EX-99.1 2 exhibit1.htm EX-99.1 EX-99.1

FOR IMMEDIATE RELEASE

HARVEST NATURAL RESOURCES ANNOUNCES

SECOND QUARTER 2007 RESULTS

HOUSTON, Texas (July 25, 2007) – Harvest Natural Resources, Inc. (NYSE: HNR) today announced 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 Isleño, 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, Corporación 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

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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.”

Conference Call

Harvest will hold an earnings conference call today at 10:00 a.m. Central Time to discuss 2007 second quarter results. To access the call, dial 785-830-1916, conference ID: Harvest, five to ten minutes prior to the start time. A recording of the conference call will also be available for replay at 402-220-4971. To listen to the live webcast of the call, please visit our website at www.harvestnr.com.

About Harvest Natural Resources

Harvest Natural Resources, Inc. headquartered in Houston, Texas, is an independent energy company with principal operations in Venezuela and business development offices in Russia and the United Kingdom. For more information visit the Company’s website at www.harvestnr.com.

CONTACT:
Steven W. Tholen
Senior Vice President, Chief Financial Officer
(281) 899-5714

“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 2006 Annual Report on Form 10-K and other public filings.”

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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
($ thousands, unaudited)
                                        June 30,   December 31,
                                        2007   2006
ASSETS:
                                                        
 
                                                        
CURRENT ASSETS:
                                                        
    Cash and equivalents                           $ 135,705     $ 148,079  
 
   Restricted cash                                     24,197       15,888  
    Accounts receivable, net                             9,482       9,811  
    Advances to provisional equity affiliate                     15,366       19,146  
    Deferred income taxes                             5,608       5,608  
    Prepaid expenses and other                             1,084       1,246  
 
                                                        
            Total current assets                     191,442       199,778  
 
                                                        
RESTRICTED CASH
                                             51,097       73,001  
OTHER ASSETS
                                             181       176  
INVESTMENT IN EQUITY AFFILIATE
                                     4,415       -  
INVESTMENT IN PROVISIONAL EQUITY AFFILIATE
                             146,436       146,436  
 
                                                        
PROPERTY AND EQUIPMENT, net
                                     3,309       3,320  
 
                                                        
 
                                                        
 
                   TOTAL ASSETS                   $ 396,880     $ 422,711  
 
                                                        
 
                                                        
LIABILITIES AND STOCKHOLDERS’ EQUITY:
                                                
 
                                                
CURRENT LIABILITIES:
                                                
    Accounts payable, trade and other                           $ 3,473     $ 3,827  
    Accounts payable, related party                             9,867       9,637  
 
   Accrued expenses                                     8,557       12,975  
 
   Accrued interest                                     6,537       6,850  
 
   Deferred revenue                                     11,217       11,217  
    Income taxes payable                             73       34  
    Current portion of long-term debt                             47,442       37,674  
 
                                                        
            Total current liabilities                     87,166       82,214  
 
                                                        
LONG TERM DEBT
                                             47,907       66,977  
 
                                                        
COMMITMENTS AND CONTINGENCIES
                                     -       -  
MINORITY INTEREST
                                             27,261       28,634  
 
                                                        
STOCKHOLDERS’ EQUITY:
                                                
    Common stock and paid-in capital                             197,424       194,556  
 
   Retained earnings                                     40,771       54,174  
 
   Treasury stock                                     (3,649 )     (3,844 )
 
                                                        
            Total stockholders’ equity                     234,546       244,886  
 
                                                        
 
                                                        
                            TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 396,880     $ 422,711  
-     -       -                              

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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
THREE MONTHS ENDED:
   June 30, 2007   June 30, 2006
 
                
 
                
Barrels of oil sold
                
MMCF of gas sold
                
Total BOE
                
Average price/barrel
                
Average price/mcf
                
 
                
 
                
 
                
REVENUES:
                
Oil sales
           $ 327  
Gas sales
             7  
 
             334  
 
                
EXPENSES:
                
Operating expenses
             672  
Depreciation
   $ 17       70  
General and administrative
     7,596       6,876  
Taxes other than on income
     185       178  
 
     7,798       7,796  
 
                
LOSS FROM OPERATIONS
     (7,798 )     (7,462 )
 
                
 
                
OTHER NON-OPERATING INCOME (EXPENSE)
                
Investment earnings and other
     2,847       2,320  
Interest expense
     (2,466 )     (15,735 )
Net loss on exchange rates
     (28 )     (4 )
 
     353       (13,419 )
 
                
LOSS BEFORE INCOME TAXES AND
                
MINORITY INTERESTS
     (7,445 )     (20,881 )
Income tax expense
     52       40,810  
 
                
LOSS BEFORE MINORITY INTERESTS
     (7,497 )     (61,691 )
Minority interest in consolidated subsidiary companies
     (736 )     (11,409 )
 
                
LOSS FROM CONSOLIDATED COMPANIES
     (6,761 )     (50,282 )
Net loss from unconsolidated equity affiliate
     (137 )     —  
 
                
NET LOSS
     ($6,898 )     ($50,282 )
 
                
 
                
NET LOSS PER COMMON SHARE:
                
Basic
     ($0.18 )     ($1.35 )
Diluted
     ($0.18 )     ($1.35 )
 
                
Weighted average shares outstanding:
                
Basic
     37.6       37.2  
Diluted
     37.6       37.2  
 
                
                 
HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
SIX MONTHS ENDED:
   June 30, 2007   June 30, 2006
 
                
 
                
Barrels of oil sold
             1,894  
MMCF of gas sold
             4,506  
Total BOE
             2,645  
Average price/barrel
           $ 28.96  
Average price/mcf
           $ 1.03  
 
                
 
                
REVENUES:
                
Oil sales
           $ 54,858  
Gas sales
             4,648  
 
                
 
             59,506  
 
                
EXPENSES:
                
Operating expenses
             9,241  
Depletion and amortization
             9,918  
Depreciation
   $ 298       458  
General and administrative
     14,029       13,745  
Taxes other than on income
     422       2,577  
 
                
 
     14,749       35,939  
 
                
INCOME (LOSS) FROM OPERATIONS
     (14,749 )     23,567  
 
                
 
                
OTHER NON-OPERATING INCOME (EXPENSE)
                
Investment earnings and other
     5,234       4,381  
Interest expense
     (4,947 )     (15,854 )
Net gain (loss) on exchange rates
     28       (6 )
 
                
 
     315       (11,479 )
 
                
INCOME BEFORE INCOME TAXES AND
                
MINORITY INTERESTS
     (14,434 )     12,088  
Income tax expense
     166       55,572  
 
                
LOSS BEFORE MINORITY INTERESTS
     (14,600 )     (43,484 )
Minority interest in consolidated subsidiary companies
     (1,373 )     (7,070 )
 
                
LOSS FROM CONSOLIDATED COMPANIES
     (13,227 )     (36,414 )
Equity in net losses of affiliated companies
     (176 )     —  
 
                
NET LOSS
     ($13,403 )     ($36,414 )
 
                
 
                
NET LOSS PER COMMON SHARE:
                
Basic
     ($0.36 )     ($0.98 )
Diluted
     ($0.36 )     ($0.98 )
 
                
Weighted average shares outstanding:
                
Basic
     37.5       37.1  
Diluted
     37.5       37.1  
 
                

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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
                    Three Months Ended June 30,   Six Months Ended June 30,
                    2007   2006   2007   2006
Cash Flows From Operating Activities:
                                        
 
   Net loss             ($6,898 )     ($50,282 )     ($13,403 )     ($36,414 )
    Adjustments to reconcile net loss to net cash provided by (used in) operating                                
 
   activities:                                        
 
           Depletion, depreciation and amortization     17       70       298       10,376  
 
           Net loss from unconsolidated equity affiliate     137       –       176       —  
 
           Non-cash compensation-related charges     1,436       1,476       2,898       2,524  
 
           Minority interest in consolidated subsidiary     (736 )     (11,409 )     (1,373 )     (7,070 )
 
           companies                                
 
           Deferred income taxes     —       (2,557 )     —       (2,557 )
    Changes in operating assets and liabilities:                                
 
           Accounts and notes receivable     327       56,538       329       58,860  
 
           Advances to provisional equity affiliate     1,857       (9,186 )     3,780       (9,186 )
 
           Prepaid expenses and other     (32 )     369       162       705  
 
           Accounts payable     1,353       (345 )     (354 )     3,044  
 
           Accounts payable, related party     116       139       230       233  
 
           Accrued expenses     423       (3,685 )     (4,504 )     (9,270 )
 
           Accrued interest     602       15,583       (313 )     15,628  
 
           Deferred revenue     —       2,241       —       4,489  
 
           Asset retirement liability     —       —       —       24  
 
           Income taxes payable     13       40,955       39       35,628  
 
                                                
 
           Net Cash Provided By (Used In) Operating                                
 
           Activities     (1,385 )     39,907       (12,035 )     67,014  
 
                                                
Cash Flows From Investing Activities:
                                        
    Additions of property and equipment     (16 )     (15 )     (287 )     (1,473 )
 
   Investment in equity affiliated             —       —       (4,591 )     —  
    Investment in provisional equity affiliate     -       (347 )     -       (347 )
 
   Decrease in restricted cash             453       —       13,595       —  
 
   Investment costs             21       634       (5 )     539  
     Net Cash Provided By (Used In) Investing Activities     458       272       8,712       (1,281 )
-                                    
Cash Flows From Financing Activities:
                                        
    Net proceeds from issuances of common stock     251       834       251       849  
 
   Payments of rates payable             (2,325 )     —       (9,302 )     (2,884 )
 
                                                
    Net Cash Provided By (Used In) Financing Activities     (2,074 )     834       (9,051 )     (2,035 )
-                                    
 
           Net Increase (Decrease) in Cash     (3,001 )     41,013       (12,374 )     63,698  
Cash and Cash Equivalents at Beginning of Period
             138,706       185,704       148,079       163,019  
 
                                                
Cash and Cash Equivalents at End of Period
           $ 135,705     $ 226,717     $ 135,705     $ 226,717  
 
                                        

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