HOUSTON, Aug. 7, 2015 /PRNewswire/ -- Harvest Natural Resources, Inc. (NYSE: HNR) (Harvest or the Company) today announced 2015 second quarter earnings and provided an operational update.

Harvest reported a second quarter net loss of approximately $25.4 million, or $0.60 per diluted share, compared with a net loss of $1.7 million, or $0.04 per diluted share, for the same period last year. The second quarter results included a non-cash loss on issuance of debt, which is related to the CT Energy transaction, of $20.4 million, or $0.48 per diluted share. Adjusted for loss on issuance of debt, Harvest would have posted a second quarter net loss of approximately $5.0 million, or $0.12 per diluted share, before any adjustment for income taxes.

The loss on issuance of debt is the result of the difference between (i) the issuance-date value of the CT Energia warrants of $40.0 million, plus the net value applied to embedded derivatives related to the non-convertible note and the convertible note issued to CT Energy of $10.95 million, plus transaction costs of $1.65 million less (ii) the loan proceeds received of $32.2 million. The sum is recognized as a non-cash pre-tax loss of $20.4 million during the second quarter of 2015.

Petrodelta generated $173.3 million in revenue during the second quarter before deductions for royalties, compared to $365.2 million for the same period in 2014. The average price of crude oil sold by Petrodelta during the second quarter was $49.71 per barrel, compared to $88.77 per barrel for the same period during 2014. Petrodelta reported a second quarter operating loss before taxes and non-operating items of $98.6 million, compared to operating income before taxes and non-operating items of $35.0 million for the second quarter of 2014. Petrodelta posted a net loss of $74.8 million during the second quarter, compared to net income of $42.3 million for the same period in 2014. The Petrodelta financial results are prepared and presented under IFRS.

Highlights for the second quarter of 2015 include:

Venezuela


    --  During the second quarter of 2015, Petrodelta drilled and completed six
        development wells and sold approximately 3.45 million barrels of oil
        (MMBO) for a daily average of approximately 37,929 barrels of oil per
        day (BOPD), a decrease of 16% over the same period in 2014.
    --  Petrodelta's current production rate is approximately 37,761 BOPD and
        the 2015 expected average production rate is 38,921 BOPD, with capital
        expenditures projected at $392.0 million.
    --  Harvest has entered into a term sheet with Petróleos de Venezuela, S.A.
        (PDVSA), Harvest's partner in Petrodelta, for the repositioning and
        growth of Petrodelta's business.

Gabon


    --  Operational activities during the period included continued evaluation
        of development plans, based on the 3D seismic data acquired in late 2013
        and processed during 2014.
    --  Harvest has engaged a third party to undertake a fixed-price,
        geophysical site survey over multiple potential well locations in the
        Dussafu block beginning in August 2015.

Corporate


    --  On June 19, 2015, the Company entered into a strategic relationship with
        CT Energy and CT Energia designed to maximize the long-term success and
        value of Harvest's Venezuelan operations and its 20.4% investment in
        Petrodelta.
    --  The Company sold CT Energy a $25.2 million, five year, 15%
        non-convertible senior secured promissory note and a $7.0 million, five
        year, 9% convertible senior secured note.
    --  Harvest also issued CT Energy a warrant to purchase up to 34,070,820
        shares of Harvest's common stock at an initial exercise price of $1.25
        per share.  The warrant becomes exercisable only after the 30-day volume
        weighted average price of Harvest's common stock equals or exceeds $2.50
        per share.
    --  At our upcoming annual shareholder meeting on September 9, 2015, Harvest
        stockholders will be asked to approve certain proposals relating to the
        transaction.
    --  If stockholder approval is not obtained, CT Energy has the right to
        accelerate full repayment of the non-convertible and convertible notes
        upon 60-days' notice.

VENEZUELA

During the three months ended June 30, 2015, Petrodelta sold approximately 3.45 MMBO for a daily average of 37,929 BOPD, a decrease of 16% over the same period in 2014, and 6% lower than the previous quarter. Petrodelta sold 1.10 billion cubic feet (BCF) of natural gas for a daily average of 12.1 million cubic feet per day (MMCFD), increasing 62% over the same period in 2014 and 13% over the previous quarter. Petrodelta's current production rate is approximately 37,761 BOPD.

During the second quarter of 2015, Petrodelta drilled and completed six development wells, five in the El Salto field and one in the Temblador field. Currently, Petrodelta is operating six drilling rigs and one workover rig and continues with infrastructure enhancement projects in the El Salto and Temblador fields.

Petrodelta's production target for 2015 is projected to be approximately 38,921 BOPD. The 2015 Petrodelta capital expenditures are expected to be approximately $392.0 million. Petrodelta expects to drill 21 oil wells during 2015.

EXPLORATION AND OTHER ACTIVITIES

Dussafu Project - Gabon (Dussafu PSC)

Operational activities during the six months ended June 30, 2015, included continued evaluation of development plans, based on the 3D seismic data acquired in late 2013 and processed during 2014. Harvest and its joint venture partner have engaged a third party to undertake a fixed-price, geophysical site survey over multiple potential well locations in the Dussafu block beginning in August 2015. The survey is a pre-requisite for siting mobile drilling units and other installations required for continuing exploration and development activities over the license. The survey will provide information about the seabed and shallow geological conditions, essential for the safe siting and operation of these installations.

Corporate

On June 19, 2015, the Company entered into a strategic relationship with CT Energy and CT Energia Holding, Ltd., an international energy trading firm ("CT Energia"), designed to maximize the long-term success and value of Harvest's Venezuelan operations and its 20.4% investment in Petrodelta. Under the terms of this strategic relationship, the Company entered into a term sheet with PDVSA for the repositioning and growth of Petrodelta's business. The Company agreed to appoint two of CT Energy's designees as the Company's representatives on the Petrodelta board of directors. CT Energia has entered into a management contract with the Company to oversee Harvest's Venezuelan day-to-day operations and to assist in the development of a plan for the business operations and financing for Petrodelta and the negotiation of definitive documents to implement such plan.

Terms of the transaction with CT Energy include:


    --  The Company sold CT Energy a $25.2 million, five year, 15%
        non-convertible senior secured promissory note ("15% Note") and a $7.0
        million, five year, 9% convertible senior secured note ("9% Note").  The
        9% Note is immediately convertible into 8,506,097 shares of Harvest
        common stock at an initial conversion price of $0.82.  Harvest also
        issued to CT Energy 69.75 shares of a newly-created series of preferred
        stock that carry voting rights equivalent to the shares of common stock
        underlying the unconverted portion of the 9% Note.
    --  Harvest issued CT Energy a warrant to purchase up to 34,070,820 shares
        of Harvest's common stock at an initial exercise price of $1.25 per
        share ("CT warrant").  The CT warrant will become exercisable only after
        the 30-day volume weighted average price of Harvest's common stock
        equals or exceeds $2.50 per share ("Stock Appreciation Date") and
        Harvest's stockholders approve certain proposals related to the
        transaction with CT Energy by a majority of votes cast, as required by
        the New York Stock Exchange ("NYSE") shareholder approval rules.  The CT
        warrant is cash-exercisable, but CT Energy may surrender the 15% Note to
        pay for a portion of the aggregate exercise price.
    --  The Company sold CT Energy a five-year 15% non-convertible senior
        secured note ("additional draw note"), under which CT Energy may elect
        to provide $2.0 million of additional funds to the Company per month for
        up to six months following the one-year anniversary of the closing date
        of the transaction (up to $12.0 million in aggregate).  If funds are
        loaned under the additional draw note, interest will be compounded
        quarterly at a rate of 15% per annum and will be payable quarterly on
        the first business day of each January, April, July and October,
        commencing October 1, 2016.  If by June 19, 2016 ("Claim Date"),  the
        volume weighted average price of the Company's common stock over any
        consecutive 30-day period has not equaled or exceeded $2.50 per share,
        the maturity date of the additional draw note will be extended by two
        years and the interest rates on the additional draw note will adjust to
        8%. During an event of default, the outstanding principal amount will
        bear additional interest at a rate of 2% per annum higher than the rate
        otherwise applicable.
    --  Harvest issued to CT Energy 69.75 shares of the Company's newly created
        Series C preferred stock, par value $0.01 per share.  The primary
        purpose of the Series C preferred stock is to provide the holder of the
        9% Note with voting rights equivalent to the common stock underlying the
        unconverted portion of the 9% Note.  Shares of the Series C preferred
        stock are entitled to vote on certain matters submitted to a vote of the
        stockholders on an "as converted" basis.
    --  At our upcoming annual shareholder meeting on September 9, 2015, Harvest
        stockholders will be asked to approve certain proposals related to the
        transaction under NYSE shareholder approval requirements and to approve
        an amendment to Harvest's charter to authorize new shares of common
        stock in an amount sufficient for future needs, including the full
        conversion of the 9% Note and full exercise of the CT warrant issued in
        the transaction.
    --  If stockholder approval is not obtained, CT Energy has the right to
        accelerate full repayment of the 9% and 15% notes upon 60-days' notice.
        Upon acceleration of the notes, Harvest would be required to seek
        alternative financing for liquidity and the strategic relationship with
        CT Energia would be terminated.
    --  CT Energy appointed three members to the Company's board of directors,
        including one appointee serving as an independent director under the
        NYSE and Securities and Exchange Commission ("SEC") rules.

Conference Call

Harvest will hold a conference call at 10:00 a.m. Central Daylight Time on Friday, August 7, 2015, during which management will discuss Harvest's 2015 second quarter results. The conference leader will be James A. Edmiston, President and Chief Executive Officer. To access the conference call, dial 719-457-2648 or 888-438-5525 five to ten minutes prior to the start time. At that time you will be asked to provide the conference number, which is 9336519. A recording of the conference call will also be available for replay at 719-457-0820 or 888-203-1112, passcode 9336519, through August 12, 2015.

The conference call will also be transmitted over the internet through the Company's website at www.harvestnr.com. To listen to the live webcast, enter the website fifteen minutes before the call to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay of the webcast will be available beginning shortly after the call and will remain on the website for approximately 90 days.

About Harvest Natural Resources

Harvest Natural Resources, Inc., headquartered in Houston, Texas, is an independent energy company with principal operations in Venezuela and Gabon. For more information visit the Company's website at www.harvestnr.com.

CONTACT:

Stephen C. Haynes
Vice President, Chief Financial Officer
(281) 899-5716

Forward Looking Statements

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. They include estimates and timing of expected oil and gas production, oil and gas reserve projections of future oil pricing, future expenses, planned capital expenditures, anticipated cash flow and our business strategy. 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 2014 Annual Report on Form 10-K and other public filings.

Harvest may use certain terms such as resource base, contingent resources, prospective resources, probable reserves, possible reserves, non-proved reserves or other descriptions of volumes of reserves. These estimates are by their nature more speculative than estimates of proved reserves and accordingly, are subject to substantially greater risk of being actually realized by the Company.

Important Information about the Transaction with CT Energy and Additional Information

The Company will file a definitive proxy statement with the SEC to solicit stockholder approval of proposals relating to the strategic transaction with CT Energy and other matters at the Company's 2015 annual meeting. The Company's stockholders are urged to read the definitive proxy statement when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. A free copy of the definitive proxy statement, as well as other filings with the SEC containing information about the Company and the proposals may be obtained, when available, at the SEC's website at www.sec.gov. Copies of the definitive proxy statement may also be obtained, when available, without charge, by directing a request to Harvest Natural Resources, Inc., Investor Relations, 1177 Enclave Parkway, Suite 300, Houston, Texas 77077 or at the Company's Investor Relations page on its corporate website at www.harvestnr.com. The Company and its directors and officers and CT Energy Holding SRL and its principals and employees may be deemed to be participants in the solicitation of proxies from the Company's stockholders in connection with the approval of the proposals at the annual meeting.


    HARVEST NATURAL RESOURCES, INC. AND
     SUBSIDIARIES

    CONSOLIDATED CONDENSED BALANCE SHEETS

    (in thousands, except per share data)



                                                June 30,             December 31,
                                                --------             ------------

                                                      2015                    2014
                                                      ----                    ----

                                               (Unaudited)

    ASSETS
    ------

    CURRENT ASSETS:

       Cash and cash equivalents                             $18,880                   $6,585

       Restricted cash                                             -                      25

       Accounts receivable, net                                  491                      339

       Deferred income taxes                                     118                       53

       Prepaid expenses and other                                368                      353
                                                                 ---                      ---

          TOTAL CURRENT ASSETS                                19,857                    7,355

    INVESTMENT IN AFFILIATE                                  164,700                  164,700

    PROPERTY AND EQUIPMENT:

       Oil and gas properties (successful
        efforts method)                                       54,544                   54,290

       Other administrative property, net                        161                      217
                                                                 ---                      ---

          TOTAL PROPERTY AND EQUIPMENT, NET                   54,705                   54,507

    EMBEDDED DERIVATIVE ASSET                                  2,627                        -

    OTHER ASSETS                                                 643                    1,484
                                                                 ---                    -----

    TOTAL ASSETS                                            $242,532                 $228,046
                                                            --------

    LIABILITIES AND EQUITY
    ----------------------

    CURRENT LIABILITIES:

       Accounts payable, trade and other                      $2,205                   $1,697

       Accrued expenses                                        4,442                    4,617

       Accrued interest                                          150                       97

       Income taxes payable                                       10                        5

       Current deferred tax liability                             40                       45

       Notes payable to noncontrolling
        interest owners                                            -                  13,709

       Other current liabilities                                 165                      128
                                                                 ---                      ---

          TOTAL CURRENT LIABILITIES                            7,012                   20,298

    LONG-TERM DEBT                                               145                        -

    LONG-TERM DEFERRED TAX LIABILITY                          15,860                   14,655

    EMBEDDED DERIVATIVE LIABILITY                             13,015                        -

    WARRANT DERIVATIVE LIABILITY                              37,595                        -

    OTHER LONG-TERM LIABILITIES                                  375                      215

    COMMITMENTS AND CONTINGENCIES (Note 12)

    MEZZANINE EQUITY, Series C preferred
     stock,  par value $0.01 per share;
     authorized 69.75 shares; outstanding,
     69.75 shares (2015)                                           -                       -

    EQUITY
    ------

    STOCKHOLDERS' EQUITY:

       Preferred stock, par value $0.01 per
        share; authorized 5,000 shares;
        outstanding, none                                          -                       -

       Common stock, par value $0.01 per
        share; shares authorized 80,000 (2015
        and 2014); shares  issued 49,320 (2015
        and 2014); shares outstanding  42,748
        (2015 and 2014)                                          493                      493

       Additional paid-in capital                            287,902                  280,757

       Accumulated deficit                                 (132,250)               (101,208)

       Treasury stock, at cost, 6,572 shares
        (2015 and  2014)                                    (66,316)                (66,316)
                                                             -------                  -------

          TOTAL HARVEST STOCKHOLDERS' EQUITY                  89,829                  113,726

    NONCONTROLLING INTERESTS                                  78,701                   79,152
                                                              ------                   ------

           TOTAL EQUITY                                      168,530                  192,878
                                                             -------                  -------

    TOTAL LIABILITIES AND EQUITY                            $242,532                 $228,046


    HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES

    CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

    (in thousands, except per share data)

    (Unaudited)



                                                               Three Months Ended June 30,           Six Months Ended June 30,
                                                               ---------------------------           -------------------------

                                                                                      2015                 2014                      2015 2014
                                                                                      ----                 ----                      ---- ----


    EXPENSES:

       Depreciation and amortization                                                             $27                                 $58               $56        $134

       Exploration expense                                                                       575                               1,648             2,507       3,481

       Impairment expense -unproved property
        costs                                                                                      -                              3,150                 -      7,610

       General and administrative                                                              5,517                               4,903             9,675      11,204
                                                                                               -----                               -----             -----      ------

                                                                                               6,119                               9,759            12,238      22,429
                                                                                               -----                               -----            ------      ------

    LOSS FROM OPERATIONS                                                                     (6,119)                            (9,759)         (12,238)   (22,429)

    OTHER NON-OPERATING INCOME (EXPENSE):

       Investment earnings and other                                                               -                                  -                -          4

       Loss on sale of interest in Harvest
        Holding                                                                                    -                              (391)                -    (1,357)

       Warrant liability income                                                                2,418                                   -            2,418           -

       Derivative income                                                                         557                                   -              557           -

       Interest expense                                                                        (614)                               (15)            (851)       (62)

       Loss on issuance of debt                                                             (20,402)                                  -         (20,402)          -

       Loss on extinguishment of  long-term
        debt                                                                                       -                                  -                -    (4,749)

       Foreign currency transaction gains
        (losses)                                                                                  77                                 259                80       (210)

       Other non-operating expenses                                                                -                                  -                -      (220)
                                                                                                 ---                                ---              ---       ----

                                                                                            (17,964)                              (147)         (18,198)    (6,594)
                                                                                             -------                                ----           -------      ------

    LOSS FROM CONTINUING OPERATIONS BEFORE
     INCOME TAXES                                                                           (24,083)                            (9,906)         (30,436)   (29,023)

    INCOME TAX EXPENSE (BENEFIT)                                                               1,604                                (88)            1,220     (1,042)
                                                                                               -----                                 ---             -----      ------

    LOSS FROM CONTINUING OPERATIONS BEFORE
     EARNINGS FROM INVESTMENT AFFILIATE                                                     (25,687)                            (9,818)         (31,656)   (27,981)

    EARNINGS FROM INVESTMENT AFFILIATE                                                             -                             16,062                 -     34,949
                                                                                                 ---                             ------               ---     ------

    INCOME (LOSS) FROM CONTINUING OPERATIONS                                                (25,687)                              6,244          (31,656)      6,968

    DISCONTINUED OPERATIONS                                                                        -                              (230)                -      (361)
                                                                                                 ---                               ----               ---       ----

    NET INCOME (LOSS)                                                                       (25,687)                              6,014          (31,656)      6,607

    LESS: NET INCOME (LOSS) ATTRIBUTABLE TO
     NONCONTROLLING INTERESTS                                                                  (262)                              7,665             (614)     16,266
                                                                                                ----                               -----              ----      ------

    NET LOSS ATTRIBUTABLE TO HARVEST
     [COMPREHENSIVE LOSS]                                                                  $(25,425)                           $(1,651)        $(31,042)   $(9,659)

    BASIC LOSS PER SHARE:

       Loss from continuing operations                                                       $(0.60)                            $(0.03)          $(0.73)    $(0.22)

       Discontinued operations                                                                     -                             (0.01)                -     (0.01)
                                                                                                 ---                              -----               ---      -----

       Basic loss per share                                                                  $(0.60)                            $(0.04)          $(0.73)    $(0.23)

    DILUTED LOSS PER SHARE:

       Loss from continuing operations                                                       $(0.60)                            $(0.03)          $(0.73)    $(0.22)

       Discontinued operations                                                                     -                             (0.01)                -     (0.01)
                                                                                                 ---                              -----               ---      -----

       Diluted loss per share                                                                $(0.60)                            $(0.04)          $(0.73)    $(0.23)




       WEIGHTED AVERAGE SHARES OUTSTANDING:

       Basic                                                                                  42,663                              41,861            42,663      41,854

       Diluted                                                                                42,663                              41,861            42,663      41,854


    HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES

    CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

    (in thousands)

    (Unaudited)


                                                         Six Months Ended June 30,
                                                      -------------------------

                                                           2015                   2014
                                                           ----                   ----

    CASH FLOWS FROM OPERATING ACTIVITIES:

       Net income (loss)                                          $(31,656)                         $6,607

       Adjustments to reconcile net income (loss)
        to net cash used in operating activities:

          Depreciation and amortization                                56                             134

          Impairment expense -unproved property
           costs                                              -                           7,610

          Amortization of debt financing costs                        283                               -

          Amortization of discount on debt                            145                               -

          Loss on debt issuance                                    20,402                               -

          Loss on sale of interest in Harvest Holding         -                           1,357

          Foreign currency transaction loss                   -                           1,468

          Loss on extinguishment of  long-term debt           -                           4,749

          Earnings from investment affiliate                  -                        (34,949)

          Share-based compensation-related charges                    988                           1,589

          Warrant liability income                                (2,418)                              -

          Deferred income tax expense (benefit)                     1,135                         (1,070)

          Derivative income                                         (557)                              -

       Changes in operating assets and
        liabilities:

          Accounts receivable                                       (152)                          1,438

          Prepaid expenses and other                                 (15)                          (249)

          Other assets                                                583                             (8)

          Accounts payable                                            508                         (2,996)

          Accrued expenses                                          (474)                       (11,229)

          Accrued interest                                            100                           (306)

          Income taxes payable                                          5                         (2,133)

          Other current liabilities                                    37                           (261)

          Other long-term liabilities                                 160                           (450)
                                                                      ---                            ----

          NET CASH USED IN OPERATING ACTIVITIES                  (10,870)                       (28,699)
                                                                  -------                         -------

    CASH FLOWS FROM INVESTING ACTIVITIES:

       Transaction costs from sale of interest in
        Harvest Holding                                       -                         (3,540)

       Additions of property and equipment                          (353)                          (521)

       Advances to investment affiliate, net                  -                           (262)

       Decrease in restricted cash                            -                             123
                                                            ---                             ---

          NET CASH USED IN INVESTING ACTIVITIES                     (353)                        (4,200)
                                                                     ----                          ------

    CASH FLOWS FROM FINANCING ACTIVITIES:

       Debt repayment                                             (8,900)                       (79,750)

       Debt extinguishment costs                              -                           (760)

       Gross proceeds from issuance of debt                        33,500                               -

       Contributions from noncontrolling interest
        owners                                                        163                             717

       Treasury stock purchases                               -                            (94)

       Financing costs                                            (1,245)                              -
                                                                   ------                             ---

          NET CASH PROVIDED BY (USED IN) FINANCING
           ACTIVITIES                                              23,518                        (79,887)
                                                                   ------                         -------

          NET INCREASE (DECREASE) IN CASH AND CASH
           EQUIVALENTS                                             12,295                       (112,786)

    CASH AND CASH EQUIVALENTS AT BEGINNING OF
     PERIOD                                                         6,585                         120,897
                                                                    -----                         -------

    CASH AND CASH EQUIVALENTS AT END
     OF PERIOD                                                      $18,880                          $8,111
                                                                    -------                          ------

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SOURCE Harvest Natural Resources, Inc.