Harvest Natural Resources Operational Update

HOUSTON, Nov. 5, 2010 /PRNewswire/ -- Harvest Natural Resources, Inc. (NYSE: HNR) today provided an operational update for its 32-percent-owned Venezuelan affiliate, Petrodelta, S.A. ("Petrodelta") as well as for Harvest's domestic and international exploration and development activity.

Venezuela

• Harvest received payment of Petrodelta dividends in the amount of $9.8 million, net to Harvest's 32 percent interest.
• In the nine months ended September 30, 2010, Petrodelta drilled and completed 13 wells and produced approximately 6.1 million barrels of oil (MMBO), an increase of 8 percent over the same period in 2009.
• Petrodelta's current production rate is approximately 25,000 barrels of oil per day (BOPD).

United States

• Harvest's net share of production from the Antelope projects in Utah totaled approximately 146,000 barrels of oil equivalent for the nine months ended September 30, 2010.  Current net production to Harvest during the month of October 2010 was 587 barrels of oil equivalent per day (BOEPD).
• Two wells of a five-well Lower Green River/Upper Wasatch delineation and development drilling program have been successfully drilled and are in varying stages of completion and testing.
• Four of the six wells related to the second phase of the Monument Butte Field Extension project have been drilled to total depth (TD) and are producing at a restricted combined rate of approximately 400 gross BOPD and 1.1 gross million cubic feet per day (MMCFD) of gas.

Indonesia

• More than 95 percent of the drilling rig and other materials and equipment has been transported to the Lariang LG-1 drill site; the well is expected to spud in November 2010.

Financing

• Closed a $60.0 million term loan facility on October 28, 2010, providing the Company with sufficient liquidity to execute its current development and exploration programs.

Harvest CEO James Edmiston said: "We are pleased to report measureable progress on several fronts this quarter.  In Venezuela, Petrodelta's drilling program has increased total proved reserves net to Harvest to 50.4 million barrels of oil equivalent (MMBOE) from 46.3 MMBOE at year end 2009.  This represents a proved reserve replacement ratio of 300 percent in only nine months.  Further, total proved and probable ("2P") reserves net to Harvest increased to over 100 MMBOE, an increase of 26 percent over year-end 2009."

Mr. Edmiston continued, "In Utah, our Harvest-operated drilling program has made good progress to date with two wells completed, two more being drilled, and the fifth location being prepared.  The initial flow results of the Kettle well are very encouraging and indicate that economic development of the Lower Green River and Upper Wasatch is feasible in the Kettle area, which lies eight miles east of the Bar F, and hence opens up a significant area of our land position for further development of the Lower Green River and Upper Wasatch.  We are also encouraged by the results of the four Stewart wells we have drilled to date in our Monument Butte Extension project.  The results of the Stewart wells, combined with recent results achieved by competitors in the general area of our Monument Butte Extension project, have served to increase the likelihood that the Monument Butte Extension project will extend to the north, west, and east onto a significant portion of Harvest's 10,000-15,000 acre lease position in the area."

Mr. Edmiston concluded, "Also, we are set to spud our first of two Budong Budong exploration wells this month.  We are hopeful that the significant delays experienced with this project are behind us, and we can now move forward with our efforts to fully evaluate these high-impact prospects over the coming months.  Finally, we have improved our cash liquidity position by closing a $60.0 million term loan facility on October 28, 2010, and received payment of Petrodelta dividends in the amount of $9.8 million, net to Harvest's 32 percent interest.  This provides sufficient capital to execute our exploration and development programs and evaluate our strategic alternatives."

VENEZUELA

During the nine months ended September 30, 2010, Petrodelta drilled and completed 13 successful development wells, produced approximately 6.12 million barrels of oil and sold 1.8 billion cubic feet (BCF) of natural gas.  Petrodelta produced an average of 22,501 BOPD during the nine months ended September 30, 2010.  Currently, Petrodelta is operating two drilling rigs and one workover rig.  In October 2010, Harvest announced another increase in Venezuelan reserves.  The increase is a result of a new reserve report dated September 30, 2010 for the El Salto field, which is the largest of the six fields operated by Petrodelta.  Proved and probable ("2P") reserves net to Harvest in Venezuela have increased to 103.0 MMBOE at September 30, 2010, a 26 percent increase over year-end 2009.  Proved reserves net to Harvest in Venezuela increased to 50.4 MMBOE at September 30, 2010, a 10 percent increase over year end 2009.  These reserve additions resulted from the successful recent drilling and the extension of Block 5, a previously proven fault block in the El Salto field.  The reserve report was prepared by the independent petroleum engineering firm of Ryder Scott Company, L.P. (Ryder Scott) at Harvest's request.

EXPLORATION AND OTHER DEVELOPMENT DRILLING ACTIVITIES

Lower Green River/Upper Wasatch Oil Delineation and Development Project

Harvest commenced drilling operations in July 2010 on its previously announced Harvest-operated five-well delineation and development drilling program.  This program represents a follow up to Harvest's first quarter 2010 Lower Green River/Upper Wasatch oil discovery in the Bar F 1-20-3-2 well.  The five wells will be drilled back to back and have planned TDs of between 10,000 and 12,000 feet each.  As of October 25, 2010, the program was nearing 50 percent overall completion as detailed below.  Harvest has a 70 percent working interest in the program.

The first well in the program, the Kettle #1-10-3-1, was drilled to 12,000 feet and was hydraulically fractured with nine stages.  The well flowed naturally up casing a total of 4,440 barrels of oil and 17.6 million cubic feet (MMCF) of gas during a nine-day flowback during clean-up.  Current flow rates on October 25, 2010 were approximately 600 BOPD and 2.8 MMCFD.  Installation of production facilities for the well is in progress.

The second well, the O.N. Moon 1-27-3-2 was drilled to a TD of 10,169 feet and cased.  The well will undergo a multi-stage frac to begin the first week in November 2010 followed by immediate flowback.

The third well, the Dart 1-12-3-2 was drilling at a depth of 4,500 feet on October 25, 2010 with a planned TD of 11,000 feet.

Monument Butte Extension Appraisal and Development Project

The six-well Monument Butte Extension development drilling program is a follow up on a successful eight-well program which commenced in 2009.  The program is operated by Newfield Exploration, targets the Green River formation, and is located immediately adjacent to the block containing the initial eight wells.  The wells are being drilled to total depths ranging from 6,800 to 7,100 feet.  Harvest has a 37 percent working interest in the six-well program. 

During the third quarter of 2010, four of the six planned wells were drilled, completed, and placed on production.  As of October 25, 2010, the four wells had produced a combined 24,000 gross barrels of crude and 47 gross MMCF of gas.  The gross current restricted production rate from the combined four wells on October 25, 2010 was approximately 400 BOPD and 1.1 MMCFD of gas.  The remaining two wells are expected to be drilled prior to the end of 2010.

Indonesia

Transportation of the drilling rig and support equipment and materials to the drilling location is 95 percent completed.  The first of two planned exploration wells is expected in November 2010 at the Lariang LG-1 site.  Site preparations are underway for the second exploration well, the Karama KD-1, which is scheduled to spud during the first quarter of 2011.

Reserves Disclosure

In December 2008, the SEC issued its final rule, Modernization of Oil and Gas Reporting, which is effective for reporting 2009 and forward reserve information.  The SEC's Modernization of Oil and Gas Reporting allows the disclosure of probable and possible reserves.

Proved reserves are those quantities of oil and gas which through analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward from known reservoirs and under existing economic conditions, operating methods, government regulations, etc., i. e., at prices as described above and costs as of the date the estimates are made.  Prices include consideration of changes in existing prices provided only by contractual arrangements and do not include adjustments based upon expected future conditions.  Probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.  Possible reserves are those additional reserves which are less certain to be recovered than probable reserves and thus the probability of achieving or exceeding the proved plus probable plus possible reserves is low.

Reserves may be estimated using probabilistic methods in which there is at least a 90 percent probability of recovery of proved reserves, at least a 50 percent probability of recovery of probable reserves, and at least a 10 percent probability of recovery of possible reserves. Harvest's probable reserves were calculated using probabilistic methods and represent the 50 percent probability that the actual quantities recovered will be equal to or greater than the proved plus probable estimate. The larger quantity of proved reserves plus probable reserves, as compared to proved reserves only, is attributable largely to using a less conservative interpretation of reservoir size and recovery factor in estimating probable reserves.

The estimate of reserves is made using available geological and reservoir data as well as production performance data. These estimates are prepared by an independent third party petroleum engineering consulting firm and revised, either upward or downward, as warranted by additional data. Revisions are necessary due to changes in, among other things, reservoir performance, prices, economic conditions and governmental restrictions, as well as changes in the expected recovery associated with infill drilling. Decreases in prices, for example, may cause a reduction in some proved reserves due to reaching economic limits earlier. A material adverse change in the estimated volumes of proved reserves could have a negative impact on DD&A expense and could result in the recognition of impairment.

In calculating the reserves in this press release, initial production rates are based on the current producing rates for those wells now on production. Test data and other related information were used to estimate the anticipated initial production rates for those wells or locations that are not currently producing. If no production decline trend has been established, future production rates were held constant, or adjusted for the effects of curtailment where appropriate, until a decline in ability to produce was anticipated. An estimated rate of decline was then applied to depletion of the reserves. If a decline trend has been established, this trend was used as the basis for estimating future production rates. For reserves not yet on production, sales were estimated to commence at an anticipated date furnished by Harvest to Ryder Scott.

Ryder Scott performed a reserve evaluation on the El Salto field with an effective date of September 30, 2010. The El Salto field represents approximately 55 percent of proved oil reserves, 87 percent of probable oil reserves and 75 percent of possible oil reserves of Harvest Natural Resources in Venezuela. Harvest believes that no material changes in remaining reserves have occurred in the other five fields of Petrodelta (Uracoa, Bombal, Tucupita, Isleno and Temblador) since December 31, 2009. Reserves on these other five fields have been estimated effective September 30, 2010 by subtracting the actual volumes produced and sold during 2010 through September 30, 2010 from the reserves as of December 31, 2009.

About Harvest Natural Resources

Harvest Natural Resources, Inc., headquartered in Houston, Texas, is an independent energy company with principal operations in Venezuela, producing and exploration assets in the United States, exploration assets in 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 www.harvestnr.com.

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 2009 Annual Report on Form 10-K and other public filings.

SOURCE Harvest Natural Resources, Inc.

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