Start Time: 11:00
End Time: 11:23
Harvest Natural Resources Inc. (HNR)
Q2 2012 Earnings Call
August 9, 2012 11:00 AM ET
Keith Head – Vice President and General Counsel
James Edmiston – President and Chief Executive Officer
Stephen Haynes – Chief Financial Officer
John Malone – Global Hunter Securities
Jason Wangler – Wunderlich Securities
Good morning and welcome to the Harvest Natural Resources Second Quarter Earnings Conference Call. As a reminder, today’s conference call is being recorded.
I would now like to turn the conference over to Vice President and General Counsel for Harvest Natural Resources, Mr. Keith Head. Please go ahead, sir.
Thank you. Good morning and welcome to Harvest natural Resources 2012 second quarter results conference call. This morning our press release was broadcasted to the Company’s fax and email list. If you would like to be on one of those lists or you did not receive yours due to a technical difficulty, please call our office at 281-899-5700.
In a few hours, a replay of today’s call will be available in the Investor Relations portion of our website at www.harvestnr.com. Additionally, telephonic replay will be available this afternoon by dialing 719-457-0820, pass code 4576497.
This conference call will contain various forward-looking statements and information including management’s expectations regarding financial, operating and other results. These statements are based on management’s beliefs as well as assumptions made by and information currently available to the management.
Although the company believes that the expectations reflected in such forward-looking statements are reasonable, we can give no assurances that such expectations will prove to have been correct.
Actual results may differ materially from the company’s expectations due to changes in operating performance, project or drilling schedules, oil and gas prices as well as other technical, political and economic factors.
Additional detailed information concerning a number of factors that could cause actual results to differ materially from today’s information is readily available in the company’s SEC filings under the heading risk factors and disclosure regarding our reserves. Investors are urged to consider closely the disclosure in our Form-10K which is available from the SEC or on our website.
At this time, I would like to turn the call over to James Edmiston, Harvest Natural Resources’ President and Chief Executive Officer.
Thanks Keith and thank you for joining us this morning. I trust you’ve had a chance to review our earnings release this morning and I’m going to provide a brief operation summary and then Steve is going to go over the second quarter financials.
I’ll discuss briefly that our previously announced transaction involving our Venezuela business and after that we’ll open up for questions.
So starting with Petrodelta, operationally Petrodelta delivered about 3.3 million barrels of oil or 36,418 barrels of oil per day to PDVSA during the second quarter compared with 2.8 million barrels or 30,680 barrels per day in the same period one year ago. That’s an increase of about 19% year-on-year. Current productions north of 39,000 barrels of oil per day. July averaged about 37,500 barrels of oil per day and on July 17th Petrodelta eclipse the 40,000 barrel a day mark for the first time.
Two drilling rigs are currently active in the field, one in El Salto and one in Temblador, while our third rig, a new build modular rig is currently rigging up in the Isleno field and should begin operations in September. Petrodelta is currently scheduled to receive two additional new modular rigs in the remainder of the year. So as we indicated in the previous call we expect both CapEx and production growth to be higher in the second half.
Overall, we are expecting production average in the 40,000 barrel a day range for the year. In the last call we discussed the upside and downsides of that number and at least one of those uncertainty seems to have gone our way as our productivity of the El Salto 44 and 45 wells in the Lower Morichal clearly exceeded our expectations.
I cannot overstate the importance of these results given the reserve sides associated with the Lower Morichal formation and the previous uncertainty associated with production rates from this formation. The remaining uncertainties both upside and downside remained to be associated with delivery, commissioning and performance of the new rigs and commissioning of the production facilities in Temblador and El Salto.
Moving into our exploration programs, in Gabon we are gearing up towards further drilling on the block in the fourth quarter this year having secured the Scarabeo of three drilling rig with a tentative spud date in October.
The Tortue prospect is perspective in three targets, the Gamba, the Madiela and the Dentale. Like most of that are currently mapped prospects on the block, we considered these low to moderate risk prospects.
The Tortue well is a key well for us as even a modest success will provide the reserve-base when combined with the pre-existing discoveries to move us into development in 2013.
Furthermore, the well will calibrate our 3D and the mapping sets a several other prospects will be structurally de-risked. Once we go into the development mode, we expect to continue to build up the productive capacity in the central portion of the block in a string approval fashion tied back to the initial development facilities.
Further on the block, we recently received a time migrated 3D dataset from the seismic which outlaid late last year in conjunction with (inaudible) block. We’ve begun the process of depth-migrating the data in order to image structuring depth. However, what we can say is that the data clearly indicates the structuring in the center of sequence that we were looking to confirm. These structures are near to short and in shallower water and should have somewhat larger target sizes in the present drilling program.
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