UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the Quarterly Period Ended June 30, 2005 or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

for the transition period from________to__________

COMMISSION FILE NO. 1-10762

____________________________

HARVEST NATURAL RESOURCES, INC.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 77-0196707
(State or Other Jurisdiction of Incorporation (I.R.S. Employer Identification
or Organization) No.)

1177 ENCLAVE PARKWAY, SUITE 300
HOUSTON, TEXAS 77077
(Address of Principal Executive Offices) (Zip Code)

(281) 899-5700
(Registrant's Telephone Number, Including Area Code)

NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes [X] No [ ]

At July 29, 2005, 37,664,214 shares of the registrant's common stock were
outstanding.

HARVEST NATURAL RESOURCES, INC.

FORM 10-Q

TABLE OF CONTENTS

Page
----

PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets at June 30, 2005
and December 31, 2004.......................................................... 3
Unaudited Consolidated Statements of Operations and
Comprehensive Income for the Three and Six Months Ended June 30, 2005 and
2004........................................................................... 4
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2005 and 2004......................................................... 5
Notes to Consolidated Financial Statements.......................................... 6

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................................. 13

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................. 19

Item 4. CONTROLS AND PROCEDURES................................................................ 19

PART II OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS...................................................................... 20

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS............................ 20

Item 3. DEFAULTS UPON SENIOR SECURITIES........................................................ 20

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................... 20

Item 5. OTHER INFORMATION...................................................................... 21

Item 6. EXHIBITS............................................................................... 21

SIGNATURES................................................................................................ 22

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

JUNE 30, DECEMBER 31,
2005 2004
----------- ------------
(in thousands)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................................... $ 109,592 $ 84,600
Restricted cash............................................................... 12 12
Accounts and notes receivable:
Accrued oil and gas sales................................................. 69,784 58,937
Joint interest and other, net............................................. 12,950 12,780
Put options................................................................... 315 14,209
Deferred income tax........................................................... 2,455 251
Prepaid expenses and other.................................................... 1,930 1,426
----------- ------------
TOTAL CURRENT ASSETS................................................. 197,038 172,215

RESTRICTED CASH.................................................................... 16 16
OTHER ASSETS ..................................................................... 1,923 2,072
DEFERRED INCOME TAXES.............................................................. 6,034 6,034
PROPERTY AND EQUIPMENT:
Oil and gas properties (full cost method - costs of $2,900
excluded from amortization in 2005 and 2004, respectively)................ 642,638 631,082
Other administrative property................................................. 12,300 10,008
----------- ------------
654,938 641,090
Accumulated depletion, depreciation and amortization.......................... (475,794) (453,941)
----------- ------------
179,144 187,149
----------- ------------
$ 384,155 $ 367,486
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade and other............................................. $ 4,256 $ 8,428
Accounts payable, related party............................................... 9,111 11,063
Accrued expenses.............................................................. 21,090 29,426
Income taxes payable.......................................................... 18,419 22,475
Current portion of long-term debt............................................. 7,358 11,833
----------- ------------
TOTAL CURRENT LIABILITIES 60,234 83,225
LONG-TERM DEBT..................................................................... -- --
ASSET RETIREMENT LIABILITY......................................................... 1,991 1,941
COMMITMENTS AND CONTINGENCIES...................................................... -- --
MINORITY INTEREST.................................................................. 48,705 39,131
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.01 a share; authorized 5,000 shares;
outstanding, none......................................................... -- --
Common stock, par value $0.01 a share; authorized 80,000 shares; issued 37,663
shares at June 30, 2005 and 37,544 shares at December 31, 2004............ 377 375
Additional paid-in capital.................................................... 187,374 185,183
Retained earnings............................................................. 94,083 61,897
Accumulated other comprehensive loss.......................................... (4,765) (487)
Treasury stock, at cost, 770 shares June 30, 2005 and 764 shares at
December 31, 2004......................................................... (3,844) (3,779)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY........................................... 273,225 243,189
----------- ------------
$ 384,155 $ 367,486
=========== ============

See accompanying notes to consolidated financial statements.

HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
(in thousands, except per share data)

REVENUES
Oil sales $ 49,662 $ 32,977 $ 103,163 $ 63,785
Gas sales 6,780 8,420 14,265 16,409
----------- ----------- ----------- -----------
56,442 41,397 117,428 80,194
----------- ----------- ----------- -----------

EXPENSES
Operating expenses 8,763 7,368 17,651 14,707
Depletion, depreciation and amortization 10,245 8,198 21,914 16,359
General and administrative 5,867 4,372 10,889 8,007
Gain on sale of long-lived assets -- (578) -- (578)
Taxes other than on income 1,332 1,118 3,053 2,312
----------- ----------- ----------- -----------
26,207 20,478 53,507 40,807
----------- ----------- ----------- -----------

INCOME FROM OPERATIONS 30,235 20,919 63,921 39,387

OTHER NON-OPERATING INCOME (EXPENSE)
Investment earnings and other 487 425 1,026 728
Interest expense (210) (2,448) (452) (4,937)
Net gain (loss) on exchange rates -- (8) 2,757 (617)
----------- ----------- ----------- -----------
277 (2,031) 3,331 (4,826)
----------- ----------- ----------- -----------

INCOME BEFORE INCOME
TAXES AND MINORITY INTERESTS 30,512 18,888 67,252 34,561

INCOME TAX EXPENSE 11,959 9,902 25,492 15,502
----------- ----------- ----------- -----------
INCOME BEFORE MINORITY INTERESTS 18,553 8,986 41,760 19,059

MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY COMPANIES 4,402 2,738 9,574 5,304
----------- ----------- ----------- -----------

NET INCOME $ 14,151 $ 6,248 $ 32,186 $ 13,755
=========== =========== =========== ===========

NET INCOME PER COMMON SHARE:
Basic $ 0.38 $ 0.17 $ 0.87 $ 0.38
=========== =========== =========== ===========
Diluted $ 0.37 $ 0.16 $ 0.84 $ 0.36
=========== =========== =========== ===========

OTHER COMPREHENSIVE INCOME (LOSS):
UNREALIZED MARK TO MARKET INCOME
(LOSS) FROM CASH FLOW HEDGING
ACTIVITIES, NET OF TAX 1,770 -- (4,278) --
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME $ 15,921 $ 6,248 $ 27,908 $ 13,755
=========== =========== =========== ===========

See accompanying notes to consolidated financial statements.

HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

SIX MONTHS ENDED JUNE 30,
------------------------------
2005 2004
------------- -------------
(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................ $ 32,186 $ 13,755
Adjustments to reconcile net income to net cash
provided by operating activities:
Depletion, depreciation and amortization.......................... 21,914 16,359
Amortization of financing costs................................... -- 152
Gain on disposition of assets..................................... -- (578)
Deferred compensation expense..................................... (515) 261
Non-cash compensation-related charges............................. 1,826 263
Minority interest in consolidated subsidiary companies............ 9,574 5,304
Changes in operating assets and liabilities:
Accounts and notes receivable................................ (11,017) (7,642)
Prepaid expenses and other................................... (504) (579)
Commodity hedging contract................................... 7,412 --
Accounts payable............................................. (4,172) (3,537)
Accounts payable, related party.............................. (1,952) 252
Accrued expenses............................................. (7,821) 2,133
Asset retirement liability................................... 50 (709)
Income taxes payable......................................... (4,056) 3,480
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................ 42,925 28,914
------------- -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of long-lived assets........................... -- 578
Additions of property and equipment................................... (13,909) (9,394)
Investment costs...................................................... 149 (887)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES........................ (13,760) (9,703)
------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuances of common stock........................... 302 2,303
Payments of notes payable............................................. (4,475) (3,183)
------------- -------------
NET CASH USED IN FINANCING ACTIVITIES........................ (4,173) (880)
------------- -------------

NET INCREASE IN CASH AND CASH EQUIVALENTS.................... 24,992 18,331

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........................... 84,600 138,660
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................. $ 109,592 $ 156,991
============= =============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest expense...................... $ 446 $ 4,771
============= =============
Cash paid during the period for income taxes.......................... $ 2,782 $ 1,674
============= =============

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the six months ended June 2005, Peter Hill, our Chief Executive
Officer, elected to pay withholding tax on a 2002 restricted stock grant on a
cashless basis. This resulted in 5,497 shares being held as treasury stock at
cost.

See accompanying notes to consolidated financial statements.

HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004 (UNAUDITED)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM REPORTING

In our opinion, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal recurring accruals
only) necessary to present fairly the financial position as of June 30, 2005,
and the results of operations and cash flows for the three and six month periods
ended June 30, 2005 and 2004. The unaudited consolidated financial statements
are presented in accordance with the requirements of Form 10-Q and do not
include all disclosures normally required by accounting principles generally
accepted in the United States of America. Reference should be made to our
consolidated financial statements and notes thereto included in our Annual
Report on Form 10-K for the year ended 2004, which include certain definitions
and a summary of significant accounting policies and should be read in
conjunction with this Quarterly Report on Form 10-Q. The results of operations
for any interim period are not necessarily indicative of the results of
operations for the entire year.

ORGANIZATION

Harvest Natural Resources, Inc. is engaged in the exploration,
development, production and management of oil and gas properties. We conduct our
business principally in Venezuela through our subsidiary Harvest Vinccler C.A.
("Harvest Vinccler").

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of all
wholly-owned and majority-owned subsidiaries. All intercompany profits,
transactions and balances have been eliminated.

REPORTING AND FUNCTIONAL CURRENCY

The U.S. Dollar is our functional and reporting currency.

REVENUE RECOGNITION

Oil and natural gas revenue is accrued monthly based on production and
delivery. Each quarter, Harvest Vinccler invoices PDVSA Petroleo S.A., an
affiliate of Petroleos de Venezuela S.A. ("PDVSA") based on barrels of oil
accepted by PDVSA during the quarter, using quarterly adjusted U.S. Dollar
contract service fees per barrel. The Operating Service Agreement ("OSA")
provides for Harvest Vinccler to receive an operating fee for each barrel of
crude oil delivered and the right to receive a capital recovery fee for certain
of its capital expenditures, provided that such operating fee and capital
recovery fee cannot exceed the maximum total fee per barrel set forth in the
agreement. The operating fee is subject to quarterly adjustments to reflect
changes in the special energy index of the U.S. Consumer Price Index. The
maximum total fee is subject to quarterly adjustments to reflect changes in the
average of certain world crude oil prices. Each quarter, Harvest Vinccler also
invoices PDVSA for natural gas sales based on a fixed price of $1.03 per Mcf. In
addition, Harvest Vinccler agreed to sell to PDVSA 4.5 million barrels of oil
stipulated as additional volumes resulting from the gas production ("Incremental
Crude Oil"). A portion of the Incremental Crude Oil is invoiced to PDVSA
quarterly at a fixed price of $7.00 per Bbl. The invoice is prepared and
submitted to PDVSA by the end of the first month following the end of each
calendar quarter, and payment is due from PDVSA by the end of the second month
following the end of each calendar quarter. Harvest Vinccler invoiced PDVSA for
the first and second quarter of 2005 for the delivery of its crude oil and
natural gas in accordance with the terms described above and recognized its
revenue in a consistent manner with prior periods. For the first quarter
deliveries, PDVSA remitted the amount due less $9.8 million. PDVSA did not
provide an explanation to Harvest Vinccler for the underpayment, but we believe,
based on public commentary, that it is attributable to a unilateral imposition
of a limit on service fees paid to all companies with operating service
agreements to two-thirds of the

market value of the crude delivered to PDVSA. This limit was announced by The
Ministry of Energy and Petroleum ("MEP") in April 2005. Regardless of the
appropriateness or legality of such a limitation, we also believe that PDVSA has
not properly calculated the unilateral limit it is placing on Harvest Vinccler's
fees because it is understating the actual market value of the crude oil. We
have notified PDVSA of this matter. Harvest Vinccler estimates that the second
quarter would be impacted by $9.0 million if the same limit were to be applied.
We believe at this time we will collect the entire amount of fees due under the
contract and, accordingly, have not recorded any allowance for either the
collectibility of the receivable or adjustment to reduce reported revenues.

CASH AND CASH EQUIVALENTS

At June 30, 2005, Harvest Vinccler had 58.0 billion Venezuela Bolivars
("Bolivars") which are shown in the June 30, 2005 financial statements as $27.2
million in cash and cash equivalents. Harvest Vinccler has a limited need for
Bolivars in the conduct of its business but expects to be able to utilize the
Bolivars received to date. However, to the extent that Harvest Vinccler receives
additional Bolivars in excess of its internal needs, it may not be possible, due
to currency control regulations, to convert any future excess Bolivars into U.S.
Dollars or other foreign currencies.

MINORITY INTERESTS

We record a minority interest attributable to the minority shareholder of
our Venezuela subsidiaries. The minority interest in net income and losses is
subtracted or added to arrive at consolidated net income.

COMPREHENSIVE INCOME

Statement of Financial Accounting Standards No. 130 ("SFAS 130") requires
that all items required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. We reflected
unrealized mark-to-market losses from cash flow hedging activities as other
comprehensive loss during the second quarter 2005 and, in accordance with SFAS
130, have provided a separate line in the unaudited consolidated statement of
operations to reflect such loss.

DERIVATIVES AND HEDGING

Statement of Financial Accounting Standards No. 133 ("SFAS 133"), as
amended, establishes accounting and reporting standards for derivative
instruments and hedging activities. All derivatives are recorded on the balance
sheet at fair value. To the extent that the hedge is determined to be effective,
changes in the fair value of derivatives for qualifying cash flow hedges are
recorded each period in other comprehensive income. Our derivatives have been
designated as cash flow hedge transactions in which we hedge the variability of
cash flows related to future oil prices for some or all of our forecasted oil
production. The changes in the fair value of these derivative instruments have
been reported in other comprehensive income because the highly effective test
was met, and have been reclassified to earnings in the period in which earnings
are impacted by the variability of the cash flows of the hedged item.

In August 2004, Harvest Vinccler hedged a portion of its oil sales for
calendar year 2005 by purchasing a West Texas Intermediate ("WTI") crude oil put
for 5,000 barrels of oil per day. The put cost was $4.24 per barrel, or $7.7
million, and has a strike price of $40.00 per barrel. In September 2004, Harvest
Vinccler hedged an additional portion of its calendar year 2005 oil sales by
purchasing a second WTI crude oil put for 5,000 barrels of oil per day. The put
cost was $3.95 per barrel, or $7.2 million, and has a strike price of $44.40 per
barrel. Due to the pricing structure for our Venezuelan oil, these two puts have
the economic effect of hedging approximately 20,800 barrels of oil per day for
an average of $18.29 per barrel. These puts qualify under the highly effective
test and the mark-to-market loss at June 30, 2005 is included in other
comprehensive loss.

Accumulated Other Comprehensive Loss consisted of $7.2 million and $0.7
million ($4.8 million and $0.5 million net of tax) at June 30, 2005 and December
31, 2004, respectively, of unrealized losses on our crude oil puts. Oil sales
for the three and six month periods ended 2005 included losses of $3.7 million
and $7.4 million, respectively, in settlement of the hedges. Deferred net losses
recorded in Accumulated Other Comprehensive Loss at June 30, 2005 and December
31, 2004, is expected to be reclassified to earnings during 2005.

We continue to assess production levels and commodity prices in
conjunction with our capital resources and liquidity requirements.

ASSET RETIREMENT LIABILITY

Effective January 1, 2003, we adopted Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143").
SFAS 143 requires entities to record the fair value of a liability for a legal
obligation to retire an asset in the period in which the liability is incurred
if a reasonable estimate of fair value can be made. No wells were abandoned in
the six months ended June 30, 2005 and nine wells were abandoned in year ended
December 31, 2004. Changes in asset retirement obligations during the six months
ended June 30, 2005 and year ended December 31, 2004 were as follows:

June 30, December, 31
2005 2004
----------- ------------

Asset retirement obligations beginning of period $ 1,941 $ 1,459
Liabilities recorded during the period -- 1,454
Liabilities settled during the period -- (540)
Revisions in estimated cash flows (4) (470)
Accretion expense 54 38
----------- ------------
Asset retirement obligations end of period $ 1,991 $ 1,941
=========== ============

EARNINGS PER SHARE

Basic earnings per common share ("EPS") are computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. The weighted average number of common shares
outstanding for computing basic EPS was 36.9 million for the three and six
months ended 2005, respectively, and 35.9 million for the three and six months
ended 2004, respectively. Diluted EPS reflects the potential dilution that would
occur if securities or other contracts to issue common stock were exercised or
converted into common stock. The weighted average number of common shares
outstanding for computing diluted EPS, including dilutive stock options, was
38.5 million for the three and six months ended 2005, respectively, and 38.2
million and 38.0 million for the three and six months ended 2004, respectively.

An aggregate of 2.0 million and 1.8 million options and warrants to
purchase common stock were excluded from the earnings per share calculations
because their exercise price exceeded the average price for the three and six
months ended 2005, respectively. An aggregate of 1.0 million options and
warrants to purchase common stock were excluded from the earnings per share
calculations because their exercise price exceeded the average price for the
three and six months ended 2004.

STOCK-BASED COMPENSATION

At June 30, 2005, we had several stock-based employee compensation plans,
which are more fully described in Note 5 to the consolidated financial
statements included in our Annual Report on Form 10-K for the year ended 2004.
Prior to 2003, we accounted for those plans under the recognition and
measurement provisions of Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. Effective
January 1, 2003, we adopted the fair value recognition provisions of Statement
of Financial Accounting Standards No. 123 ("SFAS 123"), Accounting for
Stock-Based Compensation as amended by Statement of Financial Accounting
Standards No. 148 ("SFAS 148"), Accounting for Stock-Based Compensation -
Transition and Disclosure and Statement of Financial Accounting Standard 123
(revised 2004) Share-Based Payment ("SFAS 123R"), prospectively to all employee
awards granted, modified, or settled after January 1, 2003. Awards under our
plans vest in periodic installments beginning one year after their grant and
expire ten years from the grant date. Therefore, the cost related to stock-based
employee compensation included in the determination of net income in the three
and six months ended 2005 and 2004 is less than that which would have been
recognized if the fair value based method had been applied to all awards since
the original effective date of SFAS 123R. The following table illustrates the
effect on net income and earnings per share if the fair value based method had
been applied to all outstanding and unvested awards in each period.

Net income, as reported $ 14,151 $ 6,248 $ 32,186 $ 13,755
Add: Stock based employee compensation
cost, net of tax 759 167 1,158 263
Less: Total stock-based employee
compensation cost determined
under fair value based method, net of tax (691) (317) (1,217) (568)
----------- ----------- ----------- -----------
Net income - proforma $ 14,219 $ 6,098 $ 32,127 $ 13,450
=========== =========== =========== ===========

Earnings per share:
Basic - as reported $ 0.38 $ 0.17 $ 0.87 $ 0.38
=========== =========== =========== ===========
Basic - proforma $ 0.39 $ 0.17 $ 0.87 $ 0.38
=========== =========== =========== ===========

Diluted - as reported $ 0.37 $ 0.16 $ 0.84 $ 0.36
=========== =========== =========== ===========
Diluted - proforma $ 0.37 $ 0.16 $ 0.83 $ 0.35
=========== =========== =========== ===========

Stock options of 0.1 million and 0.4 million were exercised in the six
months ended 2005 and 2004 with cash proceeds of $0.4 million and $2.3
million, respectively.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2005, the Financial Accounting Standards Board ("FASB') issued
Statement of Financial Accounting Standard 154 - Accounting Changes and Error
Corrections ("SFAS 154"), which changes the requirements for the accounting for
and reporting of a change in accounting principle. It also applies to changes
required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. Application is
effective for accounting changes and correction of errors made in fiscal years
beginning after December 15, 2005. Early adoption is permitted. The adoption of
SFAS 154 is not expected to have a material effect on our consolidated financial
position, results of operations or cash flows.

RECLASSIFICATIONS

Certain items in 2004 have been reclassified to conform to the 2005
financial statement presentation.

NOTE 2 - LONG-TERM DEBT

LONG-TERM DEBT

Long-term debt consists of the following:

JUNE 30, DECEMBER 31,
2005 2004
------------- -------------
(in thousands)

Note payable with interest at 8.1%................................ $ 900 $ 1,500
Note payable with interest at 9.1%................................ 6,458 10,333
------------- -------------
7,358 11,833

Less current portion.............................................. 7,358 11,833
------------- -------------
$ -- $ --
============= =============

Our 9.375 percent senior unsecured notes due November 1, 2007 ("2007
Notes") were redeemed on November 1, 2004. We were released from all obligations
related to the 2007 Notes. The redemption of the 2007 Notes triggered an
obligation under the terms of Harvest Vinccler's U.S. Dollar loans from a
Venezuelan commercial bank to renegotiate the terms of those loans or, if
agreement on renegotiated terms could not be reached within 30 days after
November 1, 2004, the loans could be declared due and payable. As a result, the
entire amount has been reclassified from long term to current debt. It is
possible that agreement will not be reached in negotiated terms and Harvest
Vinccler will be required to repay the remaining balance of $7.4 million.

We have classified all of our outstanding debt as current at June 30,
2005.

NOTE 3 - COMMITMENTS AND CONTINGENCIES

Excel Enterprises L.L.C. vs. Benton Oil & Gas Company, now known as
Harvest Natural Resources, Inc., Chemex, Inc., Benton-Vinccler, C.A., Gale
Campbell and Sheila Campbell in the District Court for Harris County, Texas.
This suit was brought in May 2003 by Excel and alleges, among other things,
breach of a consulting agreement between Excel and us, misappropriation of
proprietary information and trade secrets, and fraud. Excel seeks actual and
exemplary damages, injunctive relief and attorneys' fees. The Court has abated
the suit pending final judgment of a case pending in Louisiana to which we are
not a party. We dispute Excel's claims and plan to vigorously defend against
them. We are unable to estimate the amount or range of any possible loss.

Uracoa Municipality Tax Assessments. In July 2004, Harvest Vinccler
received three tax assessments from a tax inspector for the Uracoa municipality
in which part of the South Monagas Unit is located. A protest to the assessments
was filed with the municipality, and in September 2004 the tax inspector
responded in part by affirming one of the assessments and issuing a payment
order. Harvest Vinccler has filed a motion with the tax court in Barcelona,
Venezuela, seeking to enjoin the payment order and dismiss the assessment. We
dispute all of the tax assessments and believe we have a substantial basis for
our positions. We are unable to estimate the amount or range of any possible
loss.

Libertador Municipality Tax Assessment. In April 2005, Harvest Vinccler
received a tax assessment from a tax inspector for the Libertador municipality
in which part of the South Monagas Unit is located. Harvest Vinccler has
submitted a protest to the assessment at the Mayor's Office, and if no favorable
resolution is obtained, it will file a motion with the tax court seeking to
enjoin the payment order and dismiss the assessment. We dispute the allegations
set forth in the assessment and believe we have a substantial basis for our
position. We are unable to estimate the amount or range of any possible loss.

The SENIAT Tax Assessment. On July 22, 2005, the SENIAT, the Venezuelan
income tax authority, issued a preliminary tax assessment to Harvest Vinccler of
184 billion Venezuelan Bolivars related to fiscal years 2001 through 2004. At
the official exchange rate of 2,150 Bolivars per U.S. Dollar, the dollar
equivalent of the preliminary tax assessment is approximately $85 million. In
addition, the SENIAT imposed penalties equal to 10 percent of the preliminary
tax assessment claim for a total claim of 202 billion Bolivars, or approximately
$94 million. We are in the process of reviewing the assessment, but believe
Harvest Vinccler has met its tax obligations in all material respects. We intend
to take all measures necessary to protect our rights, and will vigorously
challenge all elements of the assessment that are not supported by Venezuelan
law.

International Arbitration. In July 2005, as a result of the actions taken
by PDVSA, MEP and the SENIAT, we delivered formal notices to Venezuelan
government officials of an investment dispute under Venezuelan law and
investment treaties entered into by the government of Venezuela. The bilateral
investment treaties and Venezuelan law provide for international arbitration of
investment disputes conducted under the auspices of the World Bank.

We are a defendant in or otherwise involved in other litigation incidental
to our business. In the opinion of management, there is no such litigation which
will have a material adverse impact on our financial condition, results of
operations and cash flows.

NOTE 4 - TAXES

TAXES OTHER THAN ON INCOME

Harvest Vinccler pays municipal taxes on operating fee revenues it
receives for production from the South Monagas Unit. The components of taxes
other than on income were (in thousands):

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------

Venezuelan Municipal Taxes $ 1,405 $ 869 $ 2,904 $ 1,757
Franchise Taxes (130) 120 (82) 249
Payroll and Other Taxes 57 129 231 306
----------- ----------- ----------- -----------
$ 1,332 $ 1,118 $ 3,053 $ 2,312
=========== =========== =========== ===========

NOTE 5 - OPERATING SEGMENTS

We regularly allocate resources to, and assess the performance of our
operations by, segments that are organized by unique geographic and operating
characteristics. The segments are organized in order to manage regional
business, currency and tax related risks and opportunities. Revenues from the
Venezuela operating segment are derived from the production and sale of oil and
natural gas. Operations included under the heading "Russia" include project
evaluation costs and other costs to maintain an office in Russia. Operations
included under the heading "United States and other" include corporate
management, cash management and financing activities performed in the United
States and other countries which do not meet the requirements for separate
disclosure. All intersegment revenues, expenses and receivables are eliminated
in order to reconcile to consolidated totals. Corporate general and
administrative and interest expenses are included in the United States and other
segment and are not allocated to other operating segments:

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------

SEGMENT REVENUES
Oil and gas sales:
Venezuela oil and gas sales $ 56,442 $ 41,397 $ 117,428 $ 80,194
----------- ----------- ----------- -----------

SEGMENT INCOME (LOSS)
Venezuela $ 17,607 $ 10,950 $ 38,292 $ 21,213
Russia (731) (654) (1,493) (1,191)
United States and other (2,725) (4,048) (4,613) (6,267)
----------- ----------- ----------- -----------
Net income $ 14,151 $ 6,248 $ 32,186 $ 13,755
=========== =========== =========== ===========

JUNE 30, DECEMBER 31,
2005 2004
------------- -------------

OPERATING SEGMENT ASSETS
Venezuela............................................................. $ 333,381 $ 309,794
Russia ............................................................. 407 385
United States and other............................................... 104,106 108,408
------------- -------------
437,894 418,587
Intersegment eliminations............................................. (53,739) (51,101)
------------- -------------
$ 384,155 $ 367,486
============= =============

NOTE 6 - VENEZUELA

Under the terms of our OSA with PDVSA, related to the reactivation and
further development of the Uracoa, Tucupita and Bombal fields in Venezuela, a
service fee payment to Harvest Vinccler is due by the end of the second month
after the end of each calendar quarter. PDVSA did not make its first quarter
payment for $64.8 million by the May 31, 2005 due date. By letter dated June 23,
2005, PDVSA stated that 50 percent of the amounts due would be paid in Bolivars,
and that this amount would be subject to further adjustment based upon the
amount of payments in foreign currency that Harvest Vinccler is required to
make. The letter added that the OSA would be amended to fix the future
percentage of payments that would be made in Bolivars. On June 28, 2005, Harvest
Vinccler received payment of 59 billion Bolivars from PDVSA. On June 29, 2005,
Harvest Vinccler received $27.5 million in U.S. Dollars. From our calculations,
assuming (solely for explanatory purposes) that the Bolivar could be used to
purchase United States Dollars at the official exchange rate (approximately
2,150 Bolivars per each U.S. Dollar), the amounts disbursed by PDVSA and
deposited in Harvest Vinccler's accounts are approximately $9.8 million less
than the total amount due. Harvest Vinccler has notified PDVSA in writing that
the underpayment and reported payment in Bolivars is contrary to the terms of
the OSA and demanded full and proper payment. Harvest Vinccler has a limited
need for Bolivars in the conduct of its business but expects to be able to
utilize the Bolivars received to date. However, to the extent that Harvest
Vinccler receives additional Bolivars in excess of its internal needs, it may
not be possible, due to currency control regulations, to convert any future
excess Bolivars into U.S. Dollars or other foreign currencies.

NOTE 7 - RELATED PARTY TRANSACTIONS

In March 2002, we entered into construction service agreements with
Venezolana International, S.A. ("Vinsa"). Vinsa is an affiliate of Venezolana de
Inversiones y Construcciones Clerico, C.A., which owns 20 percent of Harvest
Vinccler. This agreement was terminated on September 19, 2004. Vinsa provided
$0.2 million and $0.6 million in construction services for our Venezuelan field
operations for the three and six months ended 2004, respectively.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Harvest Natural Resources, Inc. ("Harvest" or the "Company") cautions that
any forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) contained in this report or made by
management of the Company involve risks and uncertainties and are subject to
change based on various important factors. When used in this report, the words
"budget", "guidance", "forecast", "anticipate", "expect", "believes", "goals",
"projects", "plans", "anticipates", "estimates", "should", "could", "assume" and
similar expressions are intended to identify forward-looking statements. In
accordance with the provisions of the Private Securities Litigation Reform Act
of 1995, we caution you that important factors could cause actual results to
differ materially from those in the forward-looking statements. Such factors
include our concentration of operations in Venezuela, the political and economic
risks associated with international operations (particularly those in
Venezuela), the anticipated future development costs for our undeveloped proved
reserves, the risk that actual results may vary considerably from reserve
estimates, the dependence upon the abilities and continued participation of
certain of our key employees, the risks normally incident to the operation and
development of oil and gas properties, the permitting and drilling of oil and
natural gas wells, the availability of materials and supplies necessary to
projects and operations, the price for oil and natural gas and related financial
derivatives, changes in interest rates, basis risk and counterparty credit risk
in executing commodity price risk management activities, the Company's ability
to acquire oil and gas properties that meet its objectives, changes in operating
costs, overall economic conditions, political stability, civil unrest, acts of
terrorism, currency and exchange risks, currency controls, changes in existing
or potential tariffs, duties or quotas, changes in taxes, changes in
governmental policy, availability of sufficient financing, changes in weather
conditions, and ability to hire, retain and train management and personnel. A
discussion of these factors is included in our Annual Report on Form 10-K for
the year ended 2004, which includes certain definitions and a summary of
significant accounting policies and should be read in conjunction with this
Quarterly Report.

VENEZUELA

In our Annual Report on Form 10-K for the year ended 2004, and our
Quarterly Report on Form 10-Q for the period ended March 31, 2005, we described
events in Venezuela affecting our oil and gas production and profitability. In
January 2005, we announced that our 80 percent owned Venezuelan subsidiary,
Harvest Vinccler, C.A. ("Harvest Vinccler"), was suspending its drilling
program. We have stated that a continuation in the delay of our drilling program
or a curtailment of our oil and gas deliveries could have a material adverse
effect on our financial condition, results of operations and cash flows. We also
reported that the Ministry of Energy and Petroleum ("MEP") stated that Petroleos
de Venezuela S.A. ("PDVSA") wanted to renegotiate the terms of the active
operating service agreements in Venezuela, including the South Monagas Unit
Operating Service Agreement ("OSA") held by Harvest Vinccler. In April 2005, MEP
declared that the operating service agreements lack legal validity and that
within the next six months all such agreements are to be converted into mixed
companies under the 2001 Venezuelan Organic Hydrocarbon Law ("OHL") in which the
State will have a majority ownership. MEP also imposed a cap on the service fees
paid under the operating services agreements equal to two-thirds of the market
value of the crude we deliver to PDVSA. At the time of this announcement, and
based upon an indirect confirmation by government officials, we did not think
the fee cap would have a significant impact on us (but see below). We also
reported that the Venezuelan income tax authority, the SENIAT, announced that
the income tax rate paid by companies with operating service agreements would be
increased from 34 percent to 50 percent and that the SENIAT had started a tax
audit of Harvest Vinccler for the tax years beginning with 2001. See Item 1-
Business and Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operation in our Annual Report on Form 10-K for the
year ended 2004 and Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operation, in our Form 10-Q Quarterly Report for the
period ended March 31, 2005, for a complete description of these matters.

Following the filing of our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2005, the SENIAT announced the tax increase would be made
retroactive to 2001 at a 67 percent rate and at a rate of 50 percent for all
years after 2001. The SENIAT has completed its audit of Harvest Vinccler, and on
July 22, 2005, the SENIAT issued a preliminary tax assessment of 184 billion
Venezuelan Bolivars ("Bolivars") related to fiscal years 2001 through 2004. At
the official exchange rate of 2,150 Bolivars per U.S. Dollar as of March 3,
2005, the dollar equivalent of the preliminary tax assessment is approximately
$85 million. In addition, the SENIAT imposed penalties equal to 10 percent of
the preliminary tax assessment for a total claim of 202 billion Bolivars, or

approximately $94 million. The 10 percent penalty would be payable if we pay the
preliminary tax assessment. We are in the process of reviewing the assessment,
but believe Harvest Vinccler has met its tax obligations in all material
respects. We intend to take all measures necessary to protect our rights, and
will vigorously challenge all elements of the assessment that are not supported
by Venezuelan law. Harvest Vinccler has the right to challenge the assessment
from the SENIAT by filing an answer. After filing the answer, the SENIAT is
required to issue the final assessment within one year. A final assessment by
the SENIAT may also include additional penalties between 25 percent and 200
percent of the unpaid tax. The average penalty imposed by the SENIAT is 112.5
percent of the unpaid tax unless extenuating or aggravating circumstances apply.
If a final assessment is issued, Harvest Vinccler can file an administrative
appeal with the SENIAT. During the period of review by the SENIAT, any payment
obligation is suspended. After exhausting administrative appeals, Harvest
Vinccler may either pay the tax or file a judicial appeal. If a judicial appeal
is filed, the payment obligation is suspended at the discretion of the court.
While there are no set rules on suspending payment, often times it is permitted
only if the taxpayer posts a bond or other security equal to 210 percent of the
assessment. At the current level of assessment, and considering possible
penalties, a requirement to pay the taxes or post security will have a material
adverse affect on our financial condition, and may exceed our cash balance. In
addition, the implementation of a 50 percent tax rate in the future or other
changes in the interpretation or application of the tax laws, without
compensating values, will have a material adverse effect on our financial
position, results of operations or cash flows.

In June 2005, we announced that PDVSA failed to make payment when due of
an invoice in the amount of $64.8 million for first quarter deliveries. The
payment was due on May 31, 2005. By letter dated June 23, 2005, PDVSA stated
that 50 percent of the amounts due would be paid in Bolivars, and that this
amount would be subject to further adjustment based upon the amount of payments
in foreign currency that Harvest Vinccler is required to make. The letter added
that the OSA would be amended to fix the future percentage of payments that
would be made in Bolivars. On June 28, 2005, Harvest Vinccler received payment
of 59 billion Bolivars from PDVSA. On June 29, 2005, Harvest Vinccler received
$27.5 million in U.S. Dollars. Harvest Vinccler has a limited need for Bolivars
in the conduct of its business but expects to be able to utilize the Bolivars
received to date. However, to the extent that Harvest Vinccler receives
additional Bolivars in excess of its internal needs, it may not be possible, due
to currency control regulations, to convert any future excess Bolivars into U.S.
Dollars or other foreign currencies. Continued substantial payment by PDVSA in
Bolivars or the inability to convert the Bolivars into U.S. dollars could have a
material adverse effect on our financial position, results of operations or cash
flows.

From our calculations, PDVSA's June 2005 payment to Harvest Vinccler is
approximately $9.8 million less than the total amount due. We believe this
shortfall is attributable to the unilateral imposition of the limit on service
fees previously announced by MEP. However, we also believe that PDVSA has not
properly calculated the unilateral limit it is placing on Harvest Vinccler's
fees because it is understating the actual market value of the crude oil we
deliver to PDVSA. We have notified PDVSA of this matter. A continuation of the
limit on fees as presently calculated by PDVSA would represent a significant
reduction in the fees received by Harvest Vinccler. Harvest Vinccler has
formally notified PDVSA that the underpayment and partial payment in Bolivars is
contrary to the OSA and demanded contract compliance.

Harvest Vinccler began the year with average oil production of 29,000
barrels of oil per day, and is currently averaging about 21,000 per day. This
decline is due to PDVSA's curtailment of our oil deliveries and the fact that
Harvest Vinccler has not been allowed to carry out its drilling program. Due to
these factors, in June 2005 we announced that we were withdrawing operational
and financial guidance for 2005. Production will continue to decline until
drilling is resumed and PDVSA lifts restrictions on deliveries.

Collectively, the actions by PDVSA, MEP and the SENIAT, both actual and
threatened, are having a material adverse effect on our financial condition,
results of operations and cash flows. The situation in Venezuela is also
increasing the risk that we will be unable to fund and obtain financing for
current operations, as well as growth opportunities. The situation in Venezuela
also may have a material adverse effect on our oil and gas reserves. The income
tax increase and limit on fees paid to Harvest Vinccler could cause some of the
planned future investments to become uneconomic. In addition, there is
uncertainty as to our ability to carry out our development program. These
factors create a risk of a downward revision to our proved undeveloped reserves.
As reported in our Annual Report on Form 10-K for the year ended 2004,
approximately 42 percent of oil reserves and 51 percent of gas reserves were
classified as proved undeveloped reserves. The situation in Venezuela also may
have a material adverse effect on our proved oil and gas reserves.

In July 2005, as a result of the actions taken by PDVSA, MEP and the
SENIAT, we delivered formal notices to Venezuelan government officials of an
investment dispute under Venezuelan law and investment treaties entered into by
the government of Venezuela. The bilateral investment treaties and Venezuelan
law provide for international arbitration of investment disputes conducted
through the International Centre for Settlement of Investment Disputes ("ICSID")
under the auspices of the World Bank. While we remain committed to reaching
mutual agreement with the government of Venezuela to preserve the value of our
investment, it may be necessary to submit the matter to arbitration. If
initiated, an ICSID proceeding may take a number of years to conclude, and we
can provide no assurances as to the outcome.

Without waiver of its rights, Harvest Vinccler has exchanged proposals and
continues discussions with PDVSA and MEP to establish a path forward for
converting the OSA to a mixed company under the OHL and to resolve the interim
drilling, oil and gas deliveries, pricing and currency issues. It is not
possible to give any assurances as to the timing or outcome of our discussions
with PDVSA and MEP.

CAPITAL RESOURCES AND LIQUIDITY

Debt Reduction. We have quarterly principal and interest obligations of
$1.3 million and $0.3 million, respectively, on the Harvest Vinccler variable
rate loans. We have no other debt obligations.

Working Capital. The net funds raised and/or used in each of the
operating, investing and financing activities are summarized in the following
table and discussed in further detail below:

SIX MONTHS ENDED JUNE 30,
----------------------------
2005 2004
---------- -----------
(in thousands)

Net cash provided by operating activities $ 42,925 $ 28,914
Net cash used in investing activities (13,760) (9,703)
Net cash used in financing activities (4,173) (880)
---------- -----------
Net increase in cash $ 24,992 $ 18,331
========== ===========

At June 30, 2005, we had current assets of $197.0 million and current
liabilities of $60.2 million, resulting in working capital of $136.8 million and
a current ratio of 3.3:1. This compares with a working capital of $89.0 million
and a current ratio of 2.1:1 at December 31, 2004. The increase in working
capital of $47.8 million was primarily due to higher sales prices and volumes in
Venezuela. Accounts receivable includes $9.8 million for first quarter sales not
paid by PDVSA and records second quarter PDVSA accounts receivable in the full
amount due under the OSA.

Cash Flow from Operating Activities. During the six months ended 2005 and
2004, net cash provided by operating activities was approximately $42.9 million
and $28.9 million, respectively. The $14.0 million increase was primarily due to
the increase in oil sales volumes and oil prices.

Cash Flow from Investing Activities. During the six months ended 2005 and
2004, we had drilling and production-related capital expenditures of
approximately $13.9 million and $9.4 million, respectively. The increase in
capital expenditures is due to completion of the drilling of a natural gas well
and the gathering system and facilities for the South Monagas Unit carried over
from 2004. Due to PDVSA's actions, no further drilling activity has been carried
out in 2005.

On a year to year basis, the timing and size of capital expenditures for
the South Monagas Unit are largely at our discretion, although recent actions by
PDVSA have greatly limited our ability to make our planned capital expenditures
in 2005 and could also limit us in the future. We suspended our drilling program
in January because of continuing delays in the receipt of permits to drill new
wells. We continue to expend funds for maintenance, gathering systems and
facility upgrades for the existing wells. Our remaining worldwide capital
commitments support our search for new acquisitions, are relatively minimal and
are substantially at our discretion. We continue to assess production levels and
commodity prices in conjunction with our capital resources and liquidity
requirements.

Cash Flow from Financing Activities. During the six months ended 2005,
Harvest Vinccler repaid $4.5 million of its U. S. Dollar debt (two payments of
$0.3 million and three payments of $1.3 million on the variable rate loans).
During the six months ended 2004, Harvest Vinccler repaid $3.2 million of its
U.S. dollar debt.

RESULTS OF OPERATIONS

You should read the following discussion of the results of operations for
the three and six months ended 2005 and 2004 and the financial condition as of
June 30, 2005 and December 31, 2004 in conjunction with our consolidated
financial statements and related notes included in our Annual Report on Form
10-K for the year ended 2004.

THREE MONTHS ENDED JUNE 30, 2005 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2004
(IN MILLIONS)

We reported net income of $14.2 million, or $0.37 diluted earnings per
share, in the second quarter 2005 compared with net income of $6.2 million, or
$0.16 diluted earnings per share, in the second quarter of 2004. Below is a
discussion of revenues, price and volume variances.

THREE MONTHS ENDED
JUNE 30, %
-------------------- INCREASE INCREASE
2005 2004 (DECREASE) (DECREASE) INCREASE
------- ------- ---------- -------- --------

Revenues
Crude oil $ 49.6 $ 33.0 $ 16.6 50%
Natural gas 6.8 8.4 (1.6) (19)
------- ------- --------- --------
Total Revenues $ 56.4 $ 41.4 $ 15.0 36%
======= ======= ========= ========

Price and Volume Variances
Crude oil price Variance (per Bbl) $ 23.34 $ 17.66 $ 5.68 32% $ 10.5
Volume Variances
Crude oil volumes (MBbls) 2,127 1,867 260 14% $ 6.1
Natural gas volumes (MMcf) 6,582 8,175 (1,593) (19) (1.6)
--------
Total volume variances $ 4.5
========

Revenue, Crude Oil Price Variance and Volume Variances

Revenues were higher in the second quarter 2005 compared to 2004 due to
increases in world crude oil prices and volumes as a result of our second half
2004 drilling program. Price variance is net of the $4.10 per barrel ("Bbl")
hedges in place during 2005. Gas delivery volumes have declined due to delays in
PDVSA permitting the drilling of new wells and the natural decline of associated
gas from existing oil wells. Currently, all gas deliveries are associated with
the Uracoa oil wells.

Total expenses and other non-operating (income) expense:

THREE MONTHS ENDED
JUNE 30, %
-------------------- INCREASE INCREASE
2005 2004 (DECREASE) (DECREASE)
------ ------- --------- ----------

Operating expenses $ 8.8 $ 7.4 $ 1.4 19%
Depletion and amortization 9.6 7.8 1.8 23
Depreciation 0.6 0.4 0.2 50
General and administrative 5.9 4.4 1.5 34

Gain on sale of long-lived assets -- (0.6) 0.6 --
Taxes other than on income 1.3 1.1 0.2 18
Investment income and other (0.5) (0.4) (0.1) 25
Interest expense 0.2 2.4 (2.2) (9)
------ ------- --------- --

$ 25.9 $ 22.5 $ 3.4 15%
====== ======= ========= ==

Operating expenses increased as a result of higher oil volumes and
maintenance work while the drilling program is suspended. Depletion and
amortization expense per Boe produced during the second quarter 2005 was $2.98
versus $2.40 in the second quarter of 2004. The increase was primarily due to
increased future development costs. General and administrative expense increased
due the annual issuance of restricted stock, additional audit fees, consulting
and legal fees related to our business development activities. Taxes other than
on income increased due to increased Venezuelan municipal taxes which result
from higher oil revenues and an increase in the municipal tax rate in Uracoa.

The effective tax rate declined in the second quarter 2005 to 39 percent
from 52 percent in 2004 primarily due to higher Venezuelan pre-tax revenue in
the second quarter 2005 and the elimination of corporate interest expense due to
the November 1, 2004 redemption of our 9.375 percent senior unsecured notes due
November 1, 2007 ("2007 Notes"). Our tax calculations do not include the tax
increases recently announced by the SENIAT (see Item 2. Venezuela).

SIX MONTHS ENDED JUNE 30, 2005 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2004 (IN
MILLIONS)

We reported net income of $32.2 million, or $0.84 diluted earnings per
share, in the six months ended 2005 compared with net income of $13.8 million,
or $0.36 diluted earnings per share, in the six months ended 2004. Below is a
discussion of revenues, price and volume variances.

SIX MONTHS ENDED
JUNE 30, %
-------------------- INCREASE INCREASE
2005 2004 (DECREASE) (DECREASE) INCREASE
------- ------- -------- -------- --------

Revenues
Crude oil $ 103.1 $ 63.8 $ 39.3 62%
Natural gas 14.3 16.4 (2.1) (13)
------- ------- --------- --
Total Revenues $ 117.4 $ 80.2 $ 37.2 49%
======= ======= ========= ==

Price and Volume Variances
Crude oil price Variance (per Bbl) $ 22.15 $ 16.87 $ 5.28 31% $ 19.9
Volume Variances
Crude oil volumes (MBbls) 4,658 3,781 877 24% $ 19.4
Natural gas volumes (MMcf) 13,850 15,931 (2,081) (13) (2.1)
--------
Total volume variances $ 17.3
========

Revenue, Crude Oil Price Variance and Volume Variances

Revenues were higher in the six months ended 2005 compared to 2004 due to
increases in world crude oil prices and volumes as a result of our second half
2004 drilling program. Price variance is net of the $4.10 per Bbl hedges in
place during 2005. Gas delivery volumes have declined due to delays in PDVSA
permitting the drilling of new wells and the natural decline of associated gas
from existing oil wells. All gas deliveries are associated with the Uracoa oil
wells.

Total expenses and other non-operating (income) expense:

SIX MONTHS ENDED
JUNE 30, %
-------------------- INCREASE INCREASE
2005 2004 (DECREASE) (DECREASE)
------ ------- --------- ----------

Operating expenses $ 17.7 $ 14.7 $ 3.0 20%
Depletion and amortization 20.8 15.5 5.3 34
Depreciation 1.1 0.9 0.2 22
General and administrative 10.9 8.0 2.9 36

Gain on sale of long-lived assets -- (0.6) 0.6 --
Taxes other than on income 3.1 2.3 0.8 35
Investment income and other (1.0) (0.7) (0.3) 43
Interest expense 0.4 4.9 (4.5) (92)
Net (gain) loss on exchange rates (2.8) 0.6 (3.4) --
------ ------- --------- ---

$ 50.2 $ 45.6 $ 4.6 10%
====== ======= ========= ===

Operating expenses increased as a result of higher oil volumes and
maintenance work while the drilling program is suspended. Depletion and
amortization expense per Boe produced during the second quarter 2005 was $2.99
versus $2.41 in the second quarter of 2004. The increase was primarily due to
increased future development costs. General and administrative expense increased
due the annual issuance of restricted stock, additional audit fees, consulting
and legal fees related to our business development activities. Taxes other than
on income increased due to increased Venezuelan municipal taxes which result
from higher oil revenues and an increase in the municipal tax rate in Uracoa.

The effective tax rate declined in the second quarter 2005 to 38 percent
from 45 percent in 2004 primarily due to higher Venezuelan pre-tax revenue in
the second quarter 2005 and the elimination of corporate interest expense due to
the November 1, 2004 redemption of 2007 Notes. Our tax calculations do not
include the tax increases recently announced by the SENIAT (see Item 2.
Venezuela).

EFFECTS OF CHANGING PRICES, FOREIGN EXCHANGE RATES AND INFLATION

Our results of operations and cash flow are affected by changing oil
prices. Fluctuations in oil prices may affect our total planned development
activities and capital expenditure program. In August and September 2004,
Harvest Vinccler hedged a portion of its oil sales for calendar year 2005 by
purchasing two West Texas Intermediate ("WTI") crude oil puts. See Note 1 -
Derivatives and Hedging.

Venezuela imposed currency exchange restrictions in February 2003 and
adjusted the official exchange rate between Bolivars and U.S. Dollars in March
2005 from 1,920 Bolivars to 2,150 Bolivars to the U.S. Dollar. There has been no
change in the official exchange rate since that time. There are many factors
affecting foreign exchange rates and resulting exchange gains and losses, many
of which are beyond our control. We have recognized significant exchange gains
and losses in the past, resulting from fluctuations in the relationship of the
Venezuelan currency to the U.S. Dollar. It is not possible for us to predict the
extent to which we may be affected by future changes in exchange rates and
controls. PDVSA remitted 50 percent of the first quarter oil service fees in
Bolivars. Due to currency control regulations, it may not be possible to convert
excess Bolivars into U.S. Dollars or other foreign currencies. Continued
substantial payment by PDVSA in Bolivars or the inability to convert the
Bolivars into U.S. Dollars could have a material adverse effect on our financial
condition.

Within the United States, inflation has had a minimal effect on us, but it
is potentially an important factor in results of operations in Venezuela. With
respect to Harvest Vinccler, a significant majority of the sources of funds,
including the proceeds from oil sales, our contributions and credit financings,
are denominated in U.S. Dollars, while many local transactions in Venezuela are
conducted in local currency such as local salaries, municipal and income taxes.
If the rate of increase in the value of the U.S. Dollar compared with the
Bolivar continues to be less than the rate of inflation in Venezuela, then
inflation could be expected to have an adverse effect on Harvest Vinccler.

CONCLUSION

The situation in Venezuela is adversely affecting our cash flow and may
affect our ability to fund execution of our business plan. Our business plan is
based upon projections of prices, production levels, and our assumptions that we
will be allowed to carry out our program on acceptable terms, that there will be
no disruptions or limitations on our production, that PDVSA will pay our
invoices timely and in U.S. Dollars and that our cash reserves are adequate.
These expectations and assumptions are subject to significant current risk due
to the actual and threatened actions of the Venezuelan government (see Item 2.
Venezuela). Such actions could also negatively impact the carrying value of
certain assets on our balance sheet. In the normal course of our business, our
future cash flows are subject to a number of variables including, but not
limited to, the level of production, prices, as well as various economic and
political conditions that have historically affected the oil and natural gas
business. Prices for oil are subject to fluctuations in response to changes in
supply, market uncertainty and a variety of factors beyond our control.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from the adverse changes of the situation in
Venezuela, and adverse changes in oil and natural gas prices, interest rates,
foreign exchange and political risk, as discussed in our Annual Report on Form
10-K for the year ended 2004, and our Quarterly Report on Form 10-Q for the
period ended March 31, 2005, as well as in Item 2. Venezuela.

ITEM 4. CONTROLS AND PROCEDURES

The Securities and Exchange Commission, among other things, adopted rules
requiring reporting companies to maintain disclosure controls and procedures to
provide reasonable assurance that a registrant is able to record, process,
summarize and report the information required in the registrant's quarterly and
annual reports under the Securities Exchange Act of 1934 (the "Exchange Act").
While we believe that our existing disclosure controls and procedures have been
effective to accomplish these objectives, we intend to continue to examine,
refine and formalize our disclosure controls and procedures and to monitor
ongoing developments in this area. There have not been any changes in our
internal control over financial reporting (as such term is defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to
which this report relates that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. We have established
disclosure controls and procedures to ensure that material information relating
to us, including our consolidated subsidiaries, is made known to the officers
who certify our financial reports and to other members of senior management and
the Board of Directors.

Based on their evaluation as of June 30, 2005, our principal executive
officer and principal financial officer have concluded that our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) are effective to ensure that the information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods as
specified in the Securities and Exchange Commission's rules and forms.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See our Annual Report on Form 10-K for the year ended 2004 for a
description of certain legal proceedings. There have been no
material developments in such legal proceedings since the filing of
such Annual Report.

The SENIAT Tax Assessment. On July 22, 2005, the SENIAT, the
Venezuelan income tax authority, issued a preliminary tax assessment
to Harvest Vinccler of 184 billion Venezuelan Bolivars related to
fiscal years 2001 through 2004. At the official exchange rate of
2,150 Bolivars per U.S. Dollar, the dollar equivalent of the
preliminary tax assessment is approximately $85 million. In
addition, the SENIAT imposed penalties equal to 10 percent of the
preliminary tax assessment claim for a total claim of 202 billion
Bolivars, or approximately $94 million. We are in the process of
reviewing the assessment, but believe Harvest Vinccler has met its
tax obligations in all material respects. We intend to take all
measures necessary to protect our rights, and will vigorously
challenge all elements of the assessment that are not supported by
Venezuelan law.

International Arbitration. As reported under Item 2 Venezuela above,
as a result of the actions taken by PDVSA, MEP and the SENIAT, in
July 2005, we delivered formal notices to Venezuelan government
officials of an investment dispute under Venezuelan law and
investment treaties entered into by the government of Venezuela. The
bilateral investment treaties and Venezuelan law provide for
international arbitration of investment disputes conducted under the
auspices of the World Bank.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At our Annual Meeting of Stockholders held on May 19, 2005, the
following items were voted on by the Stockholders:

1. To approve the Election of Directors:

Votes in Favor Votes Against/Withheld
-------------- ----------------------

Stephen D. Chesebro' 34,472,255 582,648
John U. Clarke 34,465,630 589,273
Byron A. Dunn 34,481,173 573,730
James A. Edmiston 34,730,530 324,373
H. H. Hardee 34,490,853 564,050
Peter J. Hill 34,490,873 564,030
Patrick M. Murray 34,488,727 566,176

2. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm for the year
ended December 31, 2005:

Votes in Favor Against/Withheld Votes Abstentions/Broker Non-Votes
- -------------- ---------------------- ----------------------------

34,981,436 51,979 21,488

ITEM 5. OTHER INFORMATION

There have been no material changes to the procedures by which
security holders may recommend nominees to our board of directors
since our Schedule 14A filed on April 8, 2005.

ITEM 6. EXHIBITS

(a) Exhibits

3.1 Amended and Restated Certificate of Incorporation.
(Incorporated by reference to Exhibit 3.1(i) to our Form 10-Q
filed on August 13, 2002, File No. 1-10762.)

3.2 Amended and Restated Bylaws as of May 19, 2005. (Incorporated
by reference to Exhibit 3.2 to our Form 10-Q filed on April
29, 2005, File No. 1-10762.)

4.1 Form of Common Stock Certificate. (Incorporated by reference
to the exhibits to our Registration Statement Form S-1
(Registration No. 33-26333).)

4.2 Certificate of Designation, Rights and Preferences of the
Series B. Preferred Stock of Benton Oil and Gas Company, filed
May 12, 1995. (Incorporated by reference to Exhibit 4.1 to our
Form 10-Q filed on May 13, 2002, File No. 1-10762.)

4.3 Second Amended and Restated Rights Agreement, dated as of
April 15, 2005, between Harvest Natural Resources, Inc. and
Wells Fargo Bank, N.A. (Incorporated by reference to Exhibit
4.3 to our Form 10-Q filed on April 29, 2005, File No.
1-10762).

4.4 Harvest Natural Resources, Inc. Deferred Compensation Plan for
the Board of Directors, dated as of May 23, 2003, between
Harvest Natural Resources, Inc. and its Board of Directors.

4.5 Amendment, Freeze and Termination Agreement to the Harvest
Natural Resources, Inc. Deferred Compensation Plan for the
Board of Directors, dated as of May 31, 2005, between Harvest
Natural Resources, Inc. and its Board of Directors.

31.1 Certification of the principal executive officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of the principal financial officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of the principal executive officer accompanying
the quarter report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

32.2 Certification of the principal financial officer accompanying
the quarter report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

HARVEST NATURAL RESOURCES, INC.

Dated: August 1, 2005 By: /S/Peter J. Hill
-------------------------------------
Peter J. Hill
President and Chief Executive Officer

Dated: August 1, 2005 By: /S/Steven W. Tholen
--------------------------------
Steven W. Tholen
Senior Vice President - Finance,
Chief Financial Officer and Treasurer

EXHIBIT INDEX

EXHIBIT
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