Harvest Natural Resources, Inc., (ticker: HNR) headquartered in Houston, Texas, is an independent energy company with principal operations in Venezuela, exploration assets in Indonesia, West Africa, China and business development offices in Singapore and the United Kingdom.
HNR recently presented at EnerCom’s The Oil and Gas Conference 18® in Denver. Click here for the webcast.
Harvest Natural Resources, Inc. announced on September 11, 2013, it has entered into exclusive negotiations to sell its outstanding shares to Pluspetrol Venezuela S.A., an entity belonging to one of the leading exploration and production companies in Latin America. Under the proposed transaction, at closing, Pluspetrol would retain Harvest’s 32% interest in Petrodelta S.A., while Harvest’s non-Venezuelan assets would be contributed to a new company (SpinCo) that would be spun off to Harvest’s shareholders. SpinCo will be managed by Harvest’s current management team.
The total consideration for the proposed transaction with Pluspetrol is approximately $373 million, and includes the assumption of HNR’s long-term debt and certain other obligations. The negotiations will occur for a specified period to reach a definitive merger agreement. HNR stressed there is no assurance that these negotiations will result in the proposed transaction or any other transaction for the sale of Harvest or any of its assets. The closing is subject to approval by the Government of the Bolivarian Republic of Venezuela and HNR shareholders.
The remaining assets to be spun-off will include Harvest’s interest in Gabon, Indonesia, Colombia, and China, as the company continues its current process to maximize the value of these assets for its shareholders.
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.
Jason Wangler, Analyst for Wunderlich Securities, called the value “incremental,” according to a Reuter’s report by Swetha Gopinath. Wangler pointed out the deal is about 1.5 times the current enterprise value of the company, which is “great given the struggles the company faced in the last year or so trying to move the asset.”
The stock market agreed. HNR’s stock rose from $4.15 per share to $5.57 per share (an increase of 34%) after the announcement. The closing price on September 12, 2013 was $5.19 per share.
Harvest Natural Resources Executive Team Commentary
James A. Edmiston, President and CEO of Harvest, said: “In spite of the consistent, profitable growth of Petrodelta, Harvest has not received the corresponding dividends from free cash flow required to fund our diversification strategy. So, while our exploration programs have yielded significant success in Utah, Gabon and Indonesia, our uncompetitive cost of capital has placed our future growth possibilities at a distinct disadvantage. This proposed sale and spin-off affords the Company and its shareholders the ability to reap the benefits of our exceptional portfolio in the near term.”
Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.