Harvest Natural Resources Inc. (HNR, Financial) filed Quarterly Report for the period ended 2010-06-30.
Harvest Natural Resources Inc. has a market cap of $266.75 million; its shares were traded at around $8.02 with a P/E ratio of 32.08 and P/S ratio of 1473.77. HNR is in the portfolios of Mohnish Pabrai of Pabrai Mohnish, George Soros of Soros Fund Management LLC.
Two drill sites were selected in 2009. Operational activities during the six months ended June 30, 2010 focused on well planning, construction for the two test well sites, mobilization of rig and ancillary equipment to the first drill site and purchase of drilling equipment. After delays in acquiring permits to mobilize the drilling rig from its port location to the drilling pad, it is now expected that the first of two exploratory wells will spud late in the third quarter of 2010. In accordance with the farm-in agreement, we expect to fund 100 percent of the well expenditures to earn our 47 percent working interest up to a cap of $10.7 million; thereafter, we will pay in proportion to our working interest. Prior to drilling the first exploration well, subject to the estimated cost of that well, our partner will have a one-time option to increase the level of the carried interest to a maximum of $20.0 million, and as compensation for the increase, we will increase our participation to a maximum of 54.65 percent. This equates to a total carried cost for the farm-in of $9.1 million. Our partner intends to exercise their option to increase the level of the carried interest and is currently reviewing the amount of the increase. During the six months ended June 30, 2010, we had cash capital expenditures of $5.6 million for well planning, construction and drilling equipment and $1.3 million for seismic data processing and reprocessing. The remaining 2010 budget for the Budong PSC is $14.5 million.
Based on our cash balance of $31.5 million at June 30, 2010, we will require additional funds in order to fund our future operating and capital expenditures. As we disclosed in previous filings, our cash is being used to fund oil and gas exploration, appraisal and development projects and to a lesser extent, general and administrative costs. Currently, our primary source of cash is dividends from Petrodelta and to a lesser extent, production from the Monument Butte Extension and Lower Green River/Upper Wasatch projects. In May 2010, Petrodelta declared a dividend of $30.5 million, $12.2 million net to HNR Finance ($9.8 million net to our 32 percent interest). However, there is no certainty that Petrodelta will pay additional dividends in 2010 or 2011. Our lack of cash flow and the anticipated level of cash dividends from Petrodelta could make it difficult to obtain financing, and accordingly, there is no assurance adequate financing can be raised. We continue to pursue, as appropriate, additional actions designed to generate liquidity including seeking of financing sources, accessing equity and debt markets, and cost reductions. In addition, we could delay discretionary capital spending to future periods or sell, farm-out or otherwise monetize assets as necessary to maintain the liquidity required to run our operations, if necessary. There can be no assurances that any of these possible efforts will be successful or adequate, and if they are not, our financial condition and liquidity could be materially adversely affected.
At June 30, 2010, we had current assets of $57.2 million and current liabilities of $11.9 million, resulting in working capital of $45.3 million and a current ratio of 4.8:1. This compares with a working capital of $34.2 million and a current ratio of 3.0:1 at December 31, 2009. The increase in working capital of $11.1 million was primarily due to the receivable for the $12.2 million dividend net to HNR Finance ($9.8 million net to our 32 percent interest) from our unconsolidated equity affiliate.
Cash Flow from Investing Activities. During the six months ended June 30, 2010, we had cash capital expenditures of approximately $23.9 million. Of the 2010 expenditures, $15.4 million was attributable to activity on the Antelope projects, $5.6 million was attributable to activity on the Budong PSC, $1.6 million was attributable to activity on the Dussafu PSC and $1.3 million was attributable to other projects. During the six months ended June 30, 2009, we had cash capital expenditures of approximately $11.3 million. Of the 2009 expenditures, $7.6 million was attributable to activity on the Antelope project, $2.2 million to Block 64 EPSA, $0.1 million to the Dussafu PSC and $1.4 million to other projects.
Cash Flow from Financing Activities. During the six months ended June 30, 2010, we closed an offering of $32.0 million in aggregate principal amount of our 8.25 percent senior convertible notes, incurred $2.7 million in deferred financings costs related to the $32.0 million convertible debt offering that are being amortized over the life of the financial instrument and $0.1 million in legal fees associated with a prospective financing. During the six months ended June 30, 2009, we incurred $1.5 million in legal fees associated with a prospective financing.
Read the The complete Report
Harvest Natural Resources Inc. has a market cap of $266.75 million; its shares were traded at around $8.02 with a P/E ratio of 32.08 and P/S ratio of 1473.77. HNR is in the portfolios of Mohnish Pabrai of Pabrai Mohnish, George Soros of Soros Fund Management LLC.
Highlight of Business Operations:
entered into force on January 11, 2010. Each exchange rate is applied to foreign currency sales and purchases conducted through the Foreign Currency Administration Commission (CADIVI), in the cases expressly provided in the Exchange Agreement. In this regard, the exchange rates established in the Agreement are: 2.60 Bolivars per U.S. Dollar and 4.30 Bolivars per U.S. Dollar. The 2.60 Bolivar exchange rate applies to the food, health, medical and technology sectors. The 4.30 Bolivar exchange rate applies to all other sectors not expressly established by the 2.60 Bolivar exchange rate. Petrodelta revalued the appropriate monetary accounts that were Bolivar-denominated to U.S. Dollars, Petrodeltas functional currency, at the published exchange rate of 4.30 Bolivars per U.S. Dollar. In general, monetary assets based in Bolivars would be revalued to a lower U.S. Dollar balance on Petrodeltas balance sheet resulting in a currency exchange rate loss on the income statement, and monetary liabilities based in Bolivars would revalue to a lower U.S. Dollar balance in Petrodeltas balance sheet resulting in a gain on exchange rates in the income statement. The primary factor in Petrodeltas gain on currency exchange rates is that Petrodelta had substantially higher Bolivar denominated liabilities than Bolivar denominated assets. During the three and six months ended June 30, 2010, Petrodelta recorded a $1.9 million and $120.7 million, before tax, ($0.6 million and $38.6 million, before tax, net to our 32 percent interest) remeasurement gain on revaluation of assets and liabilities, respectively.Two drill sites were selected in 2009. Operational activities during the six months ended June 30, 2010 focused on well planning, construction for the two test well sites, mobilization of rig and ancillary equipment to the first drill site and purchase of drilling equipment. After delays in acquiring permits to mobilize the drilling rig from its port location to the drilling pad, it is now expected that the first of two exploratory wells will spud late in the third quarter of 2010. In accordance with the farm-in agreement, we expect to fund 100 percent of the well expenditures to earn our 47 percent working interest up to a cap of $10.7 million; thereafter, we will pay in proportion to our working interest. Prior to drilling the first exploration well, subject to the estimated cost of that well, our partner will have a one-time option to increase the level of the carried interest to a maximum of $20.0 million, and as compensation for the increase, we will increase our participation to a maximum of 54.65 percent. This equates to a total carried cost for the farm-in of $9.1 million. Our partner intends to exercise their option to increase the level of the carried interest and is currently reviewing the amount of the increase. During the six months ended June 30, 2010, we had cash capital expenditures of $5.6 million for well planning, construction and drilling equipment and $1.3 million for seismic data processing and reprocessing. The remaining 2010 budget for the Budong PSC is $14.5 million.
Based on our cash balance of $31.5 million at June 30, 2010, we will require additional funds in order to fund our future operating and capital expenditures. As we disclosed in previous filings, our cash is being used to fund oil and gas exploration, appraisal and development projects and to a lesser extent, general and administrative costs. Currently, our primary source of cash is dividends from Petrodelta and to a lesser extent, production from the Monument Butte Extension and Lower Green River/Upper Wasatch projects. In May 2010, Petrodelta declared a dividend of $30.5 million, $12.2 million net to HNR Finance ($9.8 million net to our 32 percent interest). However, there is no certainty that Petrodelta will pay additional dividends in 2010 or 2011. Our lack of cash flow and the anticipated level of cash dividends from Petrodelta could make it difficult to obtain financing, and accordingly, there is no assurance adequate financing can be raised. We continue to pursue, as appropriate, additional actions designed to generate liquidity including seeking of financing sources, accessing equity and debt markets, and cost reductions. In addition, we could delay discretionary capital spending to future periods or sell, farm-out or otherwise monetize assets as necessary to maintain the liquidity required to run our operations, if necessary. There can be no assurances that any of these possible efforts will be successful or adequate, and if they are not, our financial condition and liquidity could be materially adversely affected.
At June 30, 2010, we had current assets of $57.2 million and current liabilities of $11.9 million, resulting in working capital of $45.3 million and a current ratio of 4.8:1. This compares with a working capital of $34.2 million and a current ratio of 3.0:1 at December 31, 2009. The increase in working capital of $11.1 million was primarily due to the receivable for the $12.2 million dividend net to HNR Finance ($9.8 million net to our 32 percent interest) from our unconsolidated equity affiliate.
Cash Flow from Investing Activities. During the six months ended June 30, 2010, we had cash capital expenditures of approximately $23.9 million. Of the 2010 expenditures, $15.4 million was attributable to activity on the Antelope projects, $5.6 million was attributable to activity on the Budong PSC, $1.6 million was attributable to activity on the Dussafu PSC and $1.3 million was attributable to other projects. During the six months ended June 30, 2009, we had cash capital expenditures of approximately $11.3 million. Of the 2009 expenditures, $7.6 million was attributable to activity on the Antelope project, $2.2 million to Block 64 EPSA, $0.1 million to the Dussafu PSC and $1.4 million to other projects.
Cash Flow from Financing Activities. During the six months ended June 30, 2010, we closed an offering of $32.0 million in aggregate principal amount of our 8.25 percent senior convertible notes, incurred $2.7 million in deferred financings costs related to the $32.0 million convertible debt offering that are being amortized over the life of the financial instrument and $0.1 million in legal fees associated with a prospective financing. During the six months ended June 30, 2009, we incurred $1.5 million in legal fees associated with a prospective financing.
Read the The complete Report
