Harvest Natural Resources Announces 2014 Second Quarter Results

       Harvest Natural Resources Announces 2014 Second Quarter Results  PR Newswire  HOUSTON, Aug. 11, 2014  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    oDuring 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;   oPetrodelta'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    oOn March 26, 2014, the joint venture partners resolved that the four     discovered fields in the Ruche cluster are commercial;   oOn June 3, 2014, the Director General of Hydrocarbons (DGH) of Gabon and     the joint venture partners signed a Declaration of Commerciality (DOC);   oOn 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;   oOn July 18, 2014, the Ruche cluster Field Development Plan was submitted     to the DGH;   oContinued 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    oIn June of 2014, the joint interest partners decided to relinquish their     interest in Budong;  China    oOn 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 thefourth 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            103,873      108,013 method)  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:      487          487 80,000 shares); issued 48,666 shares at June 30, 2014 (December 31, 2013: 48,666 shares)  Additional paid-in capital                            277,672      276,083  Retained earnings                                     82,623       92,282  Treasury stock, at cost, 6,572 shares at June 30,     (66,316)     (66,222) 2014 (December 31, 2013: 6,551 shares)  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      (391)      —           (1,357)     — Harvest Holding  Unrealized gain on               —          —           —           3,785 derivatives  Interest expense                 (15)       (1,067)     (62)        (2,265)  Loss on extinguishment of        —          —           (4,749)     — debt  Foreign currency transaction     259        (183)       (210)       (91) gains (losses)  Other non-operating expenses     —          (141)       (220)       (613)                                    (147)      (1,273)     (6,594)     980 LOSS FROM CONTINUING OPERATIONS    (9,906)    (10,926)    (29,023)    (13,844) BEFORE INCOME TAXES INCOME TAX BENEFIT                (88)       (1,415)     (1,042)     (1,376) LOSS FROM CONTINUING OPERATIONS BEFORE EARNINGS FROM EQUITY        (9,818)    (9,511)     (27,981)    (12,468) AFFILIATE EARNINGS FROM EQUITY AFFILIATE     16,062     7,602       34,949      57,073 INCOME (LOSS) FROM CONTINUING      6,244      (1,909)     6,968       44,605 OPERATIONS DISCONTINUED OPERATIONS            (230)      (1,006)     (361)       (1,491) NET INCOME (LOSS)                  6,014      (2,915)     6,607       43,114 LESS: NET INCOME ATTRIBUTABLE      7,665      1,551       16,266      11,483 TO NONCONTROLLING INTERESTS NET INCOME (LOSS) ATTRIBUTABLE TO HARVEST [COMPREHENSIVE        $ (1,651)  $ (4,466)   $ (9,659)   $ 31,631 INCOME (LOSS)] BASIC EARNINGS (LOSS) PER SHARE:  Income (loss) from continuing  $ (0.03)   $ (0.09)    $ (0.22)    $ 0.85 operations  Discontinued operations          (0.01)     (0.03)      (0.01)      (0.04)  Basic earnings (loss) per      $ (0.04)   $ (0.12)    $ (0.23)    $ 0.81 share DILUTED EARNINGS (LOSS) PER SHARE:  Income (loss) from continuing  $ (0.03)   $ (0.09)    $ (0.22)    $ 0.84 operations  Discontinued operations          (0.01)     (0.03)      (0.01)      (0.04)  Diluted earnings (loss) per    $ (0.04)   $ (0.12)    $ (0.23)    $ 0.80 share  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      (3,540)       — Holding 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%      2,811                     2,384 Royalty 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     32,364         11.51      20,869        8.75 and amortization  General and                 3,080          1.10       4,703         1.97 administrative  Windfall profits tax        52,123         18.54      51,928        21.78  Windfall profits credit     55,168         19.63      —             — reversal                               208,731        74.26      119,025       49.92 INCOME FROM OPERATIONS        35,042         12.46      91,756        38.50 Gain (loss) on exchange       223            0.08       (5,335)       (2.24) rate Investment earnings and       301            0.11       2             — other 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          (5,558)        (1.98)     62,925        26.39 expense (benefit)  Deferred income tax         (9,460)        (3.37)     (44,488)      (18.66) benefit NET INCOME UNDER IFRS         42,289     $   15.05      64,811     $  27.20 Adjustments to increase (decrease) net income under IFRS:  Deferred income tax         (30,359)                  (33,973) expense  Depletion expense          (5,026)                   (7,948)  Windfall profits tax        55,168                    — credit reversal  Sports law over (under)     689                       (1,463) accrual  Net income under U.S.       62,761                    21,427 GAAP Equity interest in equity     40%                       40% affiliate Income before amortization of excess basis in equity     25,104                    8,571 affiliate  Amortization of excess basis in equity               (1,163)                   (969) affiliate  Earnings from equity affiliate excluded from       (7,879)                   — results of operations Earnings from equity affiliate included in       $ 16,062                  $ 7,602 income      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%      5,458                     4,712 Royalty 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     58,676         10.75      41,334        8.78 and amortization  General and                 9,645          1.77       13,483        2.86 administrative  Windfall profits tax        98,425         18.03      117,974       25.04  Windfall profits tax (credit) and reversal of      55,168         10.11      (55,168)      (11.71) credit                               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       614            0.11       1,402         0.30 other 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          46,760         8.57       200,534       42.56 expense  Deferred income tax         (32,698)       (5.99)     (41,110)      (8.72) benefit NET INCOME UNDER IFRS         90,752         16.62      252,467       53.58 Adjustments to increase (decrease) net income under IFRS:  Deferred income tax         (24,048)                  (38,823) expense  Depletion expense           (9,897)                   (12,178)  Windfall profits tax credit and (reversal) of      55,168                    (55,168) credit  Sports law over accrual     740                       188  Net income under U.S.       112,715                   146,486 GAAP Equity interest in equity     40%                       40% affiliate Income before amortization of excess basis in equity     45,086                    58,595 affiliate  Amortization of excess basis in equity               (2,258)                   (1,522) affiliate  Earnings from equity affiliate excluded from       (7,879)                   — results of operations Earnings from equity affiliate included in       $ 34,949                  $ 57,073 income      SOURCE Harvest Natural Resources, Inc.  Website: http://www.harvestnr.com  
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