Harvest Natural Resources Announces Second Quarter 2009 Results
HOUSTON, Aug. 4 /PRNewswire-FirstCall/ -- Harvest Natural Resources, Inc. (NYSE: HNR) today announced 2009 second quarter earnings and provided an operational update.
Harvest reported a 2009 second quarter loss of $4.2 million, or $0.13 per share, compared with a loss of $0.6 million, or $0.02 per share, for the same period last year. The second quarter results include exploration charges of $3.5 million, or $0.11 per share. Petrodelta reported second quarter earnings of $34.6 million, $11.1 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 $7.0 million. Petrodelta's earnings include a nonrecurring charge of $15.6 million for adjustment to the pension and retirement plan ($5.0 million net to Harvest's 32 percent interest). The pension costs will be paid in future periods as pension benefits are disbursed to retired employees. The impact of this nonrecurring charge, net of tax, to Harvest is $0.07 per share.
Highlights to date for 2009 include:
- Increased oil production from Petrodelta's self-funded drilling program to an average of 22,057 barrels of oil per day (BOPD), a 62 percent increase over the second quarter of 2008 and a sequential 15 percent increase over the first quarter of 2009. Cash from Operations at Petrodelta was $39.9 million; a 94 percent increase over the prior quarter;
- Petrodelta drilled two successful appraisal wells in the El Salto field;
- Commenced drilling the deep 18,000 foot Mesaverde exploration well on Harvest's Antelope project located in the Uinta Basin of northeastern Utah; the well test is being drilled as a tight hole;
- On schedule to start drilling the first of two exploration wells in our Budong-Budong block in Indonesia in fourth quarter of 2009;
- Signed an Exploration and Production Sharing Agreement ("EPSA") with the Sultanate of Oman for the Al Ghubar/ Qarn Alam license block, Block 64 on April 11, 2009.
Harvest President and Chief Executive Officer, James A. Edmiston, said: "Petrodelta continues to build upon its successes both in the ongoing development program and the appraisal of the new fields. Until now, the drilling has been focused on the Uracoa and Temblador fields. In the first half of 2009, in addition to the Temblador development wells, activity has progressed on the other undeveloped fields and Petrodelta drilled two successful appraisal wells in the El Salto field. Petrodelta is currently evaluating the impact of these appraisal wells and has commenced pilot production from one of these wells, the El Salto 31 well, at rates in excess of 1,400 barrels of oil per day."
Edmiston continued, "We are excited to have started the exploration drilling operations of our Antelope project in Utah. The Bar F #1-20-3-2 well spud on June 15, 2009. The results of this well may lead to appraisal and development drilling programs on the project, which would likely be undertaken in late 2009 and 2010. The Antelope project is located in a highly productive oil and natural gas province with established production. We believe modern drilling and completion technologies hold the potential to access commercial quantities of hydrocarbons in place that were previously considered difficult to produce. In regards to our Budong-Budong Block in Indonesia, we have completed the technical interpretation and are readying to begin building locations in the third quarter in anticipation of spudding the first of two wells in the fourth quarter."
EXPLORATION AND PRODUCTION PROGRAMS
Venezuela
Petrodelta delivered 2.0 million barrels of oil, or an average of 22,057 BOPD, and 1.3 billion cubic feet (BCF) of natural gas to PDVSA Petroleo, S.A. for the three months ending June 30, 2009, as compared to 1.2 million barrels of oil or an average of 13,600 BOPD, and 3.0 BCF of natural gas to PDVSA Petroleo, S.A for the same period in 2008. Petrodelta oil production increased 15 percent over the 2009 first quarter average of 19,200 BOPD.
During the second quarter of 2009, the world market price for the quality of oil produced by Petrodelta averaged approximately $53.39 per barrel, or 90 percent of the price for West Texas Intermediate. The natural gas price received by Petrodelta is contractually fixed at $1.54 per thousand cubic feet.
Petrodelta Development Activities
Petrodelta reduced its rig count to one rig for most of the second quarter with the focus being on the drilling of two appraisal wells in the El Salto field. Petrodelta drilled and completed three development wells in the Temblador field in the second quarter of 2009, with an average initial production rate per well of 1,200 BOPD. Since Petrodelta started development drilling in the Temblador field in late 2008, oil production has increased from 1,200 BOPD to an average rate of 6,100 BOPD during June 2009. During this period, five successful wells have been completed.
In addition, two successful appraisal wells were drilled in the El Salto field which is currently undeveloped. The El Salto No. 30 well was successfully drilled, logged and cased and will be tested in the future. The El Salto No. 31 well was drilled and completed and is currently testing through temporary facilities at a rate above 1,400 BOPD.
The drilling program and field improvement activities in the prior quarters and early second quarter resulted in average production rates of 22,057 BOPD during the second quarter of 2009. The temporary reduction in rig count, appraisal program, and production facility outages resulted in a current production level of 20,500 BOPD. Additionally, PDVSA has recently failed to pay on a timely basis certain amounts owed to contractors that PDVSA has contracted to do work for Petrodelta. In addition, PDVSA has recently failed to pay on a timely basis certain amounts owed to Petrodelta with which Petrodelta pays its contractors. Not making timely payments to contractors makes it more difficult for Petrodelta to obtain the services of contractors, which difficulty is having an adverse effect on Petrodelta's business.
United States - Gulf Coast - West Bay
During the six months ended June 30, 2009, operational activities in the West Bay prospect, one of the two initial prospects of our AMI, included the interpretation of 3-D seismic, site surveying, and preparation of engineering documents. Interpretation of 3-D seismic data on the project was completed in second quarter 2009 and resulted in the identification of a revised set of drilling leads and prospects for the project.
Harvest expects to firm up plans for initial drilling on the project during the third quarter 2009, with the expectation of initial drilling on the project in early 2010. For the six months ended June 30, 2009, we incurred costs of $1.4 million for seismic interpretation, surveying, preliminary engineering and permitting.
Western United States - Antelope
During the six months ended June 30, 2009, operational activities in the Antelope project primarily focused on continuing leasing activities, concentrating primarily on Allottee leases administered by the Bureau of Indian Affairs. Harvest and our industry partner currently hold 58,000 acres on the Antelope project, or 35,000 acres net to Harvest's 60 percent interest upon earn-out. Other operational activities included surveying, preliminary engineering, and permitting preparations for a deep natural gas test well. The Permit to Drill the Bar F #1-20-3-2 well was approved on May 27, 2009, and drilling commenced on June 15, 2009. The well is currently estimated to reach total depth in September 2009. During the six months ended June 30, 2009, we incurred $7.6 million for lease acquisition, seismic program planning, surveying, permitting, site preparation and drilling costs. The expected remaining 2009 budget for this project is $9.5 million.
Indonesia - Budong-Budong
Processing of the seismic data acquired in 2008 was completed in second quarter 2009 and current activities comprise interpretation of this data and well planning. It is expected that the first of two exploration wells will spud in the fourth quarter of 2009. In accordance with the farm-in agreement, we expect to fund 100 percent of the well expenditures to earn our 47 percent working interest up to a cap of $10.7 million; thereafter, we will pay in proportion to our working interest. During the six months ended June 30, 2009, we incurred costs of $1.0 million for the 2-D seismic processing and interpretation and well planning. The projected 2009 project expenditures (net to us including our funding commitment) for the exploratory well drilling are $8.1 million.
Oman - Qarn Alam
On April 11, 2009, Harvest signed an Exploration and Production Sharing Agreement ("EPSA") with the Sultanate of Oman for the Al Ghubar/ Qarn Alam license block, Block 64. The Company will have a 100 percent working interest in the EPSA during the exploration phase. Oman Oil Company will have the option to back-in for up to a 20 percent interest in the block after the discovery of commercial quantities of natural gas.
The 3,867 square kilometer (955,600 acre) block is located in the gas and condensate rich Ghaba Salt Basin in close proximity to the Barik, Saih Rawl and Saih Nihayda gas and condensate fields. We have an obligation to drill two wells over a three year period with a funding commitment of $22.0 million. We expect to spend $4.8 million in 2009 for signature bonus, processing and interpretation of existing 3-D seismic and drilling preparations. Through June 30, 2009, we incurred costs of $2.2 million for signature bonus and training fund.
Non-GAAP Financial Measures
In this press release; Petrodelta's adjusted 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. 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 meet our future capital expenditures and working capital requirements. We also believe that financial analysts commonly use adjusted 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 June 30, 2009.
We define adjusted EBITDA as net income (loss) adjusted by interest (income) expense; depletion and depreciation; income tax expense; and non-recurring charges.
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 an earnings conference call at 10:00 a.m. Central Daylight Time on Tuesday, August 4, 2009 during which management will discuss Harvest's second quarter 2009 results. To access the conference call, dial 347-284-6930 or 866-550-6338, five to ten minutes prior to the start time. At that time you will be asked to provide the conference number, which is 1406741. A recording of the conference call will also be available for replay at 719-457-0820, passcode 1406741, until August 14, 2009. 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, Oman 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 2008 Annual Report on Form 10-K and other public filings.
HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
June 30, December 31,
2009 2008
---- ----
ASSETS:
-------
CURRENT ASSETS:
Cash and cash equivalents $64,391 $97,165
Accounts and notes receivable, net 11,029 11,570
Advances to equity affiliate 4,207 3,732
Prepaid expenses and other 2,937 3,964
----- -----
Total current assets 82,564 116,431
OTHER ASSETS 3,401 3,316
INVESTMENT IN EQUITY AFFILIATES 210,118 218,982
PROPERTY AND EQUIPMENT, net 39,906 23,537
------ ------
TOTAL ASSETS $335,989 $362,266
======== ========
LIABILITIES AND EQUITY:
-----------------------
CURRENT LIABILITIES:
Accounts payable, trade and other $689 $1,662
Accrued expenses 10,960 12,241
Advance from equity affiliate - 20,750
Accrued Interest 4,691 4,691
Income taxes payable 1,054 77
----- --
Total current liabilities 17,394 39,421
EQUITY:
STOCKHOLDERS' EQUITY:
Common stock and paid-in capital 211,580 209,259
Retained earnings 120,386 129,351
Treasury stock (65,374) (65,368)
------- -------
Total Harvest stockholders' equity 266,592 273,242
------- -------
Noncontrolling Interest 52,003 49,603
------ ------
Total Equity 318,595 322,845
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $335,989 $362,266
======== ========
HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts, unaudited)
Three months Six months
Ended June 30, Ended June 30,
--------------- ---------------
2009 2008 2009 2008
---- ---- ---- ----
EXPENSES:
Depreciation $88 $47 $157 $92
Exploration expense 3,456 2,866 4,428 4,215
General and administrative 6,432 6,422 12,899 12,634
Taxes other than on income 241 195 558 458
--- --- --- ---
10,217 9,530 18,042 17,399
------ ----- ------ ------
LOSS FROM OPERATIONS (10,217) (9,530) (18,042) (17,399)
------- ------ ------- -------
OTHER NON-OPERATING INCOME (EXPENSE)
Gain on financing transactions - 2,091 - 3,421
Investment earnings and other 296 751 627 1,882
Interest expense - (1,260) - (1,719)
--- ------ --- ------
296 1,582 627 3,584
--- ----- --- -----
NET LOSS BEFORE INCOME TAXES (9,921) (7,948) (17,415) (13,815)
Income tax expense 147 37 1,036 101
--- -- ----- ---
NET LOSS FROM CONSOLIDATED COMPANIES (10,068) (7,985) (18,451) (13,916)
Net income from unconsolidated equity
affiliates 7,476 9,409 11,886 18,218
----- ----- ------ ------
NET INCOME (LOSS ) (2,592) 1,424 (6,565) 4,302
Less: Net Income Noncontrolling
Interest 1,597 2,057 2,400 3,730
NET INCOME (LOSS) ATTRIBUTABLE TO
HARVEST NATURAL RESOURCES, INC. $(4,189) $(633) $(8,965) $572
======= ===== ======= ====
NET INCOME (LOSS) PER COMMON SHARE:
Basic $(0.13) $(0.02) ($0.27) $0.02
Diluted $(0.13) $(0.02) ($0.27) $0.02
------ ------ ------ -----
Weighted average shares outstanding:
Basic 33.0 34.7 33.0 34.9
Diluted 33.0 34.7 33.0 36.1
---- ---- ---- ----
HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Three months Six months Ended
Ended June 30, June 30,
--------------- ----------------
2009 2008 2009 2008
---- ---- ---- ----
Cash Flows From Operating Activities:
Net Income (loss) $(2,592) $1,424 $(6,565) $4,302
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depletion, depreciation and
amortization 88 47 157 92
Gain on financing transactions - (2,091) - (3,421)
Net income from unconsolidated
equity affiliate (7,476) (9,409) (11,886) (18,218)
Non-cash compensation related
charges 966 1,580 2,120 2,578
Dividends received from
unconsolidated equity affiliate - 72,530 - 72,530
Changes in operating assets and
liabilities:
Accounts and notes receivable 379 (246) 541 (278)
Advances to equity affiliate (295) 1,142 (475) 13,775
Prepaid expenses and other (1,884) (3,121) (1,780) (3,173)
Accounts payable (1,238) (1,274) (973) (3,879)
Accounts payable, related party - 60 - 185
Accrued expenses 816 3,836 (1,963) 122
Accrued Interest - (512) - (53)
Income taxes payable 96 17 977 (258)
-- -- --- ----
Net Cash Provided By (Used In)
Operating Activities (11,140) 63,983 (19,847) 64,304
------- ------ ------- ------
Cash Flows From Investing Activities:
Additions of property and
equipment (4,274) (7,933) (11,341) (11,217)
Decrease in restricted cash 1,735 3,316 - 3,244
Investment costs 221 (790) (310) (1,153)
--- ---- ---- ------
Net Cash Used In Investing
Activities (2,318) (5,407) (11,651) (9,126)
------ ------ ------- ------
Cash Flows From Financing Activities:
Net proceeds from issuances of
common stock 132 975 201 1,310
Purchase of treasury stock - (17,199) - (17,207)
Payments on notes payable - (2,560) - (2,560)
Financing costs (692) - (1,477) -
Dividends paid to noncontrolling
interest - - - (358)
--- --- --- ----
Net Cash Used In Financing
Activities (560) (18,784) (1,276) (18,815)
---- ------- ------ -------
Net Increase (Decrease) in Cash (14,018) 39,792 (32,774) 36,363
Cash and Cash Equivalents at
Beginning of Period 78,409 117,412 97,165 120,841
------ ------- ------ -------
Cash and Cash Equivalents at End of
Period $64,391 $157,204 $64,391 $157,204
======= ======== ======= ========
PETRODELTA, S. A.
STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
Three months Ended June 30,
----------------------------------------
2009 2008
------------------ ------------------
Barrels of oil sold 2,007 1,238
MCF of gas sold 1,306 3,049
Total BOE 2,225 1,746
Total BOE - Net of 33.33%
Royalty 1,556 1,334
Average price/barrel $53.39 $83.12
Average price/mcf $1.54 $1.54
----------------------------------------
$/BOE $/BOE
$ - net (1) $ - net (1)
--- --------- --- ---------
REVENUES:
Oil sales $107,154 $102,897
Gas sales 2,016 4,695
Royalties (36,125) (43,130)
------- ----- ------- -----
73,045 46.94 64,462 48.32
------ ----- ------ -----
EXPENSES:
Operating expenses 20,809 13.37 18,851 14.13
Depletion, depreciation,
amortization 9,025 5.80 7,754 5.81
General and administrative 6,989 4.49 2,056 1.54
Taxes other than on income (1,536) (0.99) 3,602 2.70
------ ----- ----- ----
35,287 22.67 32,263 24.18
------ ----- ------ -----
INCOME FROM OPERATIONS 37,758 24.27 32,199 24.14
------ ----- ------ -----
Investment Earnings and Other 1 - 4,955 3.71
--- --- ----- ----
Income before income tax 37,759 24.27 37,154 27.85
Current income tax expense 22,414 14.40 9,115 6.83
Deferred income tax (benefit) (19,284) (12.39) (8,293) (6.22)
------- ------ ------ -----
NET INCOME 34,629 22.26 36,332 27.24
Adjustment to reconcile to
reported Net Income from
Unconsolidated Equity
Affiliate:
Deferred income tax benefit 11,086 12,874
------ ------
Net income (loss) equity
affiliate 23,543 23,458
Equity interest in
unconsolidated equity
affiliate 40% 40%
-- --
Income (loss) before
amortization of excess basis
in equity affiliate 9,417 9,383
Amortization of excess basis
in equity affiliate (352) (277)
Conform depletion expense to
GAAP (263) 408
---- ---
Net income from unconsolidated
equity affiliate $8,802 $9,514
------ ------
Non-GAAP Financial Measures:
Reconcile NET INCOME as
reported under IFRS to
adjusted EBITDA:
NET INCOME $34,629 22.26 $36,332 27.24
Add back non-cash:
Depletion, depreciation
and amortization 9,025 5.80 7,754 5.81
Pension Liability 15,555 10.00 - -
Deferred income tax
(benefit) (19,284) (12.39) (8,293) (6.22)
------- ------ ------ -----
CASH FROM OPERATIONS 39,925 25.67 35,793 26.83
Investment earnings and
other (1) - (4,955) (3.71)
Current income tax expense 22,414 14.40 9,115 6.83
------ ----- ----- ----
Adjusted EBITDA (IFRS) $62,338 40.07 $39,953 29.95
======= ===== ======= =====
Six months Ended June 30,
----------------------------------------
2009 2008
------------------ ------------------
Barrels of oil sold 3,732 2,447
MCF of gas sold 2,720 6,221
Total BOE 4,185 3,484
Total BOE - Net of 33.33%
Royalty 2,941 2,668
Average price/barrel $47.48 $81.09
Average price/mcf $1.54 $1.54
----------------------------------------
$/BOE $/BOE
$ - net (1) $ - net (1)
--- --------- --- ---------
REVENUES:
Oil sales $177,183 $198,432
Gas sales 4,199 9,580
Royalties (60,912) (77,089)
------- ----- ------- -----
120,470 40.96 130,923 49.07
------- ----- ------- -----
EXPENSES:
Operating expenses 32,525 11.06 33,194 12.44
Depletion, depreciation,
amortization 16,713 5.69 12,052 4.52
General and administrative 9,214 3.13 3,734 1.39
Taxes other than on income 1,535 0.52 7,088 2.66
----- ---- ----- ----
59,987 20.40 56,068 21.01
------ ----- ------ -----
INCOME FROM OPERATIONS 60,483 20.56 74,855 28.06
------ ----- ------ -----
Investment Earnings and Other 3 - 5,008 1.87
--- --- ----- ----
Income before income tax 60,486 20.56 79,863 29.93
Current income tax expense 32,200 10.95 30,611 11.47
Deferred income tax (benefit) (23,367) (7.95) (14,976) (5.61)
------- ----- ------- -----
NET INCOME 51,653 17.56 64,228 24.07
Adjustment to reconcile to
reported Net Income from
Unconsolidated Equity
Affiliate:
Deferred income tax benefit 16,087 16,430
------ ------
Net income (loss) equity
affiliate 35,566 47,798
Equity interest in
unconsolidated equity
affiliate 40% 40%
-- --
Income (loss) before
amortization of excess basis
in equity affiliate 14,226 19,119
Amortization of excess basis
in equity affiliate (663) (552)
Conform depletion expense to
GAAP 440 (258)
--- ----
Net income from unconsolidated
equity affiliate $14,003 $18,309
------- -------
Non-GAAP Financial Measures:
Reconcile NET INCOME as
reported under IFRS to
adjusted EBITDA:
NET INCOME $51,653 17.56 $64,228 24.07
Add back non-cash:
Depletion, depreciation
and amortization 16,713 5.69 12,052 4.52
Pension Liability 15,555 5.29 - -
Deferred income tax
(benefit) (23,367) (7.95) (14,976) (5.61)
------- ----- ------- -----
CASH FROM OPERATIONS 60,554 20.59 61,304 22.98
Investment earnings and other (3) - (5,008) (1.87)
Current income tax expense 32,200 10.95 30,611 11.47
------ ----- ------ -----
Adjusted EBITDA (IFRS) $92,751 31.54 $86,907 32.58
======= ===== ======= =====
(1) $/BOE costs are now calculated on a net 33.33% royalty basis.
SOURCE Harvest Natural Resources
RELATED LINKS
http://www.harvestnr.com
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