HOUSTON, Jan 21, 2010 /PRNewswire via COMTEX News Network/ -- Harvest Natural Resources, Inc. (NYSE: HNR) today provided an operational update and overview of its 2010 exploration and production plans for its 32 percent owned Venezuelan affiliate, Petrodelta, S.A.(Petrodelta) as well as for Harvest's U.S. and international exploration portfolio.
Contingent upon successful test results in Utah and Indonesia, Harvest has planned capital expenditures of up to $111.0 million to evaluate and develop the Company's prospect portfolio in the United States and international locations, excluding Venezuela's self funding program. Additionally, we will be evaluating financing options during 2010 to fund planned projects.
During 2009, Petrodelta drilled 16 development wells, produced approximately 7.8 million barrels of oil and sold 4.4 billion cubic feet (BCF) of natural gas. Petrodelta shareholders have agreed the company will remain self-funding, relying on internally-generated cash flow to fund operations. As such, Petrodelta shareholders and board have approved a capital budget of $205 million with a significant portion of that total related to infrastructure costs to support the further development of the Temblador and El Salto oil fields. The approved budget should be self funding at a WTI oil price of $70 per barrel in 2010.
Targeted levels for oil production are 30,000 BOPD in 2010, with first quarter 2010 production expected to be 23,500 BOPD. Petrodelta plans to operate two rigs in 2010 to drill both development and appraisal wells.
In October 2009, Harvest announced an increase in reserves attributed to Petrodelta. The increase in reserves was driven primarily by the drilling of two appraisal wells in the largely undeveloped El Salto field. The previous estimate of original oil in place for the El Salto field was upwardly revised by 48 percent to 5.4 billion barrels of original oil in place. Proved reserves net to Harvest increased to 47.6 MMBOE at August 31, 2009, as compared to 43.3 MMBOE at year-end 2008. Proved, probable and possible reserves net to Harvest increased 59 percent to 211.1 MMBOE. By category and net to Harvest, proved, probable and possible reserves increased by approximately 10 percent, 35 percent and 104 percent, respectively. The reserves estimate was prepared by the independent petroleum consultants of Ryder Scott Company, L.P. (Ryder Scott) for Harvest.
The impact of the recent Bolivar devaluation in Venezuela, announced on January 11, 2010, will be negligible to Petrodelta and its partners primarily due to Petrodelta's sales of oil and gas being based in U. S. dollars. Also, should the effect of the inflation rate be lower than the Bolivar devaluation, as is expected, there should be some reduction in operating costs and capital expenditures which are denominated in Bolivars.
Harvest President and Chief Executive Officer, James A. Edmiston, said: "The interim reserve report was commissioned primarily to independently reassess the growth potential of the El Salto field and to provide input into Petrodelta's capital budget process for 2010 and beyond". Mr. Edmiston continued, "Coming off successful appraisal drilling in the El Salto field, and proving the potential of 3,000 BOPD from its first producing well in that field, Petrodelta will continue its drilling program in El Salto. It will also begin construction of the infrastructure which will permit early production rates of over 10,000 BOPD which are expected to occur from El Salto by 2011. Petrodelta will also continue development of the Temblador field, currently producing 8,500 BOPD, and will begin appraisal drilling of the Isleno field. Based on proven reserves only, Petrodelta gross oil production would reach a level over 50,000 BOPD by 2014. Given the substantial incremental resources identified in the probable and possible categories, we think Petrodelta has outstanding prospects for growth well beyond that level."
EXPLORATION AND OTHER DEVELOPMENT DRILLING ACTIVITIES
Antelope Project - United States
Ongoing exploration, appraisal, and development activities on Harvest's 60,000 acre (36,000 acres net to Harvest) Antelope project in Duchesne County, Utah during 2009 will continue in 2010. Activities are in progress on two separate projects on the Harvest leasehold as described below.
Bar F Exploration Drilling Project
During 2009 with Harvest as operator, the Bar F # 1-20-3-2 was drilled to a total depth of 17,566 feet and an extended production test is now in progress. To date, testing has been focused on the evaluation of the natural gas potential of the Mesaverde tight gas reservoir over a prospective interval from 14,000 to 17,400 feet.
Completion activities consisted of hydraulic fracturing of eight separate reservoir intervals in the Mesaverde and multiple extended flow tests of the individual fractured intervals. We have tested flow rates of 1.5 to 2 MMCFD from selected intervals in the well, and are currently preparing the well for a commingled flow test of the eight intervals.
While the results to date have not definitively determined the commerciality of a stand-alone development of the Mesaverde, we believe these results indicate significant progress toward that determination and that the Mesaverde reservoir is potentially prospective over a significant portion of our land position. Specifically, drilling, logging, coring and test results to date from the well indicate the following:
The primary technical concern regarding the prospectivity of the Mesaverde is whether or not it will have adequate porosity and permeability to produce commercial quantities over a large area. Ultimate determination of the commerciality of the Mesaverde will still require the following to be accomplished:
Once the Mesaverde testing program is completed in the Bar F well, we plan to move uphole to test multiple oil bearing intervals from 6,000 feet to 9500 feet in the Lower Green River and Upper Wasatch formations which were identified during drilling operations and confirmed by log analysis. This oil testing program will involve multiple stages of hydraulic fracturing and associated flow tests, and is expected to be undertaken during the first quarter of 2010. The objective of the oil testing program is to determine whether the oil bearing zones will demonstrate flow rates capable of commercial production in a stand-alone vertical or horizontal well which would be drilled specifically to develop the oil reservoirs. If the oil zones are proved to be commercial in the Bar F, we believe that the Lower Green River and Upper Wasatch may be producible over an extensive portion of the northern portion of our land position. Should a development program be merited, we would expect development to occur on a location by location basis, with each well representing a systematic step-out from the proven Bar F location. It is noteworthy that the Bar F well is approximately six to eight miles south of the southern limits of the Altamont-Bluebell producing field complex which produces extensively from the Lower Green River and Upper Wasatch formations. The 2010 capital expenditure program for this project is contingent on the final results of the testing program. For 2010 planning purposes, we have included a program to lease additional land, shoot 2D seismic on this related acreage, drill six Green River/Upper Wasatch appraisal and development wells, two of which may be deepened to further test the Mesaverde interval. Contingent on successful test results, the planned capital expenditures for this project in 2010 are $ 33.0 million (net).
Monument Butte Field Extension Appraisal and Development Drilling Project
Harvest is currently participating in an eight well appraisal and development drilling program to produce oil and gas reserves from the Green River formation on the southern portion of Harvest's Antelope land position. The program is operated by Newfield Exploration Company (Newfield) with Harvest holding a 43 percent working interest. The parties have formed a 320 acre Area of Mutual Interest containing the eight drilling locations. To date, five wells have been drilled with the three remaining wells expected to be drilled in late January and February 2010. Three wells are currently on production and produced at a combined average gross production rate of 1,600 BOPD and 1.8 MMCFD over the last seven days. Two additional wells have been completed and are anticipated to commence production in the near future. We expect that all eight wells will be on production by approximately March 15, 2010. Results of the program to date have exceeded pre-drilling expectations for production rates, and gross drilling and completion costs of about $800,000 per well are in line with pre-drilling estimates.
We are evaluating the potential for expanding this drilling program in view of the success of the initial wells. Work to date indicates that it is reasonable to anticipate that we will be able to identify five to ten additional viable 2010 drilling locations beyond the initial eight well program. Additionally, Harvest has further acreage to the west and on strike with the current program. We expect to firm up the potential plans for additional drilling in the first and second quarters of 2010. Planned 2010 capital expenditures for completion of the eight well program and potential expansion to other locations are $4.6 million (net).
Gulf Coast - United States
In December 2009, we wrote off the remaining carrying value of the Starks prospect, one of the prospects in our Gulf Coast AMI, as we have no plans for further activities relating to this prospect.
Budong-Budong Block, Indonesia
The interpretation of 650 kilometers of 2-D seismic was completed in the third quarter and drill sites have been selected. Currently, the locations for the two test wells are being constructed and the rig and ancillary equipment is being mobilized to the area. It is expected that the first of two exploration wells will spud in mid-March 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.
Should the two exploration wells provide positive results, we plan to drill and test two appraisal wells. We have the option to become operator after JOA approval of the development plan, and would then prepare for development drilling and construction facilities which would likely take place during 2011. Contingent on successful results of the exploration wells, capital expenditures of $28.0 million (net) have been planned for this project for 2010.
Dussafu Block - Gabon
Harvest, the operator of the Dussafu license offshore Gabon with a 66.66% working interest, has progressed the technical work in 2009 with the completion of the processing and reprocessing of 1,330 kilometers of 2D seismic and the pre-stack depth reprocessing of 1,076 square kilometers of 3D seismic data. The improved imaging from this work has allowed the interpretation to mature the prospect inventory to provide the partnership a number of prospective targets in the sub-salt section, in both the Gamba and Syn-rift plays that are productive in the nearby Etame, Lucina and M'Bya fields. Subject to drilling rig availability, we expect to drill an exploration well in the third quarter of 2010. Depending on the results from the test well, a testing program may be implemented and an appraisal sidetrack may be drilled. Contingent capital expenditures of $20.1 million (net) have been planned for this project for 2010.
Block 64 - Oman
During 2009, we signed an Exploration and Production Sharing Agreement (EPSA) with the Sultanate of Oman (Oman) for the Al Ghubar / Qarn Alam license (Block 64 EPSA). We have a 100 percent working interest in the Block 64 EPSA during the exploration phase. Oman Oil Company has the option to back-in for up to a 20 percent interest in the Block after the discovery of gas.
Block 64 is a newly-created block designated for exploration and production of non-associated gas and condensate which the Oman Ministry of Oil and Gas has carved out of the Block 6 Concession operated by Petroleum Development of Oman (PDO). PDO will continue to produce oil from several fields within the Block 64 EPSA area. The 3,867 square kilometer (955,600 acre) block is located in the gas and condensate rich Ghaba Salt Basin in close proximity to the Barik, Saih Rawl and Saih Nihayda gas and condensate fields. Current activities include compiling existing data, preparing for 3-D pre-stack depth migration reprocessing and initiating a baseline environmental survey.
During 2010, Harvest expects to complete the 3-D pre-stack depth migration reprocessing of existing seismic data and begin preparations for drilling the first exploration well scheduled to spud in 2011. Contingent capital expenditures of $4.7 million have been planned for this project for 2010.
Mr. Edmiston said, "In 2009, we continued to mature and progress our relatively extensive exploration portfolio globally, substantially increased production in Venezuela and established our first U.S. oil production in Utah. Over the course of the next six months, we expect to have in hand the results of the initial exploratory results in Utah and Indonesia and our 2010 planned capital expenditures are largely contingent upon those results. Either of these projects have the potential to significantly increase Harvest's reserves and production over the coming years. Additionally, we expect that with expanded infrastructure investment, our Venezuelan assets will begin to accelerate production from the substantial reserve base in the Temblador and El Salto fields."
About Harvest Natural Resources
Harvest Natural Resources, Inc. headquartered in Houston, Texas, is an independent energy company with principal operations in Venezuela, exploration assets in the United States, Indonesia, West Africa, China and Oman and business development offices in Singapore and the United Kingdom. For more information visit the Company's website at http://www.harvestnr.com.
CONTACT: Stephen C. Haynes Vice President, Chief Financial Officer (281) 899-5716
"This press release may contain projections and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 2008 Annual Report on Form 10-K and other public filings."
SOURCE Harvest Natural Resources, Inc.
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