Harvest Natural Resources, Inc. (HNR)
Q4 2008 Earnings Call Transcript
March 5, 2009 11:00 am ET
Keith Head – VP, General Counsel and Corporate Secretary
James Edmiston – President & CEO
Steve Haynes – VP, CFO and Treasurer
Bill Frazier – Greenhill Capital
Michael Bodino – SMH Capital
Mike Sikvolo [ph] – Matlin Patterson
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Thank you. Good morning, and welcome to Harvest Natural Resources 2008 fourth quarter and year-end results conference call.
This morning our press release was broadcast through 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 web site at www.harvestnr.com. Additionally a telephonic replay will be available this afternoon by dialing 719-457-0820.
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 management. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance 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.
The SEC permits oil and gas companies to disclose in their filings with the SEC, only proved reserves that the company has demonstrate by actual production or conclusive formation tests to the economically and legally producible under existing economic and operating conditions. We may use certain terms on this call such as resource potential, probable reserves, possible reserves, prospective resources and similar terms which the SEC's guidelines generally prohibit us from including in our filings. Investors are urged to consider closely the disclosure in our form 10k, which is available from the SEC or on our web site.
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 today. Hopefully you've had a chance to review the earnings release. I'm going to run down the progress of Petrodelta and our exploration programs and then Steve will discuss our fourth quarter and year-end financial results. After that, I'm going to take a few moments to discuss current environment, and our plans for 2009, and at the end we'll open up for any questions that you might have.
Let's start with Petrodelta. Operationally, Petrodelta delivered 1.6 million barrels of oil or 17,000 barrels of oil a day to PDVSA during the fourth quarter compared with 1.2 million barrels or 13,100 barrels per day in the same period one year ago, an increase of about one-third year-on-year. Sequentially production was up only slightly from the third quarter owing to the OPEC related production caps imposed on the business. Again, sequentially, production by month for the fourth quarter was 17,100 barrels per day for October, 16,400 barrels per day for November and 17,400 barrels per day for December, approximately.
During the fourth quarter, 1.6 billion cubic feet of gas or 18 million cubic feet of gas per day were delivered to PDVSA compared to 3.3 billion cubic feet of gas or 36 million cubic feet of gas per day in the same period one year ago. For the year ending December 31, Petrodelta delivered 5.5 million barrels of oil or 15,000 barrels of oil per day to PDVSA compared with 5.4 million barrels of oil or 14.7 – 14,700 barrels per day for the year 2007.
You remember that our drilling program commenced in April of 2008. So while production was just above flat year-on-year, production increased by 42%, from April when the drilling commenced through year-end. Gas delivered to PDVSA for the 12 month ended December 31st, was 10.7 bcf of gas or 29 million cubic feet of gas per day, compared to 13.5 billion cubic feet of gas or 37 million cubic feet of gas per day for the same period last year.
Now let's move from the production results to the drilling program. Currently Petrodelta has three rigs running, two in the Uracoa field and one in the Temblador field and we expect to be down to two rigs in the coming weeks. In the last call, while I pointed out the drilling time improvements that had been captured through the third quarter, I also communicated Petrodelta’s near term goal was to average less than 25 days drilling complete with costs below $2.5 million per well.
And although Petrodelta continued to have some struggles, especially with one rig in particular, they made some outstanding progress in drilling efficiency otherwise. Overall, Petrodelta drilled and completed 11 wells at an average of 25 days and costs of $2.9 million per well over the period. However, several wells have been drilled in less than 20 days, and the last Temblador well set a new record in drilling and complete time of only 15 days; more on that well later.
The importance of those improvements are two fold. First, the improved performance in drilling time allows more wells to be drilled annually per rig, which translates to improved production growth rate. Secondly, the improvements translate to lower capital cost per well, and therefore improved economics. The second point related to costs should improve even further as we begin to see lower service in commodity costs associated with the drilling program.