Harvest Natural Resources Announces 2013 Second Quarter Results

Aug 09, 2013, 06:15 ET from Harvest Natural Resources

HOUSTON, Aug. 9, 2013 /PRNewswire/ -- Harvest Natural Resources, Inc. (NYSE: HNR) today announced 2013 second quarter earnings and provided an operational update.

Harvest reported a second quarter net loss of approximately $4.5 million, or $0.12 per diluted share, compared to net income of $6.2 million, or $0.15 per diluted share, for the same period last year. 

Petrodelta had net income during the second quarter of $64.8 million, $20.7 million net to Harvest's 32 percent interest, under International Financial Reporting Standards (IFRS), compared to $72.0 million, $23.0 million net to Harvest's 32 percent interest, for the same period last year.  After adjustments to Petrodelta's IFRS earnings, primarily to conform to accounting principles generally accepted in the United States (GAAP), Harvest's 32 percent share of Petrodelta's earnings was $6.1 million compared to $18.2 million for the same period in 2012.

Highlights for the second quarter of 2013 include:

Venezuela

  • During the second quarter of 2013, Petrodelta drilled and completed four wells and sold approximately 3.5 million barrels of oil (MMBO) for a daily average of approximately 38,211 barrels of oil per day (BOPD), an increase of 5 percent over the same period in 2012
  • Petrodelta's current production rate is approximately 43,000 BOPD and the 2013 expected average production rate is 41,300 BOPD with capital expenditures projected at $210.0 million
  • July 2013 average production rate was approximately 41,600 BOPD

Gabon

  • Progressed planning for a cluster field development
  • Field development options have been evaluated and a field development plan is being prepared 
  • Farmout/sale process has not been concluded

Indonesia

  • Continued work on an exploration program targeting the Pliocene and Miocene targets
  • Land access and acquisition, environmental studies, and tender prequalification and procurement are on-going

VENEZUELA

During the three months ended June 30, 2013, Petrodelta sold approximately 3.5 MMBO for a daily average of 38,211 BOPD, an increase of five percent over the same period in 2012 and three percent over the previous quarter.  Petrodelta also sold 0.6 billion cubic feet of natural gas for a daily average of 6.6 million cubic feet per day.  Petrodelta's current production rate is approximately 43,000 BOPD.

During the second quarter of 2013, Petrodelta drilled and completed four development wells in the El Salto field.  Currently, Petrodelta is operating five drilling rigs and two workover rigs.  A sixth drilling rig is rigging up.  Infrastructure enhancement projects in the El Salto and Temblador fields continue.  A pipeline between the Isleno field and the main production facility at Uracoa has been completed and is in service.

The average sale price for crude oil produced during the quarter was approximately $90.33 per barrel.

EXPLORATION AND OTHER ACTIVITIES

Dussafu Project - Gabon (Dussafu PSC)

Operational activities during the three months ended June 30, 2013, have focused on subsurface and development planning studies.

Results from technical studies on the core and fluid data from the DTM-1 well have been received and incorporated into the reservoir modeling studies of the Tortue reservoirs.  These results have been largely positive, particularly for the Gamba reservoir with better recoveries estimated than originally predicted from the wireline data alone.  These subsurface studies are ongoing to evaluate and optimize development options for the Tortue and existing discoveries in the Dussafu license.

We currently estimate the contingent resources for Tortue to be eight million barrels (MMBBL) in the low case to 55 MMBBL in the high case, with a mean of 28 MMBBL.  We estimate the mean contingent resources for all the oil discoveries on the Dussafu license to be 49 MMBBL.

In conjunction with the subsurface studies, work is continuing with the development planning. The favored development concept is a Floating Production Storage and Offloading installation close to Tortue, with subsea tiebacks to Ruche and Walt Whitman.  Based upon the latest schedule and identified long lead items, the current estimate for production startup is March 2015.  Preliminary meetings were held with the Direction Generale des Hydrocarbures (DGH) in Gabon in July and a field development plan is being prepared.

The Pre-Stack Depth Migration reprocessing of the seismic data over the central and inboard part of the license is now largely complete and technical interpretation of the seismic to generate additional prospects in this part of the license has commenced.  In addition, acquisition of a new 3D seismic survey to target the Dentale potential identified in Tortue over the outboard part of the license, which is currently covered only by 2D, is being considered.

Harvest has engaged Tudor, Pickering, Holt & Co. to manage a competitive process to farmout a significant portion of its interest in the Dussafu block.  This process has not been concluded.

Budong-Budong PSC - Indonesia

Operational activities during the three months ended June 30, 2013, included continued work on an exploration program targeting the Pliocene and Miocene targets encountered in the previous two wells.  Land access and acquisition; environmental studies; construction and upgrades to access roads, bridges, and well site; permitting; and tender prequalification and procurement are on-going.  In June 2013, the revised 2013 work program and budget for the exploration well was reviewed by SKK Migas, the Special Task Force for oil and gas upstream sector.

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 are discussed, as applicable, in management's discussion and analysis of operating results in our Annual Report on Form 10-K for the year ended December 31, 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. Central Daylight Time on Friday, August 9, 2013, during which management will discuss Harvest's 2013 second quarter results.  The conference leader will be James A. Edmiston, President and Chief Executive Officer.  To access the conference call, dial 888-438-5519 or 719-325-2281, five to ten minutes prior to the start time.  At that time you will be asked to provide the conference number, which is 9175997.  A recording of the conference call will also be available for replay at 719-457-0820, passcode 9175997, through August 14, 2013.

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, and China 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 2012 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)

June 30,

December 31,

2013

2012

 (unaudited) 

ASSETS:

CURRENT ASSETS:

Cash and cash equivalents

$        9,767

$        72,627

Restricted cash

1,212

1,000

Accounts receivable, net

3,329

2,955

Advances to equity affiliate

490

656

Deferred income taxes

821

821

Prepaid expenses and other

1,105

1,460

Total current assets

16,724

79,519

OTHER ASSETS

6,491

7,613

LONG-TERM RECEIVABLE, EQUITY AFFILIATE

14,324

14,346

INVESTMENT IN EQUITY AFFILIATE

469,896

412,823

PROPERTY AND EQUIPMENT, net

105,724

82,536

TOTAL ASSETS

$    613,159

$      596,837

LIABILITIES AND EQUITY:

CURRENT LIABILITIES:

Accounts payable, trade and other

$        2,691

$          3,970

Accrued expenses

8,938

30,748

Accrued Interest

371

624

Other current liabilities

1,978

3,538

Income taxes payable

99

102

Total current liabilities

14,077

38,982

OTHER LONG-TERM LIABILITIES

403

1,108

WARRANT DERIVATIVE LIABILITY

1,685

5,470

LONG-TERM DEBT

76,124

74,839

COMMITMENTS AND CONTINGENCIES

EQUITY:

STOCKHOLDERS' EQUITY:

Common stock and paid-in capital

265,494

264,104

Retained earnings

213,009

181,378

Treasury stock

(66,217)

(66,145)

Total Harvest stockholders' equity 

412,286

379,337

Noncontrolling Interest

108,584

97,101

Total Equity

520,870

476,438

TOTAL LIABILITIES AND EQUITY 

$    613,159

$      596,837

 

HARVEST NATURAL RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts, unaudited)

Three Months Ended June 30,

2013

2012

EXPENSES:

  Depreciation and amortization 

$       87

$       97

  Exploration expense

2,603

1,541

  General and administrative

7,654

6,208

10,344

7,846

LOSS FROM OPERATIONS

(10,344)

(7,846)

OTHER NON-OPERATING INCOME (EXPENSE)

  Investment earnings and other

118

80

  Unrealized loss on warrant derivatives

-

(1,641)

  Interest expense

(1,067)

(34)

  Debt conversion expense

-

20

  Other non-operating expenses

(141)

(1,467)

  Foreign currency transaction loss

(183)

(43)

(1,273)

(3,085)

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

(11,617)

(10,931)

 Income tax benefit

(1,415)

(1,022)

LOSS FROM CONTINUING OPERATIONS BEFORE NET INCOME FROM 

       EQUITY AFFILIATE

(10,202)

(9,909)

Net income from equity affiliate

7,602

22,829

NET INCOME(LOSS) FROM CONTINUING OPERATIONS

(2,600)

12,920

DISCONTINUED OPERATIONS

(315)

(2,155)

NET INCOME(LOSS)

(2,915)

10,765

Less:  Net Income Attributable to Noncontrolling Interest

1,551

4,540

NET INCOME (LOSS) ATTRIBUTABLE TO HARVEST

$(4,466)

$  6,225

 Three Months Ended 

June 30, 2013

June 30, 2012

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

 Basic 

 Dilutive 

 Basic 

 Dilutive 

  Net income (loss) from continuing operations 

$(4,151)

$(4,151)

$ 8,380

$ 8,380

   Discontinued operations

(315)

(315)

(2,155)

(2,155)

        Net Income (loss) attributable to Harvest

$(4,466)

$(4,466)

$ 6,225

$ 6,225

   Weighted average common shares outstanding

39,238

39,238

37,375

37,375

   Effect of dilutive shares

-

-

3,424

3,424

        Weighted average common shares including dilutive effect

39,238

39,238

40,799

40,799

Per Share:

  Net income (Loss) from continuing operations

$  (0.11)

$  (0.11)

$   0.22

$   0.21

   Discontinued operations

(0.01)

(0.01)

(0.05)

(0.06)

        Net income (loss) attributable to Harvest

$  (0.12)

$  (0.12)

$   0.17

$   0.15

 

HARVEST NATURAL RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts, unaudited)

Six Months Ended June 30,

2013

2012

EXPENSES:

  Depreciation and amortization 

$      174

$      194

  Exploration expense

4,404

3,374

  Dry hole costs

-

767

  General and administrative

11,081

11,652

15,659

15,987

LOSS FROM OPERATIONS

(15,659)

(15,987)

OTHER NON-OPERATING INCOME (EXPENSE)

  Investment earnings and other

164

149

  Unrealized gain (loss) on warrant derivatives

3,785

(1,209)

  Interest expense

(2,265)

(126)

  Debt conversion expense

-

(2,402)

  Other non-operating expenses

(613)

(1,723)

  Foreign currency transaction loss

(91)

(53)

980

(5,364)

LOSS FROM CONTINUING OPERATIONS

        BEFORE INCOME TAXES 

(14,679)

(21,351)

 Income tax benefit

(1,376)

(2,242)

LOSS FROM CONTINUING OPERATIONS BEFORE NET INCOME FROM 

       EQUITY AFFILIATE

(13,303)

(19,109)

Net income from equity affiliate

57,073

39,725

NET INCOME FROM CONTINUING OPERATIONS

43,770

20,616

DISCONTINUED OPERATIONS

(656)

(7,569)

NET INCOME

43,114

13,047

Less:  Net Income Attributable to Noncontrolling Interest

11,483

7,862

NET INCOME ATTRIBUTABLE TO HARVEST

$ 31,631

$   5,185

Six Months Ended 

June 30, 2013

June 30, 2012

NET INCOME ATTRIBUTABLE TO HARVEST PER COMMON SHARE:

 Basic 

 Dilutive 

 Basic 

 Dilutive 

  Net income from continuing operations 

$ 32,287

$ 32,287

$ 12,754

$ 12,754

   Discontinued operations

(656)

(656)

(7,569)

(7,569)

        Net income attributable to Harvest

$ 31,631

$ 31,631

$   5,185

$   5,185

   Weighted average common shares outstanding

39,238

39,238

36,130

36,130

   Effect of dilutive shares

-

111

1,469

1,469

        Weighted average common shares including dilutive effect

39,238

39,349

37,599

37,599

Per Share:

  Net income from continuing operations

$     0.82

$     0.82

$     0.35

$     0.34

   Discontinued operations

(0.01)

(0.02)

(0.21)

(0.20)

        Net income attributable to Harvest

$     0.81

$     0.80

$     0.14

$     0.14

 

HARVEST NATURAL RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

Six Months Ended June 30,

2013

2012

Cash Flows From Operating Activities:

Net income

$ 43,114

$ 13,047

Adjustments to reconcile net income  to net cash

  used in operating activities:

Depreciation and amortization

188

210

Dry hole costs

-

5,617

Amortization of debt financing costs

724

287

Amortization of discount on debt

1,285

-

Foreign currency transaction loss on revaluation

436

-

Debt conversion expense

-

1,939

Allowance for account and note receivable

-

5,180

Write-off of accounts payable, carry obligation

-

(3,596)

Net income from equity affiliate

(57,073)

(39,725)

Share-based compensation-related charges

1,269

2,124

Unrealized (gain) loss on warrant derivatives

(3,785)

1,209

Other current liabilities

(1,560)

-

Changes in operating assets and liabilities:

Accounts receivable

(374)

6,182

Prepaid expenses and other

355

(950)

Other assets

397

(829)

Accounts payable

(1,279)

(6,337)

Accrued expenses

(7,175)

(2,177)

Accrued interest

(253)

(971)

Other long-term liabilities

(705)

48

Income taxes payable

(3)

532

Net Cash Used In Operating Activities

(24,439)

(18,210)

Cash Flows From Investing Activities:

Additions of property and equipment

(37,888)

(13,146)

Advances to equity affiliate

(248)

(150)

Restricted cash

(212)

1,200

Net Cash Used In Investing Activities

(38,348)

(12,096)

Cash Flows From Financing Activities:

Net proceeds from issuances of common stock

122

273

Financing costs

(195)

(167)

Net Cash Provided by (Used In) Financing Activities

(73)

106

Net decrease in Cash 

(62,860)

(30,200)

Cash and Cash Equivalents at Beginning of Period

72,627

58,946

Cash and Cash Equivalents at End of Period

$   9,767

$ 28,746

 

PETRODELTA, S. A.

STATEMENTS OF OPERATIONS

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

Three Months Ended June 30, 2013

Three Months Ended June 30, 2012

Barrels of oil sold 

3,477

3,314

MCF of gas sold

597

494

      Total BOE 

3,577

3,396

      Total BOE - Net of 33% Royalty

2,384

2,264

Average price/barrel

$     90.33

$96.10

Average price/mcf

$1.54

$1.54

$

$/BOE - net

$

$/BOE - net

REVENUES:

  Oil sales

$ 314,088

$ 318,474

  Gas sales

922

762

  Royalty

(105,528)

(106,097)

209,482

87.87

213,139

94.14

EXPENSES:

  Operating expenses

34,837

14.61

20,063

8.86

  Workovers

5,389

2.26

3,149

1.39

  Depletion, depreciation, amortization

20,869

8.75

21,718

9.59

  General and administrative

4,703

1.97

4,944

2.19

  Windfall profits tax

51,928

21.78

74,687

32.99

117,726

49.37

124,561

55.02

INCOME FROM OPERATIONS

91,756

38.50

88,578

39.12

Foreign currency transaction loss

(5,335)

(2.24)

-

-

Windfall profits tax credit

-

-

-

-

Investment earnings and other

2

-

1

-

Interest expense

(3,175)

(1.33)

(2,690)

(1.18)

Income before income tax

83,248

34.93

85,889

37.94

  Current income tax expense

44,128

18.51

31,268

13.81

  Deferred income tax benefit

(25,691)

(10.78)

(17,394)

(7.68)

NET INCOME

64,811

27.20

72,015

31.81

Adjustment to reconcile to reported net income from equity affiliate

          Deferred income tax expense

33,973

16,258

          Sports Law under(over) accrual

1,463

(420)

          Net income equity affiliate

29,375

56,177

Equity interest in equity affiliate

40%

40%

Income before amortization of excess basis in equity affiliate

11,750

22,471

    Amortization of excess basis in equity affiliate  

(969)

(538)

    Conform depletion expense to US GAAP, net of tax

(3,179)

896

Net income from equity affiliate

$     7,602

$   22,829

Non-GAAP Financial Measures:

Reconcile NET INCOME as reported under IFRS to adjusted EBITDA:

   NET INCOME

$   64,811

$      27.20

$   72,015

$      31.81

   Add back non-cash items:

      Depletion, depreciation and amortization

20,869

8.75

21,718

9.59

      Deferred income tax benefit

(25,691)

(10.78)

(17,394)

(7.68)

      Foreign currency transaction loss, net of tax

2,668

1.12

-

-

 CASH FROM OPERATIONS

62,657

26.29

76,339

33.72

      Investment earnings and other

(2)

-

(1)

-

      Interest expense

3,175

1.33

2,690

1.18

      Current income tax expense

46,796

18.51

31,268

13.81

   Adjusted EBITDA

$ 112,625

$      46.13

$ 110,296

$      48.71

   Harvest 32% of Adjusted EBITDA 

$   36,041

$      14.76

$   35,295

$      15.59

 

PETRODELTA, S. A.

STATEMENTS OF OPERATIONS

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

Six Months Ended June 30, 2013

Six Months Ended June 30, 2012

Barrels of oil sold 

6,838

6,298

MCF of gas sold

1,375

1,124

      Total BOE 

7,067

6,485

      Total BOE - Net of 33% Royalty

4,712

4,324

Average price/barrel

$92.34

$102.09

Average price/mcf

$1.54

$1.54

$

$/BOE - net

$

$/BOE - net

REVENUES:

  Oil sales

$ 631,412

$ 642,971

  Gas sales

2,123

1,734

  Royalty

(211,061)

(213,436)

422,474

89.66

431,269

99.74

EXPENSES:

  Operating expenses

61,370

13.02

41,644

9.63

  Workovers

8,453

1.79

9,057

2.09

  Depletion, depreciation and amortization

41,334

8.78

39,640

9.17

  General and administrative

12,084

2.56

9,927

2.30

  Windfall profits tax

117,974

25.04

159,425

36.87

241,215

51.19

259,693

60.06

INCOME FROM OPERATIONS

181,259

38.47

171,576

39.68

Investment earnings and other

3

-

2

-

Foreign currrency transaction gain

181,386

38.49

-

-

Windfall profits tax credit

36,371

7.72

-

-

Interest expense

(5,925)

(1.25)

(4,603)

(1.06)

Income before income tax

393,094

83.43

166,975

38.62

  Current income tax expense

181,737

38.57

73,338

16.96

  Deferred income tax benefit

(41,110)

(8.72)

(30,884)

(7.14)

NET INCOME 

252,467

53.58

124,521

28.80

Adjustment to reconcile to reported net income from equity affiliate

          Deferred income tax expense

57,620

28,299

          Reversal of windfall profits tax credit

36,371

-

          Sports Law over accrual

(188)

(765)

          Net income equity affiliate

158,664

96,987

Equity interest in equity affiliate

40%

40%

Income before amortization of excess basis in equity affiliate

63,466

38,795

    Amortization of excess basis in equity affiliate  

(1,522)

(1,027)

    Conform depletion expense to US GAAP, net of tax

(4,871)

1,957

Net income from equity affiliate

$   57,073

$   39,725

Non-GAAP Financial Measures:

Reconcile NET INCOME as reported under IFRS to adjusted EBITDA:

   NET INCOME

$ 252,467

$      53.58

$ 124,521

$      28.80

   Add back non-cash items:

      Depletion, depreciation and amortization

41,334

8.78

39,640

9.17

      Deferred income tax benefit

(41,110)

(8.72)

(30,884)

(7.14)

      Foreign currency transaction gain, net of tax 

(90,693)

(19.25)

-

-

      Windfall profit tax credit (net of tax) (non-recurring item)

(36,371)

(7.72)

-

-

 CASH FROM OPERATIONS

125,627

26.67

133,277

30.83

      Investment earnings and other

(3)

-

(2)

-

      Interest expense

5,925

1.25

4,603

1.06

      Current income tax expense

91,044

19.32

73,338

16.96

   Adjusted EBITDA 

$ 222,593

$      47.24

$ 211,216

$      48.85

   Harvest 32% of Adjusted EBITDA 

$   71,230

$      15.12

$   67,589

$      15.63

SOURCE Harvest Natural Resources



RELATED LINKS

http://www.harvestnr.com