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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