Harvest Natural Resources, Inc. (HNR, Financial)Â last month announced 2014 second-quarter earnings and provided an operational update. Harvest reported a second-quarter net loss of approximately $1.7 million, compared with a net loss of $4.5 million for the same period last year. The second-quarter results included exploration charges of $1.6 million and nonrecurring charges of $3.2 million in impairment costs related to the Budong Budong block. Adjusted for exploration charges and nonrecurring items, Harvest would have posted second-quarter net income of approximately $3.1 million, or $0.07 per diluted share, before any adjustment for income taxes.
Petrodelta, S.A. (Petrodelta), Harvest's Venezuelan affiliate, reported second-quarter operating income, before taxes and nonoperating items, of $35.0 million ($7.14 million net to Harvest's equity, under IFRS). Petrodelta reported net income for the second quarter of $42.3 million ($8.63 million net to Harvest's equity interest, under IFRS). After adjustments to Petrodelta's IFRS earnings, primarily to conform to US GAAP, Harvest's equity interest in Petrodelta's earnings was $8.2 million, compared to $6.1 million for the same period during 2013.
Highlights for the second quarter of 2014 include:
Venezuela
- During the second quarter of 2014, Petrodelta drilled and completed four development wells and sold approximately 4.1 million barrels of oil (MMBO) for a daily average of approximately 45,073 barrels of oil per day (BOPD), an increase of 18 percent over the same period in 2013;
- Petrodelta's current production rate is approximately 40,840 BOPD and the 2014 expected average production rate is 45,000 BOPD with capital expenditures projected at $350 million;
Gabon
- On March 26, 2014, the joint venture partners resolved that the four discovered fields in the Ruche cluster are commercial;
- On June 3, 2014, the Director General of Hydrocarbons (DGH) of Gabon and the joint venture partners signed a Declaration of Commerciality (DOC);
- On July 17, 2014, Gabon awarded an 850.5 square kilometer Exclusive Exploitation Authorization (EEA) for the development and exploitation of certain oil discoveries on the Dussafu Block;
- On July 18, 2014, the Ruche cluster Field Development Plan was submitted to the DGH;
- Continued processing the 3D survey acquired in the fourth quarter of 2013, which provides the first 3D coverage over the outboard portion of the block. The new 3D seismic data should also enhance the placement of future development wells in the Ruche and Tortue development program;
Indonesia
- In June of 2014, the joint interest partners decided to relinquish their interest in Budong;
China
- On July 3, 2014, the Company sold its entire interest in the WAB-21 block in the South China Sea for $3 million in cash.
Venezuela
During the second quarter ended June 30, 2014, Petrodelta sold approximately 4.1 MMBO for a daily average of 45,073 BOPD, an increase of 18 percent over the same period in 2013. Petrodelta also sold 0.68 billion cubic feet (BCF) of natural gas for a daily average of 7.5 million cubic feet per day (MMCFD). Petrodelta's current production rate is approximately 40,840 BOPD.
During the second quarter ended June 30, 2014, Petrodelta drilled and completed one development well in the Isleno Field, two development wells in the Temblador Field and one development well in the El Salto Field. Currently, Petrodelta is operating six drilling rigs and one workover rig and is continuing with infrastructure enhancement projects in the El Salto and Temblador Fields.
Petrodelta's production for 2014 is projected to be approximately 45,000 BOPD. The 2014 Petrodelta capital expenditures are expected to be approximately $350 million. Petrodelta expects to drill 19 oil wells during 2014.
The average sales price for crude oil produced during the quarter was approximately $88.77 per barrel.
Exploration and other activities:
Dussafu project – Gabon (Dussafu PSC)
Operational activities during the six months ended June 30, 2014 included continuation of planning for development of the Ruche cluster and preparation of a field development plan. Field development options have been evaluated and key and long-lead equipment has been identified. Geoscience, reservoir engineering and economic studies have progressed, and the joint venture partners resolved that the four discovered fields (Ruche, Tortue, Moubenga and Walt Whitman) are commercial at an operating committee meeting on March 26, 2014. A DOC was signed with the Gabonese Republic (Gabon) pertaining to these four oil discoveries on the Dussafu Block on June 3, 2014. Furthermore, on July 17, 2014, Gabon awarded an EEA for the development and exploitation of the oil resources within the EEA area which covers 850.5 square kilometers.
The company began reviewing the first high-quality seismic data from the 1,260-square kilometer of 3D seismic survey during the fourth quarter of 2013. The survey provides the first 3D coverage over the outboard portion of the block where significant presalt prospectivity has been already recognized on 2D seismic data. The presalt is currently the focus of deep water exploration activity offshore Gabon, and seven new exploration licenses close to Dussafu were awarded by Gabon on August 8, 2014. The new 3D seismic data should also enhance the placement of development wells in the Ruche and Tortue development program and the development of numerous undrilled structures identified within the EEA.
Budong Budong PSC – Indonesia:
In June 2014, we and our joint interest partner decided to relinquish our interest in Budong. We are working with the Indonesian government to complete the relinquishment which may take several months. As a result of these actions, the Company recognized a further charge of $3.2 million during the three months ended June 30, 2014, related to drilling obligations incurred in connection with the December 2012 acquisition of an additional 7.1 percent interest from our joint interest partner.
