Harvest Natural Resources, Inc. has announced 2005 third quarter earnings of $8.1 million, or $0.21 per diluted share. These results compare with a net income of $5.3 million, or $0.14 per diluted share, for the same period last year. Net income for the nine months ended September 30, 2005 was $40.3 million, or $1.05 per diluted share, compared with $19.1 million, or $0.50 per diluted share, for the same period last year.
Operating cash flow (defined as cash flows from operating activities before changes in operating assets and liabilities) was $26.2 million for the 2005 third quarter compared with $19.7 million for the 2004 third quarter. Operating cash flow for the nine months ended September 30, 2005 was $91.2 million, compared with the $55.2 million for the same period last year.
Production for the 2005 third quarter was 2.1 million barrels of oil and 6.3 billion cubic feet (Bcf) of natural gas for a combined total production of 3.1 million barrels of oil equivalent. Production for the first nine months of 2005 was 10.1 million barrels of oil equivalent including 6.7 million barrels of oil and 20.1 Bcf of gas. Production totals for the same period in 2004 were 3.2 million and 9.7 million barrels of oil equivalent respectively.
Harvest President and Chief Executive Officer, James A. Edmiston, said, "The financial results for the first nine months of the year reflect over 100 percent increase in earnings largely due to increased oil prices. We expect fourth quarter oil production to average about 21,500 barrels of oil per day. Our development drilling program remains suspended due to delay in issuing permits. Absent such drilling, the fields will continue to decline."
Edmiston continued, "HVCA entered into a Transitory Agreement with PDVSA which provides that the parties undertake to negotiate in good faith the terms and conditions for the conversion of our Operating Service Agreement into a Mixed Company. We have had a number of discussions in the last few months with the Ministry of Energy and Petroleum and with PDVSA and remain hopeful that we can reach a mutual agreement with the government of Venezuela on the conversion to the Mixed Company while preserving the value of our investment."
During the third quarter, Harvest Vinccler, C.A. (HVCA), the Company's 80 percent owned Venezuelan subsidiary, signed a Transitory Agreement. The Transitory Agreement reduced the fee received for the delivery of oil to PDVSA retroactively to January 1, 2005. In addition, HVCA partially paid Venezuelan income taxes related to the preliminary tax assessment for years 2001 through 2004. The net impact of these adjustments after tax and minority interest reduced net income for the third quarter by $8.7 million.
The Company averaged $26.47 per barrel of oil for 2005 third quarter deliveries, an increase of $6.60 per barrel, compared with the $19.87 per barrel average for the same period last year. The average for the nine months ended September 30, 2005 was $23.48 per barrel of oil, an increase of $5.60 per barrel, compared with the $17.88 per barrel average for the same period in 2004. The Company receives $1.03 per thousand cubic feet of natural gas delivered to PDVSA.
Compared with the same period last year, operating expenses for the 2005 nine month period increased $4.2 million primarily due to higher production volumes, higher insurance costs and increased maintenance work while the drilling program is suspended. Interest expense includes a $2.5 million accrual related to the partial income tax payments of $5.3 million on the preliminary income tax assessment for the years 2001 through 2004 which is included in income tax expense.