Petrodelta to fall short of 2011 exit rate due to underspending - Harvest

Houston-based oil firm Harvest Natural Resources (NYSE: HNR) anticipates that its Venezuelan subsidiary Petrodelta will fall short of its 40,000b/d exit rate goal for the year due to delays in the company's capital program, according to CEO James Edmiston. "Venezuelan production continues to rise, albeit at a slower rate than what we would like to see. While I expect the fourth quarter to show further sequential production growth, I also expect the company to fall short of exit production rate for the year," Edmiston said during the company's 3Q11 webcast. Petrodelta registered average production of 32,824b/d in the third quarter, up 36% year-on-year, though still short of the previously declared exit rate for this year. According to Edmiston, delays in the startup of a third rig and insufficient production infrastructure are holding up efforts to accelerate the JV's E&P program. The CEO cited ongoing issues associated with debts owed to contractors by its JV partner, Venezuela's state oil company PDVSA as a reason for at least some of the delay. The NOC is currently facing several arbitration claims associated with unpaid invoices to service companies. "The bad news is that the capital program is running behind schedule. Once again Petrodelta started this year slow and continues to be strained from a cash standpoint due to receivables owed by PDVSA. The capital program this year will almost certainly be underspent," he said. In previous years cash surpluses derived from underspent Petrodelta capital programs have been passed back to Harvest in the form of dividends. Edmiston added that Harvest continues to wait for the second part of the 2009 dividend worth some US$11mn, and suggested that a US$90mn surplus from 2010 could be made available to the firm next year due to the continued underspending at the JV. Harvest has a 32% stake in Petrodelta, with PDVSA holding 60% and local firm Vinccler the remainder.