Independent energy company, Harvest Natural Resources Inc. (HNR), has entered into exclusive talks to sell its outstanding shares to Pluspetrol Venezuela S.A. for a consideration of approximately $373 million.
The deal is an outcome of the company’s inability to keep up with the struggles of financing its exploration activities. The consideration would include the company’s long-term debt of $76.1 million (as of Jun 30) as well as other obligations.
Argentina’s Pluspetrol is expected to hold onto Harvest’s 32% stake at Petrodelta S.A., a joint venture between Harvest and state-owned Petroleos de Venezuela SA. The remaining non-Venezuelan assets would be spun-off to form a new company, SpinCo, subject to approval from the government and Harvest shareholders.
SpinCo will comprise the company’s assets in Gabon, Indonesia, Colombia, and China and will be governed by the company’s current management. While the stake at Petrodelta has not been fruitful for Harvest, its interests at Utah, Gabon and Indonesia have been quite successful.
Post announcement, shares of Harvest were up 26.5% to $5.25 when the market closed on Sep 11.
The financials look bleak with Harvest reporting second quarter loss of 11 cents per share wider than the Zacks Consensus Estimate of a loss of 7 cents per share. The company also reported a net loss of $4.5 million with loss from operations increasing 31.8% y-o-y.
However, the company’s global exploration portfolio is a positive. Moreover, management plans to generate sufficient funds for its current projects and enhance the value of its assets to benefit shareholders.
Harvest is an exploration and production company (E&P) that has its principal operations in Venezuela and Russia. The company’s main focus rests on exploration, acquisition and development of oil and gas fields.
Harvest currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
Meanwhile, one can consider other energy explorers such as Range Resources Corporation (RRC), Matador Resources Company (MTDR) and Carrizo Oil & Gas Inc. (CRZO) as good investment opportunities. All these stocks currently sport a Zacks Rank #1 (Strong Buy).
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