Harvest Natural Resources Reports 3Q:16 Results

Instant Max AI

(Harvest Natural Resources, Inc., 9.Nov.2016) – Harvest Natural Resources, Inc. reported a third quarter 2016 net loss of approximately $7.1 million, or $0.55 per diluted share, compared with net income of $5.7 million, or $0.52 per diluted share, for the same period last year. The third quarter results include exploration charges of $0.6 million, or $0.05 pre-tax per diluted share, and transaction costs related to the sale of Harvest-Vinccler Dutch Holding B.V. of $1.8 million, or $0.14 pre-tax per diluted share. Adjusted for exploration charges and transaction costs, Harvest would have posted a third quarter net loss of approximately $4.7 million, or $0.36 per diluted share, before any adjustment for income taxes.

Sale of HNR Energia

On October 7, 2016, the company, and its wholly owned subsidiary, HNR Energia, completed the sale of all of HNR Energia’s 51% interest in Harvest Holding, to Delta Petroleum, pursuant to the Share Purchase Agreement. Harvest Holding owns, indirectly through wholly owned subsidiaries, a 40% interest in Petrodelta, S.A., a mixed company organized under Venezuelan law, through which all of the company’s interests in Venezuela were owned. Thus, under the Share Purchase Agreement, the company sold all of its interests in Venezuela to Delta Petroleum.

Delta Petroleum is an affiliate of CT Energy, which assigned all of its rights and obligations under the Share Purchase Agreement to Delta Petroleum on September 26, 2016.

At the closing, the company received consideration consisting of:

— $69.4 million in cash paid after various closing adjustments;

— an 11% non-convertible senior promissory note payable by Delta Petroleum to HNR Energia six months from the closing date in the principal amount of $12.0 million, guaranteed by the sole member and sole equity-holder of Delta Petroleum;

— the return of all of the company’s common stock owned by CT Energy, consisting of 8,667,597 shares (approximately 2,166,900 shares taking into account the November 3, 2016 one-for-four reverse stock split) which was approximately 16.8% of all outstanding shares pre-closing, to be held by the company as treasury shares;

— the cancellation of $30 million in outstanding principal under the 15% Note; and

— the cancellation of the CT Warrant.

At the closing, the outstanding principal and accrued interest totaling $38.9 million and $1.4 million, respectively, under both the 15% Note and the Additional Draw Note, were repaid, net of withholding tax, as a closing adjustment to cash, and the 15% Note and Additional Draw Note were terminated. To fund Harvest’s transaction expenses and operations until the closing under the Share Purchase Agreement, CT Energy had loaned Harvest $2 million on each of June 21, 2016, July 20, 2016, August 24, 2016 and September 21, 2016 under the Additional Draw Note.

The relationship between the company and CT Energy effectively terminated upon the closing under the Share Purchase Agreement. In addition to the termination or relinquishment of all company securities held by CT Energy, Oswaldo Cisneros and Alberto Sosa resigned as CT Energy’s non-independent designees to the company’s board of directors. The company decreased its number of board members from seven to five immediately after the resignations.

Additionally, the Securities Purchase Agreement and certain agreements related to the Securities Purchase Agreement, including the Management Agreement, terminated. Finally, all liens securing company debt formerly owed to CT Energy were released at the closing.

NYSE Listing Requirements

On October 25, 2016, the company announced that it would conduct a one-for-four reverse split of its authorized, issued and outstanding common stock. The one-for-four reverse stock split became effective after the market closed on November 3, 2016, and the company’s common stock began trading on a splitadjusted basis at market open on November 4, 2016. The reverse stock split will not impact any stockholder’s ownership percentage of the company or voting power, except for minimal effects resulting from the treatment of fractional shares. Following the reverse split, the number of outstanding shares of the company’s common stock was reduced from 44,171,215 to approximately 11,042,804. Additionally, the number of authorized shares of the company’s common stock decreased from 150,000,000 to 37,500,000. On November 3, 2016, the company completed a one-for-four reverse split of its common stock. As of November 4, 2016, the closing price of the company’s common stock had increased to $4.45 per share. Given the increase in the company’s share price, the company expects that it will have regained compliance with the Pricing Standard by December 19, 2016.

On April 25, 2016, the company received a notice from the NYSE stating that the company was not in compliance with a second NYSE continued listing requirement, which provides that a company is not in compliance if its average global market capitalization over a consecutive 30 trading-day period is less than $50 million and, at the same time, its stockholders’ equity is less than $50 million.

The company believes that the sale of its Venezuelan interests on October 7, 2016 ultimately will allow it to regain compliance with the Financial Standard by increasing its stockholders’ equity. However, the company must demonstrate compliance for two consecutive financial quarters before the deficiency can be cured.

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