Harvest Natural Resources Announces 2013 Third Quarter Results

        Harvest Natural Resources Announces 2013 Third Quarter Results

PR Newswire

HOUSTON, Nov. 12, 2013

HOUSTON, Nov. 12, 2013 /PRNewswire/ -- Harvest Natural Resources, Inc. (NYSE:
HNR) today announced 2013 third quarter earnings and provided an operational
update.

Harvest reported third quarter net income of $2.0 million, or $0.05 per
diluted share, compared to net income of $5.8 million, or $0.15 per diluted
share, for the same period last year. The third quarter results included
exploration expenses of $1.5 million, or $0.04 per diluted share, an
impairment charge on our Colombia asset of $2.3 million, or $0.06 per diluted
share, and an unrealized loss on derivatives of $6.6 million, or $0.17 per
share. After adding back the charges for exploration expense, impairment and
unrealized losses on derivatives, net income would have been $12.4 million, or
$0.32 per diluted share.

Petrodelta had net income during the third quarter of $96.6 million, $30.9
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 accounting principles generally accepted in the United
States (GAAP), Harvest's 32 percent share of Petrodelta's earnings was $20.6
million, compared to $16.2 million for the same period last year.

Highlights for the third quarter of 2013 include:

Venezuela

  oNegotiations continue with Pluspetrol Venezuela S.A. to acquire the
    outstanding shares of Harvest through a transaction in which Pluspetrol
    would retain Harvest's net 32 percent interest in Petrodelta while
    Harvest's non-Venezuelan assets would be contributed to a new company that
    would be spun off to our stockholders
  oDuring the third quarter of 2013, Petrodelta drilled and completed four
    wells and sold approximately 3.8 million barrels of oil (MMBO) for a daily
    average of approximately 41,726 barrels of oil per day (BOPD), an increase
    of 9 percent over the same period in 2012
  oPetrodelta's current production rate is approximately 44,000 BOPD and the
    2013 expected average production rate is 40,400 BOPD with capital
    expenditures projected at $210.0 million
  oFour development wells were drilled during the period, two in the El Salto
    field, one in the Isleno field and one in the Temblador field

Gabon

  oNegotiation of definitive agreements continue with Vitol S.A. to acquire
    Harvest's 66.67% interest in the Dussafu PSC for $137.0 million in cash
  oAcquisition of a 1,260 square kilometer 3D seismic survey commenced in
    October 2013 and the first high quality seismic products are expected to
    be available during the second quarter of 2014
  oGeoscience, reservoir engineering and economic studies have been
    progressed, and a field development plan is progressing

Indonesia

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

James A. Edmiston, President and Chief Executive Officer of Harvest Natural
Resources stated, "The two previously announced potential transactions, taken
together, accurately reflect the strategic direction of the Company. In the
near term, the Board and Management will remain primarily focused on a sale of
the asset base of the Company in whole or in parts and a return of the
proceeds to its shareholders."

Mr. Edmiston continued, "While we cannot assure the shareholders that either
of these potential transactions will reach closure, we believe the quality of
the asset base continues to attract interest from the industry."

VENEZUELA

During the three months ended September 30, 2013, Petrodelta sold
approximately 3.8 MMBO for a daily average of 41,726 BOPD, an increase of nine
percent over the same period in 2012 and nine percent over the previous
quarter. Petrodelta also sold 0.6 billion cubic feet of natural gas for a
daily average of 6.5 million cubic feet per day. Petrodelta's current
production rate is approximately 44,000 BOPD.

During the third quarter of 2013, Petrodelta drilled and completed four
development wells, two in the El Salto field, one in the Isleno field and one
in the Temblador field. Currently, Petrodelta is operating five drilling rigs
and one workover rig. A sixth drilling rig is rigging up. Infrastructure
enhancement projects in the El Salto and Temblador fields continue.

The average sale price for crude oil produced during the quarter was
approximately $93.43 per barrel.

In September 2013, we announced that we had entered into exclusive
negotiations with Pluspetrol Venezuela S.A. (Pluspetrol) to sell the
outstanding shares of Harvest through a transaction in which Pluspetrol would
retain Harvest's net 32 percent interest in Petrodelta while Harvest's
non-Venezuelan assets would be contributed to a new company that would be spun
off to our stockholders. The total consideration would be approximately $373
million, before taking into account repayment of our long-term debt, payment
of costs and other obligations, and customary working capital adjustments.
The assets to be spun off would primarily include our interests in Gabon and
Indonesia. While our obligation to negotiate exclusively with Pluspetrol has
expired, we are continuing to discuss with Pluspetrol on a non-exclusive basis
entering into a definitive agreement that would entail this transaction or one
similarly structured.

EXPLORATION AND OTHER ACTIVITIES

Dussafu Project - Gabon (Dussafu PSC)

Operational activities during the three months ended September 30, 2013
included continuation of planning for a cluster field development.
Geoscience, reservoir engineering and economic studies have been progressed,
and a field development plan is progressing Acquisition of a 1,260 square
kilometer 3D seismic survey commenced in October 2013, and the first high
quality seismic products are expected to be available during the second
quarter of 2014. The survey will provide the first 3D coverage over the
outboard, where significant pre-salt prospectivity has been recognized on 2D
data. The pre-salt is currently the focus of deep water exploration activity
offshore Gabon. The new 3D seismic data will also enhance the placement of
future development wells in the Ruche and Tortue development program.

On September 27, 2013, HNR Global Holding B.V., an indirect wholly-owned
subsidiary of the Company, entered into exclusive negotiations with Vitol S.A.
to sell Harvest Dussafu B.V., which holds the Company's 66.67% interest in the
Dussafu PSC, for $137.0 million in cash. Net proceeds from the sale are
estimated to be approximately $121.8 million after deductions for $3.5 million
in transaction related costs and $11.7 million in taxes.

Budong-Budong PSC - Indonesia

Operational activities during the three months ended September 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.

Colombia

Harvest received notices of default from our partners for failing to comply
with certain terms of the farmout agreements for Block VSM 14 and Block VSM
15. Also approvals from the government of the Republic of Colombia in
connection with our interest remain pending. The Company is discussing this
situation with our partners to see how we may be able to cure these defaults
and reform the agreements. Unless the Company is successful at doing so, our
partners may terminate the farmout agreements, and Harvest would relinquish
our interests in the Blocks. After evaluating these circumstances, the
Company determined that it was appropriate to fully impair the costs
associated with these interests, and we recorded an impairment charge of $2.3
million during the three months ended September 30, 2013.

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 Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2013 and 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

The Company will hold a conference call at 10:00 a.m. CT on Tuesday,
November12, 2013, during which management will discuss Harvest's 2013 third
quarter results. To access the conference call, dial 800-533-7954 or
785-830-1924, five to ten minutes prior to the start time. At that time you
will be asked to provide the passcode, which is 8070567. A recording of the
conference call will also be available for replay at 719-457-0820, passcode
8070567, through 5:00 p.m. Friday, November 15, 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 September 30, 2013
Quarterly Report on Form 10-Q, 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 CONDENSED BALANCE SHEETS
(in thousands)
                                      September 30,      December 31,
                                      2013               2012
                                      (unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents             $      3,926  $    72,627
Restricted cash                       84                 1,000
Accounts receivable, net              1,860              2,955
Advances to equity affiliate          -                  656
Deferred income taxes                 821                821
Prepaid expenses and other            890                1,460
TOTAL CURRENT ASSETS                  7,581              79,519
OTHER ASSETS                          6,258              7,613
LONG-TERM RECEIVABLE–EQUITY AFFILIATE 14,947             14,346
INVESTMENT IN EQUITY AFFILIATE        495,643            412,823
PROPERTY AND EQUIPMENT, NET           106,855            82,536
TOTAL ASSETS                          $    631,284    $   596,837
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable, trade and other     $      3,458  $     3,970
Accrued expenses                      9,941              30,748
Accrued interest                      2,569              624
Income taxes payable                  85                 102
Other current liabilities             1,209              3,538
Total current liabilities             17,262             38,982
LONG-TERM DEBT                        76,793             74,839
EMBEDDED DERIVATIVE –DEBT             3,487              -
WARRANT DERIVATIVE LIABILITY          4,757              5,470
OTHER LONG-TERM LIABILITIES           640                1,108
COMMITMENTS AND CONTINGENCIES
EQUITY
STOCKHOLDERS' EQUITY:
Common stock and paid-in capital      266,323            264,104
Retained earnings                     214,962            181,378
Treasury stock                        (66,217)           (66,145)
TOTAL HARVEST STOCKHOLDERS' EQUITY    415,068            379,337
NONCONTROLLING INTEREST               113,277            97,101
TOTAL EQUITY                          528,345            476,438
TOTAL LIABILITIES AND EQUITY         $    631,284    $   596,837



HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data, unaudited)
                                Three Months Ended      Nine Months Ended
                                September 30,           September 30,
                                2013        2012        2013        2012
EXPENSES:
Depreciation and amortization  $    83  $    98  $   257  $   292
Exploration expense             1,486       1,789       5,890       5,163
Impairment expense              2,277       -           2,277       -
Dry hole costs                  -           -           -           767
General and administrative      8,244       4,810       19,325      16,462
                                12,090      6,697       27,749      22,684
LOSS FROM OPERATIONS            (12,090)    (6,697)     (27,749)    (22,684)
OTHER NON-OPERATING INCOME
(EXPENSE):
Investment earnings and other   116         82          280         231
Unrealized gain (loss) on       (6,559)     249         (2,774)     (960)
derivatives
Interest expense                (1,152)     (19)        (3,417)     (145)
Debt conversion expense         -           (946)       -           (3,348)
Other non-operating expenses    (38)        (1,078)     (651)       (2,801)
Foreign currency transaction    (131)       (22)        (222)       (75)
loss
                                (7,764)     (1,734)     (6,784)     (7,098)
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES             (19,854)    (8,431)     (34,533)    (29,782)
INCOME TAX EXPENSE (BENEFIT)    (765)       1,723       (2,141)     (519)
LOSS FROM CONTINUING OPERATIONS
BEFORE NET INCOME FROM EQUITY   (19,089)    (10,154)    (32,392)    (29,263)
AFFILIATE
NET INCOME FROM EQUITY          25,747      20,299      82,820      60,024
AFFILIATE
NET INCOME FROM CONTINUING      6,658       10,145      50,428      30,761
OPERATIONS
DISCONTINUED OPERATIONS         (12)        (344)       (668)       (7,913)
NET INCOME                      6,646       9,801       49,760      22,848
LESS: NET INCOME ATTRIBUTABLE
TO NONCONTROLLING INTEREST      4,693       4,050       16,176      11,912
NET INCOME ATTRIBUTABLE TO      $ 1,953    $ 5,751    $ 33,584    $ 10,936
HARVEST
NET INCOME ATTRIBUTABLE TO
HARVEST PER
COMMON SHARE:
Basic:
Net income from continuing      $  0.05   $  0.16   $   0.88  $   0.51
operations
Discontinued operations         (0.00)      (0.01)      (0.02)      (0.21)
Net income attributable to      $  0.05   $  0.15   $   0.86  $   0.30
Harvest
Diluted:
Net income from continuing      $  0.05   $  0.16   $   0.87  $   0.51
operations
Discontinued operations         (0.00)      (0.01)      (0.02)      (0.21)
Net income attributable to      $  0.05   $  0.15   $   0.85  $   0.30
Harvest
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic                           39,362      38,067      39,192      36,780
Diluted                         39,418      38,780      39,318      37,014



HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
                                               Nine Months Ended September 30,
                                               2013               2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                     $ 49,760           $ 22,848
Adjustments to reconcile net income to net
cash
used in operating activities:
Depreciation and amortization                  270                316
Dry hole costs                                 -                  5,617
Impairment expense                             2,277              -
Amortization of debt financing costs           1,102              377
Amortization of discount on debt               1,954              -
Foreign currency transaction loss on           436                -
revaluation
Debt conversion expense                        -                  2,758
Allowance for account and note receivable      -                  5,180
Write-off of accounts payable, carry           -                  (3,596)
obligation
Net income from equity affiliate               (82,820)           (60,024)
Share-based compensation-related charges       2,097              2,809
Unrealized loss on derivatives                 2,774              960
Changes in operating assets and liabilities:
Accounts receivable                            1,095              9,086
Prepaid expenses and other                     570                (1,693)
Other assets                                   468                (984)
Accounts payable                               (512)              (6,429)
Accrued expenses                               (6,248)            (1,830)
Accrued interest                               (147)              (1,329)
Other current liabilities                      (2,329)            -
Other long-term liabilities                    (468)              146
Income taxes payable                           (17)               862
NET CASH USED IN OPERATING ACTIVITIES          (29,738)           (24,926)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment            (39,177)           (14,733)
Advances to equity affiliate                   (381)              (302)
Restricted cash                                916                1,200
NET CASH USED IN INVESTING ACTIVITIES          (38,642)           (13,835)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuances of common stock    122                700
Treasury stock                                 (72)               -
Financing costs                                (371)              (466)
NET CASH PROVIDED BY (USED IN )
FINANCING ACTIVITIES                           (321)              234
NET DECREASE IN CASH AND CASH EQUIVALENTS      (68,701)           (38,527)
CASH AND CASH EQUIVALENTS AT BEGINNING OF      72,627             58,946
PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD     $  3,926          $ 20,419



PETRODELTA, S. A.
STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
                             Three Months Ended September 30,
                             2013                        2012
                                           $/BOE - net                 $/BOE -
                                                                       net
Barrels of oil sold         3,839                       3,512
MCF of gas sold              598                         412
Total BOE                   3,939                       3,581
Total BOE - Net of 33%       2,626                       2,387
Royalty
Average price/barrel         $   93.43                 $   92.43
Average price/mcf            $    1.54                $    1.54
REVENUES:
Oil sales                    $ 358,692                   $ 324,608
Gas sales                    923                         635
Royalty                      (119,259)                   (108,371)
                             240,356       $   91.53  216,872       $  
                                                                       90.85
EXPENSES:
Operating expenses           25,641        9.76          34,246        14.35
Workovers                    10,476        3.99          2,855         1.20
Depletion, depreciation,     23,096        8.80          22,238        9.32
amortization
General and administrative   6,092         2.32          5,418         2.26
Windfall profits tax         67,751        25.80         71,982        30.15
                             133,056       50.67         136,739       57.28
INCOME FROM OPERATIONS       107,300       40.86         80,133        33.57
Investment earnings and      7             -             2             -
other
Foreign currency transaction 11,634        4.43          -             -
gain
Interest expense             (3,238)       (1.23)        (2,975)       (1.25)
Income before income tax     115,703       44.06         77,160        32.32
Current income tax expense   61,523        23.43         32,678        13.69
Deferred income tax benefit  (42,453)      (16.17)       (1,237)       (0.52)
NET INCOME                   96,633        $   36.80  45,719        $  
                                                                       19.15
Adjustment to reconcile to
reported net income from
equity affiliate:
Deferred income tax expense  26,337                      (2,501)
(benefit)
Sports Law under(over)       184                         (168)
accrual
Net income equity affiliate  70,112                      48,388
Equity interest in equity    40%                         40%
affiliate
Income before amortization
of excess basis in equity    28,044                      19,355
affiliate
Conform depletion expense to (1,230)                     1,511
US GAAP, net of tax
Amortization of excess basis (1,067)                     (567)
in equity affiliate
Net income from equity       $  25,747                  $  20,299
affiliate
Non-GAAP Financial Measures:
Reconcile NET INCOME as reported under
IFRS to adjusted EBITDA:
NET INCOME                   $  96,633    $   36.80  $  45,719    $  
                                                                       19.15
Add back non-cash items:
Depletion, depreciation and  23,096        8.80          22,238        9.32
amortization
Deferred income tax benefit  (42,453)      (16.17)       (1,237)       (0.52)
Foreign currency transaction (11,634)      (4.43)        -             -
gain
CASH FROM OPERATIONS         65,642        25.00         66,720        27.95
Investment earnings and      (7)           -             (2)           -
other
Interest expense             3,238         1.23          2,975         1.25
Current income tax expense   61,523        23.43         32,678        13.69
Adjusted EBITDA              $ 130,396     $   49.66  $ 102,371     $  
                                                                       42.89
Harvest 32% of Adjusted      $  41,727    $   15.89  $  32,759    $  
EBITDA                                                                13.72



PETRODELTA, S. A.
STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
                             Nine months Ended September 30,
                             2013                        2012
                                           $/BOE - net                 $/BOE -
                                                                       net
Barrels of oil sold         10,677                      9,810
MCF of gas sold              1,973                       1,536
Total BOE                   11,006                      10,066
Total BOE - Net of 33%       7,338                       6,711
Royalty
Average price/barrel         $   92.73                 $   98.63
Average price/mcf            $    1.54                $    1.54
REVENUES:
Oil sales                    $ 990,104                   $ 967,579
Gas sales                    3,046                       2,369
Royalty                      (329,021)                   (321,807)
                             664,129       $   90.51  648,141       $  
                                                                       96.58
EXPENSES:
Operating expenses           88,310        12.03         75,890        11.31
Workovers                    18,929        2.58          11,912        1.77
Depletion, depreciation,     64,430        8.79          61,878        9.22
amortization
General and administrative   18,176        2.48          15,345        2.29
Windfall profits tax         185,725       25.31         231,407       34.48
                             375,570       51.19         396,432       59.07
INCOME FROM OPERATIONS       288,559       39.32         251,709       37.51
Investment earnings and      10            -             4             -
other
Foreign currency transaction 193,020       26.30         -             -
gain
Windfall profits tax credit  36,371        4.96          -             -
Interest expense             (9,163)       (1.25)        (7,578)       (1.13)
Income before income tax     508,797       69.33         244,135       36.38
Current income tax expense   243,260       33.15         106,016       15.80
Deferred income tax benefit  (83,563)      (11.39)       (32,121)      (4.79)
NET INCOME                   349,100       47.57         170,240       25.37
Adjustment to reconcile to
reported net income from
equity affiliate:
Deferred income tax benefit  83,957                      25,798
Reversal of windfall profits 36,371                      -
tax credit
Sports Law under(over)       (4)                         (933)
accrual
Net income equity affiliate  228,776                     145,375
Equity interest in equity    40%                         40%
affiliate
Income before amortization
of excess basis in equity    91,510                      58,150
affiliate
Conform depletion expense to (6,101)                     3,468
US GAAP, net of tax
Amortization of excess basis (2,589)                     (1,594)
in equity affiliate
Net income from equity       $  82,820                  $  60,024
affiliate
Non-GAAP Financial Measures:
Reconcile NET INCOME as
reported under IFRS to
adjusted EBITDA:
NET INCOME                   $ 349,100     $   47.57  $ 170,240     $  
                                                                       25.37
Add back non-cash items:
Depletion, depreciation and  64,430        8.79          61,878        9.22
amortization
Deferred income tax benefit  (83,563)      (11.39)       (32,121)      (4.79)
Foreign currency transaction (193,020)     (26.30)       -             -
gain
Windfall profit tax credit
(net of tax) (non-recurring  (36,371)      (4.96)        -             -
item)
CASH FROM OPERATIONS         100,576       13.71         199,997       29.80
Investment earnings and      (10)          -             (4)           -
other
Interest expense             9,163         1.25          7,578         1.13
Current income tax expense   243,260       33.15         106,016       15.80
Adjusted EBITDA              $ 352,989     $   48.11  $ 313,587     $  
                                                                       46.73
 Harvest 32% of Adjusted   $ 112,956     $   15.40  $ 100,348     $  
EBITDA                                                                14.95

SOURCE Harvest Natural Resources, Inc.

Website: http://www.harvestnr.com
 
Press spacebar to pause and continue. Press esc to stop.