The delayed approvals include permits to drill seven wells required to maintain and increase oil and gas production at its South Monagas Unit. In accordance with established procedures, HVCA submitted requests to Petroleos de Venezuela, S.A. (PDVSA) to obtain these permits from the Ministry of Petroleum and Energy. While PDVSA has not offered any definitive explanation for the permit delays, CVP, an affiliate of PDVSA, has sent HVCA a letter which seeks to reduce HVCA's 2005 drilling program budget below the amount previously approved and restrict production below planned levels. HVCA's current daily production is 29,000 barrels of oil and 80 million cubic feet of gas.
Harvest President and Chief Executive Officer, Dr. Peter J. Hill, said, "If the permitting approval delays continue or the capital programs or production levels are restricted, our 2005 production, earnings and cash flow projected in previously issued guidance would be adversely affected and would need to be revised. In accordance with our contract, we have a budget approved by PDVSA and have taken all steps to conduct our planned drilling program. We are attempting to meet with officials of the Venezuelan Government, Ministry of Petroleum and Energy and PDVSA to understand the reasons for these actions and to obtain the approvals necessary to proceed with our planned oil and gas development. Although the outcome of these efforts is uncertain at this time, we remain hopeful that these issues will be resolved based on our contract and the longstanding positive relationship with PDVSA and the current Administration. We think the recent appointment of a new board at PDVSA is positive, and we look forward to working with them."
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