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      Harvest Natural Resources Announces 2011 Third Quarter Results


      News provided by

      Harvest Natural Resources, Inc.

      Nov 09, 2011, 06:13 ET

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      HOUSTON, Nov. 9, 2011 /PRNewswire/ -- 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

      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 may use certain terms such as resource base, contingent resources, prospective resources, probable reserves, possible reserves, non-proved reserves or other descriptions of volumes of reserves.  These estimates are by their nature more speculative than estimates of proved reserves and accordingly, are subject to substantially greater risk of being actually realized by the Company.  

      HARVEST NATURAL RESOURCES, INC.

      CONSOLIDATED BALANCE SHEETS

      (in thousands, unaudited)

















      September 30,

      December 31,





      2011

      2010







      ASSETS:










      CURRENT ASSETS:





      Cash and cash equivalents


      $         98,044

      $        58,703


      Accounts and notes receivable, net






      Oil and gas revenue receivable


      -

      1,907



      Dividend receivable - equity affiliate


      12,200

      -



      Joint interest and other


      10,288

      2,325



      Notes receivable


      3,335

      3,420


      Advances to equity affiliate


      2,288

      1,706


      Assets held for sale


      -

      88,774


      Prepaid expenses and other


      2,463

      4,793



      Total current assets


      128,618

      161,628







      OTHER ASSETS


      2,336

      2,477







      INVESTMENT IN EQUITY AFFILIATES


      329,964

      287,933







      PROPERTY AND EQUIPMENT, net


      91,730

      36,206









      TOTAL ASSETS


      $       552,648

      $      488,244













      LIABILITIES AND EQUITY:










      CURRENT LIABILITIES:





      Accounts payable, trade and other


      $           9,763

      $          3,205


      Accounts payable -  carry obligation


      3,596

      8,395


      Accrued expenses


      15,436

      15,087


      Liabilities held for sale

      -

      663


      Accrued Interest

      220

      896


      Income taxes payable

      5,858

      72



      Total current liabilities


      34,873

      28,318







      OTHER LONG-TERM LIABILITIES


      958

      1,834







      LONG-TERM DEBT


      32,000

      81,237







      COMMITMENTS AND CONTINGENCIES


      -

      -







      EQUITY:




      STOCKHOLDERS' EQUITY:





      Common stock and paid-in capital


      232,615

      230,763


      Retained earnings


      237,525

      141,584


      Treasury stock


      (66,104)

      (65,543)



      Total Harvest stockholders' equity


      404,036

      306,804

      Noncontrolling Interest


      80,781

      70,051


      Total Equity


      484,817

      376,855

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  


      $       552,648

      $      488,244



      HARVEST NATURAL RESOURCES, INC.



      CONSOLIDATED STATEMENTS OF OPERATIONS



      (in thousands except per share amounts, unaudited)









      Three Months Ended September 30,



      2011

      2010








      EXPENSES:





       Depreciation and amortization

      $                            111

      $                            119



       Exploration expense

      1,575

      2,592



       General and administrative

      4,041

      6,620



       Taxes other than on income

      250

      218




      5,977

      9,549



      LOSS FROM OPERATIONS

      (5,977)

      (9,549)








      OTHER NON-OPERATING INCOME (EXPENSE)





       Investment earnings and other

      159

      123



       Interest expense

      (806)

      (217)



       Loss on extinguishment of debt

      -

      -



       Other non-operating expenses

      (316)

      -



       Loss on exchange rates

      (43)

      2




      (1,006)

      (92)



      LOSS FROM CONSOLIDATED COMPANIES CONTINUING OPERATIONS





             BEFORE INCOME TAXES

      (6,983)

      (9,641)



      Income tax expense (benefit)

      226

      699



      LOSS FROM CONSOLIDATED COMPANIES CONTINUING OPERATIONS

      (7,209)

      (10,340)



      Net income from unconsolidated equity affiliates

      19,613

      6,148



      NET INCOME (LOSS) FROM CONTINUING OPERATIONS

      12,404

      (4,192)



      DISCONTINUED OPERATIONS





       Income from discontinued operations

      -

      390



       Gain on sale of assets

      36

      -



       Income tax expense on gain

      (3,500)

      -



           Income (loss) from discontinued operations

      (3,464)

      390



      NET INCOME (LOSS)

      8,940

      (3,802)



      Less:  Net Income Attributable to Noncontrolling Interest

      3,819

      1,189



      NET INCOME (LOSS) ATTRIBUTABLE TO HARVEST

      $                         5,121

      $                        (4,991)









      Three months Ended


      September 30, 2011

      September 30, 2010

      NET INCOME (LOSS) ATTRIBUTABLE TO HARVEST PER COMMON SHARE:

      Basic

      Dilutive

      Basic

      Dilutive

        Income (loss) from continuing operations

      8,585

      8,585

      (5,381)

      (5,381)

        Discontinued operations

      (3,464)

      (3,464)

      390

      390

             Net income (loss) attributable to Harvest

      5,121

      5,121

      (4,991)

      (4,991)

        Weighted average common shares outstanding

      34,174

      34,174

      33,596

      33,596

        Effect of dilutive shares


      2,403

      -

      -

             Weighted average common shares including dilutive effect

      34,174

      36,577

      33,596

      33,596






      Per Share:





        Income (loss) from continuing operations

      $                           0.25

      $                           0.23

      $                          (0.17)

      $                          (0.17)

        Discontinued operations

      $                          (0.10)

      $                          (0.09)

      $                           0.02

      $                           0.02

             Net income (loss) attributable to Harvest

      $                           0.15

      $                           0.14

      $                          (0.15)

      $                          (0.15)



      HARVEST NATURAL RESOURCES, INC.





      CONSOLIDATED STATEMENTS OF OPERATIONS





      (in thousands except per share amounts, unaudited)











      Nine Months Ended September 30,




      2011

      2010








      EXPENSES:





       Depreciation and amortization

      $      354

      $      362



       Exploration expense

      7,414

      5,329



       General and administrative

      17,109

      17,466



       Taxes other than on income

      906

      716




      25,783

      23,873



      LOSS FROM OPERATIONS

      (25,783)

      (23,873)








      OTHER NON-OPERATING INCOME (EXPENSE)





       Investment earnings and other

      544

      394



       Interest expense

      (4,722)

      (1,321)



       Loss on extinguishment of debt

      (9,682)

      -



       Other non-operating expenses

      (991)

      -



       Loss on exchange rates

      (86)

      (1,549)




      (14,937)

      (2,476)



      LOSS FROM CONSOLIDATED COMPANIES CONTINUING OPERATIONS





             BEFORE INCOME TAXES

      (40,720)

      (26,349)



      Income tax expense (benefit)

      708

      832



      LOSS FROM CONSOLIDATED COMPANIES CONTINUING OPERATIONS

      (41,428)

      (27,181)



      Net income from unconsolidated equity affiliates

      55,616

      53,430



      NET INCOME FROM CONTINUING OPERATIONS

      14,188

      26,249



      DISCONTINUED OPERATIONS





       Income (loss) from discontinued operations

      (2,786)

      3,208



       Gain on sale of assets

      103,969

      -



       Income tax expense on gain

      (8,700)

      -



           Income from discontinued operations

      92,483

      3,208



      NET INCOME

      106,671

      29,457



      Less:  Net Income Attributable to Noncontrolling Interest

      10,730

      10,154



      NET INCOME ATTRIBUTABLE TO HARVEST

      $ 95,941

      $ 19,303









      Nine Months Ended


      September 30, 2011

      September 30, 2010

      NET INCOME ATTRIBUTABLE TO HARVEST PER COMMON SHARE:

      Basic

      Dilutive

      Basic

      Dilutive

        Income  from continuing operations

      3,458

      3,458

      16,095

      16,095

        Discontinued operations

      92,483

      92,483

      3,208

      3,208

             Net income attributable to Harvest

      95,941

      95,941

      19,303

      19,303

        Weighted average common shares outstanding

      34,053

      34,053

      33,424

      33,424

        Effect of dilutive shares

      -

      5,592

      -

      2,997

             Weighted average common shares including dilutive effect

      34,053

      39,645

      33,424

      36,421






      Per Share:





        Income from continuing operations

      $     0.10

      $     0.09

      $   0.47

      $                                 0.43

        Discontinued operations

      $     2.72

      $     2.33

      $   0.11

      $                                 0.10

             Net income attributable to Harvest

      $     2.82

      $     2.42

      $   0.58

      $                                 0.53



      HARVEST NATURAL RESOURCES, INC.

      CONSOLIDATED STATEMENTS OF CASH FLOWS

      (in thousands, unaudited)











      Nine Months Ended September 30,





      2011

      2010

      Cash Flows From Operating Activities:





      Net income


      $ 106,671

      $ 29,457


      Adjustments to reconcile net income  to net cash




       used in operating activities:






      Depletion, depreciation and amortization

      1,164

      2,566



      Impairment of long-lived assets

      4,707

      -



      Amortization of debt financing costs

      753

      552



      Amortization of discount on debt

      816

      -



      Gain on sale of property and equipment

      (103,969)

      -



      Loss on early extinguishment of debt

      7,533

      -



      Net income from unconsolidated equity affiliate

      (55,616)

      (53,430)



      Share-based compensation-related charges

      3,659

      3,037


      Changes in operating assets and liabilities:





      Accounts and notes receivable

      (5,971)

      4,365



      Advances to equity affiliate

      (582)

      2,952



      Prepaid expenses and other

      2,330

      (267)



      Accounts payable


      6,558

      301



      Accrued expenses


      (1,533)

      3,168



      Accrued Interest


      (1,269)

      (5,345)



      Other liabilities


      (877)

      -



      Income taxes payable


      5,786

      (213)



      Net Cash Used In Operating Activities

      (29,840)

      (12,857)

      Cash Flows From Investing Activities:





      Proceeds from sale of property and equipment

      217,833

      -


      Additions of property and equipment

      (58,474)

      (10,041)


      Additions to assets held for sale

      (31,422)

      (24,578)


      Proceeds from sale of equity affiliate

      1,385

      -


      Increase in restricted cash


      -

      (1,000)


      Investment costs


      (876)

      (203)



      Net Cash Provided by (Used In) Investing Activities

      128,446

      (35,822)

      Cash Flows From Financing Activities:





      Net proceeds from issuances of common stock

      924

      494


      Proceeds from issuance of long-term debt

      -

      32,000


      Payments of long-term debt


      (60,000)

      -


      Financing costs


      (189)

      (2,822)



      Net Cash Provided by (Used In) Financing Activities

      (59,265)

      29,672



      Net Increase (Decrease) in Cash

      39,341

      (19,007)

      Cash and Cash Equivalents at Beginning of Period

      58,703

      32,317

      Cash and Cash Equivalents at End of Period

      $   98,044

      $ 13,310



      PETRODELTA, S. A.

      STATEMENTS OF OPERATIONS

      (in thousands except per BOE and per share amounts, unaudited)







      Three Months Ended
      September 30, 2011

      Three Months Ended
      September 30, 2010






      Barrels of oil sold

      3,031


      2,219


      MCF of gas sold

      594


      457


           Total BOE

      3,130


      2,295


           Total BOE - Net of 33% Royalty

      2,087


      1,530







      Average price/barrel

      $   100.62


      $65.31


      Average price/mcf

      $1.54


      $1.54








      $

      $/BOE - net

      $

      $/BOE - net

      REVENUES:





       Oil sales

      $ 304,969


      144,917


       Gas sales

      917


      705


       Royalties

      (98,013)


      (49,519)



      207,873

      99.61

      96,103

      62.81

      EXPENSES:





       Operating expenses

      20,027

      9.60

      7,274

      4.75

       Workovers

      4,856

      2.33

      1,637

      1.07

       Depletion, depreciation, amortization

      15,687

      7.52

      11,146

      7.29

       General and administrative

      3,310

      1.59

      2,064

      1.35

       Windfall profits tax

      69,424

      33.26

      -

      -


      113,304

      54.30

      22,121

      14.46

      INCOME FROM OPERATIONS

      94,569

      45.31

      73,982

      48.35






      Gain on exchange rate

      -

      -

      (136)

      (0.09)

      Interest earnings and other

      161

      0.08

      5

      -

      Interest expense

      (2,107)

      (1.01)

      (1,302)

      (0.85)






      Income before income tax

      92,623

      44.38

      72,549

      47.41






       Current income tax expense

      52,319

      25.07

      56,660

      37.03

       Deferred income tax expense (benefit)

      (16,709)

      (8.01)

      18,785

      12.27

      NET INCOME (LOSS)

      57,013

      27.32

      (2,896)

      (1.89)

      Adjustment to reconcile to reported Net Income (loss) from

      -




         Unconsolidated Equity Affiliate:





               Deferred income tax (benefit) expense

      7,096


      (18,953)


               Net income equity affiliate

      49,917


      16,057


      Equity interest in unconsolidated equity affiliate

      40%


      40%


      Income before amortization of excess basis in equity affiliate

      19,967


      6,423


         Amortization of excess basis in equity affiliate  

      (496)


      (364)


         Conform depletion expense to GAAP

      142


      89


      Net income from unconsolidated equity affiliate

      $   19,613


      $   6,148







      Non-GAAP Financial Measures:










      Reconcile NET INCOME as reported under IFRS to adjusted EBITDA:





        NET INCOME

      $   57,013

      27.32

      $ (2,896)

      (1.89)

        Add back non-cash items:





           Depletion, depreciation and amortization

      15,687

      7.52

      11,146

      7.29

           Deferred income tax expense (benefit)

      (16,709)

      (8.01)

      18,785

      12.27

      Special Charges, net of tax

      -

      -

      13,810

      9.03






      CASH FROM OPERATIONS

      55,991

      26.83

      40,845

      26.70






        Investment earnings and other

      (161)

      (0.08)

      (5)

      -

        Interest expense

      2,107

      1.01

      1,302

      0.85

        Current income tax expense

      52,319

      25.07

      42,918

      28.04

        Adjusted EBITDA (IFRS)






      $ 110,256

      52.83

      $ 85,060

      55.59



      PETRODELTA, S. A.

      STATEMENTS OF OPERATIONS

      (in thousands except per BOE and per share amounts, unaudited)







      Nine Months Ended
      September 30, 2011

      Nine Months Ended
      September 30, 2010






      Barrels of oil sold

      8,396


      6,142


      MCF of gas sold

      1,504


      1,780


           Total BOE

      8,647


      6,439


           Total BOE - Net of 33% Royalty

      5,765


      4,293







      Average price/barrel

      $97.02


      $68.77


      Average price/mcf

      $1.54


      $1.54








      $

      $/BOE - net

      $

      $/BOE - net

      REVENUES:





       Oil sales

      $ 814,557


      $ 422,383


       Gas sales

      2,322


      2,745


       Royalty

      (271,542)


      (143,896)



      545,337

      94.59

      281,232

      65.51

      EXPENSES:





       Operating expenses

      52,993

      9.19

      27,949

      6.51

       Workovers

      18,352

      3.18

      1,637

      0.38

       Depletion, depreciation and amortization

      41,405

      7.18

      29,522

      6.88

       General and administrative

      6,162

      1.07

      8,123

      1.89

       Windfall profits tax

      161,895

      28.08

      2,915

      0.68


      280,807

      48.70

      70,146

      16.34

      INCOME FROM OPERATIONS

      264,530

      45.89

      211,086

      49.17






      Gain on exchange rate

      -

      -

      120,518

      28.07

      Investment earnings and other

      513

      0.09

      2,886

      0.67

      Interest expense

      (6,525)

      (1.14)

      (3,525)

      (0.82)






      Income before income tax

      258,518

      44.84

      330,965

      77.09






       Current income tax expense

      137,280

      23.81

      194,736

      45.36

       Deferred income tax expense (benefit)

      (44,984)

      (7.80)

      66,367

      15.46

      NET INCOME

      166,222

      28.83

      69,862

      16.27

      Adjustment to reconcile to reported Net Income from





         Unconsolidated Equity Affiliate:





               Deferred income tax (benefit) expense

      26,835


      (66,441)


               Net income equity affiliate

      139,387


      136,303


      Equity interest in unconsolidated equity affiliate

      40%


      40%


      Income before amortization of excess basis in equity affiliate

      55,755


      54,521


         Amortization of excess basis in equity affiliate  

      (1,369)


      (1,020)


         Conform depletion expense to GAAP

      (155)


      (71)


      Net income from unconsolidated equity affiliate

      $   54,231


      $   53,430







      Non-GAAP Financial Measures:










      Reconcile NET INCOME as reported under IFRS to adjusted EBITDA:





        NET INCOME

      $ 166,222

      28.83

      $   69,862

      16.27

        Add back non-cash items:





           Depletion, depreciation and amortization

      41,405

      7.18

      29,522

      6.88

           Deferred income tax expense (benefit)

      (44,984)

      (7.80)

      102,367

      23.85

      Special Charges, net of tax

      -

      -

      (52,433)

      (12.21)






      CASH FROM OPERATIONS

      162,643

      28.21

      149,318

      34.79






        Investment earnings and other

      (513)

      (0.09)

      (2,886)

      (0.67)

        Interest expense

      6,525

      1.14

      3,525

      0.82

        Current income tax expense

      137,280

      23.81

      91,552

      21.33






        Adjusted EBITDA (IFRS)

      $ 305,935

      53.07

      $ 241,509

      56.27



      SOURCE Harvest Natural Resources, Inc.

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