Harvest Natural Resources (ticker: HNR) announced on October 21, 2010 a 26% increase in proved and probable oil reserves volumes associated with its 32% indirect owned Venezuelan affiliate Petrodelta, S.A. The increase is based on a new reserve report for the El Salto field, one of six properties operated by Petrodelta. Proved reserves at El Salto net to Harvest are now 50.4 million barrels of oil (MMBO), up 10% from last year, while the 2P oil reserves net to Harvest now stand at 103.0 MMBO, an increase of 26% over the same period. Estimated net present value of future net income (before tax) relating to 2P reserves from the El Salto Field has increased to $1.456 billion, net to Harvest, an increase of 95% from year-end 2009. Petrodelta commissioned the new reserves report, prepared by an independent petroleum engineering firm, at Harvest’s request.
The increase in proved reserves is a result of the successful completion of three oil producing wells in the El Salto Field since June 2010 as part of Petrodelta’s appraisal and development drilling program. Petrodelta has two rigs working in the Uracoa, El Salto, Temblador and Isleno Fields in 2010, drilling both appraisal and development wells. As of August, Petrodelta was producing 25,000 barrels of oil per day.
Oil & Gas 360® Comments:
Although a world-class asset, the market has placed a significant discount on Harvest’s oil reserves in Venezuela for political risk. Although the news flow out of Venezuela has been overwhelmingly negative, reinforcing the tensions between that nation’s government and the United States, Venezuela remains one of the world’s top oil provinces. With estimated proved reserves of 172.3 billion barrels of oil, Venezuela holds 12.9% of the worlds proved oil reserves, second only to Saudi Arabia (Source: BP Statistical Review of World Energy, June 2010).
Harvest has been able to work pragmatically inside the country and focus on building the business, as evidenced by the company’s recent announcement of increases in proved reserves. Ever since Venezuela re-nationalized the oil and gas business in 2002, Harvest has taken proactive measures to diversify its portfolio outside the South American nation. Successful oil projects in the company’s Antelope project area in Utah have given Harvest new visible growth potential and more options for reinvesting the dividends received from Petrodelta. Harvest announced on September 27, 2010 retention of a financial advisor to assist the company in exploring strategic alternatives to enhance shareholder value. Since that time, the stock has outperformed the Amex Oil Index (XOI) by 25%.
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