2009, pending receipt of requisite permits.
Remaining 2008 net expenditures on our currently identified US exploration programs are expected to be $10.0 million, inclusive of the costs associated with the drilling of the Harvest Hunter # 1 well.
Conference call
Harvest will hold an earnings conference call today at 10:00 a.m. CST (11:00 a.m. EST) to discuss 2008 third quarter results. To access the call, dial 785-424-1055, conference ID: 7Harvest, five to ten minutes prior to the start time. A recording of the conference call will also be available for replay at 402-220-1423 until November 14, 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
(in thousands, unaudited)
September 30, December 31,
2008 2007
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $118,285 $120,841
Restricted cash - 6,769
Accounts and notes receivable, net 8,297 9,418
Advances to equity affiliate 3,236 16,352
Prepaid expenses and other 4,011 1,032
Total current assets 133,829 154,412
OTHER ASSETS 2,542 4,301
INVESTMENT IN EQUITY AFFILIATES 201,978 251,173
PROPERTY AND EQUIPMENT, net 24,504 3,583
TOTAL ASSETS $362,853 $413,469
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable, trade and other $265 $5,949
Accounts payable, related party - 10,093
Accrued expenses 10,676 11,895
Accrued Interest 4,716 5,136
Income taxes payable 177 503
Short-term debt - 9,302
Total current liabilities 15,834 42,878
MINORITY INTEREST 61,197 56,825
STOCKHOLDERS' EQUITY:
Common stock and paid-in capital 207,038 202,323
Retained earnings 143,115 147,934
Treasury stock (64,331) (36,491)
Total stockholders' equity 285,822 313,766
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $362,853 $413,469
HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts, unaudited)
Three months Ended Nine months Ended
September 30, September 30,
2008 2007 2008 2007
EXPENSES:
Depreciation 49 44 141 342
Exploration expense 4,837 102 9,052 536
General and administrative 6,700 5,857 19,334 19,452
Taxes other than on income (965) 66 (507) 488
10,621 6,069 28,020 20,818
LOSS FROM OPERATIONS (10,621) (6,069) (28,020) (20,818)
OTHER NON-OPERATING INCOME (EXPENSE)
Gain on financing transactions - 15,042 3,421 15,042
Investment earnings and other 1,122 2,296 3,004 7,558
Interest expense (22) (2,262) (1,741) (7,209)
1,100 15,076 4,684 15,391
NET INCOME (LOSS) BEFORE INCOME
TAXES AND MINORITY INTERESTS (9,521) 9,007 (23,336) (5,427)
Income tax expense (benefit) (20) 863 81 1,029
NET INCOME (LOSS) BEFORE MINORITY
INTERESTS (9,501) 8,144 (23,417) (6,456)
Minority interest in consolidated
subsidiary companies 890 2,524 4,737 1,151
NET INCOME (LOSS) FROM CONSOLIDATED
COMPANIES (10,391) 5,620 (28,154) (7,607)
Net income (loss) from
unconsolidated equity affiliates 4,534 (235) 23,335 (411)
NET INCOME (LOSS) ($5,857) $5,385 ($4,819) ($8,018)
NET INCOME (LOSS) PER COMMON SHARE:
Basic ($0.17) $0.15 ($0.14) ($0.22)
Diluted ($0.17) $0.14 ($0.14) ($0.22)
Weighted average shares outstanding:
Basic 33.6 36.3 34.5 37.1
Diluted 33.6 37.9 34.5 37.1
HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2008 2007 2008 2007
Cash Flows From Operating
Activities:
Net loss ($5,857) $5,385 ($4,819) (8,018)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depletion,
depreciation and
amortization 49 44 141 342
Gain on financing
transactions - (15,042) (3,421) (15,042)
Net (income) loss from
unconsolidated equity
affiliate (4,534) 235 (23,335) 411
Non-cash compensation
related charges 1,483 1,486 4,061 4,384
Minority interest in
consolidated subsidiary
companies 890 2,524 4,737 1,151
Dividends received from
unconsolidated equity
affiliate - - 72,530 -
Changes in operating
assets and liabilities:
Accounts and notes
receivable 1,399 (235) 1,121 94
Advances to equity
affiliate (659) 2,377 13,116 6,157
Prepaid expenses and
other 194 66 (2,979) 228
Accounts payable (475) 608 (4,354) 254
Accounts payable,
related party (10,278) 118 (10,093) 348
Accrued expenses (1,486) 916 (1,364) (3,588)
Accrued Interest (367) (1,514) (420) (1,827)
Income taxes payable (68) 813 (326) 852
Net Cash Provided By
(Used In) Operating
Activities (19,709) (2,219) 44,595 (14,254)
Cash Flows From Investing
Activities:
Additions of property
and equipment (6,022) (59) (17,239) (346)
Investment in equity
affiliate - - - (4,591)
Decrease in restricted
cash 3,525 19,520 6,769 33,115
Investment costs 12 5 (1,141) -
Net Cash Provided By
(Used In) Investing
Activities (2,485) 19,466 (11,611) 28,178
Cash Flows From Financing
Activities:
Net proceeds from
issuances of common
stock 35 290 1,345 541
Purchase of treasury
stock (11,186) (32,089) (28,393) (32,089)
Payments on notes
payable (4,651) (13,331) (7,211) (22,633)
Financing costs (923) - (923) -
Dividends paid to
minority interest - - (358) -
Net Cash Used In
Financing Activities (16,725) (45,130) (35,540) (54,181)
Net Decrease in Cash (38,919) (27,883) (2,556) (40,257)
Cash and Cash Equivalents
at Beginning of Period 157,204 135,705 120,841 148,079
Cash and Cash Equivalents
at End of Period 118,285 107,822 118,285 107,822
PETRODELTA, S. A.
STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts,
unaudited)
Three Months Ended Nine Months Ended
September 30, 2008 September 30, 2008
Barrels of oil sold 1,496 3,943
MCF of gas sold 2,843 9,064
Total BOE 1,970 5,454
Total BOE - Net of 30% Royalty 1,521 4,271
Average price/barrel $85.21 $82.66
Average price/mcf $1.54 $1.54
$ $/BOE - $ $/BOE -
net net
REVENUES:
Oil sales 127,489 325,921
Gas sales 4,378 13,992
Royalty (55,765) (132,888)
76,102 50.03 207,025 48.48
EXPENSES:
Operating expenses 20,076 13.20 53,270 12.47
Depletion, depreciation and
amortization 5,423 3.56 17,475 4.10
General and administrative 2,693 1.77 6,427 1.50
Taxes other than on income 3,541 2.33 10,629 2.49
31,733 20.86 87,801 20.56
INCOME FROM OPERATIONS 44,369 29.17 119,224 27.92
Investment earnings and other 7,397 4.86 12,405 2.90
Income before income tax 51,766 34.03 131,629 30.82
Current income tax expense 29,600 19.46 60,211 14.10
Deferred income tax benefit (10,495) (6.90) (25,471) (5.96)
NET INCOME 32,661 21.47 96,889 22.68
Adjustment to reconcile to reported
Net Income from Unconsolidated
Equity Affiliate:
Deferred income tax benefit 10,495 6.90 25,471 5.96
Net income equity affiliate 22,166 14.57 71,418 16.72
Equity interest in unconsolidated
equity affiliate 40% 40%
Income before amortization of excess
basis in equity affiliate 8,866 28,567
Amortization of excess basis in
equity affiliate (313) (865)
Conform depletion expense to GAAP (1,516) (1,774)
Reserve for interest receivable (2,428) (2,428)
Net income from unconsolidated equity
affiliate 4,609 23,500
SOURCE Harvest Natural Resources
http://www.harvestnr.com
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Service provided by Shareholder.com.
.
![]()