EXHIBIT 99.1
FOR IMMEDIATE RELEASE
(HARVEST NATURAL RESOURCES LOGO)
HARVEST NATURAL RESOURCES
ANNOUNCES SECOND QUARTER 2003 RESULTS
HOUSTON, Texas (August 7, 2003) - Harvest Natural Resources, Inc.
(NYSE: HNR) today announced net income of $1.2 million, or $0.03 per diluted
share, for the quarter ended June 30, 2003. For the same period last year, the
Company had net income of $76.3 million, or $2.09 per diluted share, including a
gain of $143.1 million ($89.6 million after tax) on the sale of the Company's
interest in the Arctic Gas Company offset, in part, by a $13.4 million,
impairment of the WAB-21 exploration property in the South China Sea. Net cash
provided by operating activities was $11.2 million for the 2003 second quarter
compared with $3.4 million for the 2002 second quarter.
Harvest had a net loss of $14.3 million, or $0.40 per diluted share,
for the six months ending June 30, 2003, including a $16.6 million non-cash
equity charge recorded in the first quarter which reduced the carrying value of
the Company's Russian affiliate as a result of low domestic Russian oil prices.
Net income for the same period last year was $77.8 million, or $2.17 per diluted
share, including the gain on sale and impairment charge discussed above. Net
cash from operating activities was $22.4 million for the first six months of
2003 compared with $11.9 million for the same period last year.
Oil production and sales for the 2003 second quarter was 2.1 million
barrels compared with 2.5 million barrels for the 2002 second quarter. Oil
production for the first six months of 2003 was 3.3 million barrels compared
with 5.0 million barrels for the same period last year. Production was shut-in
during all of January and part of February 2003 due to the national work
stoppage in Venezuela and only returned to sustainable, but modestly lower
levels, during the second quarter. Natural reservoir decline rates also
contributed to lower second quarter production volumes.
Operating expenses increased to $9.5 million for the 2003 second
quarter compared with $8.4 million for last year's second quarter. The increase
in the 2003 second quarter operating expense was primarily due to increased
workover activity in an effort to restore production to pre shut-in levels.
Harvest President and Chief Executive Officer, Dr. Peter J. Hill said,
"In spite of the $2.3 million accelerated workover program which increased our
operating expenses in the quarter, net income and net cash provided by operating
activities were strong based on favorable pricing. Looking forward, the
Venezuela natural gas pipeline and infrastructure projects are on an aggressive
schedule with first gas sales from our Uracoa Field expected in the fourth
quarter this year. The gas project not only brings a new cash flow stream based
on gas sales, it also should enable us to increase Uracoa oil production during
2004 by eliminating the current natural gas volume handling restrictions at the
processing plant."
Hill continued, "Higher than expected water cuts in the new Bombal
wells has affected our ability to replace declining production. We soon will be
implementing a gas-lift program in Bombal to counter the higher than expected
water cuts in the new wells which is expected to improve oil production."
The Company owns 34 percent of LLC Geoilbent, a Russian limited
liability company which produces and sells oil from the Western Siberian Basin.
Geoilbent's production for the six months ended March 2003 was 2.9 million
barrels which were sold at an average price of $13.73 per barrel including 1.8
million barrels which were sold in the domestic market at an average price of
$7.69 per barrel and 1.1 million barrels which were sold into the export market
at an average price of $23.48 per barrel. This compares with production for the
same period of the previous year of 3.5 million barrels which were sold at an
average price of $11.17 per barrel including 2.3 million barrels which were sold
into the domestic market at an average price of $6.83 per barrel and 1.2 million
barrels which were sold into the export market at an average price of $19.62 per
barrel. Geoilbent suspended drilling in late 2002 to conduct various studies to
improve drilling and completion procedures and reservoir management and to
manage cash flows during the period of low domestic Russian oil prices.
Geoilbent drilled three wells this year, one of which has been completed. A
second well is expected to be completed in the next 30 days. The Company
includes Geoilbent results in its financial statements as an equity investment
one quarter in arrears.
The Company is increasing its guidance for 2003 income from
consolidated companies by $3 million to a range of $5.5 million to $6.5 million
as a result of higher oil prices. The timely and successful completion of the
gas-lift program in Bombal and the natural gas sales project should enable the
Company to meet the lower end of its 2003 production targets of approximately
eight million barrels of oil equivalent. In addition, the Company expects that
2003 capital expenditures will increase from the previous guidance level of $45
to $50 million to $54 to $59 million. The increase will fund the purchase of
compressors and dehydration units for the natural gas project which originally
were intended to be leased from a service provider. In addition, the capital
budget was increased $2.6 million to fund the plugging and abandonment of wells
in Venezuela during 2003. We expect to update both our 2003 and 2004 production
estimates later this year.
Harvest Natural Resources, Inc. headquartered in Houston, Texas, is an
independent oil and gas exploration and development company with principal
operations in Venezuela and Russia. For more information visit the Company's
website at www.harvestnr.com.
CONTACT:
Steven W. Tholen
Senior Vice President, Chief Financial Officer
(281) 578-8020
This press release may contain "Forward-Looking Statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of historical facts
included in this release may constitute forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Actual results may differ materially from the
Company's expectations due to changes in operating performance, project
schedules, oil and gas demands and prices, and other technical and economic
factors.
===============================================================================
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
($ millions, unaudited)
<Table>
<Caption>
June 30, December 31,
2003 2002
------------ ------------
ASSETS:
CURRENT ASSETS:
Cash and equivalents $ 76.8 $ 64.5
Deposits and restricted cash 1.8
Marketable securities -- 27.4
Accounts receivable, net 39.6 35.4
Commodity hedging contract 4.0 --
Prepaid expenses and other 1.9 3.0
------------ ------------
Total current assets 122.3 132.1
OTHER ASSETS 2.6 2.5
DEFERRED INCOME TAXES 4.9 4.1
INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES 34.9 51.8
PROPERTY AND EQUIPMENT, net 171.0 144.8
------------ ------------
TOTAL ASSETS $ 335.7 $ 335.3
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 3.3 $ 3.8
Accrued expenses 34.2 20.7
Accrued interest 1.5 1.4
Income taxes payable 7.9 6.9
Commodity hedging contract payable -- 0.4
Current portion of long-term debt 3.8 1.9
------------ ------------
Total current liabilities 50.7 35.1
LONG TERM DEBT 100.0 104.7
ASSET RETIREMENT PROVISION 2.2
COMMITMENTS AND CONTINGENCIES --
MINORITY INTEREST 26.2 24.1
STOCKHOLDERS' EQUITY:
Common stock and paid-in capital 174.2 174.0
Retained earnings (deficit) (14.0) 0.2
Accumulated other comprehensive loss (0.4) --
Treasury stock (3.2) (2.8)
------------ ------------
Total stockholders' equity 156.6 171.4
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 335.7 $ 335.3
============ ============
</Table>
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
<Table>
<Caption>
THREE MONTHS ENDED: June 30, 2003 June 30, 2002
-------------- --------------
Barrels of oil sold 2,111 2,470
Average price/barrel $ 13.53 $ 13.37
</Table>
<Table>
<Caption>
$ $/BOE $ $/BOE
------------ ------------ ------------ ------------
REVENUES:
Oil sales $ 28,576 $ 13.53 $ 33,022 $ 13.37
EXPENSES:
Operating expenses 9,483 4.49 8,437 3.42
Depletion, depreciation and amortization 5,710 2.70 7,334 2.97
Impairments -- -- 13,427 5.44
General and administrative 3,747 1.77 5,326 2.16
Taxes other than on income 971 0.46 1,223 0.50
------------ ------------ ------------ ------------
19,911 9.42 35,747 14.49
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 8,665 4.11 (2,725) (1.12)
------------ ------------ ------------ ------------
OTHER NON-OPERATING INCOME (EXPENSE)
Gain on sale of investments -- -- 143,060 57.92
Gain on early extinguishment of debt -- -- 874 0.35
Investment income and other 354 0.17 1,127 0.46
Interest expense (2,642) (1.25) (4,500) (1.82)
Net gain on exchange rates -- -- 2,379 0.96
------------ ------------ ------------ ------------
(2,288) (1.08) 142,940 57.87
------------ ------------ ------------ ------------
INCOME FROM CONSOLIDATED COMPANIES
BEFORE INCOME TAXES AND MINORITY INTERESTS 6,377 3.03 140,215 56.75
Income tax expense 3,104 1.47 59,692 24.17
------------ ------------ ------------ ------------
INCOME BEFORE MINORITY INTERESTS 3,273 1.56 80,523 32.58
Minority interest in consolidated subsidiary companies 1,216 0.58 2,031 0.82
------------ ------------ ------------ ------------
INCOME FROM CONSOLIDATED COMPANIES 2,057 0.98 78,492 31.76
Equity in net losses of affiliated companies (853) (0.40) (2,172) (0.88)
------------ ------------ ------------ ------------
NET INCOME $ 1,204 $ 0.58 $ 76,320 $ 30.88
============ ============ ============ ============
NET INCOME PER COMMON SHARE:
Basic $ 0.03 $ 2.20
Diluted $ 0.03 $ 2.09
Weighted average shares outstanding:
Basic 35.2 million 34.7 million
Diluted 36.8 million 36.6 million
</Table>
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
<Table>
<Caption>
SIX MONTHS ENDED: June 30, 2003 June 30, 2002
-------------- --------------
Barrels of oil sold 3,338 5,009
Average price/barrel $ 14.20 $ 12.03
</Table>
<Table>
<Caption>
$ $/BOE $ $/BOE
-------------- -------------- -------------- --------------
REVENUES:
Oil sales $ 47,966 $ 14.37 $ 60,269 $ 12.03
Ineffective hedge activity (565) (0.17) -- --
-------------- -------------- -------------- --------------
47,401 14.20 60,269 12.03
-------------- -------------- -------------- --------------
EXPENSES:
Operating expenses 15,998 4.79 15,855 3.17
Depletion, depreciation and amortization 9,225 2.76 14,774 2.95
Impairments -- -- 13,427 2.68
General and administrative 6,971 2.09 8,604 1.72
Taxes other than on income 1,618 0.48 1,807 0.36
-------------- -------------- -------------- --------------
33,812 10.12 54,467 10.88
-------------- -------------- -------------- --------------
INCOME FROM OPERATIONS 13,589 4.08 5,802 1.15
-------------- -------------- -------------- --------------
OTHER NON-OPERATING INCOME (EXPENSE)
Gain on sale of investments -- -- 142,977 28.56
Gain on early extinguishment of debt -- -- 874 0.17
Investment income and other 632 0.19 1,716 0.33
Interest expense (5,310) (1.59) (11,009) (2.20)
Net gain on exchange rates 525 0.16 4,434 0.89
-------------- -------------- -------------- --------------
(4,153) (1.24) 138,992 27.75
-------------- -------------- -------------- --------------
INCOME FROM CONSOLIDATED COMPANIES
BEFORE INCOME TAXES AND MINORITY INTERESTS 9,436 2.84 144,794 28.90
Income tax expense 4,160 1.25 61,493 12.28
-------------- -------------- -------------- --------------
INCOME BEFORE MINORITY INTERESTS 5,276 1.59 83,301 16.62
Minority interest in consolidated subsidiary companies 2,102 0.63 3,411 0.68
-------------- -------------- -------------- --------------
INCOME FROM CONSOLIDATED COMPANIES 3,174 0.96 79,890 15.94
Equity in net losses of affiliated companies (17,428) (5.22) (2,085) (0.42)
-------------- -------------- -------------- --------------
NET INCOME (LOSS) $ (14,254) $ (4.26) $ 77,805 $ 15.52
============== ============== ============== ==============
NET INCOME (LOSS) PER COMMON SHARE:
Basic $ (0.40) $ 2.26
Diluted $ (0.40) $ 2.17
Weighted average shares outstanding:
Basic 35.2 million 34.4 million
Diluted 35.2 million 35.8 million
</Table>
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
<Table>
<Caption>
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- --------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- --------------
Cash Flows From Operating Activities:
Net income (loss) $ 1,204 $ 76,320 $ (14,254) $ 77,805
Adjustments to reconcile net income to net cash --
provided by operating activities: --
Depletion, depreciation and amortization 5,710 7,334 9,225 14,774
Impairments -- 13,427 13,427
Amortization of financing costs 141 1,164 281 1,464
Gain on disposal of assets -- (143,054) -- (142,977)
Gain on early extinguishment of debt -- (874) (874)
Equity in earnings of affiliated companies 853 2,172 17,428 2,085
Allowance and write off of employee notes
and accounts receivable 52 83 103 164
Non-cash compensation-related charges 81 503 123 503
Minority interest in undistributed earnings 0
of subsidiaries 1,215 2,031 2,102 3,411
Deferred income taxes -- 54,618 (667) 52,921
Changes in operating assets and liabilities: --
Accounts and notes receivable (10,242) (2,834) (4,346) (6,007)
Prepaid expenses and other 674 573 1,052 (1,972)
Put Option 2,275 -- (4,600) --
Accounts payable (2,829) (2,015) (494) 2,570
Accrued expenses 13,956 (9,112) 13,563 (10,485)
Accrued interest payable (2,197) (1,729) 34 (2,383)
Asset Retirement Liability (2,025) -- 2,238
Commodity hedging contract payable -- -- (430)
Income taxes payable 2,380 4,762 1,065 7,461
-------------- -------------- -------------- --------------
Net Cash Provided By Operating Activities 11,248 3,369 22,423 11,887
-------------- -------------- -------------- --------------
Cash Flows From Investing Activities:
Proceeds from sale of properties and investments -- 189,841 189,841
Partial payment on sale of equity interest -- (120,900) -- --
Additions of property and equipment (22,945) (7,994) (35,450) (20,715)
Investment in and advances to affiliated companies (20) 19,338 (517) 8,713
Decrease in restricted cash -- -- 1,800 --
Purchases of marketable securities (55,726) (46,642) (256,058) (46,642)
Maturities of marketable securities 82,796 33,750 283,446 33,750
-------------- -------------- -------------- --------------
Net Cash Provided By (Used In) Investing
Activities 4,105 67,393 (6,779) 164,947
-------------- -------------- -------------- --------------
Cash Flows From Financing Activities:
Net proceeds from exercise of stock options 39 1,370 159 1,841
Repurchase of common stock -- -- (404) --
Payments on short term borrowings
and notes payable -- (21,329) (2,767) (131,053)
(Increase) Decrease in other assets (384) 47 (362) 63
-------------- -------------- -------------- --------------
Net Cash Used in Financing Activities (345) (19,912) (3,374) (129,149)
-------------- -------------- -------------- --------------
Net Increase in Cash 15,008 50,850 12,270 47,685
Cash and Cash Equivalents at Beginning of Period 61,763 5,859 64,501 9,024
-------------- -------------- -------------- --------------
Cash and Cash Equivalents at End of Period $ 76,771 $ 56,709 $ 76,771 $ 56,709
============== ============== ============== ==============
</Table>
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