Harvest Natural Resources provided an update on operations of its 32 percent owned Venezuelan affiliate, Petrodelta, S.A. (Petrodelta).
PRODUCTION AND DRILLING OVERVIEW
During 2008, Petrodelta drilled and completed eight development wells and produced approximately 5.5 million barrels of oil, an increase of 1.9 percent over the previous year. Petrodelta also sold 10.7 Bcf of natural gas, a decrease of 20 percent from 2007 due to reservoir management of gas production. On a barrel of oil equivalent basis, Petrodelta sold and produced 7.3 million BOE in 2008, as compared to 7.6 million BOE in 2007.
In review, Harvest Vinccler had two rigs drilling development wells during the second half of 2004, which dramatically increased production from approximately 20,000 BOPD to over 30,000 BOPD in only six months. In January 2005, drilling operations were suspended as Harvest's Venezuelan operations began the process of converting into a mixed company. During the conversion process, production fell to approximately 12,200 BOPD. Drilling operations re-commenced in April 2008 and ten new wells were drilled. Production rates have increased 56 percent to 19,000 BOPD during this period.
Petrodelta has been advised by the Venezuelan Government that production output will remain at approximately 16,000 BOPD effective January 1, 2009, consistent with current OPEC production quotas. However, Petrodelta has been permitted to produce above this guidance for compliance with Venezuela's overall quota, as determined by OPEC.
Drilling and production operations are presently focused in the Uracoa and Temblador fields. Currently, Petrodelta is operating two rigs in the Uracoa field and one rig in the Temblador field. Petrodelta has completed two oil development wells thus far in 2009. In Temblador, drilling operations are targeted to develop previously not accessed portions of the field, and the first new development well was completed in February 2009 with initial production in excess of 1,800 BOPD. Temblador operations were transferred to Petrodelta in February 2008 and production has been increased from 1,200 BOPD to 4,900 BOPD by drilling one well, four workovers and opening of two idle wells.
For 2009, the initial drilling program includes plans for drilling development and appraisal wells for maintaining production capacity and appraising the substantial resource bases in the presently non-producing Isleno and El Salto fields.
In addition, Petrodelta shareholders have agreed that the company will remain self-funding and rely solely on internally-generated cash flow to fund operations.
James Edmiston, Harvest's President and Chief Executive Officer said, "Our Venezuelan business continues to post strong operational results in spite of the recent slowdown. I am particularly pleased with the outstanding results in the newly-acquired Temblador Field. The successes to date underscore what we believe is a very bright future for Petrodelta as it continues to develop its world-class asset base."
At December 31, 2008, Harvest's 32 percent interest in Petrodelta's proved reserves was 43.3 million BOE, consisting of 34.2 million barrels of oil and 54.2 Bcf of natural gas, in accordance with SEC rules. Approximately 79 percent of the company's proved reserves were oil and had a present value discounted at ten percent of $111.4 million, providing nearly 19 years of projected production.
Harvest's probable and possible reserves under SPE/WPC reserve definitions were independently estimated at 33.5 million BOE and 77.9 million BOE, respectively, representing a large multi-year inventory of drilling locations.
The company does not expect to incur any impairment charges related to changes in 2008 proved reserves from the previous year.
Mr. Edmiston continued, "Our balance sheet remains strong and provides Harvest with the financial stability required to endure the current volatility in the world energy and financial markets without sacrificing our growth objectives. We remain focused on our strategy to diversify operations into areas where we have operational control and the ability to apply our technical expertise to build long-term shareholder value."
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