Harvest Natural Resources, Inc. has announced a 2007 second quarter loss of $6.9 million, or $0.18 per diluted share, compared with a loss of $50.3 million, or $1.35 per diluted share, for the same period last year.
The Company has not been able to recognize the equity earnings for its producing operations in Venezuela since the 2006 second quarter. Equity earnings will be reported upon completion of the conversion to the mixed company, Petrodelta, S.A. (Petrodelta). The loss for the 2006 second quarter included a charge of $61 million for additional taxes and related interest primarily due to a retroactive tax rate increase imposed by the SENIAT, the Venezuelan income tax authority.
Harvest President and Chief Executive Officer, James A. Edmiston, said: "National Assembly approval of the formation of Petrodelta and the direct award by the Venezuelan government of the Isleno, Temblador and El Salto fields to Petrodelta in mid-June was a major milestone in the conversion process. Upon completion of the conversion, Petrodelta will invoice PDVSA for oil and gas delivered since April 1, 2006 and Harvest will be able to include its pro rata share of Petrodelta's earnings in its financial results."
Edmiston continued: "The business plan agreed between Harvest Vinccler and our partner, Corporacion Venezolana del Petroleo S.A. (CVP) is designed to maximize the value of Petrodelta's hydrocarbon resources by rapidly increasing oil and gas production, converting unproved reserves to proved reserves, and adding additional discovered reserves through exploration and capturing synergies and scale at all levels. We expect one workover rig and one drilling rig to be mobilized and begin in the Uracoa field early in the fourth quarter. An additional drilling rig is expected to start work later in the fourth quarter. A third drilling rig should begin appraisal drilling in the new fields in early 2008. We are very well positioned to benefit from the new structure with CVP and eagerly look forward to getting back to the work of producing the necessary oil that the global market demands."
Production from the South Monagas Unit
For the six months ended June 30, 2007, operating statistics (on a 100% basis) for the existing South Monagas Unit (SMU) operated by the Company's affiliate, Harvest Vinccler, S.C.A., are as follows:
• Production of 2.8 million barrels of oil and 6.7 billion cubic feet (Bcf) of natural gas. Average daily production was 15,700 barrels and 37 million cubic feet of natural gas, or 21,900 barrels of oil equivalent per day.
• Crude oil prices that would be paid if the conversion contract was in place cannot be calculated as one element of the pricing formula has not been set. Market prices for crude oil of the type produced in SMU averaged approximately $49.08 per barrel for the six months. The price for natural gas that would be paid under the conversion contract is $1.54 per thousand cubic feet.
• Taxes and royalties for Petrodelta will be 50 percent and 33 percent, respectively.
Authorization of Share Buyback Program
Edmiston said: "The Board of Directors recently authorized the purchase of up to $50 million of Harvest's common stock through open market purchase from time to time. The purchases will be funded with cash on hand and dividends from Petrodelta. Our large unrestricted cash position of $135 million at June 30 is available to fund the stock buyback program and fund organic growth oriented development and exploration acquisitions. The Board and management believe Harvest's stock is significantly undervalued and does not fully value the Petrodelta business prospects, the option value of our WAB-21 license in the South China Sea or our business development pipeline."