Harvest
Natural Resources
announce reserves reduced
in Venezuela
and excellent
financials results for
2005
Petroleumworld
CARACAS
Petroleumworld.com
02 27 06
Harvest Natural Resources, Inc. today announced proved reserves
as of year-end 2005 were reduced to 36.1 million barrels of oil
equivalent due to actions taken by the Venezuelan government during
2005.
Harvest President and Chief Executive Officer, James A. Edmiston,
said, "Adjusted for prior asset sales, last year produced
the best financials results in the Company's history, yet we faced
continuing challenges in the pursuit of our Venezuelan strategy.
Net income rose to $50.8 million and operating cash flow increased
to $119.1 million, primarily as a result of attractive oil prices.
Oil deliveries benefited from the successful drilling program
that started during the second half of 2004 increasing production
to 29,000 barrels of oil per day (Bopd) by January 2005. However,
we were forced to suspend our development program in January 2005
due to actions taken by the Venezuelan government including the
refusal of PDVSA and the Ministry of Energy and Petroleum to grant
the necessary permits. Without the ability to drill new wells,
oil production and deliveries declined throughout 2005 to a year-end
level of 22,000 Bopd and our proved reserve estimates were negatively
impacted. Absent drilling, oil and gas deliveries will continue
to decline. We expect oil deliveries will average approximately
21,000 Bopd for the 2006 first quarter."
2005
fourth quarter earnings were in the order of $10.5 million, or
$0.27 per diluted share, compared with $15.3 million, or $0.39
per diluted share, for the same period last year. Net income for
2005 was $50.8 million or $1.32 per diluted share, compared with
2004 net income of $34.4 million, or $0.90 per diluted share.
Operating cash flow (defined as cash flows from operating activities
before changes in operating assets and liabilities) was $27.8
million for the 2005 fourth quarter compared with $31.1 million
for the 2004 fourth quarter. Operating cash flow was $119.1 million
for 2005 compared with $86.3 million for 2004. See reconciliation
to Generally Accepted Accounting Principles (GAAP) in table below.
Under Securities and Exchange Commission (SEC) standards, reserves
are classified as proved reserves if they are recoverable with
reasonable certainty under existing economic and operating conditions.
The economic and operating conditions which prevailed at year-end
in Venezuela and which continue to prevail today effectively prohibit
the Company from developing the reserves previously classified
as proved undeveloped. The necessary permits to drill wells have
not been granted nor does the Company have certainty the permits
will be granted in the future. Consequently, the undeveloped reserves
classified as proved undeveloped reserves at December 2004 no
longer meet the SEC standard for proved reserves with regard to
existing conditions. This has caused proved reserves to be reduced
by approximately 50 percent. See Proved Reserves table below.
The decline of proved reserves increased the Company's depletion
rate $0.75 per Boe from $2.99 per Boe to $3.74 per Boe for the
2005 fourth quarter and is expected to continue at this level
during 2006.
The discounted future net cash flows from proved reserves, as
mandated by the SEC, at year-end 2005, net to the Company's 80
percent interest, was $329 million compared with $545 million
at December 2004. The Company estimates the uncertainties caused
by the actions taken by the Venezuelan government related to future
development programs reduced the Company's 2005 year-end discounted
future net cash flows by approximately 60 percent.
In Venezuela, the Company's 80 percent owned Venezuelan affiliate,
Harvest Vinccler, C.A. (HVCA) delivered 8.8 million barrels of
oil, or 24,000 barrels of oil per day, and 25.7 billion cubic
feet (Bcf) of natural gas for combined total deliveries of 13.0
million barrels of oil equivalent (MMBoe), or 35,700 barrels of
oil equivalent per day to PDVSA during 2005. Deliveries for 2004
were 8.2 million barrels of oil and 31.1 Bcf of natural gas for
a combined deliveries total of 13.3 MMBoe.
In 2005, the Company received an average price of $24.02 per barrel
of oil which included the amortized cost of puts purchased in
2004 to hedge oil prices and the delivery of 0.6 million barrels
at an average price of $7.00 per barrel. The 2004 average sales
price for oil was $18.90 per barrel. The Company receives $1.03
per thousand cubic feet of natural gas sold.
Edmiston continued, "HVCA continues to operate under the
2005 Transitory Agreement with PDVSA and is negotiating the conversion
of our Operating Service Agreement to a Mixed Company. We believe
we are making progress and continue to cooperatively work with
Venezuelan officials toward that end. However, significant issues
remain unresolved and the ultimate outcome remains uncertain."
Edmiston concluded, "The Company received payment for last
quarter's deliveries of oil and gas and currently has cash of
approximately $180 million available to fund our diversification
efforts. We will use this cash to build a diversified portfolio
of assets in a number of countries that fit within our strategy.
We are pursuing opportunities in a number of areas including Russia,
the Confederation of Independent States, Middle East and Asia."
Harvest Natural Resources, Inc. headquartered in Houston, Texas,
is an independent oil and gas exploration and development company
with principal operations in Venezuela and an office in Russia.
For more information visit the Company's website at http://www.harvestnr.com
.
Petroleumworld
02 27 06
Copyright
© 2006 Petroleumworld. All rights reserved
