(Harvest Natural Resources, Inc., 17.May.2016) — Harvest Natural Resources, Inc. announced 2016 first quarter earnings and provided an operational update.
Harvest reported a first quarter net loss of approximately $14.1 million, or $0.27 per diluted share, compared with a net loss of $5.6 million, or $0.13 per diluted share, for the same period last year. The first quarter results include exploration charges of $0.7 million, or $0.01 pre-tax per diluted share, and non-recurring items related to a loss on the change in fair value of warrant liabilities of $4.1 million, or $.08 pre-tax per diluted share and $5.2 million to fully reserve a note receivable from a related party, or $0.10 pre-tax per diluted share. Adjusted for exploration charges and the non-recurring items Harvest would have posted a first quarter net loss of approximately $4.1 million, or $0.08 per diluted share, before any adjustment for income taxes.
During the three months ended March 31, 2016, Petrodelta sold approximately 3.96 MMbbls for a daily average of 43,507 b/d, an increase of nine percent over the same period in 2015 and 3 percent lower than the previous quarter. Petrodelta sold 0.57 billion cubic feet (Bcf) of natural gas for a daily average of 6.2 million cubic feet per day (MMcf/d), decreasing 41 percent over the same period in 2015, and decreasing 31 percent over the previous quarter. Petrodelta’s current production rate is approximately 41,445 b/d.
During the first quarter of 2016, Petrodelta drilled and completed six development wells, five in the El Salto field and one in the Temblador field. Currently, Petrodelta is operating four drilling rigs and one workover rig and is continuing with infrastructure enhancement projects in the El Salto and Temblador fields.
Petrodelta’s production target for 2016 is projected to be approximately 42,965 b/d. The 2016 Petrodelta capital expenditures are expected to be approximately $242.8 million. Petrodelta expects to drill 19 oil wells during 2016.
Corporate
On January 4, 2016, HNR Finance provided a loan to CT Energia in the amount of $5.2 million under an 11.0 percent promissory note due 2019 (the CT Energia Note). The purpose of the loan is to provide CT Energia with collateral to obtain funds for one or more loans to Petrodelta that is 40 percent owned by HNR Finance and through which Harvest’s Venezuelan oil and natural gas interests are held. The loans to Petrodelta are to assist Petrodelta in satisfying its working capital needs and discharging its obligations. Interest on the CT Energia Note is due and payable on the first of each January and July, commencing July 1, 2016. The full amount outstanding, including any unpaid accrued interest, is due on January 4, 2019; however, HNR Finance’s sole recourse for payment of the principal amount of the loan is the payments of principal and interest from loans that CT Energia has made to Petrodelta. If and when CT Energia receives payments of principal or interest from loans it has made to Petrodelta, then those proceeds must be used to pay unpaid interest and principal under the CT Energia Note. All payments made by CT Energia to HNR Finance under the CT Energia Note must be made in U.S. Dollars.
The source of funds for HNR Finance’s $5.2 million loan to CT Energia was a capital contribution from Harvest Holding, which, in return, received the same aggregate amount of capital contributions from its shareholders, pro rata according to their equity interests in Harvest Holding. Of that aggregate amount of capital contributions, HNR Energia contributed $2.6 million, which was a capital contribution from Harvest. The management agreement the Company entered into with CT Energia also makes CT Energia a related party. During the three months ended March 31, 2016 we incurred $5.2 million to fully reserve the note receivable from CT Energia due to concerns related to the continuing deteriorating economic conditions in Venezuela.
On and effective April 1, 2016, the company and CT Energy executed a Second Amendment to the 15 percent Note. The second amendment eliminates the $1 million interest payment that would have been due and payable on April 1, 2016, and converts such amount, less applicable withholding tax, into additional principal, such that the new principal amount of the 15 percent Note was $27.0 million as of April 1, 2016.
On May 3, 2016, the company and CT Energy Holding executed and delivered a Third Amendment to the 15 percent Note. The Third Amendment increased the principal amount of the 15 percent Note to $30 million to reflect an additional loan of $3 million by CT Energy Holding to Harvest. Additionally, the Third Amendment converts the $1.1 million interest payment that would have been due and payable on July 1, 2016 less applicable withholding tax, into additional principal, such that the new principal amount of the 15 percent Note will be $31 million effective as of July 1, 2016.
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