EXHIBIT 99.1
[HARVEST LETTERHEAD]
FOR IMMEDIATE RELEASE
HARVEST NATURAL RESOURCES
ANNOUNCES FOURTH QUARTER AND 2003 RESULTS
HOUSTON, TX - (March 4, 2004) - Harvest Natural Resources, Inc. (NYSE:HNR)
today announced 2003 fourth quarter earnings of $7.8 million, or $0.21 per
diluted share, compared with $10.4 million, or $0.28 per diluted share, for the
same period last year. The 2002 fourth quarter included an income tax benefit of
$7.8 million.
Discretionary cash flow (defined as cash flows from operating activities
before changes in operating assets and liabilities) was $14.9 million for the
2003 fourth quarter compared with $19.8 million for the 2002 fourth quarter. See
reconciliation to Generally Accepted Accounting Principles (GAAP) in table
below.
Net income for the year ended December 31, 2003 was $27.3 million, or
$0.74 per diluted share compared with $100.4 million, or $2.78 per diluted
share, for 2002. Net income for 2003 includes a $46.6 million gain on the sale
of LLC Geoilbent offset, in part, by a $28.9 million equity in net losses of
affiliated companies which were related primarily to Geoilbent's full cost
ceiling test write down. The $100.4 million net income for 2002 included a
$144.0 million gain on the Company's sale of its interest in the Arctic Gas
Company.
Discretionary cash flow was $36.8 million for 2003 compared with $59.3
million for 2002. See reconciliation to GAAP in table below.
Harvest President and Chief Executive Officer, Dr. Peter J. Hill, said,
"At the start of the year we said 2003 was a period of transition for Harvest,
moving from a company totally dependent on oil production to one that seeks
transformational value growth. Taken overall, 2003 was a success. We met our
guidance despite losing 37 days of production as a result of the national civil
work stoppage in Venezuela and the changing landscape in Russia. Gas sales
started in November diversifying our revenue and cash flow streams. Including
the new gas sales for the full year, production for 2004 is projected to
increase between 50 to 75 percent resulting in strong growth of net income and
cash flow. We also signed a Memorandum of Understanding with PDVSA to evaluate,
prepare a field development plan and negotiate the rights to develop the
Temblador and El Salto Fields. During the year, we closely managed our cash
reserves to preserve our financial health and provide a platform for future
investment in growth."
In Venezuela, production for 2003 was 7.3 million barrels of oil and 2.7
billion cubic feet of natural gas for a combined total production of 7.8 million
barrels of oil equivalent. The Company began sales of natural gas on November
25, 2003 and by December 2003 sales had stabilized at volumes between 70 to 80
million cubic feet per day. Production for 2002 was 9.7 million barrels of oil.
Sales to Petroleos de Venezuela, S.A. ("PDVSA") were disrupted from December 14,
2002 until February 6, 2003 reducing 2002 sales approximately 0.6 million
barrels and 2003 sales by an estimated 1.2 million barrels.
In 2003, the Company received an average price of $14.07 per barrel of oil
including 7.2 million barrels at an average price of $14.13 and 0.1 million
barrels at an average price of $7.00 per barrel. The Company received $1.03 per
thousand cubic feet of natural gas sold during 2003. The 2002 average sales
price for oil was $13.05 per barrel.
Hill said, "During the year we elected to sell our interest in Geoilbent
to a major Russian oil and gas company at an attractive price. Our 34 percent
minority equity interest in Geoilbent did not provide us with the level of
control we wanted with respect to operating plans and financial management
consistent with our strategy. Our decision to sell Geoilbent released capital
for reinvestment in multiple growth opportunities in Venezuela and Russia and
for other corporate purposes."
Hill continued, "In 2004, we will pursue investment opportunities in both
Venezuela and Russia, drive cost improvements and increase production. We are
working to improve margins, enhance cash flows and maximize recovery of our
remaining reserves in the South Monagas Unit which is generating strong cash
flow based on attractive world oil prices, increased production and lower
operating costs per barrel of oil equivalent produced. For the next several
years, we believe Venezuela and Russia can provide Harvest with good
opportunities for additional growth through the acquisition of large oil and gas
development or reactivation projects."
RECONCILIATION OF NON-GAAP MEASURES ($MM)
<Table>
<Caption>
Three Months Ended December 31 Twelve Months Ended December 31
------------------------------ -------------------------------
2003 2002 2003 2002
----- ----- ----- -----
Net cash provided by operating activities $ 2.6 $15.5 $38.5 $42.6
Changes in operating assets & liabilities 12.3 4.3 (1.7) 16.7
----- ----- ----- -----
Discretionary cash flow $14.9 $19.8 $36.8 $59.3
</Table>
Harvest Natural Resources, Inc. headquartered in Houston, Texas, is an
independent oil and gas exploration and development company with principal
operations in Venezuela and an office in Russia. For more information visit the
Company's website at www.harvestnr.com.
CONTACT:
Steven W. Tholen
Senior Vice President, Chief Financial Officer
(281) 578-8020
"This press release may contain projections and other forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All statements other than statements of
historical facts may constitute forward-looking statements. Although Harvest
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Actual results may differ materially from Harvest's expectations
as a result of factors discussed in Harvest's 2001 Annual Report on form 10-K
and subsequent reports."
================================================================================
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
($ MILLIONS, UNAUDITED)
December 31, December 31,
2003 2002
------- -------
ASSETS:
CURRENT ASSETS:
Cash and equivalents $ 138.7 $ 64.5
Restricted cash -- 1.8
Marketable securities -- 27.4
Accounts receivable, net 43.9 35.3
Prepaid expenses and other 0.8 3.0
------- -------
Total current assets 183.4 132.0
OTHER ASSETS 2.1 2.5
DEFERRED INCOME TAXES 4.7 4.1
INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES -- 51.8
PROPERTY AND EQUIPMENT, net 184.1 144.8
------- -------
TOTAL ASSETS $ 374.3 $ 335.2
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 4.2 $ 3.8
Accrued expenses 25.6 20.6
Accrued interest 1.4 1.4
Income taxes payable 8.6 6.9
Commodity hedging contract payable -- 0.4
Current portion of long-term debt 6.4 1.9
------- -------
Total current liabilities 46.2 35.0
LONG TERM DEBT 96.8 104.7
ASSET RETIREMENT PROVISION 1.5 --
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTEREST 30.1 24.1
STOCKHOLDERS' EQUITY:
Common stock and paid-in capital 175.4 174.0
Retained earnings 27.5 0.2
Treasury stock (3.2) (2.8)
------- -------
Total stockholders' equity 199.7 171.4
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 374.3 $ 335.2
------- -------
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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: December 31, 2003 December 31, 2002
- --------------------------------------------------------------------------------------------------------------
Barrels of oil sold 2,017 1,985
MMCF of gas sold 2,660
Total BOE 2,460 1,985
Average price/barrel $13.94 $13.92
Average price/mcf $1.03
- --------------------------------------------------------------------------------------------------------------
$/BOE $/BOE
-----------------------------------------------
REVENUES:
Oil sales $28,120 $27,905
Gas sales 2,740
Ineffective hedge activity (284)
-----------------------------------------------
30,860 12.54 27,621 13.92
-----------------------------------------------
EXPENSES:
Operating expenses 7,180 2.92 9,254 4.66
Depletion and amortization 5,924 2.41 5,044 2.54
Depreciation 429 0.17 368 0.19
Write-downs of oil and gas properties and impairments 34 0.02
General and administrative 4,170 1.69 3,970 2.00
Taxes other than on income 916 0.37 1,095 0.55
-----------------------------------------------
18,619 7.56 19,765 9.96
-----------------------------------------------
INCOME FROM OPERATIONS 12,241 4.98 7,856 3.96
-----------------------------------------------
OTHER NON-OPERATING INCOME (EXPENSE)
Gain on disposition of assets 271 0.11 (34) (0.02)
Investment income and other 499 0.20 446 0.23
Interest expense (2,515) (1.02) (2,809) (1.42)
Net gain on exchange rates 2 (551) (0.28)
-----------------------------------------------
(1,743) (0.71) (2,948) (1.49)
- --------------------------------------------------------------------------------------------------------------
INCOME FROM CONSOLIDATED COMPANIES
BEFORE INCOME TAXES AND MINORITY INTERESTS 10,498 4.27 4,908 2.47
Income tax (benefit) 1,894 0.77 (7,810) (3.93)
- --------------------------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTERESTS 8,604 3.50 12,718 6.40
Minority interest in consolidated subsidiary companies 2,498 1.02 3,318 1.67
- --------------------------------------------------------------------------------------------------------------
INCOME FROM CONSOLIDATED COMPANIES 6,106 2.48 9,400 4.73
Equity in net earnings of affiliated companies 1,658 0.67 1,041 0.52
-----------------------------------------------
NET INCOME $ 7,764 $ 3.15 $ 10,441 $ 5.25
-----------------------------------------------
- --------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE:
Basic $0.22 $0.30
Diluted $0.21 $0.28
- --------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
Basic 35.5 million 35.0 million
Diluted 37.3 million 36.9 million
- --------------------------------------------------------------------------------------------------------------
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER BOE AND PER SHARE AMOUNTS, UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED: December 31, 2003 December 31, 2002
- ----------------------------------------------------------------------------------------------------------------------
Barrels of oil sold 7,347 9,708
MMCF of gas sold 2,660
Total BOE 7,790 9,708
Average price/barrel $14.07 $13.05
Average price/mcf $1.03
- ----------------------------------------------------------------------------------------------------------------------
$/BOE $/BOE
------------------------------------------------------
REVENUES:
Oil sales $103,920 $127,015
Gas sales 2,740
Ineffective hedge activity (565) (284)
------------------------------------------------------
106,095 13.62 126,731 13.05
------------------------------------------------------
EXPENSES:
Operating expenses 30,893 3.97 33,950 3.50
Depletion and amortization 19,599 2.52 24,941 2.57
Depreciation 1,589 0.20 1,422 0.15
Write-downs of oil and gas properties and impairments 165 0.02 14,537 1.50
General and administrative 15,746 2.02 16,504 1.70
Arbitration settlement 1,477 0.19
Bad debt recovery (374) (0.05) (3,276) (0.34)
Taxes other than on income 3,373 0.43 4,068 0.42
------------------------------------------------------
72,468 9.30 92,146 9.50
------------------------------------------------------
INCOME FROM OPERATIONS 33,627 4.32 34,585 3.55
------------------------------------------------------
OTHER NON-OPERATING INCOME (EXPENSE)
Gain on disposition of assets 46,619 5.98 144,029 14.84
Gain on early extinguishment of debt 874 0.09
Investment income and other 1,418 0.18 2,080 0.21
Interest expense (10,405) (1.34) (16,310) (1.68)
Net gain on exchange rates 529 0.07 4,553 0.47
------------------------------------------------------
38,161 4.89 135,226 13.93
- ----------------------------------------------------------------------------------------------------------------------
INCOME FROM CONSOLIDATED COMPANIES
BEFORE INCOME TAXES AND MINORITY INTERESTS 71,788 9.21 169,811 17.48
Income tax expense 9,657 1.24 60,295 6.21
- ----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTERESTS 62,131 7.97 109,516 11.27
Minority interest in consolidated subsidiary companies 5,968 0.77 9,319 0.96
- ----------------------------------------------------------------------------------------------------------------------
INCOME FROM CONSOLIDATED COMPANIES 56,163 7.20 100,197 10.31
Equity in net earnings (losses) of affiliated companies (28,860) (3.70) 165 0.02
------------------------------------------------------
NET INCOME $ 27,303 $ 3.50 $ 100,362 $10.33
------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE:
Basic $0.77 $2.90
Diluted $0.74 $2.78
- ----------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
Basic 35.3 million 34.6 million
Diluted 36.8 million 36.1 million
- ----------------------------------------------------------------------------------------------------------------------
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HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Year Ended
Ended December 31, December 31,
------------------------ ------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Cash Flows From Operating Activities:
Net income $ 7,764 $ 10,443 $ 27,303 $ 100,362
Adjustments to reconcile net income to net cash provided
by operating activities:
Depletion, depreciation and amortization 6,353 5,412 21,188 26,363
Impairments -- 34 165 14,537
Amortization of financing costs 76 187 497 1,745
Gain on disposal of assets (271) 35 (46,619) (144,029)
Gain on early extinguishment of debt -- 874 -- --
Equity in earnings of affiliated companies (1,658) (1,041) 28,860 (165)
Allowance and write off of employee notes and
accounts receivable 50 53 (169) (2,987)
Non-cash compensation-related charges 89 576 296 1,458
Minority interest in undistributed earnings of
subsidiaries 2,498 3,318 5,968 9,319
Extraordinary income from repurchase of debt -- (874) -- (874)
Deferred income taxes -- 752 (667) 53,618
Changes in operating assets and liabilities:
Accounts and notes receivable (5,155) 10,601 (7,935) (1,972)
Prepaid expenses and other 648 (101) 2,164 (1,130)
Put option 2,300 -- -- --
Accounts payable (4,911) (600) 359 (4,328)
Accrued expenses (1,127) (2,602) 4,310 (10,290)
Accrued interest payable (1,985) (2,001) 22 (2,489)
Asset retirement liability (307) -- 1,459 --
Commodity hedging contract payable -- 430 (430) 430
Income taxes payable (1,721) (10,031) 1,767 3,059
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities 2,643 15,465 38,538 42,627
- ---------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Proceeds from sale of properties and investments -- -- 69,500 189,841
Partial payment on sale of equity interest -- -- -- --
Additions of property and equipment (10,037) (10,486) (60,925) (43,346)
Investment in and advances to affiliated companies -- (41) 2,328 9,185
Increase in restricted cash -- -- -- (2,800)
Decrease in restricted cash -- 1,000 1,800 1,000
Purchases of marketable securities -- (234,287) (256,058) (353,478)
Maturities of marketable securities -- 219,290 283,446 326,090
Increase in other assets (697) (430) (1,900) (349)
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Investing Activities (10,734) (24,954) 38,191 126,143
- ---------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Net proceeds from exercise of stock options 681 909 1,201 3,345
Repurchase of common stock -- -- (404) --
Proceeds from issuance of short term borrowings and notes
payable -- 15,500 -- 15,500
Payments on short term borrowings and notes payable (300) (650) (3,367) (132,138)
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities 381 15,759 (2,570) (113,293)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase in Cash (7,710) 6,270 74,159 55,477
Cash and Cash Equivalents at Beginning of Period 146,370 58,231 64,501 9,024
------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 138,660 $ 64,501 $ 138,660 $ 64,501
------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
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