Is Harvest Natural Resources, Inc. (NYSE:HNR) Selling All Assets?


Harvest Natural Resources, Inc. (NYSE: HNR) has agreed to sell its Venezuelan operation to the Italian-Venezuelan firm called CT Energy Holding SRL. The deal is worth close to $100 million. HNR and CT Energy entered into a partnership last year.

Harvest Natural Resources, Inc. (NYSE: HNR)’s move to sell its Venezuelan assets comes at a time when the company is struggling with liquidity problems. The company has said that it also plans to divest its assets in Gabon. The assets along the African west coast have become less attractive in the recent years following the collapse of crude oil prices.

Oil prices are only struggling to rise above $50/barrel, yet two years ago the prices appeared to be headed toward $100/barrel. Many energy companies are counting losses amid a tough credit environment given the lower crude prices. Over supply of crude oil in the global market triggered the price fallout.

Harvest Natural Resources, Inc. (NYSE: HNR) has not said how much it expects to generate from the disposal of its assets in Gabon. But the company is hoping that the government in Gabon won’t block the sale of those assets. HNR’s attempts in 2013 to sell its assets in Indonesia were blocked by the government over claims that it had inflated the value of the assets it had agreed to sell the state-owned PT Pertamina.

Harvest Natural Resources, Inc. (NYSE: HNR) exiting Venezuela

Selling out of Venezuela is expected to save HNR the challenge of doing business in a politically unstable nation at a time when commodity prices have remained lower. The company has struggled to find success in Venezuela for more than a decade.

The transaction with CT Energy

CT Energy, which is buying Harvest Natural Resources, Inc. (NYSE: HNR)’s Venezuelan assets, has agreed to pay $92 million in cash for the assets with the balance being settled in stock and warrants to purchase stocks. HNR will initially receive $80 million in cash and the remaining portion of the cash component of the deal will be paid over a period of six months. CT Energy will also surrender $4.25 million in HNR’s stock and warrant to buy 34 million HNR shares as part of the deal.

The companies hope to close the transaction in 3Q2016.


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