Petrodelta should see 2nd rig drilling in October

Wednesday, August 20, 2008

The Petrodelta JV between Venezuelan state oil company PDVSA and Texas-based Harvest Natural Resources (NYSE: HNR) should see a second rig begin drilling in October, Harvest CEO James Edmiston said at the Enercom conference in Denver.

A third rig could begin drilling by the end of the year. Petrodelta could have four or five rigs operating by the end of 2009.

Petrodelta, meanwhile, could end the year producing 23,000-25,000b/d, Edmiston said. Harvest has a 40% stake in the JV but nets about 32% of production. PDVSA controls the balance.

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"It's not like we haven't done this before," Edmiston said. "You can go back to 2004 when we were drilling in the same fields. It's really a continuation of the same program."

New drilling was suspended while Harvest's operating service agreement for the Tucupita, Bombal and Uracoa fields was converted into the PDVSA-controlled JV.

The new JV won three new fields - Isleño, Temblador and El Salto - during the negotiations with PDVSA.

Harvest in 2004 increased production from its original three fields from around 20,000b/d to over 30,000b/d in under six months with two drilling rigs running, according to Edmiston's presentation.

New drilling restarted in April 2008 and production has already increased from around 13,000b/d to 16,500b/d with one rig operating.

Edmiston, meanwhile, said that new windfall taxes in Venezuela did not have that much of an effect on the company's netback.

When WTI is at US$124/b, Harvest receives around US$31/b. If WTI were to drop to US$90/b, Harvest's cash margin would fall US$9 to US$22/b, according to the CEO.