The Company has not been able to recognize the equity earnings for its producing operations in Venezuela since the 2006 second quarter. Equity earnings are expected to be reported in the fourth quarter of 2007. The conversion agreements were executed in September and Petrodelta, S.A. was legally incorporated shortly thereafter. Publication of the Presidential transfer decree in October 2007 represented the final step of the formal conversion process.
Harvest President and Chief Executive Officer, James A. Edmiston, said: "The last step remaining to complete the conversion of our operating services agreement to Petrodelta was the October 25, 2007 publication of the transfer decree signed by President Chavez. The transfer decree gives Petrodelta the right to develop the Uracoa, Tucupita and Bombal fields, operated by Harvest since 1992, and the Isleno, Temblador and El Salto fields recently awarded to Petrodelta. Petrodelta has a detailed plan of development, which it will begin to implement immediately. With the transfer decree in hand, Petrodelta will begin producing oil and gas under a tax and royalty structure with a one-third royalty and a 50 % income tax rate. Petrodelta will invoice PDVSA for oil and gas delivered since April 1, 2006, and Harvest will be able to include its pro rata share of Petrodelta's earnings in its financial results."
Edmiston continued: "Harvest maintains a strong balance sheet as it prepares for Petrodelta to resume the drilling program initiated by Harvest in 2004. As of October 30, 2007, we have reduced our debt to $9.3 million, repurchased $32.1 million of common stock and expect Petrodelta's drilling plan to be self-funding. The publication of the transfer decree allows us to move forward with Petrodelta's operating and drilling plans. A workover rig is being mobilized to the Uracoa Field and will begin its work program of normal repair and maintenance. The first drilling rig is currently in port awaiting customs clearance in anticipation of resuming the Uracoa drilling program, which was suspended in 2005. A second workover rig and a second drilling rig are expected to start next year."
Production from the South Monagas Unit
For the nine months and eighteen months ended September 30, 2007, operating statistics (on a 100% basis) for the existing South Monagas Unit (SMU) operated by the Company's affiliate, Harvest Vinccler, S.C.A., are as follows:
Share Buyback Program
Harvest purchased 2.9 million shares, or 7.7 %, of its common stock during the third quarter for $32.1 million, or $11.03 per share, including commissions. In June 2007, the Board of Directors authorized Harvest to purchase up to $50 million of its common stock through open market purchases.
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