Harvest Natural Resources, Inc., (ticker: HNR) headquartered in Houston, Texas, is an independent energy company with primary assets in Venezuela, exploration assets in Indonesia, West Africa, China and business development offices in Singapore and the United Kingdom.
On September 30, 2013, Harvest announced it has entered into exclusive negotiations with Vitol S.A. to sell its 66.667% interest in its offshore Gabon asset for $137.0 million in cash. Vitol is a Swiss-based, Dutch-owned private company involved in physical trading of oil, oil transportation (shipping) and upstream. According to the company’s website, Vitol operated production is about 10,000 BOEPD and has approximately 340 MMBOE in proved plus probable (2P) reserves. Vitol’s core upstream assets are located in West Africa (i.e., Ghana, Cameroon, Nigeria and the Ivory Coast) and the Former Soviet Union (i.e., Russia, Azerbaijan, Kazakhstan and Ukraine).
Harvest estimates that the sale of its Dussafu Marine Permit PSC in Gabon will bring net proceeds of $123.0 million after transaction costs and taxes. The sale is subject to the approval of the Government of Gabon and the boards of directors of both companies.
The Gabon sale announcement comes on the heels of Harvest’s announcement on September 11, 2013 that it had entered negotiations to sell its Venezuelan oil and gas assets to Pluspetrol Venezuela S.A. The proposed sale, at closing, calls for Pluspetrol to pay approximately $373 million for HNR’s 32% stake in Petrodelta S.A., including the assumption of long-term debt and other obligations.
We estimate that the net proceeds from the Gabon and Venezuela sales are $3.11 and $9.44 per share, respectively. If we deduct $1.92 per share of debt (HNR had $76 million of outstanding debt as of June 30, 2013) the sales would bring in a net $10.63 per share.
OAG360 notes that shares of HNR closed at $5.09 on September 30, 2013.
The effective date of the transaction will be October 1, 2013, and is subject to agreed adjustments.
The two pending sales would provide HNR an immediate influx in cash, the ability to off its debt (approximately $76 million as of Q2’13), and the opportunity to redistribute as much as $9.00 per share in cash to shareholders (according to Jason Wangler at Wunderlich Securities) and refocus its exploration efforts on other areas (possibly Colombia).
Keep in mind, the closings are subject to approval by HNR shareholders, as well as the respective governments of Venezuela and Gabon. OAG360 points out that government approval can be a difficult process. The company’s previous attempt to sell its Petrodelta ownership was denied in February 2013. A $725 million proposal involving Indonesia’s state oil company PT Pertamina was terminated by the Indonesian government.
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