Harvest Natural Resources Announces 2014 Second Quarter Results

HOUSTON, Aug. 11, 2014 /PRNewswire/ -- Harvest Natural Resources, Inc. (NYSE: HNR) (Harvest or the Company) today announced 2014 second quarter earnings and provided an operational update.

Harvest reported a second quarter net loss of approximately $1.7 million, compared with a net loss of $4.5 million for the same period last year.  The second quarter results included exploration charges of $1.6 million and non-recurring charges of $3.2 million in impairment costs related to the Budong Budong block.  Adjusted for exploration charges and non-recurring items, Harvest would have posted second quarter net income of approximately $3.1 million, or $0.07 per diluted share, before any adjustment for income taxes.

Petrodelta, S.A. (Petrodelta), Harvest's Venezuelan affiliate, reported second quarter operating income, before taxes and non-operating items, of $35.0 million ($7.14 million net to Harvest's equity, under IFRS).  Petrodelta reported net income for the second quarter of $42.3 million ($8.63 million net to Harvest's equity interest, under IFRS).  After adjustments to Petrodelta's IFRS earnings, primarily to conform to US GAAP, Harvest's equity interest in Petrodelta's earnings was $8.2 million, compared to $6.1 million for the same period during 2013.

Highlights for the second quarter of 2014 include:

Venezuela

  • During the second quarter of 2014, Petrodelta drilled and completed four development wells and sold approximately 4.1 million barrels of oil (MMBO) for a daily average of approximately 45,073 barrels of oil per day (BOPD), an increase of 18 percent over the same period in 2013; 
  • Petrodelta's current production rate is approximately 40,840 BOPD and the 2014 expected average production rate is 45,000 BOPD with capital expenditures projected at $350 million;

Gabon

  • On March 26, 2014, the joint venture partners resolved that the four discovered fields in the Ruche cluster are commercial;
  • On June 3, 2014, the Director General of Hydrocarbons (DGH) of Gabon and the joint venture partners signed a Declaration of Commerciality (DOC);
  • On July 17, 2014, Gabon awarded an 850.5 square kilometer Exclusive Exploitation Authorization (EEA) for the development and exploitation of certain oil discoveries on the Dussafu Block;
  • On July 18, 2014, the Ruche cluster Field Development Plan was submitted to the DGH;
  • Continued processing the 3D survey acquired in the fourth quarter of 2013, which provides the first 3D coverage over the outboard portion of the block.  The new 3D seismic data should also enhance the placement of future development wells in the Ruche and Tortue development program;  

Indonesia

  • In June of 2014, the joint interest partners decided to relinquish their interest in Budong;

China

  • On July 3, 2014, the Company sold its entire interest in the WAB-21 block in the South China Sea for $3 million in cash.

VENEZUELA

During the second quarter ended June 30, 2014, Petrodelta sold approximately 4.1 MMBO for a daily average of 45,073 BOPD, an increase of 18 percent over the same period in 2013.  Petrodelta also sold 0.68 billion cubic feet (BCF) of natural gas for a daily average of 7.5 million cubic feet per day (MMCFD).  Petrodelta's current production rate is approximately 40,840 BOPD.

During the second quarter ended June 30, 2014, Petrodelta drilled and completed one development well in the Isleno Field, two development wells in the Temblador Field and one development well in the El Salto Field.  Currently, Petrodelta is operating six drilling rigs and one workover rig and is continuing with infrastructure enhancement projects in the El Salto and Temblador Fields.

Petrodelta's production for 2014 is projected to be approximately 45,000 BOPD.  The 2014 Petrodelta capital expenditures are expected to be approximately $350 million.  Petrodelta expects to drill 19 oil wells during 2014.

The average sales price for crude oil produced during the quarter was approximately $88.77 per barrel.

EXPLORATION AND OTHER ACTIVITIES

Dussafu Project - Gabon (Dussafu PSC)

Operational activities during the six months ended June 30, 2014 included continuation of planning for development of the Ruche cluster and preparation of a field development plan.  Field development options have been evaluated and key and long-lead equipment has been identified.  Geoscience, reservoir engineering and economic studies have progressed, and the joint venture partners resolved that the four discovered fields (Ruche, Tortue, Moubenga and Walt Whitman) are commercial at an operating committee meeting on March 26, 2014.  A DOC was signed with the Gabonese Republic (Gabon) pertaining to these four oil discoveries on the Dussafu Block on June 3, 2014.  Furthermore, on July 17, 2014, Gabon awarded an EEA for the development and exploitation of the oil resources within the EEA area which covers 850.5 square kilometers.

The Company began reviewing the first high quality seismic data from the 1,260 square kilometer of 3D seismic survey during the fourth quarter of 2013.  The survey provides the first 3D coverage over the outboard portion of the block where significant pre-salt prospectivity has been already recognized on 2D seismic data. The pre-salt is currently the focus of deep water exploration activity offshore Gabon, and seven new exploration licenses close to Dussafu were awarded by Gabon on August 8, 2014.  The new 3D seismic data should also enhance the placement of development wells in the Ruche and Tortue development program and the development of numerous undrilled structures identified within the EEA.

Budong Budong PSC - Indonesia

In June 2014, we and our joint interest partner decided to relinquish our interest in Budong.  We are working with the Indonesian government to complete the relinquishment which may take several months.  As a result of these actions, the Company recognized a further charge of $3.2 million during the three months ended June 30, 2014, related to drilling obligations incurred in connection with the December 2012 acquisition of an additional 7.1 percent interest from our joint interest partner. 

Conference Call

Harvest will hold a conference call at 10:00 a.m. CDT on Monday, August 11, 2014, during which management will discuss Harvest's 2014 second quarter results.  The conference leader will be James A. Edmiston, President and Chief Executive Officer.  To access the conference call, dial 719-325-2491 or 888-481-2844, five to ten minutes prior to the start time.  At that time you will be asked to provide the conference number, which is 5523692.  A recording of the conference call will also be available for replay at 719-457-0820 or 888-203-1112, passcode 5523692, through August 18, 2014.

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 and Gabon, and a business development office in Singapore.  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 2013 Annual Report on Form 10-K and other public filings.

 

HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES 

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except per share data) 































June 30,


December 31,



2014


2013



(Unaudited)




ASSETS







CURRENT ASSETS:







  Cash and cash equivalents


$

8,111


$

120,897

  Restricted cash



25



148

  Accounts receivable, net



524



1,962

  Deferred income taxes



81



81

  Prepaid expenses and other



1,000



2,030

  TOTAL CURRENT ASSETS



9,741



125,118

LONG-TERM RECEIVABLE – EQUITY AFFILIATE



13,891



15,097

INVESTMENT IN EQUITY AFFILIATE



520,350



485,401

PROPERTY AND EQUIPMENT:







  Oil and gas properties (successful efforts method)



103,873



108,013

  Other administrative property, net



255



378

  TOTAL PROPERTY AND EQUIPMENT, NET



104,128



108,391

OTHER ASSETS



881



873

TOTAL ASSETS


$

648,991


$

734,880

LIABILITIES AND EQUITY







CURRENT LIABILITIES:







  Accounts payable, trade and other


$

1,402


$

4,398

  Accrued expenses



12,647



22,659

  Accrued interest



74



380

  Income taxes payable



45



2,178

  Current deferred tax liability



38,282



43,162

  Current portion – long term debt





77,480

  Note payable to noncontrolling interest owner



6,109



6,109

  Warrant derivative liability



1,953



  Other current liabilities



158



419

  TOTAL CURRENT LIABILITIES



60,670



156,785

LONG-TERM DEFERRED TAX LIABILITY



33,597



29,787

WARRANT DERIVATIVE LIABILITY





1,953

OTHER LONG-TERM LIABILITIES



108



558

COMMITMENTS AND CONTINGENCIES







EQUITY







STOCKHOLDERS' EQUITY:







  Preferred stock, par value $0.01 a share; authorized 5,000 shares; outstanding, none





  Common stock, par value $0.01 a share; authorized 80,000 shares at June 30, 2014 (December 31, 2013: 80,000 shares); issued 48,666 shares at June 30, 2014 (December 31, 2013: 48,666 shares)



487



487

  Additional paid-in capital



277,672



276,083

  Retained earnings



82,623



92,282

  Treasury stock, at cost, 6,572 shares at June 30, 2014 (December 31, 2013: 6,551 shares)



(66,316)



(66,222)

  TOTAL HARVEST STOCKHOLDERS' EQUITY



294,466



302,630

NONCONTROLLING INTERESTS



260,150



243,167

  TOTAL EQUITY



554,616



545,797

TOTAL LIABILITIES AND EQUITY


$

648,991


$

734,880













 

 

HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES 

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data) 

(Unaudited)










































Three Months Ended


Six Months Ended



June 30,


June 30,



2014


2013


2014


2013

EXPENSES:













  Depreciation and amortization


$

58


$

87


$

134


$

174

  Exploration expense



1,648



2,007



3,481



3,737

  Impairment expense



3,150





7,610



  General and administrative



4,903



7,559



11,204



10,913




9,759



9,653



22,429



14,824

LOSS FROM OPERATIONS



(9,759)



(9,653)



(22,429)



(14,824)

OTHER NON-OPERATING INCOME (EXPENSE):













  Investment earnings and other





118



4



164

  Loss on sale of interest in Harvest Holding



(391)





(1,357)



  Unrealized gain on derivatives









3,785

  Interest expense



(15)



(1,067)



(62)



(2,265)

  Loss on extinguishment of debt







(4,749)



  Foreign currency transaction gains (losses)



259



(183)



(210)



(91)

  Other non-operating expenses





(141)



(220)



(613)




(147)



(1,273)



(6,594)



980

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES



(9,906)



(10,926)



(29,023)



(13,844)

INCOME TAX BENEFIT 



(88)



(1,415)



(1,042)



(1,376)

LOSS FROM CONTINUING OPERATIONS BEFORE EARNINGS FROM EQUITY AFFILIATE



(9,818)



(9,511)



(27,981)



(12,468)

EARNINGS FROM EQUITY AFFILIATE



16,062



7,602



34,949



57,073

INCOME (LOSS) FROM CONTINUING OPERATIONS



6,244



(1,909)



6,968



44,605

DISCONTINUED OPERATIONS



(230)



(1,006)



(361)



(1,491)

NET INCOME (LOSS)



6,014



(2,915)



6,607



43,114

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS



7,665



1,551



16,266



11,483

NET INCOME (LOSS) ATTRIBUTABLE TO HARVEST [COMPREHENSIVE INCOME (LOSS)]


$

(1,651)


$

(4,466)


$

(9,659)


$

31,631

BASIC EARNINGS (LOSS) PER SHARE:













  Income (loss) from continuing operations


$

(0.03)


$

(0.09)


$

(0.22)


$

0.85

  Discontinued operations



(0.01)



(0.03)



(0.01)



(0.04)

  Basic earnings (loss) per share


$

(0.04)


$

(0.12)


$

(0.23)


$

0.81

DILUTED EARNINGS (LOSS) PER SHARE:













  Income (loss) from continuing operations


$

(0.03)


$

(0.09)


$

(0.22)


$

0.84

  Discontinued operations



(0.01)



(0.03)



(0.01)



(0.04)

  Diluted earnings (loss) per share


$

(0.04)


$

(0.12)


$

(0.23)


$

0.80








































  WEIGHTED AVERAGE SHARES OUTSTANDING:













  Basic



41,861



39,238



41,854



39,238

  Diluted



41,861



39,238



41,854



39,349














 

 

HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES 

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands) 

(Unaudited)
























Six Months Ended June 30,



2014


2013




CASH FLOWS FROM OPERATING ACTIVITIES:







Net income


$

6,607


$

43,114

Adjustments to reconcile net income to net cash used in operating activities:







Depreciation and amortization



134



188

Impairment expense



7,610



Amortization of debt financing costs





724

Amortization of discount on debt





1,285

Loss on sale of interest in Harvest Holding



1,357



Foreign currency transaction loss



1,468



436

Loss on extinguishment of debt



4,749



Earnings from equity affiliate



(34,949)



(57,073)

Share-based compensation-related charges



1,589



1,269

Unrealized gain on derivatives





(3,785)

Changes in operating assets and liabilities:







Accounts and notes receivable



1,438



(374)

Prepaid expenses and other



(249)



355

Other assets



(8)



397

Accounts payable



(2,996)



(1,279)

Accrued expenses



(11,229)



(7,175)

Accrued interest



(306)



(253)

Income taxes payable



(2,133)



(3)

Deferred tax asset and liabilities



(1,070)



Other current liabilities



(261)



(1,560)

Other long-term liabilities



(450)



(705)

NET CASH USED IN OPERATING ACTIVITIES



(28,699)



(24,439)

CASH FLOWS FROM INVESTING ACTIVITIES:







Transaction costs from sale of interest in Harvest Holding



(3,540)



Additions of property and equipment



(521)



(37,888)

Advances to equity affiliate



(262)



(248)

(Increase) decrease in restricted cash



123



(212)

NET CASH USED IN INVESTING ACTIVITIES



(4,200)



(38,348)

CASH FLOWS FROM FINANCING ACTIVITIES:







Debt repayment



(79,750)



Debt extinguishment costs



(760)



Contributions from noncontrolling interest owners



717



Net proceeds from issuances of common stock





122

Treasury stock purchases



(94)



Financing costs





(195)

NET CASH USED IN FINANCING ACTIVITIES



(79,887)



(73)

NET DECREASE IN CASH AND CASH EQUIVALENTS



(112,786)



(62,860)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD



120,897



72,627

CASH AND CASH EQUIVALENTS AT END OF PERIOD


$

8,111


$

9,767





























 

 

PETRODELTA, S. A.

STATEMENTS OF OPERATIONS

(in thousands except per BOE and price amounts)










































Three Months Ended June 30,



2014


2013






$/BOE - net





$/BOE - net

Barrels of oil sold 



4,102






3,477




MCF of gas sold



682






597




  Total BOE 



4,216






3,577




  Total BOE - Net of 33% Royalty



2,811






2,384




Average price/barrel


$

88.77





$

90.33




Average price/mcf


$

1.54





$

1.54




REVENUES:













  Oil sales


$

364,144





$

314,088




  Gas sales



1,050






922




  Royalty



(121,421)






(104,229)







243,773


$

86.72



210,781


$

88.42

EXPENSES:













  Operating expenses



60,542



21.54



36,136



15.16

  Workovers



5,454



1.94



5,389



2.26

  Depletion, depreciation and amortization



32,364



11.51



20,869



8.75

  General and administrative



3,080



1.10



4,703



1.97

  Windfall profits tax



52,123



18.54



51,928



21.78

  Windfall profits credit reversal



55,168



19.63








208,731



74.26



119,025



49.92

INCOME FROM OPERATIONS



35,042



12.46



91,756



38.50














Gain (loss) on exchange rate



223



0.08



(5,335)



(2.24)

Investment earnings and other



301



0.11



2



Interest expense



(8,295)



(2.95)



(3,175)



(1.33)

  Income before income tax



27,271



9.70



83,248



34.93

  Current income tax expense (benefit)



(5,558)



(1.98)



62,925



26.39

  Deferred income tax benefit



(9,460)



(3.37)



(44,488)



(18.66)

NET INCOME UNDER IFRS



42,289


$

15.05



64,811


$

27.20

Adjustments to increase (decrease) net income under IFRS:













  Deferred income tax expense



(30,359)






(33,973)




  Depletion expense 



(5,026)






(7,948)




  Windfall profits tax credit reversal  



55,168









  Sports law over (under) accrual



689






(1,463)




  Net income under U.S. GAAP



62,761






21,427




Equity interest in equity affiliate



40%






40%




Income before amortization of excess basis in equity affiliate



25,104






8,571




  Amortization of excess basis in equity affiliate  



(1,163)






(969)




  Earnings from equity affiliate excluded from results of operations



(7,879)









Earnings from equity affiliate included in income


$

16,062





$

7,602




 

 

PETRODELTA, S. A.

STATEMENTS OF OPERATIONS

(in thousands except per BOE and price amounts)

(unaudited)





























Six Months Ended June 30,



2014


2013






$/BOE - net





$/BOE - net

Barrels of oil sold 



7,980






6,838




MCF of gas sold



1,244






1,375




  Total BOE 



8,187






7,067




  Total BOE - Net of 33% Royalty



5,458






4,712




Average price/barrel


$

86.44





$

92.34




Average price/mcf


$

1.54





$

1.54




REVENUES:













  Oil sales


$

689,798





$

631,412




  Gas sales



1,916






2,123




  Royalty



(230,505)






(209,762)







461,209


$

84.50



423,773


$

89.94

EXPENSES:













  Operating expenses



105,606



19.35



62,669



13.30

  Workovers



13,806



2.53



8,453



1.79

  Depletion, depreciation and amortization



58,676



10.75



41,334



8.78

  General and administrative



9,645



1.77



13,483



2.86

  Windfall profits tax



98,425



18.03



117,974



25.04

  Windfall profits tax (credit) and reversal of credit



55,168



10.11



(55,168)



(11.71)




341,326



62.54



188,745



40.06

INCOME FROM OPERATIONS



119,883



21.96



235,028



49.88














Gain on exchange rate



168



0.03



181,386



38.49

Investment earnings and other



614



0.11



1,402



0.30

Interest expense



(15,851)



(2.90)



(5,925)



(1.25)

  Income before income tax



104,814



19.20



411,891



87.42

  Current income tax expense



46,760



8.57



200,534



42.56

  Deferred income tax benefit



(32,698)



(5.99)



(41,110)



(8.72)

NET INCOME UNDER IFRS



90,752



16.62



252,467



53.58

Adjustments to increase (decrease) net income under IFRS:













  Deferred income tax expense



(24,048)






(38,823)




  Depletion expense



(9,897)






(12,178)




  Windfall profits tax credit and (reversal) of credit



55,168






(55,168)




  Sports law over accrual



740






188




  Net income under U.S. GAAP



112,715






146,486




Equity interest in equity affiliate



40%






40%




Income before amortization of excess basis in equity affiliate



45,086






58,595




  Amortization of excess basis in equity affiliate  



(2,258)






(1,522)




  Earnings from equity affiliate excluded from results of operations



(7,879)









Earnings from equity affiliate included in income


$

34,949





$

57,073




 

 

SOURCE Harvest Natural Resources, Inc.



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