EXHIBIT 99.1
FOR IMMEDIATE RELEASE
[HARVEST LOGO]
We Realize the Potential
HARVEST NATURAL RESOURCES ANNOUNCES
THIRD QUARTER 2004 RESULTS
HOUSTON, Texas (November 4, 2004) - Harvest Natural Resources, Inc.
(NYSE: HNR) today announced 2004 third quarter earnings of $5.3 million, or
$0.14 per diluted share. These results compare with net income of $46.4 million,
or $1.25 per diluted share, for the same period last year. The 2004 third
quarter results include $1.0 million of charges related to project evaluation of
Russian properties and $2.9 million for the $85 million prepayment of the
Company's 2007 senior notes. Excluding these charges, 2004 third quarter net
income would have been $9.2 million, or $0.24 per diluted share. The 2003 third
quarter results included a $46.3 million gain on the sale of the Company's 34
percent equity interest in LLC Geoilbent, a Russian company operating in West
Siberia. See Reconciliation of GAAP Measures to Non-GAAP Measures in table
below.
Net income for the nine months ended September 30, 2004 was $19.1
million, or $0.50 per diluted share, compared with net income of $19.5 million,
or $0.53 per diluted share, for the same period last year. The nine months ended
September 30, 2003 included a $46.3 million gain on sale, offset in part by
$30.5 million equity in net loss related to Geoilbent. See Reconciliation of
GAAP Measures to Non-GAAP Measures in table below.
Discretionary cash flow (defined as cash flows from operating
activities before changes in operating assets and liabilities) was $19.6 million
for the 2004 third quarter compared with $7.6 million for the 2003 third
quarter. Discretionary cash flow for the nine months ended September 30, 2004
was $54.8 million, compared with the $21.9 million for the same period last
year. See Reconciliation of GAAP Measures to Non-GAAP Measures in table below.
Production for the 2004 third quarter was 1.9 million barrels of oil
and 7.9 billion cubic feet (Bcf) of natural gas for a combined total production
of 3.2 million barrels of oil equivalent. Production for the first nine months
of 2004 was 9.7 million barrels of oil equivalent including 5.7 million barrels
of oil and 23.8 Bcf of gas. Production for the same periods last year, which
consisted of oil only, was 2.0 million for the third quarter and 5.3 million
barrels for the nine months respectively.
Harvest President and Chief Executive Officer, Dr. Peter J. Hill, said,
"We continue to deliver strong results based on sustained high gas production,
high oil prices and lower operating expenses. We have two rigs drilling oil
wells in our Uracoa Field and expect both rigs to continue drilling through the
rest of the year and into 2005. As of November 4th, the rigs have completed 10
wells and are projected to drill and complete another six wells by year end.
October oil sales exceeded 25,000 barrels of oil per day (Bopd) and we now
expect to exit the year comfortably within our 25,000 and 30,000 Bopd guidance."
1177 Enclave Parkway, Suite 300 o Houston, Texas 77077 o ph: 281.899.5700
fax: 281.899.5702
Page 1 of 7
The Company received an average of $19.87 per barrel of oil for 2004
third quarter sales, an increase of $5.90 per barrel over the $13.97 per barrel
average for the same period last year. The average the Company received for the
nine months ended September 30, 2004 was $17.88 per barrel of oil, an increase
of $3.77 per barrel over the $14.11 per barrel average for the same period in
2003. Revenue for the nine months ended September 30, 2004 included 0.5 million
barrels of oil at a $7.00 fixed price. The volume of fixed price oil delivered
to PDVSA is based on the volumes of the Company natural gas sales. The Company
receives $1.03 per thousand cubic feet of natural gas delivered to PDVSA.
Hill said, "During the third quarter, our 80% owned Venezuelan
subsidiary, Harvest Vinccler, purchased West Texas Intermediate (WTI) puts for
10,000 barrels of oil per day (Bopd) for 2005. The puts have an average floor
price of $42.20 per barrel. Historically, Harvest Vinccler receives
approximately 48% of WTI for most of the oil it delivers to PDVSA. Consequently,
the puts have the effect of hedging almost 21,000 Bopd of our 2005 production.
The floor price set by the puts help protect our 2005 cash flow and give us the
opportunity to both fund our capital expenditure program and maintain our cash
position."
Operating expenses were $7.9 million, or $2.46 per barrel of oil
equivalent (Boe), for 2004 third quarter compared with $7.7 million, or $3.87
per barrel of oil equivalent, for last year's third quarter. Operating expenses
for the 2004 first nine months were $22.6 million, or $2.34 per Boe, compared
with $23.7 million, or $4.45 per Boe, for the same period in 2003.
Hill continued, "We prepaid the $85 million of senior notes
outstanding, reducing total debt to $13.4 million and eliminating $8 million of
annual interest expense. Our $68 million cash balance and our cash generating
capacity provide us with the financial flexibility to pursue growth
opportunities. We continue to evaluate properties in Venezuela and Russia to
find opportunities which meet our focused acquisition criteria."
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES ($ MILLIONS)
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
--------------------------- --------------------------
2004 2003 2004 2003
---- ---- ---- ----
EARNINGS $ 5.3 $46.4 $19.1 $19.5
Russian property evaluation 1.0 -- 1.2 --
Prepay 2007 Senior Notes 2.9 -- 2.9 --
Gain on sale of LLC Geoilbent -- (46.4) -- (46.3)
LLC Geoilbent equity in net loss -- 0.5 -- 30.5
----- ----- ----- ------
$ 9.2 $ 0.5 $23.2 $ 3.7
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
--------------------------- --------------------------
DISCRETIONARY CASH FLOW 2004 2003 2004 2003
---- ---- ---- ----
Net cash provided by operating activities $ 8.8 $13.5 $37.7 $35.9
Less changes in operating assets & liabilities 10.8 (5.9) 17.1 (14.0)
----- ----- ----- -----
Discretionary cash flow $19.6 $ 7.6 $54.8 $21.9
1177 Enclave Parkway, Suite 300 o Houston, Texas 77077 o ph: 281.899.5700
fax: 281.899.5702
Page 2 of 7
Harvest will hold an earnings conference call today at 9:00 a.m.
Central Time (10:00 a.m. Eastern Time) to discuss 2004 third quarter results. To
access the call, dial 785-424-1054 five to ten minutes prior to the start time.
A recording of the conference call will also be available for replay at
402-220-2570. To listen to the live webcast of the call, please visit our
website at www.harvestnr.com.
Harvest Natural Resources, Inc. headquartered in Houston, Texas, is an
independent oil and gas exploration and development company with principal
operations in Venezuela and an office in Russia. For more information visit the
Company's website at www.harvestnr.com.
CONTACT:
Steven W. Tholen
Senior Vice President, Chief Financial Officer
(281) 899-5714
Amanda M. Koenig
Investor Relations
(281) 899-5716
"This press release may contain projections and other forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All statements other than statements of
historical facts may constitute forward-looking statements. Although Harvest
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Actual results may differ materially from Harvest's expectations
as a result of factors discussed in Harvest's 2003 Annual Report on Form 10-K
and subsequent reports."
================================================================================
1177 Enclave Parkway, Suite 300 o Houston, Texas 77077 o ph: 281.899.5700
fax: 281.899.5702
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
($ millions, unaudited)
September 30, 2004 December 31, 2003
------------------ -----------------
ASSETS:
CURRENT ASSETS:
Cash and equivalents $ 68.4 $ 138.7
Accounts receivable, net 55.6 43.9
Put options 11.4 --
Deferred income tax 1.2 --
Prepaid expenses and other 1.3 0.8
------------------ -----------------
Total current assets 137.9 183.4
OTHER ASSETS 1.2 2.1
DEFERRED INCOME TAXES 4.7 4.7
PROPERTY AND EQUIPMENT, net 179.3 184.1
------------------ -----------------
TOTAL ASSETS $ 323.1 $ 374.3
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable, trade and other $ 3.8 $ 4.2
Accounts payable, related party 10.9 10.5
Accrued expenses 20.8 15.1
Accrued interest 0.1 1.4
Income taxes payable 15.0 8.6
Current portion of long-term debt 6.4 6.4
------------------ -----------------
Total current liabilities 57.0 46.2
LONG TERM DEBT 7.0 96.8
ASSET RETIREMENT PROVISION 0.8 1.5
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTEREST 36.9 30.1
STOCKHOLDERS' EQUITY:
Common stock and paid-in capital 180.5 175.4
Retained earnings 46.5 27.5
Accumulated other comprehensive loss (2.4) --
Treasury stock (3.2) (3.2)
------------------ -----------------
Total stockholders' equity 221.4 199.7
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 323.1 $ 374.3
================== =================
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
THREE MONTHS ENDED: September 30, 2004 September 30, 2003
------------------ ------------------
Barrels of oil sold 1,909 1,993
MMCF of gas sold 7,879 -
Total BOE 3,222 1,993
Average price/barrel $ 19.87 $ 13.97
Average price/mcf $ 1.03
$ $/BOE $ $/BOE
--------- --------- --------- ---------
REVENUES:
Oil sales $ 37,937 $ 27,834
Gas sales 8,116
--------- --------- --------- ---------
46,053 14.29 27,834 13.97
--------- --------- --------- ---------
EXPENSES:
Operating expenses 7,934 2.46 7,715 3.87
Depletion and amortization 7,695 2.39 5,182 2.60
Depreciation 500 0.16 428 0.21
Write-downs of oil and gas properties and impairments - - 165 0.08
General and administrative 7,130 2.21 4,605 2.31
Arbitration settlement - - 1,477 0.74
Bad debt recovery - - (374) (0.19)
Taxes other than on income 1,438 0.45 839 0.42
--------- --------- --------- ---------
24,697 7.67 20,037 10.04
--------- --------- --------- ---------
INCOME FROM OPERATIONS 21,356 6.62 7,797 3.93
========= ========= ========= =========
OTHER NON-OPERATING INCOME (EXPENSE)
Gain on disposition of investment - - 46,348 23.26
Loss on early extinguishment of debt (2,928) (0.91) - -
Investment earnings and other 597 0.19 285 0.14
Interest expense (2,447) (0.76) (2,579) (1.29)
Net gain (loss) on exchange rates (1) - 2 -
--------- --------- --------- ---------
(4,779) (1.48) 44,056 22.11
--------- --------- --------- ---------
INCOME FROM CONSOLIDATED COMPANIES
BEFORE INCOME TAXES AND MINORITY INTERESTS 16,577 5.14 51,853 26.04
Income tax expense 7,617 2.36 3,603 1.81
--------- --------- --------- ---------
INCOME BEFORE MINORITY INTERESTS 8,960 2.78 48,250 24.23
Minority interest in consolidated subsidiary companies 3,654 1.13 1,367 0.69
--------- --------- --------- ---------
INCOME FROM CONSOLIDATED COMPANIES 5,306 1.65 46,883 23.54
Equity in net losses of affiliated companies - - (473) (0.24)
--------- --------- --------- ---------
NET INCOME $5,306 $ 1.65 $ 46,410 $ 23.30
========= ========= ========= =========
NET INCOME PER COMMON SHARE:
Basic $0.15 $1.31
Diluted $0.14 $1.25
Weighted average shares outstanding:
Basic 36.2 million 35.3 million
Diluted 38.3 million 37.0 million
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
NINE MONTHS ENDED: September 30, 2004 September 30, 2003
------------------ ------------------
Barrels of oil sold 5,689 5,331
MMCF of gas sold 23,811 -
Total BOE 9,658 5,331
Average price/barrel $ 17.88 $ 14.11
Average price/mcf $ 1.03
$ $/BOE $ $/BOE
--------- --------- --------- ---------
REVENUES:
Oil sales $ 101,722 $ 75,800
Gas sales 24,525 -
Ineffective hedge activity - (565)
--------- --------- --------- ---------
126,247 13.07 75,235 14.11
--------- --------- --------- ---------
EXPENSES:
Operating expenses 22,641 2.34 23,713 4.45
Depletion and amortization 23,174 2.40 13,675 2.57
Depreciation 1,380 0.14 1,160 0.22
Write-downs of oil and gas properties and impairments - - 165 0.03
General and administrative 15,137 1.57 11,576 2.17
Gain on sale of long-lived assets (578) (0.06) - -
Arbitration settlement - - 1,477 0.28
Bad debt recovery - - (374) (0.07)
Taxes other than on income 3,750 0.39 2,457 0.46
--------- --------- --------- ---------
65,504 6.78 53,849 10.11
--------- --------- --------- ---------
INCOME FROM OPERATIONS 60,743 6.29 21,386 4.00
--------- --------- --------- ---------
OTHER NON-OPERATING INCOME (EXPENSE)
Gain on disposition of investment - - 46,348 8.69
Loss on early extinguishment of debt (2,928) (0.30) - -
Investment earnings and other 1,325 0.14 917 0.17
Interest expense (7,384) (0.76) (7,889) (1.48)
Net gain (loss) on exchange rates (618) (0.06) 527 0.10
--------- --------- --------- ---------
(9,605) (0.98) 39,903 7.48
--------- --------- --------- ---------
INCOME FROM CONSOLIDATED COMPANIES
BEFORE INCOME TAXES AND MINORITY INTERESTS 51,138 5.31 61,289 11.48
Income tax expense 23,119 2.39 7,763 1.46
--------- --------- --------- ---------
INCOME BEFORE MINORITY INTERESTS 28,019 2.92 53,526 10.02
Minority interest in consolidated subsidiary companies 8,958 0.93 3,469 0.65
--------- --------- --------- ---------
INCOME FROM CONSOLIDATED COMPANIES 19,061 1.99 50,057 9.37
Equity in net losses of affiliated companies - - (30,518) (5.72)
--------- --------- --------- ---------
NET INCOME $ 19,061 $ 1.99 $ 19,539 3.65
--------- --------- --------- ---------
NET INCOME PER COMMON SHARE:
Basic $0.53 $0.55
Diluted $0.50 $0.53
Weighted average shares outstanding:
Basic 36.0 million 35.3 million
Diluted 38.0 million 36.8 million
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Cash Flows From Operating Activities:
Net income $ 5,306 $ 46,410 $ 19,061 $ 19,539
Adjustments to reconcile net income to net cash provided by operating
activities:
Depletion, depreciation and amortization 8,195 5,610 24,554 14,835
Impairments -- 165 -- 165
Amortization of financing costs 76 140 228 421
Gain on disposition of assets and investments -- (46,348) (578) (46,348)
Equity in net losses of affiliated companies -- 473 -- 30,518
Allowance for employee notes and accounts receivable -- (322) -- (219)
Non-cash compensation-related charges 1,423 84 1,686 207
Minority interest in consolidated subsidiary companies 3,654 1,367 8,958 3,469
Write off of unamortized financing costs 936 -- 936 --
Deferred income taxes -- -- -- (667)
Changes in operating assets and liabilities:
Accounts and notes receivable (3,939) 1,567 (11,581) (2,779)
Prepaid expenses and other 74 464 (505) 1,516
Commodity hedging contract (14,947) 2,300 (14,947) (2,730)
Accounts payable 3,191 5,764 (346) 5,270
Accounts payable, related party 43 286 295 1,082
Accrued expenses 3,218 (8,412) 5,634 4,355
Accrued interest payable (1,331) 1,973 (1,353) 2,007
Asset retirement liability -- (472) (709) 1,766
Income taxes payable 2,887 2,423 6,367 3,488
--------- --------- --------- ---------
Net Cash Provided By Operating Activities 8,786 13,472 37,700 35,895
--------- --------- --------- ---------
Cash Flows From Investing Activities:
Proceeds from sale of investment -- 69,500 -- 69,500
Proceeds from the sale of long-lived assets -- -- 578 --
Additions of property and equipment (10,380) (15,438) (19,774) (50,888)
Investment in and advances to affiliated companies -- 2,845 -- 2,328
Decrease in restricted cash -- -- -- 1,800
Purchases of marketable securities -- -- -- (256,058)
Maturities of marketable securities -- -- -- 283,446
Investment costs 671 (841) (216) (1,203)
--------- --------- --------- ---------
Net Cash Provided By (Used In) Investing Activities (9,709) 56,066 (19,412) 48,925
--------- --------- --------- ---------
Cash Flows From Financing Activities:
Net proceeds from issuances of common stock 1,059 361 3,362 520
Purchase of treasury stock -- -- -- (404)
Payments on long-term debt (86,592) (300) (89,775) (3,067)
Dividend paid to minority shareholder (2,100) -- (2,100) --
--------- --------- --------- ---------
Net Cash Provided By (Used in) Financing Activities (87,633) 61 (88,513) (2,951)
--------- --------- --------- ---------
Net Increase (Decrease) in Cash (88,556) 69,599 (70,225) 81,869
Cash and Cash Equivalents at Beginning of Period 156,991 76,771 138,660 64,501
--------- --------- --------- ---------
Cash and Cash Equivalents at End of Period $ 68,435 $ 146,370 $ 68,435 $ 146,370
========= ========= ========= =========
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