Harvest Natural Resources, Inc., (ticker: HNR) headquartered in Houston, Texas, is an independent energy company with primary assets in Venezuela and exploration assets in Indonesia, West Africa and China.
Harvest announced its net oil sales for Q4’13 were 3,964 BOE, according to its earnings release on March 17, 2014. The sales, coming entirely from its assets in Venezuela (Harvest owns a 32% net interest in Petrodelta, a mixed operating company), are 15% higher when compared to Q4’12. Petrodelta’s current production rate is 43.8 MBOEPD gross. The venture is operating six rigs and which drilled and completed 13 wells in fiscal 2013. Total oil production for 2013 reached 39.8 MBOPD – an increase of 10% compared to 2012.
Venezuela Review
Harvest is in the midst of a two-phase process of selling off its Venezuela assets. The first phase, completed in December 2013, involved selling a portion of its 32% net equity stake in its Petrodelta affiliate for $125 million. As of December 16, 2013, HNR holds a 20.4% net equity interest in Petrodelta, pro forma for the divesture, and is in the process of completing the deal. The final step of the process involves the sale of HNR’s remaining stake in Petrodelta share for $275 million. The transaction must be approved by HNR shareholders and the Venezuelan government.
In a conference call following the release, Stephen Haynes, HNR’s Chief Financial Officer, said the company used proceeds from the December sale to eliminate the company’s long-term debt.
Shifting to Gabon
Company executives said further equity acquired from the Venezuela sales will be used to develop its assets in Gabon. A 702 square mile 3D seismic survey was completed in November 2013 and results from a pre-stack depth processing test are expected to be received in Q2’14. HNR currently holds 67% ownership in the region, with the remaining 33% piece belonging to Vitol S.A.
Source: HNR 2013 Presentation
No additional wells have been drilled in the venture and HNR is potentially seeking another partner in the play. James Edmiston, President and Chief Executive Officer of Harvest, said as many as 20 companies have inquired about joining the project and HNR will continue to evaluate its options for a suitable addition.
In a conference call following the release, HNR denied that the sole purpose of conducting a 3D shoot was to sell its leasehold.
“The simple point is that 3D is not going to detract from the value of that block,” Edmiston said. “We got good mapping, we’re 100% in terms of our drilling there… There’s four, five structures that we mapped up, 2D in the outboard I think with a mean risk number of somewhere on the order of 650 MMBO, which obviously from a size standpoint is dramatically larger than what we have.”
According to the Energy Information Association, Gabon produced 240 MBOPD in 2013 but is aiming to double its production following an offshore lease sale conducted in October 2013. Total S.A. (ticker: TOT) reported a discovery in August 2013 located in the deepwater presalt play. Geological similarities to Brazil’s offshore formations are a major selling point for future operations in Gabon.
Financial Results
HNR reported a loss of $122.7 million ($3.02 per share) for Q4’13. Adjusted for non-recurring fees and charges, HNR’s quarterly results would have been a net loss of $12.2 million ($0.33 per share). Included in the final financial results were exploration charges of $9.9 million, a $23.0 loss on the first tranche of the Venezuela asset sale and an income tax expense of $75.2 million related to tax liabilities from the Venezuela divestures. HNR reported total net loss of $77 .0 million for 2013. Excluding the non-recurring items, HNR’s net income for the fiscal year would have been $22.2 million ($0.56 per share).
The company is currently exploring options to sell its exploratory fields in both China and Indonesia. Operations offshore China are on a temporary hold due to political disputes in the region.
The company discontinued operations in both Colombia and Oman in 1H’13.
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