Harvest natural resources boosts Venezuelan reserves

Oct 21, 2010 12:00 AM

Harvest Natural Resources announced an increase in reserves attributed to Petrodelta, Harvest's 32 % indirect owned Venezuelan affiliate.
The increase is a result of a new reserve report dated September 30, 2010 for the El Salto field, which is the largest of the six fields operated by Petrodelta.

Proved and probable ("2P") reserves net to Harvest in Venezuela have increased to 103.0 mm boe at September 30, 2010, a 26 % increase over year end 2009. Proved reserves net to Harvest in Venezuela increased to 50.4 mm boe at September 30, 2010, a 10 % increase over year end 2009.
These reserve additions are the result of successful recent drilling and the extension of Block 5, a previously proven fault block in the El Salto field. The reserve report was prepared by the independent petroleum engineering firm of Ryder Scott Company at Harvest's request.

As used in this article, references to oil and gas reserves that are "net to Harvest" refer to Harvest's net 32 % indirect equity interest in Petrodelta after deducting a 33.33 % royalty and do not refer to working interest ownership or other ownership interest held directly by Harvest.

Highlights of the interim reserves report:

  • The discovery of a southern extension to El Salto Block 5 through the drilling of the ELS 33 and ELS 34 wells. The drilling has added 394 mm boe of gross oil-in-place, and 28.2 mm boe gross of proved, probable and possible oil reserves through 2027.
  • Total gross oil-in-place at the El Salto field is now estimated at 7.1 bn barrels compared to 6.7 bn barrels at year end 2009.
  • The increase in proved reserves is driven by the successful completion of three producing oil wells, ELS 32, ELS 33 and ELS 34, since June 2010.
  • In the El Salto field only, 2P oil reserves net to Harvest now stand at 66.3 mm boe, an increase of 20.0 mm boe, or 43 %, from year end 2009. Proved oil reserves are 22.9 mm boe, up 29 % from last year.
  • The Before Tax Discounted Future Net Income from the El Salto field 2P reserves net to Harvest has increased to $ 1,456 mm, a 95 % increase from year end 2009.

The interim reserve report only included the El Salto field. In the opinion of Harvest, there has been no material change to the reserves at the other five fields except for production in 2010. After adjusting the other five fields from year end 2009 reserves for 2010 production through September, the total 2P oil and gas reserves in Venezuela net to Harvest are now estimated to be 91.9 mm boe and 66.6 bn cf of gas or 103.0 mm boe.
The reserves of all six fields in Petrodelta will be reviewed at year end 2010.

Harvest President and Chief Executive Officer, James A. Edmiston, said, "This new reserve report on El Salto documents the continued impressive results of Petrodelta's appraisal and development drilling program in the prolific El Salto field. Since year end 2008, through the drilling of a total of five wells in El Salto, Harvest's net proved and probable oil reserves in El Salto have surged to 66.3 mm boe from 28.8 mm boe, a 130 % increase in less than two years."
Edmiston continued: "Taking into account the production net to Harvest of 1.3 mm boe and 0.4 bn cf from year end 2009 through September 2010, the total proved reserves net to Harvest in Venezuela have increased to 50.4 mm boe from 46.3 mm boe at year end 2009. This represents a proved reserve replacement ratio of 300 % in only nine months. Proved plus probable reserves net to Harvest in Venezuela now stand at 103.0 mm boe compared to 83.3 mm boe at year end 2009 and 71.0 mm boe at year end 2008."

"Since the commencement of Petrodelta's operation of the El Salto field, the mapped gross oil-in-place in the nine drilled fault blocks has increased by 51 % to 7.1 bn barrels, driven by new drilling and the resulting improved petrophysical analysis. This year, Petrodelta has also reprocessed and reinterpreted 1,000 km of 2D and 110 sq km of 3D seismic, which has identified at least ten prospective, yet undrilled, fault blocks within the El Salto licensed area."
"Harvest's internal geological mapping suggests that these additional fault blocks could contain more than 4 bn barrels of unrisked gross oil in place."

The reserve report for the El Salto field assumes a West Texas Intermediate crude oil price of $ 77.34 per barrel, which yields $ 69.12 per barrel after adjustment for location and quality.
The natural gas reserves were based on a contractual price of $ 1.54 per tcf. Both oil and gas prices were held constant.

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